Strategy+Business Summer 2022

“In a hybrid situation, you need meeting MARTEL: At the height of COVID-19, we found that display information, blend rooms to become our engagement level was lower. We focused on improv- with the real world, or even media rooms, ing our communications. For example, right now, we’re simulate a virtual world where you have working on a plan for how we should be communicating and show the worker how all the tools teams with our people to inform them about what the com- to go about the task safely. need to feel like pany is doing, why we’re doing it, and how they can be they’re working part of the solution. We’ve made a point to bring people together in person for meetings and team-building ac- together.” tivities—in a safe and responsible way—and have great- ly increased our use of technology to keep people ULBRICH: The pandemic Christian Ulbrich connected. That focus on communication has really im- has accelerated the need proved employee engagement. for technology within JONES LANG work spaces. One example LASALLE (JLL) But it’s not only about communication. It’s about understanding what employees want and making sure is an increased need for feature inside the mind of the ceo we’re delivering that. Are we an employer of choice? Are we hitting the criteria for what people want to see their sensors. You need to know employer doing? We are having this dialogue with em- ployees as we speak. where your people are in BECOMING the office and how they’re using the office so that you TECH-ENABLED can take necessary safety measures. In a hybrid situa- SUBRAHMANYAN: If you look at our Hazira facility, it has come a long way; today, we could label it Factory 4.0 tion, you also need meeting rooms to become media or 5.0. In the past, workers would come in to work at the site under the scorching sun at 9 in the morning, go for rooms, where you have all the tools teams need to feel lunch at 1, come back to work at 3 in the afternoon, and wind up work at 5 in the evening. Today, three welding like they’re working together, even if some people are at jobs are handled by a single welding expert sitting in a small, air-conditioned cubicle. The worker controls the home and some are in the office. workstation, monitoring everything on the computer screen. This work can be carried out from anywhere be- Pre-pandemic, you would know that on Monday, cause it is an internet of things station. your offices would fill up, and they would stay full until In addition, safety measures for workers are taught through augmented and virtual reality. When a worker Friday afternoon. It was easy to run meetings, make an- climbs a transmission line tower, he or she wears a HoloLens [mixed reality headset]. Using multiple sen- nouncements, and offer opportunities for collaboration. sors, advanced optics, and holographic processing that melds seamlessly with its environment, these holograms Now, it’s complicated, because you don’t know who is showing up when. You might also need technology for 49 booking certain seats in a bank of desks to ensure that team members can sit near one another. Though technology and data are the key pillars of any business now, the real estate industry has tradition- ally been slow to embrace them. Until a couple of years ago, buildings had very little technology embedded. That is changing now, and technology integration has significantly accelerated. + Resources For more of our CEO interviews: strategy-business.com/inside-the-mind-of-the-ceo For more about how PwC is empowering the workforce: pwc.com/gx/en/services/people-organisation/workplace-evolution.html More thought leadership on this topic: strategy-business.com/the-power-of-people-reimagined

feature organizations & people 50

Maintaining feature organizations & people network connections 51 Illustration by Patrick Hruby As we redesign work for the hybrid future, it is vital to understand the ways that information flows and networks form within organizations. BY LYNDA GRAT TON Our collective experience in the pandemic created a once-in-a-lifetime opportunity to rethink what we want from work and our working lives. We had a chance to question many fundamental assumptions, adopt new habits, and form new narratives about how work gets done. The experience also confronted corporate leadership teams with the challenge of how they would respond. Would they stay with their old ways or embrace the opportunity to be bold and redesign systems to make working a more purposeful, productive, agile, and flexible activity? This effort to redesign work is well underway. And as we confront a new hybrid future, it is important that we take the valuable lessons learned during the pandemic with us. One of those lessons, which I’ve observed based on my research and advisory work, surrounds the topic of connections and networks—and their importance in building culture and getting work done.

Lynda Gratton Adapted from Redesigning is professor of management Work: How to Transform Your practice at the London Business Organization & Make Hybrid School and founder of the con- Work for Everyone, by Lynda sultancy practice HSM Advisory. Gratton. © 2022 Lynda Gratton. She is the author of ten books, Published by the MIT Press. including The Shift, The Key, All rights reserved. and, with Andrew J. Scott, The 100-Year Life. To begin to reimagine work, you have to create a when people simply bump into each other will be di- deep understanding of how your company works. And minished. Andy Haldane, former chief economist at the feature organizations & people that involves developing an understanding of the differ- Bank of England, explained to me: “Exposure to new ent types of jobs within the business, the tasks that they and different experiences—sounds, smells, environ- involve, and the behaviors and capabilities that support ments, ideas, people—is a key source of creative spark. productivity. But the classic description of job tasks and These external stimuli are fuel for our imaginations, and the related element of productivity assume an almost the imagined, made real, is what we typically mean by static process, which is essentially about the individual. creativity. Home-working can starve us of many of these In reality, people, the tasks they perform, and the jobs creative raw ingredients—the chance conversation, the they do are embedded within networks of human con- new person or idea or environment. Home-working nections. Through these connections flow knowledge, means serendipity is supplanted by scheduling, face-to- insight, and innovation. One of the major insights from face by Zoom.” the experience of the pandemic is how important these These concerns are real and valid—and so, before often-overlooked human connections are to organiza- decisions about the redesign of work are made, you need tional health and vitality. In general, networks shrank. to have a view of the current structure of networks and That’s because people working from home spent more knowledge flows and use it to consider how the models time with those they already knew well and less time of the redesign of work will change them. 52 with people they knew less well, and they created far fewer new friendships. Tacit vs. explicit knowledge It is also important to understand networks and Not all knowledge is the same. Some knowledge is ex- knowledge flows because any redesign of work can inad- plicit and objective: it’s easy to write down and access, vertently disrupt them. It is no surprise that the poten- and it moves with ease across your business. It’s carried tial disruption of networks and knowledge flows is at the by manuals, websites, and handbooks. In companies heart of two major concerns about the redesign of work: with a history of working virtually, much of the design the socialization of the young and the possibility of ser- of work is about making explicit as much knowledge as endipitous encounters. We learned that lack of face-to- possible. That benefits new joiners and new team mem- face connectivity was particularly tough for young peo- bers, who can quickly get up to speed on how projects ple as they joined companies without being around work and the skills of their colleagues. Above: MIT Press, 2022. people in an office environment. And there is widespread Yet much of the valuable knowledge that resides fear that young joiners to a firm will suffer if they work within a company is tacit knowledge: the insights, from home, as they will not be able to observe and net- know-how, mental models, and ways of framing that are work with more experienced members of the firm. held in the minds of individuals and are part of how In addition, there’s anxiety that the watercooler they see and interact with the world. Because this conversations and serendipitous encounters that happen knowledge is held in the minds of individuals, it is much

If the redesign of In those tough situations, people were taking solace feature organizations & people work in your company from their nearest and dearest. includes changes to 53 place and time, such Yet at the same time, people’s relations with their as working from home, broader network of colleagues, associates, and more dis- then this will inevitably tant friends began to erode. Here are two comments impact networks. from managers I noted in my daily journal in mid- 2020—when many had already experienced six months more difficult than explicit knowledge to express and of lockdown: “Some of the people in the team who are codify. Indeed, there is a view that you can only really working from home are feeling very lonely. If they are access another’s tacit knowledge when you know them naturally extroverts, this is really impacting their happi- and when you trust each other. So, while explicit knowl- ness and well-being”; and, from another manager: “At edge stands outside of relationships and is codified in the moment, what really concerns me is the pressure on manuals and websites, tacit knowledge fundamentally networks. People are getting close to each other and, resides within relationships. frankly, that’s been a lifesaver for many over the past months. But what has happened to the watercooler mo- If the nature, extent, or depth of these relationships ments? It’s impossible when everyone is at home to just is changed by the redesign of work, then the fear is that accidentally bump into people.” this precious commodity will suffer. So in the jobs that you are looking at, consider what knowledge is impor- What is happening here is almost below the surface. tant to be productive in that job—how much is explicit Most of us don’t systematically track our networks, and in the sense that a new joiner could easily find this few companies have empirical data on how knowledge knowledge, and how much is implicit. If your proposed flows within and across their business. Yet it is clear model of work will require more virtual working, then that if the redesign of work in your company includes you need to consider investing in more knowledge- changes to place and time, such as working from home capture processes to create more explicit knowledge. or adopting a revised schedule, then this will inevitably impact networks. That’s why it is so important to under- Strong ties stand how networks work and how your redesign ideas By the spring of 2020, still early in the pandemic, it be- will change them. The networks framework on page 54 came apparent that changing work patterns, and par- illustrates some of the key concepts. ticularly working from home, were impacting the devel- opment and maintenance of human connections and The foundational concept is ties: the relationships networks. We quickly learned that many people were that connect one person to another (each person in the spending more of their time with people they already network is shown as a node). These ties vary on a con- knew. Often these strengthening bonds turned out to be tinuum from strong to weak. Most of us have relatively crucial to positive feelings of worth and mental health. few strong ties; these are with the people we know well, whom we trust, and whom we can turn to for help and support. There is often a sense of balanced reciprocity in these relationships: people are happy to give to each oth- er, but if one regularly takes more than they give, then over time the relationship will begin to deteriorate. Those you have strong ties with are people who know and understand you and who can empathize with your situation. (In the networks framework, these strong ties are shown by black lines.)

