BETRueuhrvseoiinepewesasn Artificial Intelligence in Supply Chain Planning November - December 2019 europeanbusinessreview.com ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• The Coach Route to Transformation ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Do You Realise How Scary You are? ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Agility and Resilience: Leadership in the Digital Age The 3 Myths of EMPLOYEE AUTONOMY empowering communication globally USA $22 EU €17.5 CAN $22 UK £15
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The European Business Review empowering communication globally NOVEMBER – DECEMBER 2019 BANKING DECISION MAKING PEOPLE 38 Scandinavian secure-sharing software 62 The 3 Myths of Employee Autonomy 9 What European Banks Need to Know about Competing with Ecosystems as a service: The ultimate solution for Carsten Lund Pedersen decision-makers Alessandro Secchi, Luca Gagliardi Møyfrid Øygard, Admincontrol COMMUNICATION 67 Do you realise how scary you are? and Nanna Svahn LEADERSHIP 43 Agility and Resilience: The Essential Megan Reitz and John Higgins GLOBAL BUSINESS Qualities of Leadership in the COMPENSATION 12 Overlooked Strategies for Surviving the US- Digital Age 71 Pay Secrecy China Trade War (and possibly others) Katharina Lange, IMD Dan Prud’homme and Mark Cohen Adrian Furnham DIGITAL LEADERSHIP FUTURE SERIES 48 Business software solutions from the MANAGEMENT 76 “Managing by Values” (MBV): 18 What Every Manager Should Know About can-do partner-next-door Human-Centered AI: A Manager’s Interview with Michał Sztanga, Future Innovative tools for successful micro Introduction to Human-Centered Artificial Processing behavioural conduct Intelligence Anat Garti and Simon L. Dolan Mark Esposito, Terence Tse, Aurelie COACHING 52 The Coach Route to Transformation: LEADERSHIP Jean and Josh Entsminger 83 Soft Leadership for Millennials Helping Individuals and Organisations to SUPPLY CHAIN Arrive at their Full Potential M.S. Rao 24 Artificial Intelligence (AI) in Supply Chain Interview with Ms Gina Lodge, The Academy of Executive Coaching DIVERSITY Planning The Future is Here & Now (AoEC) 88 Changing the face of finance and Mark Balte, Logility EXECUTIVE EDUCATION professional services 59 Wharton: Where Entrepreneurs Learn Lucy Franklin PROCUREMENT the Business of Business How Wharton INNOVATION 28 The Procurement Call for Agile, What does Executive Education gave one European 90 Six Lessons I Learned About Innovation it mean? entrepreneur the business skills to launch his company Terrence Hahn Andressa Reis and Hervé Legenvre INTELLECTUAL PROPERTY DATA MANAGEMENT 96 3-steps to Commercialising Intellectual Moving From Data and Knowledge to 34 Competitive Advantage Property in the Creative Industries Gene Shill Mostafa Sayyadi empowering communication globally
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From the Editors CREATING, INNOVATING AND MANAGING BY VALUES “ Being relevant and being able to people/human factor. generate real value to the business Katharina Lange from IMD argues that today’s is even more important than being cutting-edge,” said Michał Sztanga, Managing digital business landscape demands different, Director of Future Processing. agile and hyper-aware leaders who also under- stand the importance of resilience. In line with this thought, we present to you the year-end issue of The European Business Gina Lodge from the Academy of Executive Review with a special focus on the important Coaching (AoEC) discusses why executive issues that will generate real value for your coaching is still one of the most versatile and business and organisation. powerful change management tools available to organisations in today’s volatile times. First off, with the growing application of AI across all business functions, many don’t In our cover story, Carsten Lund Pedersen fully understand what it is and how it can help debunks 3 myths of employee autonomy and improve business operations. Mark Balte from provides solutions and strategic advice for Logility gives clear insights into the capabilities addressing autonomy in the workplace to ensure available today to help you improve produc- the greatest value creation. tivity, accuracy and speed. Anat Garti and Simon L. Doland explore further Further, Mark Esposito et al, examine the by proposing a series of ideas on how to render the relationship between human and AI, offering Managing By Values (MBV) concept truly opera- a practical guide for managers and executives tional, so that the full potential of this revolutionary to learn about how to optimise human-centred concept can be rendered instrumental. approaches to AI to create maximum benefits. Further in the issue, we also cover interesting Creating value is also about making good topics about leadership and communication, decisions. Møyfrid Øygard from Admincontrol entrepreneurship, executive education, innova- explores the art of making decisions as well as tion, and so much more. how technology can enhance its effectiveness. We hope that you enjoy reading this issue, and On top of advanced technologies, the core as we approach the end of 2019, we wish you an of value creation is still highly dependent on the excellent holiday season – Merry Christmas and a prosperous new year! Production & Design: Angela Lamcaster Print Strategy: Stefan Newhart Production Accounts: Lynn Moses Editors: Elenora Elroy, David Lean Group Managing Editor: Jane Liu Editor in Chief: The European Business Review Publishing Oscar Daniel READERS PLEASE NOTE: The views expressed in articles are the authors' and not necessarily those of The European Business Review. Authors may have consulting or other business relationships with the companies they discuss. The European Business Review: 3 - 7 Sunnyhill Road, London SW16 2UG, Tel +44 (0)20 3598 5088, Fax +44 (0)20 7000 1252, [email protected], www.europeanbusinessreview.com No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without written permission. Copyright © 2019 EBR Media Ltd. All rights reserved. ISSN 1754-5501 empowering communication globally
