TEBR_JanFeb2022_zinio

THE BRAND BASED VIEW from being a design enabled technology provider to a truly expensive brand. Tesla too, with Elon A framework that has the potential to cut Musk at the helm, has transformed itself by through this ambiguity could be a point-of-de- trading up. Other trading-up examples include parture in the strategy field. This approach goes P&G’s launching of its high-end skin-care product beyond the traditional examination of resources SK-II based on the branding strategies based on as a source of value, and focuses more on the mystic image, customize service through beauty councilors, and the The traditional resource based view saw the firm as a emphasis on the benefits of herbal ingredients. collection of unique resource and capability pool that, Suntory’s Yamazaki if utilized in a distinctive way, can be employed to drive competitive advantage. Valuable resources, however, can brand is another case of trading up its image as a high-end whisky brand. take a variety of forms. Many of those were overlooked On the other hand, by the traditional definition of a core competence. brands like Infiniti, the luxury vehicle division of Nissan is trading down with executive models of brand itself. Termed Brand Based View, the its cars. This is a particularly powerful strategy approach derives its strength from its ability with which the luxury brands have survived to highlight why certain brands are successful- through multiple generations over hundreds of and where others are not. To answer this, one years. A framework that has the potential to cut needs to think what the owner of the idea had in through this ambiguity which we term as brand mind? Who were the customers? How was (s)he based advantage. Termed, Brand Based Value, differentiating the products, goods and services? the approach derives its strength from its ability When did the product looked for ways to trade to highlight why certain brands are successful up or trade down? Apple has traded up its image through generations and others are not. STAGES OF BRAND BASED VIEW ACTIONS NEEDED The 3P Idea Create extreme differentiation: Define the dominant brand idea – intricately linked The Story to a person, philosophy and purpose. The Vision of the Founder The DNA, Codes & Brand Identity Heritage, anchorage and purpose Create Desire and Aspiration through A culture of excellence communities Integrity, humanity and trust in the community it serves Personality and Self-image. Brand image with physical characteristics and rela- The BBV Strategy tionship with consumers and their eco-system Logic of need – utilitarian practical values Logic of desire – existential, utopian, mythical values Logic of interest – non-existential economic values Logic of pleasure – non-utilitarian, esthetic Credibility, Legitimacy and Authenticity interwoven together Notion of a strong brand is sticky and sustainable in the age of open innovation, digital and mobile economies The ultimate superiority in Brand Experience as a differentiating factor www.europeanbusinessreview.com 51

BRANDING THE FRAMEWORK Vuitton brings to mind connotations of luggage and travel. They all embolden the vision of their BBV consists of the following key elements founder Thomas Burberry, Hans Wilsdorf and which play a major role to strengthen a firm’s Theirry Hermes respectively which continues brand based advantage. after so many years. They created their commu- nity and till date consumers flock to this THE 3P IDEA community due to its values of integrity, human- istic and trust in the brand. The dominant idea in creating a Brand Based View rests on a person, a philosophy and a sense Storytelling has, as a result, been a key of purpose. Take the example of some of today’s enabler for the dream factor. A brand’s story is leading technology companies. Apple (Steve Jobs), built on its ethos, which is in fact the myth. Once Amazon (Jeff Bezos), Meta (Mark Zuckerberg), they myth is created it travels seamlessly through Alibaba (Jack Ma), Farfetch (Jose Neves) and communities. A classic example of this is the Tencet (Pony Ma). All of them has been influ- tagline of DeBeers, which stated way back in 1947 enced substantially by their founders, with their that “A diamond is forever. How else could two philosophy and their purpose to create something months’ salary last forever?” This simple tag line they believed in. All in their life time. And they transcends simultaneously the logic of desire, went to become multi-billion dollar businesses. interest, pleasure and need. It persists after 75 years. It was written by copywriter Mary Frances THE STORY Gerety at Philadelphia agency N.W. Ayer, which made it one of the best campaigns of the twen- tieth century. The advertisement invented the modern concept of the engagement ring and the diamond’s relationship with love and marriage. The story of the intimate history of Marilyn The use of story is perhaps the best way to convey a brand’s identity and ethos to its clients2. This is perhaps what people want most: the stories of today, the anecdotes, stories of people who are connected and who share experiences. The stories are of the founders, his or her vision. The heritage, the history and the purpose of why the brand was created are critical to attain the excel- lence to survive the winds of time and change of generations. Competitive advantage based on the storytelling is likely to lead to timeless- ness to continue with integrity, humanity and trust in the community it serves. People don’t forget stories. If one speaks about a brand and associates it with an important experience from one’s life, people will remember it much better than if one merely explains the product to them. For example, Burberry has been related to the trench coat used in England, Rolex is associated with sports, perseverance, and time, Hermès evokes saddles and leather interiors, and Louis 52 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Monroe and the perfume Chanel No. 5 have brand. It is its essence. The DNA is the intangible enticed people for generations with her famous aspect that is translated into the brand codes, quote about wearing only Chanel No. 5 to bed. which are the visual expression of the Brand J’Adore, the perfume from Dior, tells the story DNA. The DNA and Codes are what constitute of its creation in the the major part of the short film Le Parfum. If one speaks about a brand brand story-telling It emphasizes the experience. In the story that the perfume and associates it with case of Dior, the DNA was created from an important experience defines the consumer- flowers around the from one’s life, people will a princess, a star, the world, combining the center of attention; scents of Damask rose, remember it much better utterly feminine and Arabian jasmine, and than if one merely explains delicately beautiful. Indian tuberose, while the product to them. And the codes of the the glass bottles are brand are an expres- blown in Murano, Italy. sion of this - the roses, the color pink for femininity and gold for opulence, and the THE DNA, CODES & BRAND corolla which inspires the full skirts and silhou- IDENTITY ettes of Dior ball gowns. In contrast the DNA of Chanel is that of women’s liberation from full skirts, flounces and overt femininity. This trans- The DNA of the brand is what makes it unique, lates into the straight silhouettes of the Chanel differentiated and easily identifiable by tweed suit, the practical, army-satchel inspired consumers. It is the inherent composition of a 2.55 handbag, and the little black dress. Chanel maintains its identity, one which was created decades before. Together with maintaining iden- tity brands have to be relevant, desirable, and inspirational in today’s socio-cultural climate. Brand identity is about the raison d’être of a product: how it is perceived by consumers and by competitors, what it stands for, what makes it unique, the promise it offers and the value it holds for its customers. A brand’s identity embodies its history, savoir-faire, and mystique. It is the sum of constitutive parts that make us recognize it as special and original. Building a brand identity takes time. Within the BBV, the concept of the brand – its name, identity and key characteristics - is considered fundamental. It has to be relevant, unwavering and clear. This strategy is to develop a reputation, its presence in such a way to leverage the brand status and awareness globally. To develop such a presence requires specific product and design attributes, quality, craftsmanship, minute attention to details to create innovative and unique products. These key products often epitomise the www.europeanbusinessreview.com 53

BRANDING brand signature or brand DNA, as they can assist depend on a company’s capacity to create desire in portraying the personality and value of the crea- for goods by instilling one of the logics to have tors. For example, as depicted in its brand identity, them –the logic of need, desire, interest and Chanel embodies the strong woman, Coco Chanel, or pleasure or a combination of the all four. A who has climbed the social ladder. This was dream, a desire, an interest around the product Gabrielle Chanel’s story. Her modest origins, and that appeals to the consumer. Creation of “the the fact that she reached the pinnacle of society dream” is strongly linked to the manner in which at a time when most women did not have a pres- the brand DNA is marketed and communicated, tigious career, is part of the brand’s identity. To so as to put forth a unique and unforgettable express this core identity, Chanel’s retail locations brand identity. When the market was local, in worldwide have majestic staircases, usually in France or in Italy, this was easy, but with the white, symbolizing their founder’s upward social globalization of markets today, the dream has to mobility. Brand Codes and DNA are essential for cross borders and cultures. creating a Brand Based Advantage, as they clearly define who the brand is, and establish themselves Different cultures dream differently though, firmly in the minds of consumers. and their aspirations vary. In similar vein, consider the case of luggage brands Rimowa and Tumi. CREATE DESIRE AND ASPIRATION The luggage was differentiated in such a way that THROUGH COMMUNITIES they both became brands to reckon with - Rimova with technology, Tumi with materials, created Many goods do not cater to our primary needs. their own specific Brand Based Advantage within This means that they are “non-essential.” their specific category of luggage industry. While Production and distribution therefore heavily the case of DeBeers, a renowned leader in the diamond industry, a potential threat was turned into an advantage. Artificial diamonds, that have most common use as industrial goods material, 54 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

were seen as something that could upend a market during the current situation, where new ways that depends on a perception of relative scarcity. to think through a problem becomes critical. The lab that manufactures synthetic stones has On multiple fronts, strategy has come under created a brand through DeBeers, called Lightbox, fire with innovation of new ideas. More-often- that has capitalized on the brand’s existing BBA. than-not organizations are focusing more on In similar vein, Harley Davidson motorcycles building-their-brand, their brand-based-commu- command a premium price and extreme brand nity rather than trying to differentiate wholly on loyalty in its community despite the fact that the product. They are trying to provide unpar- in terms of technical superiority and product alleled service to their community to those performance, it is easily surpassed by some of who are loyal to their brand, their brand value its Japanese and European competitors. Shiseido and the value that the organization stand for. relied on world-renowned designer’s brands to This has happened as there has been a shift in overcome the lack of credibility as a Japanese the consumer perceptions of value during the producer. Dassai, a sake brand of Asahi Shuzo, post-pandemic. was promoted to be high quality sake which fits universal cuisine, to overcome negative image Why this shift? The brand is an identity in toward Japanese sake in the international market. itself, one that can be leveraged to achieve a sustainable competitive advantage that can THE NEW BUSINESS LANDSCAPE: outlast one provided by traditional means THE BRAND BASED VIEW STRATEGY such as resources. The brand once created, nurtured and efficiently managed to be both The post-pandemic business landscape is timeless and contemporary can create sustained undergoing a transformation be it digital advantage over generations. This tectonic shift especially during the post-pandemic scenario, thus demands a critical re-think of yester year’s strategy principles: First, the sources and locus THE IDEA IN PRACTICE At every step in a corporation, resource allocation is critical to the strategy making process and its implementation. During the process, managers face the dilemma of arbitrage. Most corporations are more concerned about their resource based values such as – technology, functionality, service – but have overlooked the importance of aspira- tional and emotional values of the brand. A brand is an identity. It is the reflection of what customers feel with their senses. To do this effectively corporations need to have a concrete idea of what they stand for and direct all actions in creating the brand identity that will be the basis of the brand based view. Moving from the resource based view to the brand based view the managers are in fact changing the constraint of resource from the supply side to the demand side. It is not anymore about the resource allocation that is the key to implementation but the aspiration and the pull from the consumer that will drive the implementation. As consumer aspires and pay higher prices the brand drives the growth of the corporation. This produces a visible and immediate impact designed at keeping the stakeholder in good faith while the brand trades-up. Clarify intent Assign and Communicate Align the product Co-create Deliver with transparency – the 3P, the reiterate the about the value of organization and integrate seamless, transac- story, the DNA, aspirational the brand rather with the concept emotional tion less, personalized the desire. nature of the than the utility of of credibility, connection customer service for brand the product legitimacy and individuals and for the authenticity community it serves www.europeanbusinessreview.com 55