Most of us have relatively few strong ties; these are with the people we know well, whom we trust, and whom feature organizations & people we can turn to for help me: “Bringing ideas from across all our disciplines is cru- and support. cial for us. In the office we have engineers, designers, planners, technical specialists, and consultants. We want them to talk with each other and bounce ideas off each other. One of the ways we do that is, within the office, to move teams from one place to another around every quarter.” It turns out that with regard to the redesign of work, These strong network ties can be important to ex- proximity is a significant driver of the formation of ploiting the knowledge individual team members have strong ties. Who you sit next to in the office and who (shown in the center of the networks framework). Be- you are likely to bump into in the corridor have a sig- cause they know each other well and trust each other, nificant impact on how these strong ties are formed. they are more likely to share their tacit knowledge. Yet This powerful driver of proximity occurs through- while these networks of strong ties are excellent at sur- out our lives. Take college friendships. There are poten- facing tacit knowledge, they are less able to create new tially hundreds, possibly thousands of students with ideas. Why? Because people are conversing about what whom you could form lasting relationships. Yet as those they already know, and their familiarity with each oth- researchers who have tracked these relationships have er’s ideas means they are unlikely to encounter concepts 54 discovered, the probability is that your closest and that are new to them. longest-lasting friendships will be formed with students rooming in adjacent dorms. In fact, in a series of studies, A network framework for understanding the impact researchers were able to compute a direct correlation be- of strong and weak ties on the diffusion of knowledge tween the degree of friendship and the dorm distance: Strong ties Weak ties Within the group the closer the dorm, the greater the probability of creat- ing a long-lasting relationship. It’s the power of proximity that is such an important factor in the design of offices. If, for example, all the 2. Exploration through marketing team sit closely together, they get to know synthesis each other better, but they often fail to build relation- ships with other teams located on different floors—or 1. Exploitation strategy+business issue 107 even perhaps across the corridor. Using the power of proximity is crucial for the design group Arup, which 3. Innovation through has more than 15,000 specialists working in projects novel combinations spanning 140 countries. As Arup principal Joe Corren- Source: Redesigning Work: How to Transform Your Organization & Make Hybrid za, who is based in the company’s Melbourne office, told Work for Everyone, by Lynda Gratton

Weak ties weak ties—that new information is distributed, and it is feature organizations & people here that serendipity often occurs. At the other end of the spectrum of relationships are 55 weak ties (shown in the networks framework as a gray In the networks framework, you will notice that line). These represent the links to the hundreds of people two members of the inner group have strong ties to you are associated with. These are the acquaintances you members of other groups. These are boundary spanners, meet less frequently and to whom you have little emo- people who link two different networks together. When tional attachment. You know something about them— two distinct networks have very limited overlap in mem- for example, they would probably reply to an email you bership, it creates what sociologist Ron Burt calls a sent them—but you don’t know much about their inter- “structural hole” in terms of the fields of knowledge. A ests or family. You have many more of these weak ties boundary spanner whose relationships connect the two because they take less time and resources to maintain. camps can bring together completely different domains Indeed, you may have many hundreds or even thousands of knowledge—and the possibility of exploration through of such connections on social media. Yet you probably synthesis. Boundary spanners are in a position to explain devote less time to these large but weak networks than the groups to each other, to point out areas of overlap- to your small number of strong ties. ping interest, and to encourage people to question their basic paradigms and ways of working. As you think The value of weak ties lies in their number: they about the redesign of work, it’s worth considering who have value precisely because there are so many of them. the boundary spanners might be in your own organiza- This was shown in one of the classic studies of networks tion: does the redesign create natural channels for them carried out by Stanford University sociologist Mark to connect to others, or are you inadvertently blocking Granovetter, who studied the ways in which people off these important channels? found a new job. (This research, by the way, preceded the growth of online job-search platforms such as Having many weak ties provides an exciting LinkedIn and Monster, which have the potential to opportunity for people to connect beyond their immed- create thousands of potential job connections.) What he iate group into the wider community. This is important found was that when someone is looking for a new job, because it offers an opportunity to be innovative and it is rarely a person they know well who originally generate innovation through novel combinations. suggests one. It is more likely to be a friend of a friend. Granovetter discovered that within groups of people The possible impact on these novel combinations who know each other very well, there is much overlap- was one of the greatest concerns for business during the ping knowledge. So, if one of your close friends hears of pandemic. Many commentators talked about those wa- a vacancy, it’s likely that you’ll also hear about it— tercooler relationships. They began to realize that an of- because you have overlapping networks—and will pass fice could be not only a place of close proximity but also that information on to another friend who is looking for a place where people had serendipitous encounters. a new job. It is through friends of friends—the power of There was a deeper anxiety that when people worked from home, such encounters—and the creative sparks

feature organizations & people they set off—would be dramatically eroded. This is an well and trust—we naturally pivoted toward video important consideration as you redesign work. It high- meetings. But what of those relationships with people lights the importance of those precious times in the of- we didn’t know so well—the weak ties? Consider com- fice to both create proximity and encourage serendipity. panies such as the Swedish technology group Ericsson, which is using online platforms to host conversations Technology and network ties among many thousands of people over a period of three There is no doubt that one of the distinguishing features days (see “Let’s talk about how we work,” below). Might of the pandemic was the speed at which people adopted these virtual conversations be the base from which new technologies such as Zoom and Microsoft Teams and networks are created—ones that could remain weak but the capacity of these technologies to deliver a low-cost, could also strengthen as people catch up individually on high-reliability service. We are beginning to realize that video meetings? these technologies could play a crucial role in transform- ing how networks are formed and how knowledge flows. Are these virtual connections the same as meeting people face-to-face, and are they likely to be the basis of In our strong network ties—with people we know serendipitous connections? Frankly, we don’t know yet. Let’s talk about which addressed issues such as how “That sounds interesting” or “Do how we work working during the pandemic had you have an example of how this created both challenges (such as worked for you?” The facilitators R ecently, the Swedish lack of social contact) and benefits also engineered new encounters by technology company Ericsson (such as increased productivity connecting people with others who through reduced distraction). were following a similar conversa- invited its employees to take part in The process created a shared tional thread. an important conversation . sense of collective destiny and al- This process of co-creation In 2019, Ericsson asked 3,750 lowed people to hear from others out- engaged employees directly in the 56 leaders and managers to have a side their immediate circle. It meant, conversation, so everyone who virtual conversation over a 75-hour for example, that someone in an participated had a better idea of period about the future and val- administrative role could have a real- what others felt, the choices and ues of the company. The following time, unfiltered conversation with the trade-offs they faced, and how those year, plans were made to broaden CEO, or a software developer in India choices and trade-offs measured the conversation to discuss how could talk at length to a customer up to their own experience. “People potential new ways of working might relations person in Germany. could empathize with each other as affect Ericsson’s culture. All 95,000 An important feature of the pro- they listened to and shared their employees from around the world cess was the introduction of teams own stories,” said Selina Millstam, were invited to engage in an in-the- of facilitators, who engaged and vice president and head of talent moment, moderated conversation. supported those on the platform, management at Ericsson. “And from On April 28 of that year, just two encouraging them to have a much a process perspective, it brought strategy+business issue 107 months into the pandemic, more than wider conversation. The facilitators to light the many experiments and 17,000 people participated in this gave people confidence to speak out work-arounds that were taking place virtual exchange. They created more by using prompts such as “Could across the company.” than 28,000 conversational threads, you tell me more about this?” or

These are extraordinary, Finally, consider the impact of technologies such as feature organizations & people transformational times. videoconferencing or virtual platforms on how these We have a chance networks are formed and maintained. In what way are now to fundamentally they substituting for face-to-face connections? What are change our relationship the potential challenges, and also the benefits? to the work we do, to our organizations. These are extraordinary, transformational times. We have a chance now to fundamentally change our Certainly, during lockdown, I made a couple of really relationship to the work we do, to our organizations. We good serendipitous connections with people I had not will transform this relationship by redesigning work. known previously. And after connecting with them over There is no doubt that there will be obstacles along the video conversations, I felt I had begun to know them way on our transformational journey, and that our cour- relatively well. Remember also that, looking forward, age and taste for experimentation will be tested. Yet as I there is sure to be an avalanche of innovation around look at how people around the world are stepping up to human connectivity. There is already much excitement debate, cooperate, and build, I am convinced that we about the possibilities of virtual and augmented reality can create a future that will support us in being not only in building and supporting networks. more productive in our work but also more fulfilled. + An understanding of the role that weak and strong ties play in building and maintaining networks should 57 inform the redesign of work. As you consider the current networks and knowledge flows in your business, bring a group together, and, using the networks framework on page 54 as a template, draft what you think were the pre-pandemic networks and knowledge flows that were central to those jobs. Ask: Were people primarily in tight network groups? Were there people who were boundary-spanning to other groups? Did people have broad, weak ties to many others both within and outside the business? As you think about the current reality in your busi- ness, consider how these networks and knowledge flows are operating. Has there been a shift in weak and strong ties? If so, what impact might this have on the way that tacit knowledge flows and the possibility of new combi- nations of knowledge?