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Banking What European Banks Need to Know about Competing with Ecosystems BY ALESSANDRO SECCHI, LUCA GAGLIARDI AND NANNA SVAHN Partnering with diverse groups of companies EdgeProp, Averspace, and SoReal to pool offers 89% of the is proving to be a rewarding way to attract new onto the platform.1 Launched in 2018 by DBS, this customers and expand existing relationships. ecosystem enables customers to buy, sell, or rent a 120 bank leaders But managing these networks is a relatively home from a single platform – and take out a loan we recently new area for most banks, especially in Europe. in the process. Among other returns, this ecosystem surveyed A replicable operating model will help. generated more than SGD 300 million in home loan said they believe requests for DBS in its first year of operation.2 that ecosystem- Banks are increasingly turning to new and based initiatives diverse partnerships to spark growth – Other growing bank-based ecosystems are will be their main for good reason. Ecosystems that offer focusing on different core customer interests, driver of future complementary products and services via a single such as wellness and travel. The big challenge is value creation. platform can open new revenue streams for all managing an ecosystem over time – while also launching companies involved. In most cases, banks will and managing others successfully. Eighty-nine percent receive fees in exchange for allowing its partners of the 120 bank leaders we recently surveyed access to their customer database. In some cases, (with banks located in 19 countries across the banks suddenly find themselves able to follow globe) said they believe that ecosystem-based customers far beyond the boundaries of their initiatives will be their main driver of future value traditional relationships. creation. Among leaders of banks in Europe the response was almost identical, at 88 percent. Yet Take the DBS Property Marketplace in orchestrating even a single ecosystem is relatively Singapore, for example, in which the Singapore- new territory for most banks. And in Europe, the based bank (DBS) works with partners including challenge is exacerbated as many firms are still www.europeanbusinessreview.com 9
Banking Since not struggling to pull outdated legacy systems fully is highly fragmented. In the housing market, for all partners into the digital world. example, a bank might find itself managing rela- can offer the tionships with dozens of real estate agents, legal same value, Our research, bolstered by interviews with services firms, and moving companies. standardising experts on ecosystem strategy and development, agreements suggests that adopting a replicable operating model Strategic partners call for a more tailored with small at the outset would help most banks orchestrate approach, with dedicated staff and contractual partners will their first ecosystem with confidence. It would also terms specifically designed to ensure the health and make partner sustain them as they expand their ecosystem port- longevity of the partnership. One bank we studied management folio, saving them from redundant learning curves. has a dedicated team to manage 20 strategic part- easier. ners and another dedicated team responsible for And, by providing guidelines and guardrails more than 100 tactical partners. up front, it would address our respondents’ most consistent ecosystem concerns, such as devel- Remuneration models should be similarly sorted, oping strong technology platforms, maintaining based on the type of ecosystem and the role of data security, and ensuring a consistent brand the partner. It might be a percentage of the trans- customer experience. action value, a flat fee, or a combination of both. Remuneration might also take the form of data Even banks that are already orchestrating exchange; aggregating customer data from different multiple ecosystems can benefit from reverse- touch points can help the bank provide a better engineering a standard operating model across customer experience and simultaneously draw a ventures. Complex partnerships will always evolve, customer deeper into the ecosystem. with partners coming and going, strategy shifting, and new innovations rising. Gathering best prac- 2 Put onboarding on the fast track. tices, in the form of an operating model, will After the contract, onboarding is the next benefit all ecosystem endeavours. critical element that can enhance the value of a partnership (or damage it). Lacking a stand- Foundations of a strong operating model ardised and agile process, onboarding can take What behaviours anchor a strong and replicable more than six months, as the agreements make operating model? We found several that we could their way through different layers of IT, legal, classify as “the basics” (establishing key perfor- and compliance approvals. Banks need to accel- mance indicators and measuring and monitoring erate this process, to ensure that all parties are progress, for example, or using intelligent marketing able to take full advantage of the market condi- tools to turn data into insights). But we also found tions that are bringing them together. They should five that were less intuitive, namely: also put limits on the length of time allowed for onboarding tactical partners. One bank we inter- 1Differentiate between strategic and tactical viewed does not proceed with a partnership if it ecosystem partners. takes more than six months to onboard the part- Contractual partnerships generally ensure ners because integration costs start to erode value the flexibility that’s needed to operate in an ever- that the ecosystem can generate. changing ecosystem, no matter the type of partner. However, since not all partners can offer the same Providing APIs can be a way to reduce inte- value, standardising agreements with small part- gration costs and time to market. One bank that ners will make partner management easier. Some we studied, in the Asia Pacific region, launched a ecosystems may end up managing hundreds of such partner portal to provide access to its private API partners if the market in which they’re operating system, and quickly found it to be the fastest and Complex partnerships will always evolve, with partners coming and going, strategy shifting, and new innovations rising. Gathering best practices, in the form of an operating model, will benefit all ecosystem endeavours. 10 The European Business Review November - December 2019