BRANDING of competitive advantage now lie in the innova- has enhanced with the rise of social media, tion inside the firm that leads to creation of desire social commerce such as e-commerce and outside the firm. The advantage is cumulative as the m-commerce. desire necessitates a pull rather than a push (which erodes over time as competitors catch up). Second, The above three can be achieved when the it is more of a mind-capture, an experience rather brand rightfully achieves credibility (trusted and than value-capture, of ownership. It means that the believed in), legitimacy (conforming to the rules, community that a brand creates protects itself not tradition that can be logically justified and vali- only with loyalty but creating mind-space owner- dated) and authenticity (true to its values which it ship. The community has an open dialogue with stands for). To build credibility, legitimacy and the brand within the social landscape it belongs to. authenticity takes a lifetime. The time invested Third, the pace of change in the markets creates the in building the identity, clarifying the ethos, and need to access different communities of customers, being true to the clients is what is often missed by collaborating with brands at different levels of many. It is something that is not taken into account evolution and buying potential of customers. This when one calculates sales using different pricing models. To make a brand well known is an art in and of itself. It is not a science. The meaning of the brand, and what it stands for, needs to be clarified both internally and externally. The codes need to be defined: the brand needs to know who it is, what it represents and why it exists. One can buy an accessory and it is accessible. One can buy a little something and one belongs to a certain group. Hence, we envision to create a sustainable compet- itive advantage that creates value for the long term – what we term as the brand based advantage. REFERENCES 1 Barney, J (1995). Looking inside for competitive advan- tage. Academy of Management Perspectives. 9(4): 2 Som, A & Blanckaert. C (2021). The Road to Luxury. Wiley (2nd edition) ABOUT THE AUTHORS Kazuhiro Asakawa is Professor of Global Ashok Som is Professor at the Management Innovation Management at Department. Professor Som's expertise is in Graduate School of Business global strategy and re-designing organizations. Administration, Keio University, He is author of the books The Road to Japan, where he teaches inter- Luxury: The New Frontiers in Luxury Brand national management and global innovation. He Management (Wiley , 2021), International has held the Mitsubishi Foundation Chairship at Management: Managing the Global Corporation (McGrawHill, Keio Business School. Kaz received his Ph.D. and 2009) and Organization Re-design and Innovative HRM (Oxford M.Sc. from INSEAD, France, his MBA from Harvard University Press, 2008). His current research is on creative Business School, and his BA summa cum laude in industries focusing on luxury, movie and art industries. He is a Political Economy from Waseda University, Japan. regular speaker in international conferences and advises European and Indian multi-nationals. 56 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Commercial and Digital Diligence Combined Data dashboard Tech enabled data-led Strategic Consulting for originations and solutions for confident and Digital competitor monitoring decision making Transformation Supporting investors and brands throughout the entire M&A lifecycle onefourzerogroup.com

LEADING IN THE POST-C VID WORLD Building the strategic architecture of the POST PANDEMIC CORPORATE LANDSCAPE by Mark Esposito, Alessandro Lanteri, Terence Tse 58 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

The Covid-19 pandemic has been a major disruptor for tried and tested approaches to strategy and an accelerator of new emerging approaches. In this article we present two research-based frameworks of emerging approaches to strategic decision-making. The first, DRIVE (Tse and Esposito, 2017), is a macro-level framework that maps the contextual megatrends shaping the socio-economic ecosystem. The second, CLEVER (Lanteri, 2019), is a meso-level framework that describes the drivers of successful strategy implementation. Jointly, the two frameworks constitute the foundation of a new strategic architecture that empower firms to identify growth opportunities and successfully organize to pursue them in the turbulent, post-pandemic world economy. www.europeanbusinessreview.com 59

LEADING IN THE POST-C VID WORLD The Covid-19 pandemic has been a major of roughly 6-7 years in average, on the efforts of disruptor for tried and tested approaches digital transformation across industries, sectors to strategy. More specifically, it acted as an and geographies. So, the change did not just accelerator of two emerging approaches: digital allegedly happen, it did happen from the expe- transformation (Soto-Acosta, 2020) and sustain- rience of what we have been able to assess in ability (Barbier and Burgess, 2020). Even as the our own practice of educators, consultants and pandemic still impacts our lives and livelihoods, advisors. companies are stepping These findings are not up their efforts and new Even as the pandemic still impacts our surprising: companies imperatives and business that are more aggressive models are emerging lives and livelihoods, companies are in digitizing their activi- every day, as a form of stepping up their efforts and new imper- ties are more likely to end validation of new organ- atives and business models are emerging up achieving superior izational practices and economic performance norms. The pandemic has every day, as a form of validation of new (Bughin et al., 2017) not only changed our per- organizational practices and norms. and those that actively ception of the world but manage a wide range of equally accelerated our sustainability indicators adoption to new forms of work and production are better able to create long-term value for all which are becoming visible by the day. stakeholders (Funk 2003). A new survey reveals that 38 percent and How do business leaders seize these 31 percent of managers answered, “we need to opportunities? re-evaluate” and “we are taking steps to change”, respectively, when responding to how the coro- navirus event is affecting their decisions on A STRATEGIC ARCHITECTURE digital transformation (EY, 2020). In another study, 70 percent of executives surveyed in Austria, Germany and Switzerland claimed the While the challenges with new normal is always pandemic had pushed them to accelerate the related to the ability to identify existing frame- pace of digital transformation within their firms works that could help and the synthesis of (Malev, 2020). In a survey of almost 1,600 CEOs some of the issues we are facing, in this article from 83 countries, 25 percent of the respondents we present two research-based frameworks strongly agreed that “climate change initiatives of emerging approaches to strategic deci- will lead to significant new product and service sion-making that jointly help decision makers opportunities for [their] organisation” (PWC, to identify growth opportunities and success- 2020). And in a private conversation with a senior fully organize to pursue them in the turbulent, McKinsey’s partner, it was stated that most of post-pandemic world economy. These frame- the firm’s clients have witnessed an acceleration works were originally designed by aspiring to 60 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

future fitness, in integrating adaptable and flex- execution on the micro. The meso level provides ible thought processes in their functioning. They opportunities for formulation of strategy, idea- were designed as non-exhaustive instruments, tion of business models which probe markets purported to grasp the flow of the times in which and reconfigure systems. It is an important we are living, rather than advocating seminal aspect of how systems become purposeful. theory within 3 levels of critique utilized to best capture the entropy of events, in an ever-com- The micro level involves the most active plex world, where linear models of distribution agents in the economy, such as consumers and are less and less functional to the purpose of individuals, who make decisions on the foun- prediction and forecast. dations of limited information, sentiments and access to opportunities. It is where markets get The macro level of analysis taps on the contex- validated and where decision making blends tual need to assess the environment and the nature theoretical assumptions with projectable action- of the forces that are shaping the conditions for ability and where the socio-economic system business and public policy to operate. From the enables itself. scanning of the externalities to the detection of grassroot movements, to the discovery of growth The first of these frameworks, DRIVE (Tse models undetected by traditional economic indi- and Esposito, 2017), is a macro-level framework cators (Esposito, Tse, Soufani, 2013), this level of that maps the contextual megatrends shaping analysis is needed to determine magnitude and the socio-economic ecosystem and the trajec- direction of the trends. tories emerging from it. The second, CLEVER (Lanteri, 2019), is a meso-micro level frame- The meso level of analysis refers to the insti- work that describes the drivers of successful tutional and intermediated level of the economy strategy implementation and provides access in which a necklace of entities is operating as to a series of actionable levers which can turn connectors between forces at the macro and vision into reality. TABLE 1 MACRO-VIEW Tools & Techniques A way to • Economic identifying growth • Social • Megatrends - DRIVE opportunities • Political • Fast-Expanding BUSINESS MESO-VIEW Markets (FEM) (Business Model MICRO-VIEW REVISED Canvas) • Individuals BUSINESS • Consumers MODEL CANVAS Copyright© 2017 Terence Tse and Mark Esposito • Edge • Job To Be Done • MVP • Pre-mortem www.europeanbusinessreview.com 61

LEADING IN THE POST-C VID WORLD UNDERSTANDING HOW ’DRIVE’ the future holds and help us picture a future in the making. BRINGS THE MACRO LEVEL OF Let’s look at them under each individual lens, to best under- ANALYSIS TO LIFE stand the overall purpose of the conceptual framework. During the research conducted, we have observed, Demographic and Social Changes pivoted, and researched several points of junc- tion, where the current trends of the present set At the center of any future state are people. It is now a the trajectory for events to occur in the future, and known fact that the populations in the developed world are we believe that these elements carry significance. both shrinking and aging, partially a result of the combi- In the vast ocean of knowledge, information, and nation of very high life expectancy and very low fertility data, we find that there are five undercurrents rates. This is particularly visible if we tap on the visuals that can give us some directions as to how the of any population pyramid today, which is an easy, albeit future would unfold. These five paths aren’t exclu- serious, effort to envision how populations are distrib- sive or exhaustive. Most are likely just a minimal uted by gender and segments of age, from zero to 85+. representation of all undercurrents that inter- Interestingly, it was called a pyramid because it implied play with the shaping forces of our societies, but that children, the base of the population pyramid, are more with this in mind, we have narrowed the research numerous than elderly, hence the renowned shape. But down to five megatrends, which we call the from a glance of global population pyramid today, versus a DRIVE framework, consisting of the following: comparison of population pyramid in 1970, the differences are astounding. Children are yet the most populous group • Demographic and Social Changes in our societies, but only by marginal units. The pyramid • Resource Scarcity is changing in shape and converging more into a dome, • Inequalities so to say—fatter at the bottom up to 50 years of age and • Volatility, Scale, and Complexity thinner from 50 and above, but definitely far from resem- • Enterprising Dynamics bling a pyramid at best. Projections show that the majority of populations of developed countries will be over 40 years We believe that each of these megatrends is unique old by 2030, with Japan reaching an average of 52 by then, in its own right, but, in combination, they can followed by Italy and Germany. Less obvious though, the present a fairly comprehensive picture of what 62 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

same is happening in the developing econo- business policies, as past experience has shown mies. Take China, for instance. Even though that productivity significantly increases in the Middle Kingdom has a younger population industries that are unprotected and can freely (35.4) today than the United States (37.4), by 2030 compete, coupled with a modern fiscal system this will be 42.1 compared to 39.5—China’s aging that reinvests taxes into logistics, mobility, and population is going to “catch up” with the devel- public services. Yet in times of uncertainties, oped world (Roland Berger Strategy Consultants, governments are more inclined to erect trade 2015). Most emerging economies remain young, barriers and pursue protectionism, or to alienate however. the electorate with short-term austerity meas- The most youthful are those of the sub-Sa- ures, which distance countries even further from haran region. For example, the average age of this template of increased productivity—the exact Nigerians is 15 years old in 2013. Yet, by 2030, opposite to what should be done to make the the average age of the country would only be future better (Godin & Mariathasan, 2014 ). 15.2 years old! As people are getting older, they are also The implications of such demographic shifts converging: more and more people are living in can be huge and destabilizing at best. While the cities. In 1950, the urbanization ratio in China was developed world will be facing challenges such 13%. Today, roughly half of the country’ s popu- as maintaining and sustaining the social secu- lation lives in cities and the government plans to rity systems and financing pensions, because push that to 70% by 2025 (Johnson, 2013 ). There of an influx of its elderly population, the devel- is a good reason for having more city dwellers: oping ones will greater urbanization is have to be able Projections show that the majority of popu- shown to have a positive to provide educa- effect on gross domestic tion and access to lations of developed countries will be over product (GDP) develop- basic health care to 40 years old by 2030, with Japan reaching ment. In fact, countries youngsters as well as an average of 52 by then, followed by Italy with the highest urbani- create jobs for them. and Germany. Less obvious though, the same zation ratios are showing On a global basis, as the greatest GDP per people are getting is happening in the developing economies. head of the popula- tion (Johnson, 2013 ). older, the world ’ s population will Moreover, countries with plateau for the first time in human history. high populations and levels of urbanization tend A worrying implication is that there will be to have the strongest GDP growth (Dobbs et al., insufficient labor power to support the old-age 2011 ). And while this may seem to be challenged pensioners (Dobbs, Ramaswamy, Stephenson, & by the progressive hybridized work agenda around Viguerie, 2014). With the labor pool shrinking, the world, there is reason to believe that the recent the only way to maintain economic growth is to developments due to Covid19 will not alter or continuously invest in raising productivity and change the course of action of an inexorable inten- competitiveness, away from natural resources sification of urbanization in the years to come. and more toward models of economic efficiency that do not resort to intense factors of production, Resource Scarcity to extract value. This not only requires companies to increase their efforts—and capital—in making Urbanization and the continuous growth of investments, at least in the medium term, but world’ s population size would put a lot of pres- this could also put governments in a dilemma. sure on the use of resources because cities and What is needed are more liberal economic and resources to run them are always co-related. But www.europeanbusinessreview.com 63