feature leadership 58

IT’S TIME TO feature leadership CHALLENGE 59 THE STATUS QUO AT FAMILY BUSINESSES NEXT-GENER ATION LE ADERS NEED TO PRIORITIZE ENVIRONMENTAL, SOCIAL, AND GOVERNANCE ISSUES TO BUILD THEIR OW N LEGACY. BY PETER ENGLISCH for those fortunate enough to be born into a family that operates a successful family business, it often feels like walking a predetermined path. The goal is clear: to take over from the previous generation, add value to the enterprise, and pass it on to the next generation. More often than not, the journey starts with an MBA, followed by stints working in different parts of the firm. But the pressures of succession, the need to win in a rapidly changing world, and the desire to carve out one’s own path are real. Vincent Fong, a member of the fourth generation of his family’s multimillion-dollar Hong Kong real estate business, understands that tension well: “It’s completely normal to want to prove yourself, if you’re second or third generation in a successful family business.” Illustration by Dan Page

Peter Englisch [email protected] is the global family business and EMEA entrepreneurial and private business leader at PwC. Based in Essen, he is a partner with PwC Germany. feature leadership The crucial question is, how? How can members of Recent research by Family Capital, an online pub- the next generation act as responsible stewards of the lishing platform dedicated to family enterprises, shows family legacy while also being catalysts for necessary that over the last decade, the market value of family change? After all, the strategies that got a business businesses has dipped below that of similar publicly through its first 50 years will not be sufficient for the listed companies. One of the key reasons could be that next 20 years—or the next ten. Business as usual isn’t an listed companies, pushed by investors and public pres- option in a world characterized by economic disruption, sure, are leading the way on prioritizing ESG (see uncertainty, and the threat of climate change. The skill chart below). sets and strategies required for business success are changing, and family businesses have often been slow to In the investment world, of course, past perfor- react to change. mance is no guarantee of future results. And this trend of lagging behind nonfamily businesses is reversible— Businesses that have better ESG risk scores also have higher market values As sustainability became more important to investors in the past decade, the market capitalization of family businesses began to trail that of nonfamily businesses. Family Business Index Corporate Index 60 280 260 240 220 Index value200 strategy+business issue 107180 160 140 120 100 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 Note: Family Capital rated the top 100 family businesses and the top 100 nonfamily businesses using an ESG risk profiler. The index value is set at 100 on Jan. 1, 2012. Source: David Bain, “Family businesses fall behind non-family companies on ESG and lose their trust premium,” Family Capital, Sep. 16, 2021

not least because a solid majority of NextGens (how we businesses is that annual revenue growth has to be in feature leadership refer to the generation of family business owners wait- double digits to accommodate the coming generations. ing to lead) understand the challenge. In PwC’s Global By putting growth ahead of sustainability, NextGens NextGen Survey 2022 of more than 1,036 NextGens, are closely following the thinking of their parents, 59% said they believed that their own family business though they are more concerned with environmental is- was moving too slowly on sustainability, and 72% said sues (see chart below). they expected to be involved in increasing their family business’s focus on investments for sustainability in the Setting growth as a priority is both understandable future. That’s good news. The challenge is that only and vital. But as the ESG revolution continues, the con- 28% are involved right now. At the top of generational nection between reinforcing viability in the marketplace priorities, according to the survey, is business growth. and making progress on environmental and social goals will strengthen and become clearer. Simply put, deliver- Given the economic challenges afoot, this focus on ing growth requires applying a powerful ESG lens to growth is not surprising. The rule of thumb for family business issues. Generational priorities: Like parents, like children All generations in a family business look to grow through new markets. Gen Z is more likely to prioritize sustainability. Current generation All NextGen Millennials Gen Z Expanding into new 55% sectors or markets 47% Offering new or the right 49% products or services 44% Adopting new technologies 50% Improving digital skills 39% Investing in innovation 40% and R&D 36% Reducing the organization’s environmental impact 49% 61 50% Increasing the focus on social 44% responsibility and sustainability 41% 52% 39% 40% 40% 28% 34% 32% 37% 15% 24% 16% 26% 25% 31% 32% 38% Note: Responses are drawn from a 2021 PwC family business survey and the present NextGen survey. The list of priorities in the family business survey included “introducing new products and services” and “increasing the organization’s social responsibility.” The NextGen list formulates the questions as “ensuring we offer the right products and services for today’s customers” and “increasing our focus on investments for sustainability and impact.” Source: PwC’s Global Family Business Survey 2021; PwC’s Global NextGen Survey 2022

There are four steps that NextGens can take now to Not every NextGen needs to be an entrepreneur to help accelerate delivery on sustainable growth and pre- succeed in safeguarding the legacy of a family business. pare themselves to be the future leaders who can secure But all will have to disrupt the status quo from within if and build on the family legacy. They involve a signifi- the business has not yet fully embraced ESG. They will cant rethinking of what to prioritize and how to build have to do so in part because their stakeholders, includ- the necessary skills. ing lenders, customers, and employees, are demanding These steps are: progress. “Every business leader wants to grow their 1. Imagining what success looks like under a sus- business. This is where NextGen owners come in,” says tainability framework Susanne Stormer, ESG and sustainability services leader 2. Understanding how an ESG focus feeds into at PwC. “Understanding and accounting for how ESG feature leadership wealth management in family businesses, particularly in dimensions of performance may create or erode enter- the context of a family office (a distinct business entity prise value is essential to pivoting with society toward a that systematically and thoughtfully invests for the fu- more sustainable future.” And the PwC survey shows ture outside the context of the core family business) that NextGen leaders, especially those in the younger 3. Challenging one’s skills—a traditional MBA cohorts, are focused on sustainability. Although only degree may not be the qualification needed to lead in 16% of the current generation of leaders say it is a prior- the future ity to increase the focus on social responsibility and sus- 4. Negotiating a new generational contract so that tainability, 32% of millennial NextGens and 38% of everyone understands what is expected of him or her gen Z NextGens agree. By the same token, millennial within a defined time frame (25%) and gen Z (26%) NextGens are more likely than the current generation in charge of the business (15%) Sustainable success to cite reducing the organization’s environmental impact For Fong, embracing sustainability and proving himself as a priority. meant stepping outside the business. “In real estate, profit is all about access to capital and making the right Future wealth management 62 land purchasing decisions,” he says. “Anything outside In a world gripped by crisis, creating that required that core competency is marginal.” Though not yet 30, double-digit growth is a tall order. There are different Fong, who has a business degree from the University of ways to build wealth. It can come from increasing the Southern California, has already started three compa- value of the company’s core business. And it can come nies. (He founded the first, an online music collabora- through diversification and investing in other businesses tive called FindMySong, when he was just 19.) Raze and assets via a family office. The choice is a big respon- Technology, which launched in 2018, is the result of sibility for NextGens to inherit. Fong’s scouring the academic world to find ideas to Many family businesses are formalizing wealth commercialize that had sustainability at their core. management through a separate family office—some Raze, based in Hong Kong, uses photocatalyst processes 42% of NextGens responded that their families had to create light-activated, long-lasting, natural antibacte- one. And here, too, NextGens are well placed to make rial products, including self-sanitizing paint. “It’s more their mark. It’s a notable finding of PwC’s survey that strategy+business issue 107 difficult to create something outside the safety net of the 43% of those with a family office have a sustainability family business, but I see it as a win-win,” says Fong. “It’s strategy, compared with 37% of those with no family not just about getting recognition for doing something office. Families with family offices were also more likely by myself—it’s about how we can use this business to to have a written constitution and a succession plan in strengthen the family’s position and progress.” place (see “The role of the family office,” page 63).

NextGens are more likely than the current generation in charge of the business to cite reducing the organization’s environmental impact as a priority. Exceptional education London School of Economics, and at 19, she is at the feature leadership beginning of her journey. When she graduates, she The disruption of recent years has sent a powerful mes- plans to work at the Tony Elumelu Foundation, part of sage to both educational institutions and students that the family’s private investment firm Heir Holdings, the traditional topics of study in business management which has funded more than 15,000 young African programs need to change. A new approach is required to entrepreneurs since it was set up in 2010. “I’m passionate prepare the next generation of leaders, one that reflects about giving back to Africa, and it is important to me the existential crises the planet is facing. “The risk is that that I do this not just by giving out handouts, but by if students do not see the real world reflected in the cur- investing in people and making a real, long-standing riculum, then business schools will become museums of impact in their lives,” she says. management history,” Omid Aschari, associate professor at Switzerland’s University of St. Gallen, recently put it. A crisis such as the COVID-19 pandemic reminded businesspeople at all levels that their training and career Oge Elumelu, daughter of Nigerian economist and path can’t prepare them for everything. Indeed, in the businessman Tony Elumelu, is a good example of a PwC NextGen survey, 28% of respondents said the NextGen who is looking for a broad learning experi- pandemic identified a need for upskilling and additional ence. She’s studying philosophy and politics at the The role of the oped by Thomas Zellweger of the to all three elements. “The concept 63 family office of a family office has gained mo- University of St. Gallen. It focuses on mentum in recent years, in light of F amily offices aren’t just about a massive wealth transfer between numbers—they can help build three elements that align with what generations and the increasing valuable skills. Wealth management complexity of the family ownership and the concept of ownership compe- PwC calls the owner’s agenda: business ecosystem,” says Peter tence go together. Ownership com- Vogel, professor of family business petence is the skill through which • What is owned: how owners and entrepreneurship, International ownership—and the control it implies Institute for Management Develop- over resources—is used to create combine resources to create value ment (IMD). “If done right, the family value. This will be vital in setting the office can play a critical role in en- future business growth agenda. In today and in the future suring sustainable business growth the world of family business, owner- as well as preserving the wealth and ship competence is a model devel- • How it is owned: setting fam- unity of the family.” ily governance, choosing leaders and managers, and providing incentives to maximize value creation • When it is owned: timing, and decisions such as succession plan- ning and the staging of investment. If a business is to create sus- tained growth, it must pay attention