easiest way to connect partners securely from the more traditional advisor role First-mover advantages and beyond with the bank. The portal standard- into that of active risk management Banks in Europe (and North America) ises partner interactions, minimising and monitoring. They need to move are generally behind their peers in the Asia the need for discretionary judgement away from a bottom-up, subjective Pacific region on the ecosystem front. calls. Partners are encouraged but process that sits in an organisation And so far, European banks have focused not required to use the portal; almost siloed from the rest of the bank to more on retail - related ecosystems, 80 percent do, however, and they an integrated, yet objective function with Spanish banks including BBVA, benefit from a streamlined onboarding focused on critical process break- Santander, and CaixaBank, taking the process. The partner portal has also points. For some compliance teams lead. But coming late to the global party helped the bank improve control of its this may require a mindset shift not isn’t necessarily bad news. Banks here can ecosystems in their early development just a new process or a new internal build on what others have learned. And phase as they can track API usage. client to support. in these regions, large, incumbent players (with wide shares of customers) domi- 3 Nurture the partner community to 5 Take ownership of nate many markets, and most are not sustain innovation. ecosystem security. yet participating in a banking ecosystem. In a strong banking ecosystem, Security is a central element of First-mover advantages are still widely value is created through interactions trust, which is the foundation of a available. with the orchestrator. Partners and strong digital environment. Previous developers may connect through Accenture research has shown that Ultimately, however, ecosystem various portals, but these transactional the failure to safeguard data is the value will be told by the number of interactions aren’t enough to foster second biggest reason (behind cost) customer interactions that trigger valuable innovation. why consumers leave their financial interactions among partners and result services provider.3 And respondents to in sales. So successful ecosystems will For that, partners need to get to know our current survey recognise a trusted grow on the back of their ability to one another’s businesses more fully. brand as the single most important leverage data to spark and guide inno- factor in making an ecosystem attrac- vation. These five anchors will help That’s why the bank, as orchestrator, tive to customers. position them to succeed. needs to create an environment in which these companies can get to know each Banks orchestrating ecosystems About the Authors other’s businesses more fully. To provide should thus shoulder the responsibility Allesandro Secchi (ales that expanded level of support, the bank for what happens in their ecosystem sandro.g.secchi@accenture. might consider organising conferences and take the lead role in security com) is a senior principal, and other events, at which partners matters. They are originating business offering development lead, can give and receive direct, unfiltered on their own platforms; if a breach with Accenture. feedback, review new promotions, were to occur, customers would see and brainstorm innovations (perhaps their brand as the primary brand no Luca Gagliardi (luca. through design-thinking activities, sprint matter where in the chain of transac- [email protected]) sessions, and hackathons). tions it happened. is a senior principal with Accenture Research. 4 Set up a proactive With this in mind, they should compliance department. conduct mandatory outsourcing risk Nanna Svahn (nanna. Banks should be able to count assessments on partners, share secu- [email protected]) is on compliance departments that are rity expertise, and promote their an associate manager and rigorous, proactive and confident. security practices (including reporting Nordic financial services The key shift in behaviour is that practices). One bank we studied in research lead at Accenture. compliance now will need to develop the Asia Pacific region shares its an ability to flag issues before they security staff with strategic partners References become problems (versus being and suggests technology vendors to 1. https://www.dbs.com / newsroom / DBS_ launches consulted in the wake of an incident). tactical partners to help them achieve _ Southeast _Asias_largest_bank_led_property_marketplace To do so, they need to move away higher security standards. 2. DBS 2018 annual report 3. 2019 Accenture Global Financial Services Consumer Study http://www.accenture.com/us - en / insights /finan- cial - services - consumer - study - 2019. www.europeanbusinessreview.com 11
Global Business Overlooked Strategies for Surviving the US-China Trade War (and possibly others) BY DAN PRUD’HOMME AND MARK COHEN T he trade war between the US against Huawei, a leading Chinese reconfiguring supply chains, others and China has escalated to a telecom firm. The supply chain disrup- which are distinct – are less discussed point far beyond the expec- tions from the trade war are immense.1 but critical for many firms to survive tations of many. In what started the tensions. as volleys of tariffs and a WTO And Western firms are increas- complaint against China’s “forced” ingly fearful of regulatory reprisals Reconfiguring manufacturing supply technology transfer policies, now in China.2 While reconfiguration of chains the right way involves expanded export controls, manufacturing supply chains involving Attempts to redraw manufacturing inbound investment restrictions, China has been on the forefront of supply chains so that companies’ restrictions on labor mobility, an FBI many managers’ responses to the trade goods will be classified as originating task force on economic espionage dispute,3 currently available advice is from a country other than China, and from China, visa limitations, and an sometimes ill-informed about how to therefore avoid the latest round of embargo (albeit a temporarily relaxed best do so. Further, intellectual prop- Trump tariffs, are fraught with risks. one at the time of writing this article) erty (IP), innovation, and non-market In some cases, it may be possible to strategies – some of which also involve 12 The European Business Review November - December 2019
reduce US tariffs to zero if a firms’ goods undergo For example, embedding software into computer a sufficiently high level of manufacturing or other memory in a device in a country outside of China transformation in a country that enjoys duty-free may be sufficient to transform that device from a treatment under a free trade agreement or other memory device into a product having a new “name, preferential arrangement with the US. However, in character or use”, such as a device to perform order for products to be eligible for US non-pu- certain functions in a computer, and therefore able nitive “most favored nation” tariffs, firms will to avoid new US customs duties. In addition, if the usually need to perform a “substantial transfor- software is not “sold” with the medium in which it mation” of their product components in a country is embedded rather the customer is only granted a outside of China and prove the country of origin right to use the software, the value of the software of such transformation. Separate rules regarding may not be factored into the US customs’ duty the country of origin may also apply if the product valuation of the product. is subject to antidumping or countervailing duties. Additionally, US export control laws have separate If relocating IP rights and production outside rules regarding incorporation of US technology of China