LEADING IN THE POST-C VID WORLD after years of resource exploitation, dating back chains would also be deeply affected by water from colonialism to our days, resources are scarcity, across regions, but more so, where now rapidly depleting and dropping in quality, manufacturing is still the key driver of produc- or at least the availability cycle is undermined tion. It takes, for instance, with an average (Tse, Esposito, & Soufani, 2014 ). Resource scar- car containing about 2,150 pounds of steel, city, inevitably, represents another megatrend. this would mean over 300,000 liters of water is Many people relate resource scarcity to energy, needed to produce the finished steel for just one thinking that the world would run out of car (Grace Communications Foundation, n.d.). fossil fuels soon. It is true that fossil fuels are Lately, circular economy, also known as the nonrenewable. “cradle-to-cradle” model, is gradually gaining But there are reasons why the worry is more and more traction as the model of the unwarranted. First, there is a huge amount of future, and, hopefully, its inherent regenerative reserves that is modus operandi yet to be invento- Lately, circular economy, also known as the will gain more ried. Second, there and more ground, are always wind “cradle-to-cradle” model, is gradually gaining carving space for and solar energy, more and more traction as the model of the a needed shift to which, in addition future, and, hopefully, its inherent regenerative circularity. This is to the associated where we believe sensitivity to shift modus operandi will gain more and more ground, there will be a dedi- to clean ener- carving space for a needed shift to circularity. cated focus towards gies, have become a sustainability largely available transformation, also because of the climatic changes. Water and which will rise from the ashes of the phoenix, in food, on the other hand, are different stories. At this case, our old models of productions that have the current consumption rate, according to the been grounded to zero during the pandemic. World Wildlife Fund (n.d.), it is possible that by 2025 two-thirds of the world’s population may Inequalities face water shortages. It is not just a matter of not quenching thirst. The world seems to have woken up to the issue of As cities becoming ever more urbanized, the inequality when the French economist Thomas increased requirements on sanitation would put Piketty (2013) argued in his bestseller that the further pressure on the use of water and beyond, unequal distribution of wealth in the devel- in what we see as strings of co-related short- oped countries has become more so in recent ages. At the same time, most companies’ value years and since then, it didn’t get any better. 64 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

The increasing pressure on the systems and income has decreased from 56.5% in 1979 to the gap becoming inexorably larger, coupled by 45.1% in 2012 (Bernstein & Raman, 2015). structural dysfunctions caused by the degrees of implications inferred by the pandemic, our Worst yet, this “hollowing out” is not only world is more unevenly distributed now than confined to the United States; the same phenom- ever. In the past 30 years, the incomes of the enon is also observed in 16 European countries wealthiest have surged into the stratosphere around the same period (Goos, Manning, & (and the higher up in the income hierarchy one Salomons, 2014). This, as it turns out, is the conse- is, the greater the increase has been), while the quence of automation and computerization (more incomes of the large majority have stagnated. below). While the middle-class disappearing may This has led to a level of inequality in wealth suggest a rebalance of wealth toward either poor in the developed world not seen since the eve or rich people, the story behind may present of the Great Depression (Piketty, 2013). Income bleaker aspects and nuances. Middle class in inequality—while a serious dysfunction of how modern civilizations is the bearing engine of wealth should be distributed—is, unfortunately, our economic outputs. In dry terms, it is where not necessarily the most acute of the socioec- GDP is ultimately produced. If the middle class onomic gaps we have analyzed. In fact, just slims itself to the level of becoming marginally as worrying is that the phenomenon that the relevant, repercussions in the standards of living middle-income class is gradually disappearing. must be anticipated as likely to happen. The In the United States, while productivity and GDP framework doesn’t exclusively mention income have continued to grow, middle-income earners inequality as the sole form of inequality, but we have been making less over time: the percentage tend to believe that a series of socio-economic of households earning 50% of the average inequalities are on the rise, even if what seems allegedly to be non-financial matters, such as life expectancy, access to education, gender opportu- nities, or simply access to healthcare. This is why we believe that the repercussions of widening inequalities in various dimensions of our soci- eties, especially when very little effort has been made to stop it, could greatly impact our future, inferring a trajectory we hope to be able correct, prior to its full deployment in our societies. Indeed, the current pandemic is most likely going to drive inequality further as a result of the so-called K-shaped recovery: large compa- nies and public-sector institutions with direct www.europeanbusinessreview.com 65

LEADING IN THE POST-C VID WORLD Sophia humanoid robot speaking Russian at Open Innovations Conference at Skolokovo technopark, Moscow Anton Gvozdikov / Shutterstock.com access to government and central bank stimulus emergence of internal combustion engine, elec- packages will make some areas of the economy tricity, and household plumbing about a century recover fast but leave others out. This comes at later, brought significant economic growth to the expanse of small and medium-sized enter- the world’ s economy (Gordon, 2012). prises, blue-collar More recently, workers, and the dwin- The technological tipping point has been the revolution that dling middle class caused our economy (Bheemiah, Esposito the development of advanced sensors. and productivity to and Tse, 2020). It must This has given robots the ability to sense take off once again be noted that technol- and interpret the world around them. was the advent of ogies alone are not Internet technolo- necessarily solution gies (Brynjolfsson to reverse this situation. Technologies needed & McAfee, 2014). One of the most observed to be complemented with the right government writers in this field, Jeremy Rifkin ( 2011 ), policies and company practices in order to be speaks about a third industrial revolution, address these inequality concerns. when the fledging of existing platforms or engines—namely, the energy, communica- Volatility, Scale, and Complexity tion, and mobility drivers— converge. Indeed, what makes the online technology different The world has not been a tremendously exciting from—and far more powerful than—other revo- place in terms of economic growth for most lutionary technologies within this integrated of the past two millennia. Such growth really view of converging models in the past is the fact started to accelerate only after the Industrial that it acts a glue to different types of devices Revolution. The invention of steam power and technologies, often leading something that in mid-eighteenth century, followed by the is novel. Things have changed since then and 66 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

from the incremental nature of technologies, Enterprising Dynamics hassled by the concerns raised by the Moore’s Technologies are not just fundamentally Law, we see today that new forms of deeptech changing the way we live; they are also reshaping are generating more and more combinatorial how businesses work. While our research on outputs and these outputs are giving rise to new volatility demonstrates clear orientation toward priorities ahead. combinatorial modus operandi, other parts of One outcome emerging from the combined the world—namely the emerging economies— use of these technologies is robotics, which are living this reality by contextualizing many have recently reached a point of intelligence of these technologies to serve local markets. To at which they will be able to help humans many people in the West, China is often viewed in every kind of industry, in ways previously as a country unable to innovate and prone to unimaginable. The penetration of robotics acquiring existing technology from others. This into regular activities is increasing as we reflects perhaps a natural response that China’s speak, with examples of robotics applied also stellar economic rise is partly due to the coun- to biology, in what futurists call the “fourth try’s inclination to assimilate existing Western industrial revolu- The Middle Kingdom may not be very good products and, worse tion,” where the yet, sell fake goods. Yet combination of at coming up with products based on such view underscores biology, robotics, its own ideas, but this does not mask the fact that many and digital may the truth that in certain areas it has people confuse inno- become a new vation with invention. integrated reality been doing business with such a level of The Middle Kingdom of products and novelty that Western companies should may not be very good services. take as reference. at coming up with products based on its The technolog- ical tipping point own ideas, but this has been the development of advanced sensors. does not mask the truth that in certain areas This has given robots the ability to sense and it has been doing business with such a level of interpret the world around them (Williams, novelty that Western companies should take 2016 ). Just as important is the arrival of cloud as reference. Whereas businesses in the West computing. Previously, robots would have to and Japan remain strong in engineering— learn all by themselves as individual entities. and science-based innovation, Chinese firms With the possibility of linking them all up to excel themselves in the customer-focused and a single source, learning by one can be easily shared with the others. This puts robotics on a very steep learning curve and hence faster devel- opments (Ross, 2016 ). The rise of robotics could, like the earlier Internet revolution, lead to the development of new ecology around robotics, providing plenty of new opportunities. The fast- paced technology development would require businesses to be adaptive, but above all, capable of synthesizing and integrating elements that may learn quicker than the programmer would have ever imagined. And we are just getting started. www.europeanbusinessreview.com 67

LEADING IN THE POST-C VID WORLD CLEVER— a Collaborative Intelligence Learning Systems Exponential Technologies framework of The use of data analytics to Leveraging technologies that strategic drivers The intelligent coordi- empowers decisions that improve at an accelerating rate (in Definition and nation of increasingly are not only faster and more terms of cost and performance) Strategic Impact broad ranges of skills. accurate, but also continu- and support rapidly increasing It allows outcomes and ously become ever faster and productivity Illustrative performances that are more accurate. examples not simply better, but otherwise altogether Google’s search predictions; Uber’s use of mobile and GPS; impossible. email spam filtering; Alibaba’s Jio’s transition from oil to mobile; Wikipedia’s use of the Taobao; Ant Financial’s Instagram’s use of personal crowd; Amazon’s robot- data-driven new insurance cameras; Google Glasses 2.0; human warehouse products; IBM’s Watson; ubiquitous computing; additive management; chess Netflix’s recommendation manufacturing and 3-D printing; players in freestyle system; Dubai Airports’ from the Human Genome Project to competitions; financial passengers flow; Harley consumer DNA test kits. roboadvisors; robosurgery. Davidson’s web marketing. Counterexamples Tesla’s excessive automa- — AT&T’s sale of its mobile operations tion; retail apocalypse. in the 80’s and subsequent repur- chase; Kodak’s failure to exploit digital photography; Google Glasses 1.0. Source: Lanteri (2021) efficiency-driven sorts (Woetzel et al., 2015 ). This might sound trivial at first glance, but we invoices into different languages automatically, imagine that it would be rather difficult in the and all of these must be conducted seamlessly United States or United Kingdom for online plat- on their platforms. In some cases, while the forms to extend into financial services without business model is new, the customers can often running into regulatory concerns or competition tweak it to add a new dimension to the business from incumbents such as As more and more businesses model, customizing it in some way banks (Tse, 2015). Naturally, at every interaction. Compared to Western companies do not are now conducted online, it the past, one would know if there is stand still. Companies of all can be expected that there actually a demand only when it gets sizes are taking on new and will only be more dramatic to the stage of getting ready to sell different entrepreneurial the product to customers. But the dynamics. For instance, a and speedier changes in entrepreneurs would have to come London-based translation business models and value up with concept, build a prototype, company is now much more chains in the years to come. raise the funding, conduct market of an information tech- research, manufacture and hold nology (IT) integrator with a inventory, and find sales channels small set of translation activ- and negotiate with them, all of ities. This is not only because computers and which consumes an enormous amount of time software can now do most of the translation; and money. As more and more businesses are this is also due to large multinational clients now conducted online, it can be expected that demanding full IT integration to their systems. there will only be more dramatic and speedier In this instance, these corporations require the changes in business models and value chains in translation company to translate all of their the years to come. 68 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Value Facilitation Ethical Championship TABLE 2 The coordination of transac- The pursuit of an aspirational reason for Responsive Decision Making tions among users. It allows being (beyond money). It helps seize new Approaching strategic deci- faster growth, with less capital opportunities, give meaning to peoples’ sions as discovery and learning and fewer employees, and so lives, attract talent, successfully innovate, processes of fast-changing achieving higher profitability. navigate change, minimize risks, reduce competitive conditions, which costs, increase revenues, and earn a helps organizations to respond in societal license to operate. a timely and progressively more effective fashion. Email; Airbnb; Baidu; bitcoin/ Unilever’s Sustainable Living Brands; New Balance’s always in beta; blockchain; John Deere’s social enterprises and B-Corp; UN’s Rent The Runway’s launch; MyJohnDeere; the World Sustainable Development Goals; Dropbox’s market test; PayPal’s Economic Forum at Davos. Grameen Bank; Business Roundtable’s pivot from Palm Pilots to email; Statement on the Purpose of a Amazon’s always day one; the Corporation; Patagonia’s discouraging Agile Manifesto; lean startup customers from buying new garments; methodologies; design thinking. Environmental, Social, and Governance (ESG) investments, Socially Responsible Investments (SRI), and impact investing. Nokia’s failure to develop a plat- BP’s Deep Horizon catastophe; Segway’s initial dud; failure of form open to third parties. Facebook’s Cambridge Analytica scandal; 80% new product launches Uber’s former CEO scandals. DISCOVERING THE CLEVER WAY reports the definition and strategic advantages TO ENACT ON THE MESO/MICRO of each driver, as well as illustrative examples LEVEL OF THE ECONOMY and counterexamples. Moving the level of analysis to the meso-level, Collaborative Intelligence CLEVER is a framework of strategic drivers, that Collaborative Intelligence refers to the intelli- is the forces that offer strategic advantages and gent coordination of a broad range of skills. It — therefore — trigger strategic change. These six is a strategic driver that allows outcomes and drivers are: performances that are not simply better, but otherwise altogether impossible. • Collaborative intelligence • Learning systems A good example of the power of Collaborative • Exponential technologies intelligence is the online open encyclopedia • Value facilitation Wikipedia. Its content originates from a vast • Ethical championship community of contributors from different • Responsive decision making. backgrounds, each of whom offers their own knowledge on a broad range of topics. Some The first three elements of the framework contributors volunteer their editing and represent the ‘hard’ features—the technolog- reviewing skills. Wikipedia also assign sepa- ical components—the following three capture rate tasks to automated bots and to humans, decision-making and managerial styles. Table 2 so that each perform the tasks they are most qualified for. For example, bots verify whether new content is plagiarized. They can rapidly compare the percentage of text that identical to www.europeanbusinessreview.com 69