NextGens must confront important questions as to what value the family business creates and what capabilities are needed to deliver on that promise. education. But when we asked what NextGens thought the current generation will make. The current genera- they needed to learn, the list was a familiar one: finance tion needs to be sure that the business will be in safe feature leadership (53%), leadership development (48%), and business hands and its new leaders have the understanding and model innovation (41%). Sustainability was identified as skills to protect and grow the business. This challenge a priority by only 25%—even though two-thirds said is particularly acute given that the skills needed today they saw an opportunity for family businesses to lead the are very different from those needed by the previous way in sustainable business practices. If that’s going to generation. happen, NextGens will have to play a significant role, “It is not easy to transition from the driver’s seat to and they will need new skills to do that. the passenger’s seat. But I felt heartened that my next Most NextGens who answered the survey already generation could take the family business to the next have excellent business qualifications—89% have com- level because of how they have stepped up to build mu- pleted at least a university degree, the majority in busi- tual trust and credibility with the current generation,” ness and finance, and 17% hold an MBA degree or doc- says Gan See Khem, executive chair and managing di- torate. But it is clearly crucial to expand the aperture rector of Health Management International, a Singa- beyond the traditional management and strategy con- pore-based company that offers private healthcare ser- cepts. The recent book by our colleagues Paul Leinwand vices in Southeast Asia. and Mahadeva Matt Mani, Beyond Digital: How Great In many ways, the pandemic strengthened the 64 Leaders Transform Their Organizations and Shape the Fu- bonds within family businesses. As well as focusing all ture, sets out seven leadership imperatives that are es- generations on growth, COVID-19 focused minds on sential to shaping a company’s future. The first among succession—an area that some family businesses have them is to reimagine the company’s place in the world. neglected in the past. In the 2022 survey, 61% of Next- NextGens must confront—and answer—important Gens said there was a succession plan of some kind in questions as to what value the family business creates place, even if it was informal. In a PwC survey of family and what capabilities are needed to deliver on that prom- businesses before the pandemic, only 15% said they had ise. Over the past two years, business schools and busi- a formal succession plan, though about 40% had some ness networks have started offering a range of new areas kind of road map for succession. That significant in- of study that can encourage future leaders to learn to crease represents real progress. think differently about their businesses. NextGens need But the crisis has, if anything, made the current to proactively seek out these opportunities, and particu- generation even more nervous about handing over con- strategy+business issue 107 larly build skills to deliver on ESG goals. trol; 39% of NextGens say there is a resistance in their company to embracing change, and 57% say it’s a prob- Ties that bind lem that the current generation isn’t ready to retire. Handing over a business to the next generation of lead- NextGens are striving to prove themselves worthy, but ers is the most important (and emotional) decision their elders rarely articulate what being prepared for

succession means in practice. “You don’t just wake up tion across generations, to set the pathways for senior feature leadership one day and suddenly know your responsibilities and leaders that affirm their identity and status.” role in the family business,” says Isabelle Randon Frota, 65 third-generation member of her family’s Brazil-based Looking ahead multinational automotive and financial-services orga- Around the world, and in every industry, the pace of nization. “There are 12 of us in the third generation— change is accelerating. Leaders of companies face diffi- we’ve all visited the company’s operations from an early cult pressures: they must simultaneously manage day- stage, but that’s only part of it. We all need to learn, to-day work, plan to meet long-term goals and commit- prepare, and practice.” ments, and ensure that their operations are resilient to the forces that could disrupt their supply chains and Randon Frota’s family is relatively unusual in that it businesses today or next week. Successful family busi- took concrete steps to set out exactly what was required nesses have proven their ability to think in these differ- of each generation. In 2018, Randon Frota was instru- ing dimensions. But staying ahead of the curve requires mental in setting up a committee to discuss third-gener- bold strategic thinking. Now is the time for the Next- ation development, which provides a forum for intergen- Gens to engage with the current leaders to start imagin- erational communication and for ensuring that the family’s strong values are nurtured and passed on. “We ing a resilient and dynamic future for their company. + always knew what was expected of us—to go abroad, complete an MBA, for example—but we didn’t really Resources understand why that was important in the context of the business,” says Randon Frota. “Now, we know, and we Jeannie Diefenderfer, “Making ESG a strategic asset,” s+b, Mar. 31, 2022: can contribute much more.” CEOs can advance environmental, social, and governance concerns by treating them as more than a compliance requirement. It’s a good model to follow. Family businesses are more willing to talk about future leadership—the next Peter Englisch, “Leaders in waiting,” s+b, Jan. 28, 2020: A survey of step of maturity is to make clearer the stages and condi- family-owned enterprises finds millennials ready to step up, and high- tions of succession. Articulating and discussing a new lights four paths they can follow to success. generational contract is important. It’s vital to have an ongoing conversation about what will drive growth in PwC, Global NextGen Survey 2022: Report on which this article is the future and what roles NextGens want to and can based, exploring how global threats have united the generations around play. “The responsibility for generational transition does a common goal: driving growth to secure the stability of the business not fall solely on the shoulders of the current genera- and the family (www.pwc.com/nextgen). tion,” points out Kenneth Goh, academic director of the Business Families Institute at Singapore Management David Reimer and Adam Bryant, “The new rules of succession planning,” University. “NextGen can play an active role by ‘manag- s+b, Feb. 7, 2022: Too often, boards fail to pick the best CEO candidate ing up,’ based on mutual respect and good communica- because they focus on the wrong criteria. A three-step plan will help identify the right person for the top job. More thought leadership on this topic: strategy-business.com/leadership

THOUGHT LEADER The Thought Leader Interview: Elizabeth Kolbert Human ingenuity has gotten us into a global environmental crisis. According to the Pulitzer Prize–winning author, it also has the potential to get us out. BY AMY EMMERT and grew up in Larchmont, N.Y., before earning a bachelor’s degree in literature from Yale University. While studying at the University of Hamburg in Germany as a Ful- bright scholar, she began stringing for the New York Times, where she ended up working as a reporter from 1985 to 1998. The New Yorker hired her as a staff writer in 1999, and shortly after reading Alley’s book, she was off to Greenland to explore a glacial ice coring operation. That trip was the first of many field stud- ies that inspired a three-part award- winning series in the New Yorker called “The Climate of Man,” fol- lowed by her first climate-related thought leader ‘A‘ book can change your needed to be told. She had been book, Field Notes from a Catastrophe, life,” says Elizabeth Kol- thinking that maybe she could settle then The Sixth Extinction, which bert, author of The Sixth the climate change debate once and won the Pulitzer Prize. In her most recent book, Under Extinction and longtime staff writer for all. Alley’s book, which laid out a White Sky: The Nature of the Fu- at the New Yorker. Kolbert isn’t be- his research on glacial ice cores, told ture, Kolbert takes readers on a trip ing self-referential. In fact, she’s a history of climate change span- around the world—from the Great talking about someone else’s book: ning more than 100,000 years. It Lakes of the United States to the The Two-Mile Time Machine, by offered confirmation that global Great Barrier Reef in Australia—ex- Pennsylvania State University glaci- warming was the big story Kolbert amining the devastating effects of Photograph by Matt Oner ologist Richard B. Alley. had been looking for, and set her humankind’s ingenuity on the envi- When Kolbert came across Al- on a path that eventually turned ronment and the ways in which that ley’s book in 2001, she’d been con- her from a political reporter into same ingenuity is being applied to templating a big project—some- a renowned climate observer and try to reverse the devastation. In thing really important that would commentator. an interview with strategy+business, 66 let her go deep and tell a story that Kolbert was born in the Bronx Kolbert discussed what she’s learned

about the climate crisis, how innova- didn’t say that, but that was his mes- versing the flow, the Great Lakes hy- tion is shaping the future of the nat- sage—that humans are now not ex- drological basin and the Mississippi ural world, and how business can actly in control but driving a lot River Basin were connected in a way tap into that innovation. of the major geological, biogeo- that they had not been before. They chemical cycles. should not be connected. They have S+B: In your writing, you refer been separate, certainly since the S+B: Your new book is all about, end of the last ice age. often to a new unofficial epoch in in your words, “people trying to solve problems created by people The reversal of the Chicago the earth’s geological history called trying to solve problems.” You relate River was successful in diverting this to chemotherapy, in which Chicago’s sewage. But then, toward the Anthropocene Epoch. Can you sometimes the medicine is as bad the end of the century, a new prob- as or worse than the disease itself, lem started to emerge. People real- explain how this era is defined and and you end up needing interven- ized that now invasive species could tions to mitigate the effects of move between the two basins. In how its concept is important the medicine. Can you give us particular, Asian carp were moving an environmental example? up the Mississippi toward Chicago. to understanding current environ- These fish are a big menace to a KOLBERT: The book begins with the lot of other fish and therefore mental challenges? story of the Chicago River, when, to ecosystems. KOLBERT: The Anthropocene is a “We have changed the climate thought leader term that was put into circulation already in a way that will be visible by a Dutch chemist named Paul J. many millions of years from now in Crutzen, who shared a [1995] Nobel the record, in the rocks.” Prize for discovering ozone-deplet- ing chemicals. He described this ep- in the very early part of the 20th Separating these two basins 67 och as one in which human impacts century, the flow of the river was re- again is just too hard because so on the planet basically vie with versed in order to prevent Chicago’s much infrastructure has gone up the great forces of nature that have sewage from being dumped into its around them. So people are trying always shaped our history. So, in drinking water. In the process of re- to impose some new form of con- the Anthropocene, human impacts are now on a geological scale. We have changed the climate already in a way that will be visible many mil- lions of years from now in the re- cord, in the rocks. I once interviewed Crutzen for a piece on the Anthropocene, and he told me that he meant that term to be a warning to the world. Basi- cally, you broke it, you own it. He