is not feasible, a second strategy is to into foreign-manufactured products. restructure payments for IP rights to reduce the customs valuation of the goods when imported Under long-standing case law, a product is into the US. Companies that import goods from “substantially transformed” if it obtains a new unrelated parties in China usually pay duties based “name, character or use” in that third country. on the “transaction value” or price actually paid Generally speaking, mere assembly or packaging is for the imported goods. This transaction value not enough to achieve substantial transformation, can be adjusted to account for the licensing fees and each country may have its own country of and royalties from the IP rights that the manufac- origin rules governing such transformation. In other turer of the products needs to pay, which is called a words, if a company thinks it can install the last Customs “assist.” screw in an electronic device in Vietnam and thereby avoid US tariffs on Chinese goods, it is misguided. One way to reduce the amount of “assists” is Much more substantial forms of manufacturing to pay license fees directly to third party licensors need to take place. If the country of origin is rather than have the manufacturer incorporate the misrepresented to US Customs, US law provides for license and royalty fees into the costs of goods sold a range of penalties, including significant rewards to to an importer.4 Importers can obtain guidance whistleblowers who report on fraudulent behavior. from Customs on valuation of their goods or contact their Customs broker for suggestions on Intellectual property strategies additional strategies. Restructuring IP transactions IP rights are among the least expensive assets to Based on current information, if a firm’s reposition to reduce US duty rates owed to the trade imported products originate from China and are war. This repositioning can be achieved in one of on the 25% tariff list of the Trump Administration two ways. without any exclusion from relief, they will be subject to duties of 25% as will their corresponding First, firms may relocate their IP rights in a new royalties.5 As of September 1st 2019, an additional country of manufacture. In certain cases, IP rights round of products is expected to be subject to 10% could help “transform” the manufactured goods duties.6 Of course these duties may change. sufficiently to qualify corresponding goods as originating from that country. Before undertaking Attempts to redraw manufacturing supply chains any significant change of a supply chain, guidance so that companies’ goods will be classified as should be obtained from US Customs. originating from a country other than China, and therefore avoid the latest round of Similarly, strategies for sourcing and integrating Trump tariffs, are fraught with risks. computer software, including that protected by IP rights, into products can alter the country of origin or US customs’ duty valuation of those products. www.europeanbusinessreview.com 13
Global Business Even in industries built upon decades of Western talent and research, where Western firms have sizeable experience curves and lead-time advantages, Chinese firms are making headway. Leveraging China’s improved IP regime into a less risky institution for Western firms. In 2019, a significant number of legal reforms – Foreign ownership restrictions were removed on largely due to the trade war – were made to China’s new energy vehicle (NEV) operations in China as IP regime that make it less risky for Western firms to of 2018, reducing the significant risks caused by a license to China, collaborate with Chinese partners, 2017 FTT policy requiring transfer of three core and otherwise engage in IP-intensive operations in technologies to foreign-Sino JVs as a precondition the country.7 However, these important reforms for foreign firms to produce NEVs in China. have received insufficient attention in multina- In January 2019, a long-awaited national-level tionals’ strategizing for the Chinese market. specialised IP appellate tribunal was established in China’s Supreme People’s Court to provide greater In March 2019, China’s Foreign Investment Law uniformity in adjudication of technology-oriented was revised to explicitly prohibit “forced technology IP disputes. This tribunal, which is similar to the transfer” (FTT) policies and establish penalties for US Court of Appeals for the Federal Circuit,8 joins government officials involved in misappropri- recently established specialised IP courts in China ating foreign trade secrets. Also in March 2019, that hear cross-regional appeals and therefore the Chinese government abolished controversial help correct local protectionist tendencies. In provisions governing the import and export of April 2019, both the trademark law and the law technology as well as controversial technology-re- governing trade secret misappropriation and other lated provisions governing Sino-foreign equit y types of unfair competition were strengthened. joint ventures. In April 2019, the Administrative Numerous other improvements have recently been Licensing Law was revised to prohibit the state made to China’s IP regime.9 from making technology transfer a prerequisite for granting business licenses in China. Unfortunately, improvements in China’s IP regime have ironically come at a time when supply These reforms join a wide range of others in chains are being disrupted and the US is making it 2018 and 2019 that transform China’s IP regime more difficult to engage in technology collaboration with China. Nevertheless, Western firms should capitalize on the recent IP reforms in China – looking past many of the criticisms about China’s IP regime that initially fueled the trade war – with corpo- rate-level-driven adjustments to their technology and IP management strategies. For example, foreign licensors can now more easily transfer their technol- ogies to unrelated parties in China. US trade data reflects this change: unrelated party transactions now dominate US-origin technology transfer to China. More generally, the recent IP reforms in China make conducting IP-intensive operations and enforcing IP rights in China less risky for multinationals. Some US firms and government officials have assumed that pushing for even more reforms to China’s IP regime will bring even greater benefits. Indeed, other reforms would be helpful to further reduce risks of innovating in China.10 However, 14 The European Business Review November - December 2019