LEADING IN THE POST-C VID WORLD that already published elsewhere, and quickly among vast stores of diverse data—ranging from raise a warning if the percentage is too high. demographic information to spending habits, Such important work would be too time from social interactions to online search history, consuming for humans. However, bots are inca- from geolocation to personality…—and identify pable of editing the text to avoid plagiarism. So, statistical correlations between inputs and some if necessary, a human can step in and execute relevant outputs. This way, when they are given an informed correction. The diverse skillsets of new inputs they can quickly and cheaply predict many humans (a crowd) and bots achieved what the corresponding outputs (Agrawal et al., 2018). human experts alone A good illustra- could not. Netflix gathers large amounts of data about tion of Learning Collaborative Systems is the video intelligence does not the viewing behavior and preferences of content producer their subscribers. Netflix’s algorithms can emerge by simply then predict what content each viewer is and distributor bundling together Netflix. They gather different skill- large amounts sets, but ultimately likely to enjoy each time they login. These of data about the depends on the algorithms are so accurate that 80 percent viewing behavior process of coordi- of the content streamed on the platform and preferences of nating them (Malone, their subscribers. 2018; McAfee, 2010). comes from recommendations. Netflix’s algorithms can then predict Some examples of Collaborative intelli- what content each gence are the combination of the skills of humans viewer is likely to enjoy each time they login. and machines (Daugherty and Wilson, 2018), These algorithms are so accurate that 80 percent the power of the crowds with diverse skillsets, of the content streamed on the platform comes experiences, expertise, and origins (Surowiecki, from recommendations (Plummer, 2017). 2005), and open innovation (Chesbrough, 2003) Other content producers shoot a pilot that leverages knowledge and resources that episode before producing new series, in order are both internal and external (e.g., consumer to test it with its target audience, and gather feedback, competitors, universities) to an feedback that helps predict future viewership. organization. Netflix does not shoot pilots. It uses data to choose what new content to produce. Viewers’ Learning Systems ratings of different content, genres, and actors suggested the very successful remake of the Learning Systems consist in the use of data “House of Cards” series (Carr, 2013). The success analytics to process large amounts of data to rates of traditional pilot-tested TV shows are gain insight and make superior, automated deci- 30-40 percent. Netflix original shows’ are 80 sions. Even with the simple forms of learning percent (Orcan Intelligence, 2018). and automation (Davenport and Ronanki, 2019; Iansiti and Lakhani, 2020) in use nowadays, it Exponential Technologies is a strategic driver that empowers decisions that are not only faster and more accurate, but Exponential Technologies consists in the lever- also continuously become ever faster and more aging of technologies whose performance accurate. improves at an accelerating rate and so support At the core of this strategic driver are Machine rapidly increasing productivity. Digital technolo- Learning (ML) algorithms that explore patterns gies — such as digital sensors, computing power, 70 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

and blockchains — improve very rapidly and the are poised to transform “the way we work and performance improvement of each new version consume (commerce), our well-being (health), of the technology is greater than all the cumulated our intellectual evolution (learning), and the improvements until that point. natural world around us (environment)” (Segars, For example, in November 2019, the best camera 2018, p. 4). If digital technologies continue phones on the market had a resolution ranging improving at this accelerating rate, over the between 12 megapixels (MP) and 48 MP (Wired 2019). next twenty years we will experience a degree of Soon thereafter a 108 MP camera phone was released innovation comparable to that experienced over (Kelion, 2019). Similarly, 5G connectivity is expected the last century (Kurzweil, 2001). to transmit data one hundred times faster than the previous 4G standard. As 5G is being rolled out, 6G Value Facilitation is already poised for release, with an anticipated connectivity one hundred times faster than 5G. Value Facilitation refers to the coordination of transactions among users, via a platform (Parker Besides the speed of release and the accel- and Van Alstyne, 2016). In a market exchange, erated improvements, digital technologies value is created between buyers and sellers integrate into and reinforce each other, a completing transactions. These platforms do process called convergence that results in not create value; they facilitate transactions that rapidly increasing productivity (Camerona et al., create value. Value Facilitation is a strategic driver 2005). These accelerating digital technologies DenPhotos / Shutterstock.com www.europeanbusinessreview.com 71

LEADING IN THE POST-C VID WORLD AlesiaKan / Shutterstock.com that allows faster growth, with less capital and meeting a triple bottom line (Elkington, 1994) is fewer employees, and so achieving higher profit- not enough. The next, bolder step, requires the ability. This way, value creation is largely curated deliberate pursuit of dual goals—financial sustain- by users, often using spare capacity or underused ability and positive social and environmental assets. Since users create impact (Battilana et al., 2019; value for each other (Katz Launched in 2008, Airbnb listed one Dacin et al., 2011)—to ensure and Shapiro, 1986), the more business becomes a force for users participate in a plat- million properties by 2015 (Hagiu good. form, the more valuable the and Rotham, 2016), and by 2020 it For example, consumer platform becomes. Seven surpassed seven million listings. of the world’s twelve largest goodsmultinationalUnilever has a portfolio of over 400 companies by market capi- brands, including house- talization operate a business model of this type hold names like Axe, Knorr, Lipton, Magnum. In (Hirt, 2018). the early 2000’s it began transforming some of its For example, Airbnb does not directly brands, associating them with a purpose. The first engage in value creating exchanges. It facili- such case is Dove, a skin care brand, which started tates exchanges that create value between hosts celebrating the natural beauty of every woman, and guests. Launched in 2008, Airbnb listed one instead of promoting idealized beauty standards million properties by 2015 (Hagiu and Rotham, embodied by airbrushed models, which cause 2016), and by 2020 it surpassed seven million many girls and women to feel insecure about listings (Airbnb, n.d.). Marriott, the largest hotel their appearance. Dove stopped using profes- company in the world, took fifty-eight years to sional models for its campaigns and instead hired get to one million rooms and reached 1.2 million women in a wide range of skin colors and body rooms only in 2020 (Trejos, 2018). shapes, to pass the message that real women, with stretchmarks and all, are beautiful. Six months Ethical Championship after launch, sales went up 700 percent. Today, Dove is Unilever’s biggest brand. Unilever kept Ethical Championship refers to the pursuit of an investing in brands with purpose, which it calls aspirational reason for being beyond money. It is “sustainable living brands.” By 2017, more than a strategic driver that helps seize new opportuni- half of Unilever’s top performing brands were ties, give meaning to peoples’ lives, attract talent, sustainable living brands. Moreover, these brands successfully innovate, navigate change, minimize with purpose grew 46 percent faster than the other risks, reduce costs, increase revenues, and earn brands and account for 70 percent of Unilever’s a societal license to operate. All this is reflected revenue growth. in the financial bottom line, as companies with a purpose outperformed the S&P 500 by a factor of Responsive Decision Making 14 between 1998 and 2013 (Sisodia, 2014). Most people believe that “capitalism as it exists Responsive Decision Making consists in today does more harm than good in the world” approaching strategic decisions as discovery and (Edelman, 2020, p. 12). Curbing the negative side learning processes in fast-changing competitive effects of capitalism by embracing Corporate conditions. It is a strategic driver that helps organ- Social Responsibility, or CSR (Carroll, 1991) or izations to respond in a timely and progressively 72 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

more effective fashion to uncertainty. Some exam- traditional waterfall approach, it would have ples of Responsive Decision Making are dynamic built a production facility to roll out the new capabilities (Teece et al., 1997); a learning culture product and then it would have started selling it, (Garvin, 1993); the lean startup (Blank, 2013; Ries, only to find out that some of its target customers 2011) and hypothesis-driven learning (Eisenmann were ‘wrong,’ and so it would have wasted et al., 2014) and design thinking (Brown, 2008; large resources and then had to fix its offering, Martin, 2009). at a much greater cost and possibly too late. To remain successful in fast-changing competitive landscapes, assets must be recon- figured and redeployed and both internal and CONCLUSION external structures must be redesigned. Yet, it is not enough to reorganize. Reorganization itself must be reimagined to fit turbulent To successfully navigate the upheaval caused environments. by the Covid-19 pandemic, business leaders For example, GE developed the Durathon must reconsider their strategy. Two of the battery following an agile approach key strategy questions they must (Blank, 2013). It began approaching Most people believe that answer are: where their company potential customers to explore their will play and how will it win (Lafley needs and expectations, iteratively “capitalism as it exists & Martin, 2013). This article provides developing and testing prototypes today does more harm two research-based frameworks to that, while not ready for the market, than good in the world”. answer these two critical questions. helped gather invaluable feedback. When answering the first of these In the process, GE abandoned some questions, DRIVE assists decision of its original target customers, makers in tracking the megatrends identified new market niches, and validated the that shape the competitive landscape and in viability of its Durathon battery before its manu- identifying major emerging opportunities, facturing plant was ready. If it had followed the which traditional tools for strategic planning www.europeanbusinessreview.com 73