Amy Emmert emmert_amy@ strategy-business.com is a senior editor at strategy+business. trol, some new form of human engi- ies like New Orleans, which is one of cost of carbon dioxide removal. neering, to counteract the first. the fastest-sinking places around. Climeworks has an innovative proj- They’ve actually electrified a section The latest idea for how to fix ect in Iceland where it, in conjunc- now of the canal that was created this, which will cost billions of dol- tion with the Icelandic government, when the river was reversed. As you lars, is to actually create fake flood- is experimenting with injecting CO2 go there, there are these huge signs ing, or controlled floods. Water con- very deep underground in a certain warning you not to stick anything taining a lot of sediment would be kind of rock, where it reacts and in the water because you’re going to pulsed out at certain times to try forms calcium carbonate that can be permanently stored. I think that is going to be a “No one is doing enough. If we were huge push in coming years, because doing enough, emissions would not there’s already too much CO2 in the air, and if you’re rigorous about net be still going up, but they are.” zero, it means that if there’s any- thing in your supply chain or your business cycle that’s putting out car- get electrocuted. And I just read re- to build some land back to buffer bon, you have to take the same cently that plans are going forward places like New Orleans. amount of carbon out of the air— for another barrier that’s supposed Whether either of these solu- not by an offset, but by taking it out to keep these Asian carp out of the tions is going to work is a very open of the air. thought leader Great Lakes, and that’s a billion- question. But it is not easy technologically dollar project. to do it at scale. In fact, there’s a big Another example is the Missis- S+B: Business can be on both sides prize sitting out there if someone sippi River. We have prevented the of environmental crises like these, can figure out how to take a billion Mississippi from flooding to prevent contributing to the problem and tons of CO2 out of the air. many [tragedies]. But we didn’t real- trying to innovate a way out of it. ize that river floods built the whole Can you give us some examples S+B: A lot of companies have ramped Mississippi Delta. If you don’t let it of companies that are innovating up their commitments to reducing flood, you are no longer getting any creative environmental solutions? their carbon emissions, and there’s a strategy+business issue 107 land being built from the sediment KOLBERT: One is a company called lot of talk about net-zero goals. Is that’s left behind after the flood. So Climeworks, based in Zurich. They what companies are doing right now the whole Mississippi Delta is sink- are one of many startups, but prob- enough? If not, what more is needed? ing, and it’s sinking pretty fast. That ably the furthest along, that are try- KOLBERT: No one is doing enough. 68 has tremendous repercussions for cit- ing to master and bring down the If we were doing enough, emissions

would not be still going up, but they into almost metaphysical territory. I KOLBERT: I don’t think it has. This are. [Emissions rose by 6% in 2021.] can only legitimately claim that for- idea of a reset, which may be hap- So, we’re not doing enough, and that est preservation, let’s say, is an offset pening in certain spheres, is not hap- includes major corporations, minor if it was going to be cut down. If it pening in terms of energy usage. corporations, and everyone. was just going to stay there, it’s not There was a big drop at the begin- an offset. So there are a lot of games ning. Everyone was just sitting at I just read a report that looked being played with offsets. home, so of course carbon dioxide at these corporate pledges and what emissions dropped. But I think as progress is really being made, and I think we need to completely companies ramp up again and peo- it was pretty dispiriting. It’s very move away from the offset mentali- ple go back to the office, we’re al- easy to make pledges. It’s very hard ty. Your emissions are your emis- ready seeing a pretty big surge right to fulfill them. And that is because sions. And this goes for companies back to pre-pandemic levels of emis- carbon emissions are baked into and individuals. You have to take sions. There might be a lot more vir- every step of our manufacturing responsibility for reducing your own tual meetings, for instance, and that processes and every link in our emissions, not saying you’re carbon supply chain. “Carbon offsets are like the Wild I’m very worried that there’s just West. There’s no regulation and no going to be a lot of hand-waving and accounting for them. There are a lot greenwashing. Corporations are not of games being played.” people, but they are made up of peo- ple who are going to have to live on neutral because you bought a lot of potentially could be a game changer thought leader this planet and who have children offsets. That’s just a sophisticated in business travel. But the flip side is who are going to have to live on this form of greenwashing. that mass transit ridership is way 69 planet. And we are really talking down, which means more people are about—and I’m not being overly One thing to look at is whether commuting by car now. And people dramatic, sadly—the future of our the cost of reducing your emissions have moved farther from their jobs, world. This is not a game. by a ton is the same as the cost of which makes for longer commutes. buying an equal offset. Buying off- S+B: You mentioned carbon offsets, sets is comparatively very cheap. If We haven’t reset the whole we were really going to get to net energy economy—and how could through which companies and zero via offsets, or even toward net we have in two years? And I think zero via offsets, they would be get- the other thing that’s very disturb- individuals can purchase or invest ting more and more expensive. But ing about COVID-19 and what it they’re not. So that, to me, is a sign taught us—and I’m sure this mes- in efforts to remove or reduce that they’re not really on the level. sage was not wasted on corporate America—was that people can be emissions. But are these just a way S+B: Do you think the pandemic has convinced of a lot of things that are not true. That’s extremely danger- for companies to dodge direct changed anything about the trajec- ous for all of us. responsibility? tory of climate change? KOLBERT: My view of carbon off- sets—and I try to delineate pretty clearly what I know and what I only know because I read about it just like everybody else—is that offsets are like the Wild West. There’s no regu- lation and no accounting for them. To be a legitimate offset, you get

S+B: How can corporate America help with greater potential to swiftly and porting Under a White Sky, I had to to change the messaging about significantly improve the climate acknowledge that that possibility in climate change? picture? many ways is gone. Even what we KOLBERT: I think we need our cor- KOLBERT: I try not to speak outside call wilderness areas in the US are porate leaders and our government of my area of expertise, but I would heavily managed. We live in a man- leaders on the same page, saying it’s say that one thing that is crucial here aged world, and we have to. time for action—action that isn’t is that investors have to have a clear I do think that we, unfortu- comfortable. sense there will be a financial cost to nately, have crossed a line, probably I think it would be very helpful letting emissions go at their current without realizing it, or many differ- if corporate leaders would say that rate, and therefore a payback in in- ent lines. In the case of coral, for in- pretty much everything needs to be vesting in the best technologies. If stance, it’s very stark. You’re not get- on the table right now. Because our investors thought, for instance, that ting those reefs back by just doing world is fundamentally dysfunc- there was going to be a carbon tax, nothing and praying. And you’re not tional. That’s pretty bad for busi- that might change a lot of things. even getting them back by dramati- ness. And we seem to be trying to cally reducing carbon emissions, al- just keep our blinders on for as long S+B: There’s a poignant moment though that might save those that as possible. in Under a White Sky, when your late remain. So the case for some kind of Also, a lot of corporations have, friend Ruth Gates, who was working intervention becomes more and on paper at least, fairly impressive on developing “super corals” that more compelling. and laudable climate goals, but then could withstand the effects of global Whether there’s a grand inter- give money to candidates and politi- warming, talks about how a lot of vention that will save us is the cians who are standing in the way people want to “go back to some- big question at the heart of Under of doing anything about climate. thing.” She acknowledges that there a White Sky, and it’s the question So, it’s a weird, schizophrenic situa- is no going back, and she accepts a that I don’t think at this point we tion. If corporate business leaders future “where nature is no longer can answer. But I think we have could say they’re no longer support- fully natural.” To me, this reflection to hope that intervention is the an- ing candidates who are blocking struck a pandemic chord. We’ve all swer, because the alternatives are action on climate change, things become conditioned to the idea of a would change so fast your head “new normal.” But in our pandemic pretty bleak. + thought leader would spin. And that would be such story, although the new normal is a positive move. born out of loss, we also make important gains in stepping forward S+B: PwC recently conducted an differently. Assuming interventions analysis of climate technology can succeed in saving the planet, do investments and found that the vast you feel this way about an environ- majority of investments are made in mental “new normal”? technologies with a proven track KOLBERT: Well, that’s a big assump- strategy+business issue 107 record but lower emissions- tion. But I’m very ambivalent. I defi- reduction potential than newer, nitely consider myself to be a good, unproven technologies. What do you old-fashioned environmentalist who think should be done to encourage says, “The less you tinker, the bet- 70 investment in emerging technologies ter.” But even in the course of re-