paradoxically, further ratcheting up the Additionally, even if the even more competitive in the future.13 current trade war in an effort to squeeze trade war further fragments even more IP reforms from the Chinese global markets, it will not For example, Tencent and Baidu are government may lessen the willingness prevent Chinese firms from innovating in Internet business models, of the authorities to actually effectively being both domestically and Haier is highly competitive in innovative implement the important reforms that internationally competitive. consumer goods/white goods, DJI is have already been made. This would be engineering excellent drones, Huawei a lost opportunity for Western firms. regimes to see if their R&D programs will and Xiaomi are producing high-quality be subject to further regulation, if more and affordable telecommunications Navigating technology export controls liberal export control requirements are equipment, Huawei is a leader in 5G Firms investing in the US will need to available for R&D activities conducted standards setting, Alibaba is offering find smart ways to maintain business outside the US, and if company proce- popular and inexpensive cloud data continuity in the face of a more powerful dures for obtaining approval to file patents services, BYD is making competitive Committee on Foreign Investment resulting from such R&D overseas need NEVs, BGI is advancing in genome in the United States (CFIUS) and an to be altered. Some firms, such as Oracle, sequencing, and Cloudwalk is devel- expansion of US export controls, which have already had to significantly alter oping advanced artificial intelligence can block mergers and acquisitions operations in China in light of some of facial recognition technology. Many of involving Chinese firms or technology these challenges. China’s innovative companies achieve transfers involving vaguely-defined startling growth targets by leveraging “foundational”, “critical” or “emerging” Innovation strategies the rapid growth of the local market, technologies.11 There are also export From one perspective, Western firms incredible scalability and lightning-fast restrictions aimed at Chinese firms and and research organisations have time-to-market, improving local IP a recent ban (albeit one temporarily seemingly benefited from the trade war protection, and government support relaxed at the time of writing this article) effectively blocking innovative Chinese and some local regulatory barriers on selling semiconductor chips and competitors out of the US market. against foreign competition. software to Huawei in particular. However, despite these near-term advantages, Western firms must realize Even in industries built upon decades Varied IP and R&D responses are that Chinese innovation cannot be of Western talent and research, where needed to address these challenges. As contained in the long-run. In fact, Western firms have sizeable experience export control laws generally do not Chinese firms are already innovating in curves and lead-time advantages, cover publicly-disclosed documents a range of industries and will become Chinese firms are making headway. For such as published patents,12 firms example, HiSilicion, owned by Huawei, should often still be able to license is making competitive smartphone their US-derived patented technology semiconductor chips, and Cambricon to related or unrelated parties in China and Horizon Robotics are making in the face of a more rigorous export competitive artificial intelligence (AI) control environment. Nonetheless, chips. Further, despite the trade war, additional care may be necessary when there will be considerable temptation licensing to Huawei and certain other for Western firms to collaborate with companies placed on the US “entity list”, increasingly capable Chinese firms which can set restrictions potentially and research organisations to advance involving patents, such as participation in next-generation technologies that no technical standards-setting bodies. At the one dominates at present – ranging same time, R&D-intensive US companies from various applications of AI to new that patent in China and elsewhere may energy vehicles. face additional challenges from US export controls if US-derived propri- Additionally, even if the trade war etary technology is involved. Companies further fragments global markets, it will will need to closely monitor changes in not prevent Chinese firms from being US and other countries’ export control both domestically and internationally competitive. Chinese firms will inevi- tably leverage their growing presence www.europeanbusinessreview.com 15
Global Business not just in China but in other emerging markets, Western firms need to of skilled Chinese workers preferring to work for which account for almost two-thirds of world respond not by remaining Chinese rather than foreign firms may very well economic growth and more than half of new technologically complacent quicken with the added incentive of increased US consumption over the last fifteen years.14 And behind the protectionist investigations into Chinese economic espionage. China’s Belt and Road Initiative (One Belt, barriers established during Although it is unclear if these burgeoning trends One Road) might help secure these important the trade war. Instead, to will be more serious in the future, to be safe, sources of future demand.15 compete in the long- Western multinationals need to respond with run they must ramp up smart non-market strategies. Further, the trade war has already emboldened a heighted sense of nationalism in the form of investment in R&D. European firms might capitalize on decreases a feverish quest for technological “self-reliance” of Chinese tourism to the US by ramping up in China.16 This neo-techno-nationalism appears marketing for European destinations. to be contributing to faster mobilisation of state and private resources that might enable Chinese Firms should engage directly with the US firms to catch up to foreign counterparts in a government and via US industry associations to range of industries, both emerging and more ask for a more measured approach and resolution mature. Huawei, for example, is relying more to the trade war. Some firms have already adopted extensively on its own CPU and modem for this strategy: in May 2019, 173 Western firms its cell phone sales in China and has recently together wrote to President Trump arguing that launched its own operating system, named “It is time to bring this trade war to an end”.19 “Harmony”, for its cell phones. In the Chinese market, strategies should be Western firms need to respond not by adopted to present the best face possible to remaining technologically complacent behind the Chinese government, suppliers, alliance the protectionist barriers established during the partners, and household consumers. Western trade war. Instead, to compete in the long-run firms’ messaging, both via trade associations they must ramp up investment in R&D, and trim and on social media (e.g., Weibo and WeChat), down internal