LEADING IN THE POST-C VID WORLD might only capture when it is too late. For the multi-causal patterns and non-linear trajecto- second questions, CLEVER maps the drivers ries of change, the future cannot be predicted. of strategic advantage decision makers should So, even equipped with the DRIVE and the leverage to maintain a competitive edge. Jointly, CLEVER frameworks, decision makers might the two frameworks constitute the foundation of still face sudden black swans and wildcards that a new strategic architecture that empower firms lead to unexpected circumstances and rapidly to identify growth opportunities and success- shifting competitive scenarios. fully organize to pursue them in the turbulent, post-pandemic world economy. Frameworks should instead be judged for their usefulness. In the years spent researching Although they’ve only been published for and refining our frameworks, we have witnessed less than five years, our frameworks have now firsthand how they have been applied in dozens been taught in several graduate programs in of companies across industries and geographies. business schools around the globe and have Business leaders can use the two frameworks become the cornerstone of many executive to understand where strategic opportunities education programs and consulting projects. emerge, to find inspiration for strategic action, Despite these accolades, these frameworks do and so ensure their organizations become stay not aspire to be perfect. In turbulent times, with future-ready in the post-pandemic era. ABOUT THE AUTHORS Dr. Mark Esposito is a Dr. Alessandro Lanteri Dr. Terence Tse socio-economic strategist is Professor of Strategy is a professor and bestselling author, and Innovation at researching the Fourth ESCP Business School, at Hult Industrial Revolution and he also teaches in Global Shifts. He works at the executive education International interface between Business, programs for Saïd Technology and Government and co-founded Business School at University of Oxford and Business Nexus FrontierTech, an Artificial Intelligence London Business School. company. He is Professor of Business and An expert educator, he helps executives and School and a Economics at Hult International Business School students understand emerging technologies like and serves also as a clinical professor at Arizona AI and blockchain, and seize the opportunities of co-founder State University’s Thunderbird Global School of turbulent environments. Alessandro works with Management where he oversees the 4IR Initiative. multinationals, governments, International and executive director of Nexus Since 2011 he has been equally a faculty member Organizations, startups and family businesses at Harvard University’s Division of Continuing across five continents. FrontierTech, an AI company. Education. He is an advisor to the Prime Minister His research regularly appears on top Office in the UAE and a Policy Fellow at UCL’s international publishers, including Harvard He has worked with more than Institute for Innovation and Public Purpose. He Business Review and MIT Technology has authored/co-authored over 150 publications, Review outlets, LSE Business Review, World thirty corporate clients and 11 books, among which 2 Amazon bestsellers: Economic Forum Agenda and Forbes. His Understanding how the Future Unfolds (2017) latest book “CLEVER. The Six Strategic intergovernmental organizations and The AI Republic (2019). His next book “The Drivers for the Fourth Industrial Revolution” Great Remobilization: Designing A Smarter World” became a no.1 Amazon bestseller. His next in advisory and training capacities. with Dr. Olaf Groth and Dr. Terence Tse, will be book, “Innovating with Impact,” will be published in 2022 by MIT University Press. published in 2022 by The Economist. In addition to being a sought after global speaker., he has written over 110 published articles and three other books including the latest Amazon best seller, “The AI Republic: Building the Nexus Between Humans and Intelligent Automation“. His next book “The Great Remobilization: Designing A Smarter World” with Dr. Olaf Groth and Dr. Mark Esposito will explore the post pandemic designs as we prepare for the great reset. 74 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022



STRATEGIC SPOTLIGHT WHY INVEST Most companies are missing the opportunities of IN STRATEGIC strategic foresight in developing and growing their FORESIGHT? business. We have seen this time and again both in our research and in our work with companies. Instead, by Nando Malmelin managements’ focus is mostly on immediate results or and Kalle Kantola short-term profits and incremental development. In doing so, they fail to take advantage of many emerging opportunities for future business. Yet research has shown that strategic foresight can help to improve business competitiveness. When viewed in the long term, firms that systematically invest in foresight are more profitable and grow their value more than others. Indeed, strategic foresight is a largely unexploited opportunity for companies. It allows firms struggling with transformation to recognize emergent technolo- gies, identify social and political disruptions, foresee and forecast changes in consumer behavior and under- stand market changes. 76 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

investment in systematic foresight makes finan- cial sense. And equally, it’s difficult for corporate management to prove to the board of directors or the company’s shareholders that investments in systematic foresight are essential for busi- It’s difficult for corporate ness. Therefore, management often focuses the money in areas that yield management to prove to immediate and numerically demon- the board of directors or strable value. the company’s shareholders The systematic development of foresight requires that its value to the As the pace of change that investments in system- business can be clearly and practi- in the world continues atic foresight are essential cally demonstrated. But how to do to accelerate and the for business. Therefore, this? What exactly are the benefits of operational environment be- management often focuses systematic foresight to firms? What are comes ever more complex, it the money in areas that the needs and problems that system- yield immediate and numer- atic foresight can resolve? What are the specific processes on which foresight can contribute with significant knowl- is increasingly important for ically demonstrable value. edge and insights? Investing in strategic foresight, we firms to understand future trajectories. This is especially suggest here, increases the competi- critical in the VUCA world, where volatility, un- tiveness of the company in three key areas: certainty, complexity and ambiguity complicate 1 strategic management, strategic management. Strategic foresight offers a useful set of methods and tools for upgrading 2 new business and growth, strategic thinking and actions in an environ- 3 organizational renewal. ment of continuous disruptions. *** Next, we look at these benefits in more detail. So why then businesses don’t harness strategic Firstly, foresight provides valuable and useful foresight in a systematic way to support their futures knowledge in support of strategic management processes? In our experience, management. In practice, this means that there are several reasons. Most importantly, systematic foresight allows firms to gain a deeper firms do not considered systematic foresight to and wider understanding of the changes in their be so critical for practical business management operating environment and their impacts on that it warrants significant investments. strategic decision-making. Developing a foresight system to identify and Furthermore, identifying weak signals, analyze future opportunities is often considered for instance, can help corporate management expensive. It’s often thought of as a slow and question current strategic assumptions and laborious process with uncertain value. Concrete principles and forge a common strategic vision benefits from systematic foresight are not of the company’s future direction. Companies expected to materialize until well into the future. need to grasp what the future world could look like and what impact their business would have This is why it’s difficult for middle manage- in that environment. Foresight helps in develop ment, say the strategy team or the R&D unit, to prove to the CEO and the executive team that www.europeanbusinessreview.com 77

STRATEGIC SPOTLIGHT an understanding of the market development, company’s purpose and An enriched understanding of the emergence of new position in the future markets, and changes society – and its role in future consumers is also impor- in industries and value tant in developing future concepts networks. building that society. and products. To develop the firm’s Foresight can also Systematic fore- help firms identify new sight will also help firms prepare for alternative product portfolio, it’s important that growth opportunities and futures and associated new ideas are co-created and tested take advantage of them. risks. Most importantly, with customers and stakeholders. It allows to develop well- however, foresight is used founded growth strategies not only to identify and and to chart roadmaps for control risks but also and future growth. At its best, specifically to facilitate controlled risk-taking. disruptive foresight can even provide insight At the same time, it opens up new strategic and tools for creating whole new markets. paths to bolder decision-making and to more Foresight can help understand the needs adventurous explorations. and behavioral patterns of future customers. An enriched understanding of future consumers is also important in developing future concepts Secondly, foresight supports the development and products. To develop the firm’s product port- of new business and growth. Systematic fore- folio, it’s important that new ideas are co-created sight helps corporate management understand and tested with customers and stakeholders. 78 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Thirdly, systematic foresight provides broad competencies to enhance their capacity for support for organizational renewal. Futures self-renewal and innovation in a constantly knowledge helps the organization to ques- changing business landscape. Developing future tion its strategic assumptions and prevailing skills and competencies is critical to improving paradigms. This will allow the organization business competitiveness. to constantly reassess the organizational beliefs and work practices to strengthen its Companies should also invest in building resilience. organizational structures and culture that support employees’ efforts to create and Foresight will help to create a better take advantage of futures knowledge in their understanding of what kind of organizational everyday jobs. Furthermore, investing in capabilities and skill sets are crucial in the future. various networks and ecosystems of co-cre- Firms need to have new and broad-ranging ation will foster the application of futures knowledge. ABOUT THE AUTHORS *** Ph.D. Nando Malmelin works at VTT Technical Research Centre of Finland As discussed, it is difficult to demonstrate as a Professor of Practice focusing on the value of systematic foresight based on strategic change. He is also an Adjunct short-term economic indicators. Usually, Professor of media and communi- the benefits of futures knowledge become cation studies at the University of apparent years later. This is why many firms Helsinki. fail to focus on strategic foresight. It is, there- fore, crucial to develop methods that clearly demonstrate the value of futures knowledge to encourage managerial boards to invest in systematic foresight. A holistic understanding of emerging consumer habits, new markets and social phenomena opens up new strategic opportu- nities for innovation. When firms have access to solid and evidence-based insight about the future, they will also have the readiness and courage to invest in new growth opportuni- ties. Therefore it is critical for firms to invest in creating a systematic understanding of possible futures to identify and take advantage of the emerging changes and disruptions in the uncertain world. Dr.Sc. (Tech.) Kalle Kantola is a Vice President, Foresight and Data Economy at VTT Technical Research Centre of Finland. He has several positions of trust around innovation, digitalization and business strategy. www.europeanbusinessreview.com 79

RatioRISK MANAGEMENT The closure of a terminal at the world’s third-busiest container port in China is one of the latest examples of supply chain bottlenecks that led to disruptions propagating around the world. In addition, the Greensill scandal, that wreaked havoc in the financial services industry earlier in 2021, calls for a better understanding of risk management interdependencies between the manufacturing and financial services sectors. THE PATH FORWARD TO A UNIFIED RISK FRAMEWORK by Kamil J. Mizgier As demand for vehicles is increasing, the inventory to sales ratio (which serves as an indicator of the number of months of inventory that are on hand in relation to the sales for a month) hit rock bottom in July 2021, to levels not seen in modern history as depicted in Figure 1. SOMETIMES THINGS MUST GO WRONG BEFORE THEY’LL GO RIGHT Inflation is a growing risk for global supply chains as well — with price pressures coming from demand growth that outstrips supply growth, rising commodities prices and FIGURE 1 Auto Inventory/Sales Ratio The source: U.S. Bureau of Economic Analysis, Auto Inventory/Sales Ratio [AISRSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlou- isfed.org/series/AISRSA, September 1, 2021. 80 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

disrupted inventories. At the same time there THE LIGHT AT THE END OF is little evidence of quantitative models that THE TUNNEL incorporate the impact of inflation expectations on purchasing behavior from the supply chain perspective. The effects of supply chain disrup- Risk management is a profession with a long tions have been observed during the pandemic history and while main advances and break- with shortages of materials such as semi-con- throughs are typically attributed to risk modeling ductor, toilet paper and timber to name a few. techniques developed in the financial services Industries such as automotive form industry, other industry sectors have important complex supply chains, with production contributions and areas of application as well. outputs vulnerable to disruptions due to short- The chemical industry is a good example, with ages of inputs across tiers and geographies. At various techniques and standards developed the same time smaller businesses reported over the last decades, including the operational delays with suppliers, concentrated in other loss distribution approach (Meel et al., 2007). industry sectors Environmental like chemical, and health safety, hazard construction,and To make things even more complicated customers labor services. expect services and products to be available through identification To make things a combination of digital and physical channels. techniques, even more compli- risk analysis cated customers and heat maps expect services to mention and products to be available through a combi- a few are well-established risk management nation of digital and physical channels. So, techniques. The industry regulatory bodies led what can companies do to measure, mitigate, the development of various regulatory stand- and hedge the risk of lost sales? ards (such as the ISO standards) that are closely followed in practice. www.europeanbusinessreview.com 81