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Books in Brief Business needs to adjust thing as an apolitical business. The Zammit-Lucia’s ultimate goal is its political antennae New Political Capitalism was pub- to live in a world in which “innova- by Deborah Unger lished on February 3, three weeks to tive energies of private enterprise the day before the war in Ukraine operating within competing, well- The New Political Capitalism: began, and it’s safe to say that its au- structured, and well-regulated mar- How Business and Societies thor would not have wanted such a kets is vital to progress.” But for that Can Thrive in a Deeply Politicized stark illustration of his thesis. In fact, to happen, business needs to have “a World, by Joe Zammit-Lucia, his message for this new age is opti- deep understanding of how politics Bloomsbury, 2022 mistic: businesses will thrive when and the constant contestation of po- T he argument that business- they understand and act on the po- litical ideas work, how they drive as es today need to be more litical dimension of their operations. well as follow contemporary culture, politically aware regarding And behaving this way also can help and how to embed these under- solve the existential challenges of the standings into the core of their busi- their operations and supply chains present while ultimately providing a ness models.” may seem like a truism. But it’s better future for all. He revisits the topics of global- probably also the case that very few In the book, Zammit-Lucia, ization and the power of brands en CEOs thought they would wake up who is the founder of Radix, a think route to describing and giving ex- on February 24, 2022, to face a deci- tank that positions it- amples of what he sees sion about how to respond to the self in what it calls the as the model political invasion of Ukraine by Russia. Some “radical center,” walks company. One such ex- books in brief (including PwC) started the process us through a decades- ample is Patagonia, the of withdrawing their businesses long evolution of in- clothing company that from Russia; others initially chose to dustrial, shareholder, makes a feature of its continue operating as usual. But and stakeholder capi- environmental politics threats by the public to boycott the talism. His two previ- and was decades ahead latter, amplified on social media, ous books, with co- of its time when it was forced household names into U- author David Boyle, founded by US rock turns and apologies. also from Radix, tack- climber and environ- Illustration by Noma Bar We’re now experiencing what led the problems fac- mentalist Yvon Choui- Joe Zammit-Lucia calls, in his new ing liberal democracy and global- nard in 1973. Its global supply chains book of the same name, the age of ization—both of which he is in are designed to minimize the com- the new political capitalism: a world favor of. Political capitalism, he ar- pany’s environmental footprint, and where politics and business collide gues, is central to the success of it enhances the longevity of its prod- 72 in real time and there’s no such both projects. ucts by offering free repairs. In 2002,

it announced that 1% of its profits land, and the game was won when tic as a rotary phone. His evidence? would go to environmental causes. the player with the lowest amount of The inexorable rise of global threats, money managed to double it. Under whether climate change or armed Chocolate maker Tony’s Choc- “Monopolist” rules, successful play- conflict, and powerful multifaceted olonely is another model political ers bought properties and collected stakeholders. Which brings us up to company—and an example of what rent if other players landed on them. the present, when CEOs face real Zammit-Lucia calls a “purely politi- Here, the winner was the person political decisions such as whether cal brand.” The company was found- with the most money. to do business with Russia during ed in 2005 by documentary film- the war or to buy cotton from makers who wanted to change the When Parker Brothers was Xinjiang province over claims of horrendous working conditions of shown a modified version of the worker abuses. Ghanaian cocoa farmers. The film game by an unemployed salesman they made about child labor didn’t named Charles Darrow, it released Outlining the prescription for have the impact they were hoping change is easier than coming up for, so the filmmakers started their with a solution. In a chapter on cul- own chocolate company. When it tural leadership, Zammit-Lucia sug- was sued for claiming to be 100% gests there are three components to child labor–free by another choc- succeeding in the politicized world. olate maker who maintained that First, accept that business is political such a thing was impossible, the and it has an important role that goes beyond financial performance; We’re now in the age of the new second, lead from the outside in, to political capitalism, and there’s no understand the effect of the com- such thing as an apolitical business. pany on the world; and third, “ex- ecutives need to think as citizens— court rejected the suit. The publicity only one version. Monopoly was not just about themselves but about books in brief raised the profile of Tony’s Choc- a hit, and Darrow became an in- their customers and everyone else olonely. As a result, its workers’ stant millionaire. As Zammit-Lucia they do business with.” Using the wages, which are tied to revenues, writes, the Darrow rags-to-riches response to the pandemic as an also rose. The company had made its story “made a better marketing example, he focuses on the collabo- political point. backdrop than a social activist agi- rations between companies and gov- tating for a fairer, collaborative ernments to develop, test, and roll Amid its repeated refrain that society.” It was a game of its time. out vaccines. His hope: that we don’t companies need to think politically, “Who knows where we would all be forget what can be done for the pub- the book contains delightful nug- today had Parker Brothers marketed gets from the history of capitalist Prosperity instead of Monopoly?” lic good if we work together. + culture. One of them is the story of Zammit-Lucia writes. Elizabeth Magie, a progressive ac- Deborah Unger tivist who in 1904 invented a board Flash forward through the de- is a senior editor at strategy+business. game called the Landlord’s Game. regulated worlds created by Rea- The game had two sets of rules to ganism and Thatcherism to the era 73 illustrate how different constraints of financial capitalism, the un- affect player behavior and was de- healthy relationship between law- signed to show how new landlord makers and business elites, and regulations could hurt poor ten- Milton Friedman’s “the business of ants. Under “Prosperity” rules, ev- business is business.” Zammit-Lucia ery player gained money when argues this approach to the capital- someone bought a new block of ist enterprise is now as anachronis-

Follow your S curve Johnson, a consultant and speak- Indeed, S curves have been used in er, has a knack for picking out theo- many arenas since then, and Rog- by Theodore Kinni ries from the discipline of innovation ers’s book is among the most cited and applying them to individual in the social sciences, according to Smart Growth: How to Grow Your growth. In her 2015 book, Disrupt Google Scholar. People to Grow Your Company, Yourself, she used Clayton Chris- Johnson’s S Curve of Learning by Whitney Johnson, Harvard tensen’s theory of disruptive innova- follows this well-established path. Business Review Press, 2022 tion as the foundation for a guide There’s the slow advancement to- R ecently, someone on to career-changing moves. In Smart ward a “launch point,” during which LinkedIn asked me for ca- Growth, Johnson applies Everett M. you canvas the (hopefully) myriad reer advice. LOL. The ink Rogers’s theory of innovation diffu- opportunities for career growth sion to forging a career path. available to you and pick a promis- line of my career is a random squig- In his 1957 doctoral disserta- ing one. Then there’s the fast growth gle with lots of breaks and blotches. tion, Rogers showed that the num- once you hit the “sweet spot,” as you It isn’t until about halfway through ber of Iowa farmers adopting a new build momentum, forging and in- that the line begins to look like it weed killer followed an S curve: habiting the new you. And, finally, might be going somewhere. That’s adoption started slowly, with only there is “mastery,” the stage in which the point at which I found some- a few farmers willing to take you might cruise for a while, reaping thing I enjoyed doing a chance on the new the rewards of your efforts, before that paid enough for product; shot upward you start looking for something books in brief me to keep doing it. I as the majority of new, starting the cycle all over again. grabbed that like a farmers became con- Johnson lays out six different drowning man does a vinced of its benefits; roles that you must play as you travel life ring. and then leveled off as along her learning curve. In the I grabbed Whit- the remaining, most launch phase, where I spent what felt ney Johnson’s new cautious farmers final- like an eternity, you first act as an book, Smart Growth, ly committed. By the Explorer, who searches for and picks with similar enthusi- time Rogers’s seminal a destination. Next you become a asm, because it seemed Diffusion of Innova- Collector, amassing the information strategy+business issue 107 there might be a more tions was published in and resources needed to confirm rational and ordered way to view my 1962, the rural sociologist was con- that the destination is the right one career. There is. As Johnson might vinced that the S curve of innova- before pushing toward it. In the tell it, I didn’t flounder for years; I tion diffusion depicted “a kind of sweet spot, you become an Acceler- 74 followed the “S Curve of Learning.” universal process of social change.” ator, putting the information and

knowledge you collected to work, of a red herring. True, Johnson The other warning is a reality and then a Metamorph, for whom, dedicates certain sections to how check. As far as I can tell, most peo- as Johnson says, “‘I do this’ evolves leaders can help employees travel ple’s careers don’t conform to neatly into ‘I am this.’” In the mastery their S curves, as well as tips for drawn S curves. No matter how phase, you assume the role of An- chor: your destination has been at- In the S Curve of Learning, there’s tained, and you bask in your devel- slow advancement to a “launch point.” opmental glory. When you tire of Then fast growth when you hit the the easy life, you become a Moun- “sweet spot.” And finally, “mastery.” taineer in search of new S curves to summit. managers. There are also tables that those careers look in hindsight, they books in brief track the emotions employees may are more often random, emerging If this all sounds a little pre- be feeling as they traverse each over time from a miasma of inten- cious, well, sometimes it is. John- growth stage, or that briefly describe tion, hard work, circumstance, and son’s style is inspirational and aspira- how to help people depending on dumb luck. In this regard, Smart tional, but she also grounds her ideas the maturity level of the company Growth should come with a dis- in concrete advice and warnings. In (i.e., young and/or growing, advanc- the chapter on being an Explorer, for ing and/or mid-stage, and historic claimer: results may vary. + example, she provides seven ques- and/or complex). But the sections tions for evaluating an S Curve of aimed directly at managers total Theodore Kinni Learning, such as, “Is it easy to test?” fewer than 30 pages. is a contributing editor of strategy+business. and “Is the reward worth the cost?” He blogs at Reading, Writing re: Management In the chapter on being a Mountain- I have a couple of other warn- and is @TedKinni on Twitter. eer, she warns of two dangers: free- ings. One concerns the book’s un- fall, when the self-satisfied slip (or derlying assumption that career 75 get pushed) off their summits, and opportunities are boundless. It’s the death zone, where learning stops obvious that they aren’t for many and careers stagnate. people, even though Johnson in- cludes several stories of people who Managers may want to grab overcame seemingly unvaultable the book, because Johnson’s S curve barriers to success. could help them guide the career de- velopment of their employees. Be forewarned, though: the book’s sub- title, How to Grow Your People to Grow Your Company, is something