organisational barriers slowing may wish to strategically establish a measured time-to-market of new products and services, distance from the US governments’ and allowing quick and powerful responses to a some US firms’ more heavy-handed tactics. more complex regulatory environment as well Corporate social responsibility (CSR) activities as to nimble, innovative, and increasingly global across China could also be ramped up in the Chinese competitors. instance that the trade war increases percep- tions that Westerners at large are becoming Non-market strategies aggressors towards China. Surprisingly restrained beforehand, official state propaganda and Chinese social media has Surviving the trade war turned uglier in 2019 as a result of the trade war. While redrawing manufacturing supply chains Anti-US pledges have arisen on the Internet and has been on the forefront of many managers’ other Chinese media outlets to “fight” against responses to the US-China trade tensions, effec- US “bullying” by boycotting American products.17 tively doing so is more complicated than many Chinese outbound tourists, a massive source of believe. Further, smart intellectual property, revenue for some foreign firms, might increas- innovation, and non-market strategies are also ingly focus their cash on “more welcoming critical to weathering the long-term battle that nations” than the US.18 And the growing trend appears to be at hand. Some of these strategies may also be useful to firms facing other trade wars 16 The European Business Review November - December 2019
in the future – a probable prospect in an era of 8. Cohen, M, 2019, A Federal Circuit with Chinese Characteristics: The rising neo-populism and protectionism.20 launch of China’s New National Appellate IP Court, see https://chinaipr. com/2019/01/04/a-federal-circuit-with-chinese-characteristics-the-launch- About the Authors of-chinas-new-national-appellate-ip-court-%E4%B8%AD%E5%9B%B- Dan Prud’homme (EMLV & DKU) D%E7%89%B9%E8%89%B2%E7%9A%84%E8%81%94%E9%82%A is an associate professor at EMLV 6%E5%B7%A1/ Business School (École de Management 9. Prud’homme, D., Zhang, T., 2019. China’s Intellectual Property Regime Léonard de Vinci) (Paris, France). He is for Innovation: Risks to Business and National Development. Springer. also a non-resident senior researcher at 10. Ibid 11. Bureau of Industry and Security, Review of Controls for Certain the GLORAD Center for Global R&D and Emerging Technologies, 83 Fed. Reg. at 58202 (Nov. 19, 2018). Innovation at Tongji University (Shanghai, China). 12. See Export Administration Regulations (EAR), Sec. 734.3(b)(3) , which provides that the following types of information are not “subject to the Mark Cohen (University of EAR,” regardless of their content: (i) “published” information; (ii) infor- California, Berkeley) is a Chinese- mation that arises during, or results from, “fundamental research;” (iii) speaking Intellectual property and information released by instruction in academic institutions; (iv) infor- commercial attorney with over 25 years mation in patents and published patent applications; (v) information that is a experience in emerging markets. Former non-proprietary system description; and (vi) certain types of telemetry. See US government and US Embassy (Beijing) official, also Sec. 734.10 on patents specifically. former Fulbright Professor (Republic of Slovenia). 13. Prud’homme, D., von Zedtwitz, M., 2018. The changing face of Extensive experience in management of patent innovation in China. MIT Sloan Management Review, https://sloanreview. porfolios, IP enforcement campaigns, government mit.edu/article/the-changing-face-of-innovation-in-china/; Greeven, M., and media relations, international trade matters Yip, G., Wei, W., 2019. Understanding China’s next wave of innovation. (including WTO issues), and public policy efforts, MIT Sloan Management Review, https://sloanreview.mit.edu/article/ including antitrust advice. Educated thousands of understanding-chinas-next-wave-of-innovation/ leading Chinese public and private sector officials on 14 McKinsey Global Institute, 2018. Outperformers: High-growth IP matters, and have lectured before business and emerging economies and the companies that propel them, available at academic audiences throughout the world. I have also https://www.mckinsey.com/~/media/mckinsey/featured%20insights/ served as an expert witness on intellectual property innovation/outperformers%20high%20growth%20emerging%20 matters involving Chinese companies. economies%20and%20the%20companies%20that%20propel%20them/ mgi-outperformers-full-report-sep-2018.ashx References 15. Scheve, K., Zhang, R., 2016. One belt one road: Chinese strategic 1. AmCham China Member Survey, May 22nd 2019, available at https:// investment in the 21st Century. Harvard Business Review Case Studies, www.amchamchina.org/about/press-center/amcham-statement/ available at https://hbr.org/product/one - belt - one - road - chinese - 2. US firms in China fear ‘retaliation’ against Huawei curbs: Am Cham, strategic - investment - in - the - 21st- century/P87 - PDF - ENG available at https://www.bbc.com/news/business-48361689, citing an 16. China’s Xi Jinping revives Maoist call for ‘self-reliance’, 2018, https:// interview with AmCham Chairman Tim Stratford www.ft.com/content/63430718-e3cb-11e8-a6e5-792428919cee 3. Maidment, P., 2018. How Western multinationals are responding to 17. For example, see: Chinese media calls for ‘people’s war’ as US trade war the escalating U.S.-China trade war. Harvard Business Review, available heats up, 2019, https://edition.cnn.com/2019/05/14/asia/china-us-bei- at https://hbr.org/2018/12/how-western-multinationals-are-respond- jing-propaganda-intl/index.html; China’s propaganda machine takes aim at ing-to-the-escalating-u-s-china-trade-war U.S. over trade war, 2019, https://www.nytimes.com/2019/05/14/world/ 4. It should be noted that, generally, trademarks are not added to the asia/china-propaganda-trade.html; China’s latest weapon in the trade war: transaction value for assists. Karaoke, 2019, https://www.bbc.com/news/world-asia-china-48359002 5. For a list of the various tariff tranches see Section 301 Trade Remedies to 18. Trade war is putting Chinese tourists off US, with many opting for be Assessed on Certain Products from China available at https://www.cbp. ‘more welcoming’ nations, 2019, available at https://www.scmp.com/ gov/trade/remedies/301-certain-products-china. tech/big-tech/article/3010145/ctrip - ceo - says - trade - war - putting - 6. See https://twitter.com/realdonaldtrump/status/1156979446877962243 chinese - tourists - us - many - opting - more 7. Cohen, M. 2019. Unpacking the Role of IP Legislation in the Trade War, 19. FDRA Open Letter to President Trump, May 20th 2019, available at available at