RISK MANAGEMENT Financial services firms, on the other hand, availability and analysis. ERP systems providers focused on the innovation in risk modeling tech- form the lifeblood of any organization’s data niques to address Basel regulatory requirements. capabilities, and most risk management The main regulatory requirement is the amount modules are interconnected with the central of capital that needs to be held by financial insti- data repository allowing for model development tutions in case of a severe economic downturn in real time. and this is the area where banks and insurance firms historically directed significant resources. Companies have realized that they must invest in technology to remain However, due to the digital transformation profitable in the digital era and data availability which has grown dramati- cally over the last few years major advances and With the unfolding of digitalization, companies that convergence in risk modeling techniques across are willing to stay ahead of the pack are investing industry sectors can be seen. in technology to remain profitable. Adding new technologies to the existing technology stack has THE RECIPE FOR RISK MANAGE- never been easier and companies are using third MENT SUCCESS party vendors to enhance their capabilities. There are several factors driving the advances Covid-19 accelerated the transfor- of risk management techniques that can help mation and enabled tech driven your organization to cope with these challenges. customer/supplier management Data availability The side effect of the increased over the The side effect of the pandemics is that pandemics is that digi- last few years talization was forced to While financial services digitalization was forced to happen at happen at an unprece- firms have built their an unprecedented scale and speed. dented scale and speed. With the majority of knowl- business models predom- edge workers completing inantly using data, manufacturing firms have their tasks remotely, new ways of communi- made enormous progress in terms of data cation and global collaboration have emerged 82 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

as a result. Customer and supplier relationship Another useful measure, Time to Recovery (see models come to light driven by data that allow Mizgier et al., 2013) is an essential concept used for predictive analytics across industry sectors. in scenario building and stress testing. Cross industry workshops Sustainability It is time to revisit your risk management can help to establish agenda is driving strategy, think globally and act locally common data sources the visibility in according to your industry’s level of maturity. (similarly to ORX) that supply chains firms can use to vali- date their corporate risk models. Finally, Climate change and Economic Capital (see the regulatory developments in the sustain- Mizgier, 2018) provides a framework to assess ability space build momentum as investors the ROI and decide how to steer the business to expect ESG to be part of the firms’ long-term achieve the best risk-return profile and manage commitment. With the goal to reduce CO2 emis- supplier relationships on a risk-adjusted basis. sions in the extended value chain, there are many opportunities for increased supplier visibility. CONCLUSION — WHEN MANA- Risk modeling methodologies converge GING RISK THINK GLOBALLY, ACT at the intersection of data and enterprise LOCALLY risk analytics Financial services and manufacturing firms form a complex system of suppliers, customers, capital As an example, Value at Risk, still largely providers and insurers that is densely intercon- unexplored by non-financial firms is gaining nected on a global scale. Covid-19 brought this increased interest as the concepts of resilience dependency to the forefront and the repercus- and tail events drive corporate risk agendas. sions can be seen unfolding to this day and will stay with us for the unforeseeable future. Luckily, REFERENCES risk managers have tools and techniques at their 1. A. Meel, L.M. O’Neill, J.H. Levin, W.D. Seider, U. Oktem, N. Keren disposal that can help them to navigate these trou- bled waters if used wisely across industry sectors. (2007) Operational risk assessment of chemical industries by It is time to revisit your risk management exploiting accident databases, Journal of Loss Prevention in strategy, think globally and act locally according to your industry’s level of maturity. For this to the Process Industries, Volume 20, Issue 2, Pages 113-127 occur, more collaboration is needed both in terms of data sharing and understanding of risk manage- 2. Mizgier, Kamil J./Jüttner, Matthias/Wagner, Stephan M. ment tools. It is not going to happen in one day, but we can already see progress in that space that (2013): Bottleneck Identification in Supply Chain Networks, will materialize in the years to come. IInternational Journal of Production Research, Volume 51, Issue 5, Pages 1477-1490 3. Mizgier, Kamil J. (2018): On Economic Supply Chain Risk Capital, The European Financial Review, August/September 2018, Pages 53-55 ABOUT THE AUTHOR Kamil J. Mizgier works as Global Supplier Relationship and Risk Management Leader at Dow. Prior to this role, he gained professional experience in risk modeling at BNY Mellon, UBS and Aduno Group. He has published several academic and practitioner articles on risk management. He obtained his Master's degree in Applied Physics from the Warsaw University of Technology and a PhD in Supply Chain Management at ETH Zurich. www.europeanbusinessreview.com 83

MANAGEMENT Dale Carnegie said “Life is a boomerang. What you give, you get.” How can employers use this theory to turn The Great Resignation into an opportunity? One man did just that, and the result were astounding. “OPERATION BOOMERANG” Let gracefulness activate good karma to bring them back to you More than 19 million US work- the news and our social media feeds by Avi Liran ers and counting have quit blinded us from the great opportuni- their jobs this year. This is ties that lie within? To answer that, we organization’s culture, there are more the highest number recorded by the need to first look at why so many are profound reasons for resignations. American Bureau of Labor statistics in leaving their jobs. history. According to Microsoft, 49% The pandemic ‘pressure cooker’ of the Singapore workforce plans to While it is true that a large of lockdowns and work-from-home leave their job by the end of this year. percentage of employees are isolation allowed many the time leaving their jobs due to a lack of to reflect and evaluate their career Has all of the negativity about The worker protection, stress, disre- choices. Not only has this pushed Great Resignation that is flooding spect and dissatisfaction with their people into realizing that they need to seek out opportunities which align with their values, but it has also 84 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

encouraged individuals to pursue Resignation could be seen as an incu- Group in Indonesia, is an accom- their desired careers and dreams. bator for opportunities. So, what can we, plished C-level hospitality leader. In fact, Aviva, the UK’s largest as employers, do as our talent leaves? He taught me a valuable lesson in insurance provider, found that around How can we use this to our advantage? 2007 how a delightful leader should 60% of workers in the UK intend What would a delightful leader do? approach the issue that is pertinent on changing to our current careers. In What can we, as employers, do as our talent massive employees’ addition to this, the silo effect leaves? How can we use this to our advantage? resignation. of corporate During that culture, exac- year, many new erbated by covid, has left many hotels were recruiting new talent, among them were the two integrated employees feeling disconnected, THE DELIGHTFUL resorts: Marina Bay Sands and Resort unrecognized, and unseen. This LEADER APPROACH has created a craving for a sense of World Sentosa who needed more than belonging. Greg Allan, the former general 15,000 people. Where would they With so many people globally manager of Marriott in Singapore, hunt for the best managers? Marriott reshaping their priorities, The Great the President & COO Aryaduta Hotel was at the top of their list because it www.europeanbusinessreview.com 85

MANAGEMENT is well known to have a great culture be tempted into staying as they have that constantly develops their team likely already signed up with their hospitable. Remember your own members. future employer. journey and that the new generation Greg had to do something to stop will be unlikely to stay forever. After the exodus of talent, so he embarked all, birds eventually fly out of the nest. on “Operation Boomerang’: Greg made a choice. With each resigning LET THE BIRDS FLY employee, he would invest time, energy, kindness, and support It is natural to feel hurt to see an INVEST IN THE FAREWELL instead of the expressing the natural employee leave after you have disappointment felt when people that invested in them. But if you are confi- Investing in your farewell process is you invest in and care for an excellent way to make leave. What came back to By investing in your farewell process, your ex-employee feel him was astounding. great. Your remaining Having spent more they are likely to become loyal employees will see than 15 years researching members of your company’s alumni. another human side of the best practices from They will become your ambassadors the culture. They will around the world in leave feeling respected, Delivering Delight within and recommend young talent to you. well-treated and appre- organisations, I was ciated to end on a sweet captivated by his wisdom. note. Praise them for the Greg shared that in Singapore dent that you are good leader working great work they have done. Share how (and in many other countries in in a positive and nourishing organ- you believe they contributed to the Asia), when an employee is giving isational culture, don’t fall into the company and made an impact. Offer you notice of leaving their job, it is ego trap of bitterness toward their them authentic and unconditional almost always too late to keep them. ‘ungratefulness’. Instead practice friendship and wish them success in There is a slim chance that they can your values and remain graceful and their new journey. 86 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Plant seeds for the future by flattered that the GM is interested in come back home. You will thrive here. offering a listening ear in case they them and will show up. We value you here.” need an advice. Your mentorship can As they are already working for Greg called this ‘Operation Boomerang’ be valuable for them as they may face another organisation, they will be to be used for the best among those unfamiliar challenges in their new more likely to be open with you and who left. To his great delight, more role. Then send them off with your tell you if there was an internal reason than one third of the people who blessings. why they left your organisation. were headhunted, came back! By investing Their return in your farewell Now, you have an opportunity to ask them had stopped process, they are the mass loss likely to become about their experience in their new role and of talent at loyal members offer your mentorship. If they reveal that they the company. of your compa- do not have a great boss or peers and if the When they ny’s alumni. They came back will become your culture does not match up to yours, you can tell with increased ambassadors them “I kept this job open for you, come back loyalty, they and recommend home. You will thrive here. We value you here.” were more young talent to motivated than you. You never ever before. know how well They shared they’ll do, perhaps one day they will The honest feedback you will get stories with their peers and employees headhunt you. with distance is invaluable can be on why it was better to work for used to improve your culture, your Marriott than for their competitors. processes and help you fix blind Their stories were contagious. When WAIT. INVITE. LISTEN. spots. people heard that the grass outside is not greener, it increased also job satis- faction and levels of engagement in It’s likely you will want to understand their colleagues. So, what about the two thirds who their motive for leaving, however, exit TRUST THE BOOMERANG interviews are mostly ceremonial. In did not return? We can use their feed- most cases, especially in Asia, people Now, you have an opportunity to ask back to our advantage and improve on who just leave do not want to hurt the them about their experience in their our organisations through a deeper 'rice bowl' of others and you will get new role and offer your mentorship. understanding of what employees limited information. Be patient. If they reveal that they do not have a want from their workplace. A few weeks after they leave, invite great boss or peers and if the culture The boomerang has returned in a the talent that you would have liked to does not match up to yours, you can variety of ways. Use the Boomerang keep for lunch. Most of them will be tell them “I kept this job open for you, approach to have good business and personal karma. What you give, you get so much more. ABOUT THE AUTHOR Known as the ‘Chief Delighting Officer,’ Avi Liran is an author, economist, a TEDx global expert professional speaker. He has been researching, consulting, and implementing positive cultures transformation in 21 countries, helping top leadership teams to create delightful employees and customers experiences that deliver superior business results. www.europeanbusinessreview.com 87

PEOPLE MANAGEMENT Nearly all selection processes involve the famous trio: application form, references and interview. Both the selectors and the candidates seem to like it that way, which probably explains why it continues with some modification despite the evidence about its many drawbacks. OLD AND NEW TAKES ON SELECTION INTERVIEWS by Adrian Furnham F or many the selection interview So why are interviews so poor at predicting is an impression management performance? There is a long and growing list of battleground, where selectors factors that collectively explain this. buy books on “killer questions” to “get beneath the skin” of the interviewee. • Interviewers differ in insight, skills, preferences: some have The latter buy books of “smart arse an- got skill and insight and not others. Training helps but swers” to confuse the interviewer. It is, some are naturals with real insight. of course process of smoke-and-mir- rors, subterfuge and play-acting: which • Interviewers are not as logical and rational and able to deal is why certain individuals (narcissists with complexity as they suppose; interview confidence is and psychopaths) like them and do well, often negatively correlated with interview competence. and often get selected. • Interviewers’ motives, attention and need for justification We know that older, more socially of their decisions differ widely which leads to problems of confident, manipulative people rather reliability: very different candidates are preferred. like interviews. They shun tests and assessment centres, preferring to show • Interviewees nearly always portray a positive (unrealistic) off their well-honed charm to less impression by self-promotion and self-enhancement; it is sophisticated interviewees. They can do called impression management, dissimulation and faking. “apparent sincerity”, and glib, politically hot and sensitive phrases positively role • Interviewers often look for, and pay attention to, novel off their tongue. and quirky and negative information which they weigh too heavily in their judgements. • Interviewees are increasingly being coached on how to behave in interviews, so you are measuring performance skills not the real person. 88 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