How the Fed came lenge the notion that central banks work with colleagues in January through the pandemic are designed to be sober, slow- 2020. Then the pandemic hit. moving institutions that absorb The Fed was alert to the serious- by Mike Jakeman huge amounts of information to ness of the pandemic faster than make small and gradual tweaks to the administration or Congress. Ac- Trillion Dollar Triage: How economic policy. “Building up the cording to Timiraos, it faced two Jay Powell and the Fed Battled a Fed’s brand and making the institu- daunting challenges. The first, mak- President and a Pandemic—and tion a paragon of diligent, apolitical ing it as easy as possible for house- Prevented Economic Disaster, by analysis struck Powell as something holds and firms to borrow and repay Nick Timiraos, Little, Brown, 2022 he might be uniquely equipped to debt, was the more straightforward. T he first thing people know accomplish,” writes Nick Timiraos, Powell used former Fed chair Ben about Jay Powell is that he chief economics correspondent of Bernanke’s playbook of cutting rates is the chair of the US Fed- the Wall Street Journal, in his new to zero and embarking upon a tur- book on Powell’s Fed, Trillion Dol- bocharged version of quantitative eral Reserve. The second is that he lar Triage. He wanted the Fed to easing. The second, and more com- is not an economist. After Powell continue to talk more and in lan- plicated, challenge was ensuring the joined the Fed, he complained to a guage that everyone understood. He continued flow of money around the colleague: “They talk to me like I’m also sought to investigate whether global financial system as the mar- a golden retriever.” Despite his pro- the Fed was delivering a strong ket for US Treasuries seized up. This fessorial appearance, the former cor- economy for ordinary Americans. was a problem that the Fed grappled porate lawyer was conspicuous in a To do this, he settled on a nation- with continually in the spring of building full of eco- wide tour, dubbed 2020. It dragged the bank further nomics Ph.D.s. Yet “Fed Listens.” and further into new territory. Each Powell’s plainspoken What Powell heard time Powell and his colleagues con- manner and evidence- was that the Fed was sidered expanding its reach, into based approach meant paying too much at- buying corporate bonds, municipal that within a decade he tention to inflation and debt, or exchange-traded fund secu- was at the helm of the too little to unemploy- rities, they asked themselves varia- books in brief biggest central bank in ment. That realization, tions of the same question: were they the world, as the global coupled with the fact prepared to do all they could to re- economy faced its stiff- that globalization had duce the chance of a short-term di- est challenge in genera- changed the economy saster without knowing the long- tions. Powell’s leader- so that it was capable term consequences? And each time, ship during the acute phase of the of tolerating much lower un- they decided that they were. COVID-19 pandemic helped to employment without stoking infla- Powell’s willingness to conduct prevent a financial meltdown, but tion, drove Powell to resolve that a “full-court press on the market,” how did the appointment of an out- the inflation target should be made in the words of one analyst, meant strategy+business issue 107 sider change the most important in- truly symmetrical: if inflation had that confidence in the economy was stitution in economics? been allowed to run below 2% for a restored relatively quickly. Conse- After he was tapped for the period, it should also be allowed to quently, several of the Fed’s most chairman role by Donald Trump in exceed it for a similar duration. He unorthodox measures were used 76 early 2018, Powell sought to chal- shared a draft of his new frame- sparingly. Timiraos argues that

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Powell practiced a key tenet of crisis inflation soaring. When inflation pandemic meant that it assumed a management: by showing a willing- began to accelerate in mid-2021, bigger and bigger role in combating ness to do more, he ended up having Powell repeatedly described it as it, at the same time that it also tried to do less. The approach also enabled “transitory” and focused on the to correct its errors of the past. Its a faster economic recovery than need to repair the jobs market. Ac- monetary stimulus collided with a many had expected. However, this cording to Timiraos, “the Fed’s new belated and enormous wave of gov- ernment spending. Long known as the lender of last Here, a counterfactual might be helpful. What would have happened resort, at the height of the pandemic if the Fed had not pulled every lever it could reach? Powell’s gamble of a the Fed became “the backup lender lifetime was that the US would be to the entire world.” dealing with a worse outcome than an uncomfortable spike in the cost of living. A yearslong depression was avoided. So too was a permanent rapid recovery unwittingly dragged framework…effectively committed slump in inflationary expectations. Powell’s two major changes at the officials to react too late.” By the Timiraos’s sympathetic study gives Fed—its reprioritization of un- start of 2022, the labor market was Powell plenty of credit for his short- employment against inflation and strengthening rapidly, but inflation term crisis management. But the books in brief the size of its pandemic response— was at its highest point in 40 years. long-term challenge, that of fixing into conflict. Had Powell’s Fed overdone it or the system that led to such reliance At the time of the Fed Listens merely been unfortunate? on the Fed, awaits. + tour, the central bank had spent a Timiraos’s conclusion, that the decade trying to push inflation up. Fed has been asked to do too much, Mike Jakeman Powell was worried inflationary ex- feels like the right one. Long known is a freelance journalist and has pectations would become stuck at a as the lender of last resort, at the previously worked for PwC and the permanently low level, echoing height of the pandemic it became Economist Intelligence Unit. Japan’s “lost decades.” Holding in- “the backup lender to the entire strategy+business issue 107 terest rates lower for longer to focus world.” During the Powell era, it has on driving down unemployment also stepped in to try to reduce both seemed a low-risk strategy. But the unemployment and inequality in Fed did not reckon on pandemic- the US. That the Fed quickly under- 78 related supply problems sending stood the ruinous potential of the

A guide to business leaders likely will encoun- erything in pursuit of wealth and books in brief growing older ter the problem long before their status. Besides, almost everyone dotage, for aging societies and low blessed with choices in life could 79 by Daniel Akst birth rates imply that executives benefit from heeding the author’s ad- worldwide are going to have to get vice to find one’s “deep purpose” and From Strength to Strength: used to hiring and managing more strip away whatever doesn’t serve it. older workers. Imagine Marie Kondo turned loose Finding Success, Happiness, on your calendar. Executives presiding over a gray- and Deep Purpose in the Second ing workforce, and those who are Business leaders who embrace themselves graying, or who hope to the author’s point can use it in two Half of Life, by Arthur C. Brooks, face the phenomenon gracefully and ways: to rein in their own worst meaningfully, could do worse than workaholic impulses, and to help Portfolio, 2022 to consult From Strength to Strength, team members give proper weight Brooks’s brief, earnest, and pleasing- to the things outside work that con- A rthur C. Brooks is a striv- ly upbeat book on the subject. As an tribute so much to a meaningful er. As a young man, he aging striver, Brooks knows what life (an effort that might even was such an accomplished you are up against, and, as a seeker, improve productivity). French horn player that he was able he offers useful guidance for finding to make a living as a classical musi- a path forward. Managers will also want to note cian. He later obtained a Ph.D. and the author’s comments about abili- ran the American Enterprise In- His insights are sometimes ob- ties and age. Brooks argues that in stitute (AEI) for a decade. He also vious, yet you need to hear them various ways our powers begin to became a fluent Catalan speaker, a anyway. The book’s most important wane long before we are truly old. columnist for the New York Times, He experienced this when his skills and a father. message, unwelcome on the French horn started to de- though it may be, is cline during his 20s and then dete- But Brooks is also that you are going to riorated so steadily that he decided a seeker. Raised an ob- die. You say you know to find another line of work. servant Protestant, he that already? Well, you converted to Roman don’t act like it. This is Yet, as we age, we gain powers Catholicism as a teen not to say you should as well. Drawing on the work of and has since explored abandon your career British psychologist Raymond Cat- a range of religious tra- and your long-range tell, who in 1971 posited that people ditions during a life- plans. But as we age— possess two types of intelligence in time of reading. He’s as our time grows a mix that varies with age, Brooks made spiritual jour- shorter—we should al- writes: “The first is fluid intelligence, neys to India and has low a healthy awareness of mortality which Cattell defined as the ability cultivated a personal to influence our professional and to reason, think flexibly, and solve relationship with the Dalai Lama. personal choices. And we should ac- novel problems. It is what we com- knowledge what an obsessive focus monly think of as raw smarts….” The combination of striver and on work can and cannot do for us. Innovators tend to have fluid in- seeker makes Brooks an interesting Fortunately, a growing sense of telligence in abundance. Cattell guide to the problem of aging for the end’s nearness can help us recog- noted that “it was highest relatively the kind of driven overachievers nize the foolishness of sacrificing ev- early in adulthood and diminished likely to be reading this article. Get- ting old is something all of us face sooner or later, if we are lucky. But