https://chinaipr.com/2019/05/19/unpacking-the-role-of-ip- https://fdra.org/wp-content/uploads/2019/05/2019-Footwear-Tariff- legislation-in-the -trade-war /; Prud’homme, D., von Zedtwitz, M., 2019. Letter-1.pdf Managing “forced” technology transfer in emerging markets: The case of 20. Prud’homme, D., von Zedtwitz, M., Arreloa, F., 2019. Strategic responses China. Journal of International Management; Prud’homme, D., Zhang, T., to neo-populism. The European Business Review, available at https:// 2019. China’s Intellectual Property Regime for Innovation: Risks to Business www.europeanbusinessreview.com/strategic-responses-to-neo-populism/ and National Development. Springer; Prud’homme, D., 2019. Reform of China’s ‘forced’ technology transfer policies. University of Oxford Business Smart intellectual property, innovation, Law Blog, available at https://www.law.ox.ac.uk/business-law-blog/ and non-market strategies are also blog/2019/07/reform-chinas-forced-technology-transfer-policies critical to weathering the long-term battle that appears to be at hand. www.europeanbusinessreview.com 17
Future Series WHAT EVERY MANAGER SHOULD KNOW ABOUT HUMAN-CENTERED AI: A Manager’s Introduction to Human- Centered Artificial Intelligence BY MARK ESPOSITO, TERENCE TSE, AURELIE JEAN AND JOSH ENTSMINGER As AI advances, there is a need for better frame- Successful AI human error. Across such projects a common works to understand how to create value from projects are theme has emerge – AI systems may be good at changing human-AI relationships. This article less about the correcting for problems identified, but they are not offers a practical guide for managers and exec- tech than the very good at independently identifying what counts utives looking to leverage human-centered institutions and as a problem that needs to be corrected outside approaches to AI. practices to of what was explicitly identified as a problem, yet. which they are The problem of using AI goes further – as its not “ Ithink the problem was that our systems connected. simply correcting for the mistake but alerting that designed to recognise, and correct a mistake was needed to be corrected. human error failed us.”1 This was the explanation given in 1999 by Carl Pilcher, science This identification problem has been joined by a director for solar system exploration at NASA’s host of like issues creating difficulties for firms trying Jet Propulsion Laboratory, when a failed meas- to build, buy, deploy, and change artificial intelligence urement conversion led to the 125 million Mars solutions. Fundamental to all these problems is a lack Climate Orbiter slamming into the Martian surface. of common principles and guidelines shaping how This problem was succeeded 14 years later when a organisation understand the value of AI and what calculation error in the design of a new Spanish people want from it. As the adoption and develop- submarine2 led to a fatal flaw, such that the subma- ment of AI progresses, the latter of points of what rine could submerge but could not resurface – an value AI should provide is occupying a larger space error causing a 2.2 billion dollar investment to be in public attention, as AI often brings out automation delayed by years. Each of these errors was a simple anxiety over the possibility of the replacement of issue of calculation and translation, ultimately a people’s competitive advantage across tasks and jobs matter of mistaken decimal points. So, what if a rather than their use to accentuate a person’s advan- system could automatically catch all such errors? tages – whether to help humans catch errors, or to replace human where they produce errors. Naturally, the suspicion has already been investi- gated, with novel artificial intelligence (AI) systems As AI advances, manager and executives need being deployed across sectors to reduce rates of better frameworks to understand how to create value from changing human-AI relationships. Human-Cen- 18 The European Business Review November - December 2019
tered AI is emerging as just such a framework to help firms evolutions across the elements and institutions, to ‘look orient themselves under rapidly changing technology, to around the corner’ at what’s next in value creation. A lack better balance ethical principles and successful use, and to of clear understanding of unique development paths not better identify what counts as an ethical and successful use only for the firm but the larger market for the institutions of AI at all. and elements of a successful AI system can lead to delayed development, unsuccessful implementation, and reduced WHY AI IS NEVER JUST AI effectiveness at scale. To understand how to leverage human-centered AI, managers first need to understand changes facing AI AI is never just AI. Yet, within each are inherent warnings management. This begins with three fundamental points: for firms looking to leverage AI to build advantages – as the attempt to acquire a solution without the requisite talent to First, that the AI technology itself is far more than manage and implement it can lead to failure. Each should the algorithm; rather, AI is the umbrella term for a class also cement that as a system, individual elements can advance of systems integrating talent capable of creating and at different rates – a firm can acquire data sets without the augmenting AI solutions, the AI algorithm designs them- talent, new algorithms can emerge without appropriate data selves, valuable data sets and data management strategies, to be trained on, new data capture systems can advance data capturing devices, and computational power to train without acquiring appropriate data management. and run the solutions. Each of these elements has their own development path, and the unique combinations of each is But these backend levels have considerable influence what generates a competitive solution. on how people understand their relationship with AI and the opportunities afforded. AI is a device for augmenting Second, that successful AI projects are less about the cognition, it reshapes what a person needs to think about tech than the institutions and practices to which they are for a task. Consider the calculator as a service for storing connected. This can be split between the organisation and organising mathematical information, its function is to deploying the solution and the expected end users. On the replace the need for human to mentally perform any such side of the organisation comes the need for buy-in from calculation for themselves and defer it to the technology. existing staff, training on how to use the solution, and an effective feedback design; on the side of the user comes a UNDERSTANDING HUMAN CENTERED host of additional dimensions relating to the user-experience ARTIFICIAL INTELLIGENCE and interface design