• Variations occur in how interviewers use any rating scale used during or after the interview; some give extreme scores while others never do. • Interviewers make up their mind far too before the interview or too soon into it: they are highly selective in the things they notice, remember and rate. They can’t weigh and integrate information well like an AI program. • Interviewers cannot cope with the complexity of integrating the information they collect: people are capricious and inconsistent, which interviewers cannot understand or resolve inconsistencies…. and people are inconsistent • Interviewers are susceptible to forming a first impression and ignoring later data: the well known first impressions effect which can be firmness of handshake, perfume used or the subtle exposure of jewelry or tattoos • Even relatively little pieces of negative information (failures) has a great impact: Reasons to reject (i.e. select out) factors have disproportionate weight compared to select-in factors. • Interviewers have their own (wrong, unproved, bizarre) implicit personality theories (i.e. red heads are intelligent, rugby players are good team workers). So many have come up with a list of SMALL THINGS THAT MAKE A BIG DIFFERENCE recommendations such as: 1Three is a wonderful literature based on good studies albeit with a Prepare all questions on a thorough, up-to-date job analysis.; Ask exactly the “fun-and-games” approach that show how much little things impact on same questions of each candidate; Do not interview ratings allow questions from the candidate until after the interview (when the data have been Consider three unrelated areas: collected); Rate each answer using multiple rating scales.; Use detailed anchored rating Smell: Does perfume, after-shave or body odour have an impact, scales and take detailed notes; Use multiple consciously or unconsciously, on interview ratings? There have been a interviewers where possible.; Use the same few studies in this area. Some guinea-pigs on a interview training course interviewer(s) across all candidates and were asked to rate smells, finding the most and least popular. The next provide extensive training to enhance reli- day they interviewed (unbeknown to them) an actor, who played the ability; Use statistical rather than clinical same role for each selector while wearing a popular, unpopular or no prediction. perfume. And guess what? When wearing the preferred perfume the actor was rated as more socially skilled, conscientious, and trustworthy, Other recommendations include: Restrict the range of the interview to selec- 2There seems some evidence that women are more sensitive to these tion (not recruiting) and focus on the most job-relevant; Rely on multiple independent cues than men. And, of course, BO is a big no-no. Note the claim that Ms reviewers; Train interviewers in the process Markel chose Diana’s personal perfume to lure the young Prince. of the selection interview. Handshake: The body language gurus have described all sorts of hand- In many ways this is old hat but still ignored. shakes, such as the “dead fish”; the “knuckle grinder” and “the stiff-arm www.europeanbusinessreview.com 89

PEOPLE MANAGEMENT thruster”. The “glove” or “politician” handshake is AUTOMATED DIGITAL INTERVIEWS where one person tries to cover the other’s (oppo- 3nent’s) hand completely. The desirable shake? Firm, Traditional interviews are very expensive in terms with a strong and complete grip with (moderately) of time and money. Usually the interviewee has to vigorous shaking for around 5 seconds while main- travel, sometimes long distances to be interviewed taining total eye contact. by one or more individuals who have to make time for the process. Unless Voice: There are several Even with structured interviews audio-recorded, which features in a voice: pitch, is rare and seen as a variability, loudness. where people are asked the same sign of paranoia, there Some people seem to questions it is possible that the verbal is no reliable data about have “nice voices”. Some tone and non-verbal behaviour of the what went on during the actors are famous for interview which could their “rich and dark” or interviewer could be importantly or be challenged in a court “sexy and sultry” voices. subtly different eliciting different of law. It is their signature: reactions in interviewees. their meal ticket. And Even with structured interviews where people so it has been shown at are asked the same ques- selection. The attrac- tions it is possible that tiveness of the voice has an important, subtle and the verbal tone and non-verbal behaviour of the consequential impact. interviewer could be importantly or subtly different And accent? Don’t even go there for embar- eliciting different reactions in interviewees. rassment? Play people tapes with exactly the same The advent of automated interviews claims responses to questions, even in the same voice, and to offer many advantages over more traditional you find a “strong accent effect”. interviews. Usually this involves an interviewee 9900 TTHHEE EEUURROOPPEEAANN BBUUSSIINNEESSSS RREEVVIIEEWW JJAANNUUAARRYY -- FFEEBBRRUUAARRYY 22002222

responding on camera to a set of standardised, responded online to voice recordings, results showed pre-recorded (text, audio or video) questions. These that they engaged in less deceptive impression interviews are recorded and analysed by a whole management, provided shorter answers and felt that range of techniques ranging from state-of-the-art AI they had fewer opportunities to perform at their best. technology or more modest techniques. It is possible to do an analysis of the verbal, vocal and non-verbal Early studies in this area also showed that the more aspects of the recorded answers. Indeed, this meth- positive the interviewee was about the usefulness and odology has become so widespread that various HR ease of use with the technology the happier they were technology providers offer their services to do this. with it. Thus it seems that as this technology becomes more sophisticated, user-friendly and wide-spread From the recorded interviews it is possible to the more it will be accepted by the candidate. measure a very wide-range of particularly inter- esting variables ranging from facial expressions to FAKING. LYING AND DISSIMULATION vocabulary and word-speed to latency of response. They might even be used to measure body temper- The biggest issue is that people lie in interviews (as ature changes, and in time, other physiological well as on application forms and questionnaires) Max methods. These interviews are recorded and thus Eggert has listed a number of typical types of lies. may be used at any time to link data from them to any subsequent behaviours. White-Lies: “I am a totally committed team player”. “I have excellent social skills and Everything about their supposed advantage the ability to read people”. “I am utterly depends on a number of things. First, standard prob- trustworthy and loyal”. lems with interviews: the honesty of the interviewees, impression management, acquiescence all of which Altruistic Lies: These attempt a cover-up, make the interview unreliable in the sense that the but look as if they are helping others. data are inaccurate and unreliable. Second, that the So rather than say they left their last job questions asked are perceptive and high yield. Third, because their manager was a bully, or the that of the many variables measured, the most rele- company was patently dodgy, they say they vant (to the selection task) are chosen. Just because it resigned to look for new challenges. is recorded is not good enough Lies of Omission: The most common and One paradoxical finding at the moment is however easiest of lies. People might omit details reactions to digital interviews. A number of studies of school or university grades because of have shown that candidates do not like them and that they had poor marks. Whole periods of their they lead to a negative perception of the organisation life are obfuscated. The most common lie they are applying to. Participants report feeling less in control and that they have an impression of lower social presence and fairness. Interviewees express concerns with privacy. Yet in a study where students www.europeanbusinessreview.com 91

PEOPLE MANAGEMENT concerns dates, often to disguise the fact that the may not do their preparation as thoroughly as they candidate seemed to spend a surprisingly short should. They may be impatient and inattentive in amount of time in a succession of jobs. It is no long interviews. more not less than concealment. Introverts make diffident, interviewers. They Defensive Lies: The defensive lie is one that pause more, seeming hesitant, when they are conceals by generalizations or vagaries. Ask a processing information. They often find the process person about their previous boss’s management tiring and intimidating and feel more for those style, their reason for leaving or their health record candidates who are similar to themselves. They and you are often faced with a string of vague usually take the data gathering more seriously and expressions such as “like others in the company”; see the whole interview less as a social occasion than “much the same as my co-workers”; “at that time”. a semi-scientific exercise . Certainly, the introverted Ask vague questions you get defensive lies. candidate probably gets a “better deal” (more favour- able hearing) from the introverted interviewer. Impersonation Lies: This is also called the transfer lie and occurs mostly where people take credit for Poorly adjusted (neurotic) interviewers are, by others’ work. Statements such as “I doubled sales definition, hyper-sensitive to real and imaginary over the year”; or “I was responsible for a budget threats. They are stress-prone and may see people of over three million.” All others in the hierarchy in general as threatening. Neurotic interviewers are forgotten in these lies. And it is difficult to can easily feel threatened by the potential “mover establish the facts often as to who exactly was and shaker”. They listen carefully to the candidates’ responsible for particular successes (and disasters answers to questions about work-life balance, diver- which are, of course, omitted). sity, counselling and other issues. Embedded Lies: This is a clever subterfuge to Stable interviewers, like stable employees, are confuse the interviewer. So “I really enjoyed my better news. They are less moody and better able time in Oxford” could refer to a first job in the City to weigh the information. They worry less about of Dreamy Spires where s/he was a mere underling. what might go wrong and cope with all the little The idea is to suggest than an experience, qual- dramas at interviews well. They tend to be calm, ification or achievement was very different from focused and rational. the actuality. “It was good fun being with the BBC” could mean practically anything from “I once went to a show there” to “They filmed at my school”. Errors of commission or fact: This is lying 101. They are explicit, verifiably, false claims. It is about claiming qualifications you don’t have; starting up or working for companies that never existed; skills that don’t exist. It is the most blatant form of lie. THE PERSONALITY OF INTERVIEWERS How does the personality of the interviewer may play a very significant role in the whole interview process. So do different types/personalities make different decisions on the same people given the same criteria? Extraverts usually enjoy interviewing. They are sociable; eager to be amused and entertained and entertaining. Extraverts probably talk too much and listen too little.They 92 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

Agreeable interviewers are What of the abilities of the warm, empathic and trusting. They The interview is a social interviewer? How are bright, are for the most part likeable. They process. It can be a educated interviewers different understand that interviews can sophisticated intellectual from their less talented peers? be stressful. They are concerned Another paradox: the clever about making the candidate theatrical show; a hall of prefer discriminating questions, comfortable, relaxed and able to be mirrors; a game of bluff the dim prefer “clever” questions. their real selves. They are slow to and counter-bluff. There Brighter people tend to have a chide and swift to bless and believe bigger vocabulary and think fast. they get the best out of others by is no doubt that there They ask good questions which giving them a chance. is a lot of ‘gut feeling’ sort the wheat from the chaff. going on in both parties, Less agreeable and likeable The less bright and less interviewers believe you under- educated interviewers might stand people best by “putting despite all their training. rehearse “killer” questions that them on the spot”. They treat the make them appear intelligent, interview as a “Paxman-inspired” even if they cannot process the political interview. They cross-examine individuals, often answers. They can be intimidated in group interviews pushing them to give details of success and failure which and behave badly. They often have “crackpot” theories, their CV overlooks. They are hard to please: cynical, tough, refreshingly evidence-free about desirable characteris- world-weary and they care little for interviewee comfort. tics in candidates. Conscientious interviewers are not only conscientious about how they approach the task of interviewing, but also what they are looking for. Hard work is a virtue. Some are even prepared to “trade off” ability for the work ethic: CONCLUSION preferring the loyal plodder to the capricious wunderkind. Conscientious interviewers are concerned that the appli- The interview is a social process. It can be a sophisticated cant follows orders, obeys rules, and has a sense of duty. intellectual theatrical show; a hall of mirrors; a game of bluff Less conscientious interviewers want to have fun. They and counter-bluff. There is no doubt that there is a lot of ‘gut tend to be less achievement-orientated, less careful and feeling’ going on in both parties, despite all their training. with a much weaker work ethic. All that “postponement of So the moral of the story? First, acknowledge that the gratification” stuff never worked with them. They prefer interviewers’ make-up (ability and personality) do inev- what the Freudians call “the pleasure principle”. They seek itably play a part. Second, try to work out how specific out playmates more than solid and reliable colleagues. interviewers react to particular candidates. Third, use The ambition and achievement needs of interviewers multiple interviewers but particularly those with the are also relevant. Paradoxically, both the low and high ability and personality profiles found among those. Forth, ambitioun interviewer may be intimidated by the obvi- follow the rules and guidelines with respect to training ously ambitious candidate. Those with low ambitions interviews. Fifth, supplement interview data by references can feel intimidated by newly minted MBAs who want and tests. Sixth, the cost of errors (known to all those who to be on the board at 30 and retired at 40. The highly divorce) is high so invest time, money and effort in trying ambitious see a potential threat. to do a better job. ABOUT THE AUTHOR Adrian Furnham is Professor of Psychology at BI: Norwegian Business School. He is particularly interested in assessment, particularly the development and evaluation of psychometric tests and has recently completed a co-authored book \"The Psychology of Spies and Spying\". www.europeanbusinessreview.com 93

FUTURE SERIES THE USE OF DOPAMINE TO ENHANCE RESILIENCE IN A POST COVID-19 ERA: Lessons from recent discoveries in neuroscience that helps sustain vigilance and productivity in life and work by Simon L. Dolan and Kyle M. Brykman 94 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