rapidly starting in one’s thirties The trick for aging achievers many religious figures for my taste. and forties.” like Brooks is to play to these new He practices his faith daily, but Cattell’s second type of smarts strengths while letting go of the From Strength to Strength reflects a is “crystallized intelligence,” or the powers that depended on youth. Fol- healthy spiritual ecumenism by en- ability to use one’s increasing store lowing his own advice, he stepped compassing other religions and of knowledge. In other words, writes down as chief of the AEI in his mid- practices, including Buddhism and Brooks, “when you are young, you 50s and now teaches at Harvard. Hinduism. Few comparable books have raw smarts; when you are And yet, he says, “I am not exhorting address the human tendency to be- old, you have wisdom.” Crystallized you to hate and reject the world; to come more interested in spiritual matters as we age, and fewer still Aging societies and low birth rates offer encouragement. Brooks is an enthusiastic guide, imply that executives worldwide are but he is asking a lot: that, as you age, you live an examined life, that going to have to get used to hiring you embrace your newfound capaci- and managing older workers. ties rather than rage against the ebb- ing of your old ones, and that you lay off the frantic tap dancing you hope will gain the world’s admira- intelligence seems to grow with age live like a hermit in a Himalayan tion—if only because sooner or later and tends to make older people bet- cave. There is nothing bad or shame- the applause must stop. To make ter historians and teachers. Brooks ful about the world’s material abun- things easier, he boils his philosophy argues that high achievers sooner dance, and we are right to enjoy it.” down to a mere seven words: or later have to give up roles that Rather than ticking off a bucket Use things. are largely analytical or depend on list, he decided that he would teach, Love people. quick thinking in favor of roles that reduce his needs, and focus on peo- Worship the divine. exploit their superior ability to as- ple. Like many who write about Good advice, and better yet, he semble and apply what they know— happiness, Brooks emphatically ad- leaves each of us to decide on the di- books in brief and that aid the young. vocates for investing in human rela- vine part for ourselves. As an atheist, People have long known this; tionships—potentially a fraught area I approve. Everyone can have a deep the author quotes the Roman for business leaders, who may find it purpose, with or without religion, statesman and philosopher Cicero, easy to form shallow, transactional and getting older can help you focus who believed that while the old friendships but not the deeper ones on it. + should “have their physical labors that take time and might arise from reduced,” at the same time, “their the workplace if one weren’t the Daniel Akst mental activities should be actually boss. Friendships are something to is a business writer, author, and novelist strategy+business issue 107 increased. They should endeavor, work on, the author says, and I based in New York’s Hudson Valley. His too, by means of their counsel and agree. It’s surprising how few people books include Temptation: Finding Self- Control in an Age of Excess. practical wisdom to be of as much seem interested in doing so. service as possible to their friends Brooks is frank about his Ro- and to the young, and above all to man Catholicism, which I found re- 80 the state.” freshing even if he quotes a few too

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To err is human, formance, and deepen the meaning work that in many ways departs to regret, divine of their work. from prevailing academic research Drawing on a mix of anecdote (which tends to analyze regret in by Tom Ehrenfeld and social psychology, The Power of static domains such as work, family, Regret is an attempt to understand and health). Pink’s categories are The Power of Regret: How and make use of the complicated much more fluid. Foundation re- Looking Backward Moves Us mental calisthenics that individuals grets stem from a failure to be Forward, by Daniel H. Pink, conduct retroactively—in Pink’s responsible, conscientious, or pru- Riverhead Books, 2022 words, “the stomach- dent, such as failing to W hat if you had started churning feeling that save for retirement saving for retirement the present would be from an early age or in your 20s? Or if you better and the future other failures of fore- brighter if only you sight. Boldness regrets had pursued a graduate degree in- hadn’t chosen so poor- refer to chances we stead of plunging immediately into ly, decided so wrongly, didn’t take, generally the job market? How much richer a or acted so stupidly in one-time opportuni- life would you have if you’d kept in the past.” ties to act that we turn touch with close friends from the In 2020, the best- down because of the past? If these questions spark a tinge selling author of Drive, risk involved. Moral of regret for you, that’s not necessar- When, and To Sell Is regrets refer to “bad books in brief ily a bad thing. Human refashioned himself as a road” decisions we take that com- A new book by Daniel Pink, modern-day guru of all things re- promise our belief in our own good- one of the world’s leading man- gret. Pink and a team of researchers ness. Connection regrets result from agement thinkers, challenges the carried out the American Regret neglecting (usually over the long notion that regret is a negative emo- Project, a survey of nearly 4,500 US term) people who establish our own tion that should be avoided. Regret, individuals touted as “the largest sense of wholeness, which ends up he argues, can be an indicator “of quantitative analysis of American at- eroding our sense of belonging to a a life well lived,” if only we identify, titudes about regret ever conducted.” greater group. codify, and process it in the right He also launched a website, the By reframing regret in this way, strategy+business issue 107 way. What’s more, he convincingly World Regret Survey, which col- Pink argues that we can more easily claims that by enlisting regret’s lected more than 16,000 regrets identify what really makes us tick, “shape-shifting powers as a force for from people in 105 countries. and tackle what has truly kept us good,” people can sharpen their From this corpus of anguish from realizing our goals. The theory 82 decision-making, boost their per- and disappointment comes a frame- is that open-minded individuals

willing to approach regret pragmat- The third step follows naturally: engaging prose, characteristically ically can adjust their future behav- practice self-distancing by detaching full of insight and humor. ior for the good, and that categoriz- yourself from your behavior through ing regret into a neat framework time, space, and language. Create a The result is a breezy guide that helps those individuals identify mindful detachment that frees you focuses its advice more on psycho- missed opportunities and clarify to both experience and learn from logically processing the outcomes of true value. your regrets. At the end of the path, actions than on trying to produce Pink promises that your regret will better actions. But, with tongue Pink then prescribes a three- be transformed into a powerful force slightly in cheek, I can assure you, step process. First, create a mecha- for stability, achievement, and pur- you won’t regret picking up this nism of self-disclosure regarding be- pose, and you will be released from book. Learning to use the hard les- havior you regret. Disclose your sons of our past to plan a better fu- ture is tried and true advice worth By reframing regret, we can more repeating. Beyond that, there’s more easily identify what really makes us to be gained from deepening one’s tick, and tackle what has truly kept consciousness about why we make us from realizing our goals. decisions in the present—and lever- aging that to make better choices regret to yourself and to others long-standing burdens and will be books in brief through simple actions such as keep- able to give yourself permission to now and forever. + ing a regret diary or talking into a pursue your dreams. voice recorder. Second, reckon with Tom Ehrenfeld your regret through self-compassion, Though it’s full of practical ad- is a freelance writer and editor based which he presents as “a middle road vice, Pink’s book might ultimately in Cambridge, Mass. Formerly a writer/ in handling negative emotions—not be more entertaining than it is inspi- editor with Inc. magazine and Harvard suppressing them, but not exagger- rational. His notion of regret as the Business Review, he is also the author of ating or overidentifying with them way to make sense of how to avoid The Startup Garden. either.” Building an awareness of re- bad decisions (actively or inactively) grettable behavior helps alleviate the is a clever hook. But the heart of the 83 psychic turmoil and enables one to project is the wealth of touching sto- move forward productively. ries he has unearthed through his research—helped along by Pink’s

Strategy Shop Leaders need to be good writers, too Effective management requires strong communication skills, including writing. BY ADAM BRYANT I mproving your writing skills puntal or eschew—that rarely come byzantine explanations for simple may sound like one of those ev- up in everyday conversation. procedures like how to put on a seat- ergreen goals, but it’s particu- belt. Or try making sense of the Whatever the intention, WSL larly relevant for leadership right leads to an overall tone that adds “about us” pages on some corporate now. After all, most communica- distance between the writer and the websites, particularly those of tech tions from leaders, whether they are reader. And that is precisely the op- firms. “Your database instances are company-wide emails, memos, or posite of what is needed now from deployed in a unique virtual private tweets, start out in written form. leaders. A more conversational writ- cloud (VPC) to ensure network iso- Getting them right helps build a ing tone shortens the distance be- lation.” Translation: we keep your strong culture—a bigger challenge tween author and audience. It feels data safe in our cloud. now that some form of hybrid more real, which is what everyone To prevent WSL and expert- work is going to be with us for a craves at a time when they are living itis, it’s useful to keep in mind a long time. more of their lives online. lesson that Susan Salka, CEO of I have two overarching tips to To guard against WSL, just ap- California-based AMN Healthcare, share about how to be a better writ- ply this simple test when reviewing learned from her father: “If some- er. Although I work in leadership what you’ve written: Does this body was talking over his head, consulting now, I was a reporter and sound like me? Would I talk like using big words, being too complex, then an editor for 30 years, and I’ve this if I were speaking face-to-face or trying to act too sophisticated, seen time and again the traps that with a colleague? Reading aloud he would say, ‘Would you break end page writers fall into. Here are two of the is a good way to check for the WSL that down to cows, chickens, and biggest ones. If you can recognize problem. taters?’…Years later, I realized that and avoid them, you’ll be a better The expert-itis problem. “Expert- the message is, keep it simple. Don’t writer, communicator, and leader. itis” happens when people get too overcomplicate things.” The WSL problem. WSL stands close to their subject. They assume Does all your writing, as a lead- Illustration by Martin León Barreto for writing as a second language. I use everyone else knows as much as they er and in your organization, pass the it as a shorthand to describe how do, so they focus on the nuances of a “cows, chickens, and taters” test? + people will often treat writing as if it particular topic or insight without were a completely different form of explaining the context. Adam Bryant communication from the way they Expert-itis crops up everywhere. is a managing director of the ExCo Group, speak. They use sentence structures It’s why air travel can sometimes a senior-leadership development firm. that feel less natural, and they start seem so stressful. Operational com- He is the author, with Kevin Sharer, of reaching for more formal or fancier plexity often bleeds into communi- The CEO Test: Master the Challenges That Make or Break All Leaders. 84 words or phrases—such as contra- cations, confusing customers with

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