INTRODUCTION And within the stream of research in positive psychology, there is the emerging construct of Resilience is an emerging concept in business and psychology. Resilience, that for many represent the opposite Its origins are in the school of thought inspired by Seligman pole of stress – the focus is on positive adjustment and colleagues and the positive psychology movement.1 The to inherent life challenges, resulting in a healthy, premise of positive psychology is that well-being can be productive, and happy self. Although the construct defined, measured, and taught. Well-being includes positive of resilience has been around for decades, it gath- emotions, intense engagement, good relationships, meaning, ered steam and popularity during and post the and accomplishment (PERMA). Questionnaires can measure COVID-19 pandemic. Resilience, though often it. Trainers can teach it. Achieving it not only makes people applied to individuals, is also relevant to teams, more fulfilled but makes corporations more productive, companies, communities, and governments. soldiers more resilient, students more engaged, marriages During the pandemic, organizational resilience was happier. Seligman even came up with a formula: tested, as companies encountered unexpected chal- lenges that necessitated constructive adaptation H=S+C+V (structure, processes, contacts with employees, and market creation and penetration). The rules of the Happiness (H) equals your genetic set point (S) plus the games have changed and those who were unable to circumstances of your life , plus factors under voluntary control bounce back (i.e. demonstrate resilience), for what- (V). Unlike previous promises of happiness, positive psychology ever reason, were unfortunately wiped out from the insists it is evidenced-based, using the resources of contempo- business scene. The non-resilient attitude of these rary social science—surveys, longitudinal studies, meta-analyses, companies let to their demise, to their extinction. animal experiments, brain imaging, hormone measuring, and case studies. Most recently, Seligman has turned to big data anal- In this paper we focus on the essence of indi- yses of postings on social media websites (e.g., Facebook). He vidual resilience, and more specifically approached and his team have created a curriculum of positivity. They have measured the impact of training and the surprising benefits of learned optimism. The conclusions of positive psychology can validate experience and offer hope, in a sense, that: • Genetics shape mood and personality, but only in part. • Human beings can change and improve. • Moods matter but can be altered by understanding circadian rhythm. • Individuals have signature strengths that can be identified and employed. • Flow moments exist and can be cultivated. • Other people matter. • Strong social bonds are crucial. • Marriage and religion contribute to well-being. • Positivity improves health, work, creativity, and relationships. • Intrinsic adaptation to both the good and bad is useful • Optimism is a learned skill. • Happiness requires effort. • Happiness is contagious. www.europeanbusinessreview.com 95

FUTURE SERIES from the angle of neuroscience. Our aim is to help you identify positive and negative behavior advance the proposition that some hormones are patterns — and guide your future behavior. playing an important role in creating a sustainable REMAIN HOPEFUL resilience. More specifically, neurotransmitters, like dopamine, seem to help spark the chem- You can't change the past, but you can always ical messengers that keep us alert and on task. look toward the future. Accepting and even Dopamine in particular, seem to have a biological anticipating change makes it easier to adapt and connection to motivation, focus and resilience.2 view new challenges with less anxiety. The word resilience derives from the present TAKE CARE OF YOURSELF participle of the Latin Neurotransmitters, like dopamine, Tend to your own needs verb resilire, meaning and feelings. Participate “to jump back” or “to seem to help spark the chemical in activities and hobbies recoil.” The base of messengers that keep us alert and you enjoy. Include resilire is salire, a verb on task. Dopamine in particular, physical activity in meaning “to leap” that your daily routine. Get also pops up in the seem to have a biological connection plenty of sleep. Eat a etymologies of such to motivation, focus and resilience. healthy diet. Practice sprightly words as sally stress management and and somersault. In more relaxation techniques, clinical terms, resilience such as yoga, meditation, is the ability to adapt to difficult situations. When guided imagery, deep breathing or prayer. stress builds, or adversity and trauma strikes, you BE PROACTIVE still experience anger, grief, anxiety, and pain, but you are able to keep functioning, sometimes even Don't ignore your problems. Instead, figure out flourishing because of it.3 The Mayo clinic offers what needs to be done, make a plan, and take the following tips for becoming more resilient: action. Although it can take time to recover from GET CONNECTED a major setback, traumatic event or loss, know that your situation can improve if you work at it. Building strong, positive relationships with loved ones and friends can provide you with needed support and acceptance in good and bad times. Establish other important connections by volunteering or joining a faith or spiritual community. MAKE EVERY DAY MEANINGFUL Do something that gives you a sense of accomplishment and purpose every day. Set goals to help you look toward the future with meaning. LEARN FROM EXPERIENCE Think of how you've coped with hardships in the past. Consider the skills and strategies that helped you through difficult times. You might even write about past experiences in a journal to 96 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

THE CONCEPT OF RESILIENCE AT and unpredictable acute event (e.g., COVID-19 LIFE AND AT WORK pandemic) versus a minor and predictable chronic obstacle (e.g., high work demands). Resilience can be conceived in several ways, What matters, however, is how people perceive including as a stable trait-like difference, a capacity, the adversity. Resilient people and organizations an outcome, and a process. The trait perspective view adversity as a springboard for growth and assumes that some people are inherently more development as opposed to a negative experi- resilient due to their inherent personality, including ence that should be avoided at all costs. greater hope and optimistic beliefs. The capacity perspective focuses on the resources that people Second, resilience involves demonstrating (e.g., social support) and organizations (e.g., positive adaptation, such that an individual psychologically safe culture) have acquired that or organization returns to (bounces back), or enable them to bounce back quickly and more even surpasses (thrives), previous levels of effectively. The outcome perspective focuses on functioning.5 Positive adaptation may happen whether individuals demonstrate resilience, in instantaneously or take many months to years. terms of achieving greater performance, cohe- It is facilitated by mechanisms of social support, sion, and/or well-being despite adversities. It learning, communication, and improvisation, focuses on whether one is resilient based on among others. Without positive adjustment, the their actions, whereas the capacity perspective entity simply succumbs to the adversity or may considers whether one can demonstrate resil- survive, but with some impairments, and thus ience if and when adversity strikes. Finally, the did not demonstrate a resilient outcome. process perspective captures a combination of these elements, as it focuses on how entities use THE KEY ROLE OF DOPAMINE AND their capacities to demonstrate resilience. ITS CONNECTION TO RESILIENCE Common throughout these perspectives is Now, that we understand what resilience entails, that resilience involves two defining elements we turn to the latest discoveries from neurosci- – the experience of adversity and positive ence that explains why some people are more adaptation despite this adversity.4 First, enti- resilient than others. The field of neurosci- ties must experience adversity to demonstrate ence places the focus on the role of Dopamine. and build resilience. Adversity ranges on many Dopamine is known as the pleasure-and-reward continuums, including severity, duration, and neurotransmitter. It helps create a feeling of predictability, which impacts individuals’ and enjoyment and a sense of reward and accomplish- organizations’ ability to demonstrate resilience. ment when we get something done. It motivates For example, consider the different behaviors performance and builds positive habits. and emotions involved in responding to a severe www.europeanbusinessreview.com 97

FUTURE SERIES Research undertaken at the Huberman Lab at Stanford In other words, more and more evidence is University, proposes that Dopamine, in its role as chemical showing that we tend to repeat behaviors that messenger in our brain, has the ability to help us create, cause dopamine to be released. On the flip side, stay focused, and complete projects with extreme effi- low dopamine correlates with feelings of hope- ciency.6 Huberman has concluded that Dopamine helps lessness, worthlessness and even depression.8 us feel more motivated, energized, happy, alert, and in Perhaps the bad news, then, is that Dopamine can control. It so follows that Dopamine would fuel resilience also play a role in addictive behaviors. Dopamine by stimulating support seeking, persistence over chal- deficiency can impair our ability to manage stress, lenges, and positive mood to execute activities. In a series focus attention, finish tasks, and maintain moti- of videos on Apple Podcasts, which reviews the research on vation.9 Other downsides including self-isolation Dopamine consequences, Dr. Huberman and his colleagues and self-destructive thoughts and behaviors. presents 14 tools to show how to control dopamine release Researchers have found that, in the long-term, to increase motivation and focus and reduce addiction low dopamine levels, or poor dopamine signaling and depression. They also explain why dopamine stacking can, result in hand tremors, slowness of move- with chemicals and behaviors inevitably leads to states of ment and even pre-Parkinson’s symptoms.10 underwhelm and poor performance. They further explore how to achieve sustained increases in baseline dopamine, HOW DOPAMINE WORKS IN compounds that protect dopamine neurons (e.g., caffeine) THE BRAIN from specific sources. Finally, they describe non-prescrip- tion supplements for increasing dopamine—both their Dopamine begins kicking in before we obtain benefits and risks—and synergy of pro-dopamine supple- rewards. This is important because it means ments with those that increase acetylcholine.7 that its real job is to encourage us to act, either to achieve something good or to avoid something FIGURE 1: bad. Essentially, dopamine affects how our brain THE HORMONES OF MOODS AND CONDUCT decides whether a goal is worth the effort in the first place. When our brain recognizes that some- Alertness Anxiety SEROTONIN thing important is about to happen, dopamine Concentration Impulse Obsession kicks in. Researchers have found that dopamine Energy Irritability Compulsion spikes occur during moments of high stress — like NOREPINEPHRINE Memory when soldiers with PTSD hear gunfire. Attention Mood Researchers fromVanderbilt University headed Cognitive by postdoctoral student Michael Treadway and Function Professor of Psychology David Zald, correlated dopamine levels with resilience by mapping the Appetite brains of “go-getters” and “slackers.” They found Aggression that people willing to work hard had higher Sex dopamine levels in the striatum and prefrontal cortex — two areas known to impact motivation DOPAMINE and reward. Among slackers, dopamine was Reward present in the anterior insula, an area of the brain Motivation involved in emotion and risk perception.11 Similar research from Brown University assessed the role of dopamine in influencing how the brain evaluates whether a mental task is worth the effort by measuring natural dopamine 98 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022

HARD WORK levels while choosing between memory tasks In sum, the results from these experiments reflected of varying difficulties. More difficult mental the findings for natural varying dopamine levels. To tasks were rewarded with gain more insight into the more money, and those with decision-making process, the higher dopamine levels in a People willing to work hard researchers tracked the partic- region of the striatum called had higher dopamine levels in ipant’s eye movement as they the caudate nucleus were the striatum and prefrontal reviewed information about more likely to focus on the task difficulty and the amount benefits (the money) and cortex — two areas known to of money they would receive. choose the difficult mental impact motivation and reward. Their gaze patterns suggested tasks. Those with lower Among slackers, dopamine was that dopamine didn’t alter dopamine levels were more their attention to benefits vs sensitive to the perceived present in the anterior insula, costs. Rather, it increased how cost, or task difficulty.12 Next, an area of the brain involved in much weight people gave to the participants completed emotion and risk perception. the benefits once they were experiments after taking looking at them. either an inactive placebo, methylphenidate (a stim- ulant drug typically used HOW DOPAMINE MAKES YOU FEEL to treat ADHD), or sulpiride (an antipsychotic medication that, at low doses, increases dopa- mine levels). Increasing dopamine boosted how Dopamine, thus, seems to help us know exactly what we willing people with low, but not high, dopamine want and how to get it: it helps us access our self-confi- synthesis capacity were to choose more difficult dence, rational, self-awareness, and our critical thinking. mental tasks. Dopamine also helps us focus intently on the task at hand www.europeanbusinessreview.com 99

FUTURE SERIES and take pride in achievement: it enhances our strategic IMPLICATIONS thinking, masterminding, inventing, problem solving, envisioning, and pragmatism. We may feel overly alert Some research assert that excessive dopamine can or need less sleep than other people. Dopamine also lead to excessive risk-taking behaviors and impulsive seems to support the following activities: actions, like reckless driving, shoplifting, violence, or over-control of others. However, as a person’s neurobi- • Reward and pleasure centers. ology, brain structure, and genetics will also influence • Attention and learning. symptoms, two people could have equally high levels • Sleep and overall mood. of dopamine, but entirely different symptoms may • Behavior and cognition. result. This could be due to differences in dopaminergic • Movement and emotional responses. receptors and how each brain processes the dopamine. • Voluntary movement, motivation, and reward. Below is a list of some negative symptoms that could stem from high dopamine. And here is another interesting angle. It seems that Dopamine also plays an important part in morning wake- AGITATION: fulness. Sergio Gonzales and his collaborators report Those with high dopamine may feel internally that dopamine inhibits norepinephrine’s melatonin restless and overstimulated. While sufficient producing effects and shuts off melatonin production in dopamine can actually help some people stay calm, the morning when the brain needs to awaken.13 abnormally high levels can make a person feel internally nervous and knotted. It may be difficult to sit still for long periods of time. 100 THE EUROPEAN BUSINESS REVIEW JANUARY - FEBRUARY 2022