of any given system. So with the context of the AI ecosystem, let’s go back to the Mars lander briefly. The basic problem identified was a Third, that AI systems evolve, and so do the institutions lack of oversight into unit measurement, coming from the and practices once AI is used. So, the question for managers multi-national collaboration that went into the program. is not the next 6 months, but the next 5 years of expected But the question is not simply oversight, it’s how a problem would be identified for the engineers and overall staff. When Mars Climate Orbiter undergoing acoustic testing that simulate launch conditions. transferring designs, should there have been an automated Source: http://grin.hq.nasa.gov/ABSTRACTS/GPN-2000-000498.html checklist of identified problems which identified inconsisten- cies in projections? The question quickly seems to become about the design of appropriate user-experiences informing them on poten- tial issues in the calculation, but the issue extends far beyond any given user-experience to the context of how design and management staff understand the problems and needs of any such users. It’s not just about identifying that the unit measure- ment is an issue, but the best way of informing individuals at each step of the design process to be aware that inconsisten- cies might be an issue. Humans are inconsistent, idiosyncratic, intuitive – devel- oping their own means of making sense of the world and effective AI solutions need to take that into account in order to be desirable and maximise their usability. While www.europeanbusinessreview.com 19
Future Series Humans are inconsistent, idiosyncratic, intuitive – developing their own means of making sense of the world and effective AI solutions need to take that into account in order to be desirable and maximise their usability. the nuances here will be explored as long as AI is The question of fairness is precisely the question applied in business, it brings out the question of the of how an organisation understands and manages larger context, namely: what role AI should play in its potential to discriminate, whether intended or any given human-AI interaction, in any given organ- unintended, across all decision-making contexts. AI isation, in any given job. What do we as humans only works with the material given, and much prior want AI to do? data reflects past discriminatory and biased beliefs and behaviours, again whether intended or not. Therein lies the fundamental point of human-cen- Hiring data for Amazon reflected a male dominated tered AI – to design and leverage artificial intelligence tech sector, thus discriminate against female hires for enhancing human capabilities in an effective, when deployed as an AI resume assessment system. intelligible, and ethical manner. The first and last consideration is what human institution, behaviour, Intelligibility and Transparency or practice the AI is intended to help shape, what it However, to understand if a solution is fair, or is intended to alleviate, and, by shaping or alleviating, effective, such solutions demand means of deci- what it will serve to do in the larger social sense. This phering the AI outputs. This problem tends to go by identification is necessarily vague in so far as the different names – explainable AI (XAI), transparent approach needs to help organise and align a variety of AI, and or intelligibility. perspectives and definitions concerning what counts as enhanced capabilities, effective solutions, intelli- This problem arises from the black box problem gible solutions, and ethical solutions. Human-centered – while inputs are understood, the outputs often exceeds any consideration of user-experience. cannot be understood in relation to the reasoning or rules an AI developed to produce those outputs; ENSURING ETHICALLY ALIGNED AI we can see that a neural network was trained on So now the organisation has made a decision that picture of cats and dogs to identify each, but we the AI is desirable, they have understood the context cannot understand the specific weighting and rules for whether the use of AI will enhance or inhibit it created to generate such identification patterns. human capabilities, and now they need to further understand the manner of enhancing those capabil- Privacy ities in the nuances of AI system creation and usage. AI generates rules from specifications – these speci- fications can be engineered by humans, as in the case This means ensuring that the AI being designed of AlphaGo or, as in almost all cases, they are derived or bought is aligned with the ethical principles of from data. The higher quality the data, the better the the firm and stakeholders. outputs can be expected to perform; this, importantly, does not mean more data in every case. In many cases Fairness the data and means of collecting it are pursued without AI solutions are often designed as aides to existing the consent of those impacted by the data. The most decision-making processes. AI for recruitment often prominent case is the training and use of modern facial serves either to reduce the time burden of reviewing recognition systems. initial resumes to sort for the top 5, or to assess addi- tional data-points during an interview that might Autonomy otherwise go missed by a recruiter. The question is All AI solutions make a claim on the problems of then whether this process helps to unburden recruiters a firm and the benefits of using human labour by and candidates of biases for the process to be more being created as a mechanism which can enables meritocratic, or whether the process affirms prior human skills, replace them, or serve as a hybrid of biases, assumptions, stereotypes, or conventions. 20 The European Business Review November - December 2019
the two. Designing a chat-bot to take In short, the best human centered 3. What are the environments3 in which over redundant questions for consumer design understands the system into those decisions will be made and information rather than taking over which humans are placed, where they how can that decision making envi- customer service overall; designing an make decisions, and how the decisions ronment change? AI system that predicts and aids humans can impact them downstream. with writing rather than writing the Within these three is the necessary article. These are extreme dichotomies WHAT MANAGERS AND EXECUTIVES empathic context for understanding which are unfortunately still reflected SHOULD CONSIDER? the larger perspective of generating in the market. An autonomy-conscious This article was written with the intention human-centered design in the context of design team will work to understand the of helping guide how managers and exec- AI. Addressing these concerns will aid in nuances of a given task, decisions make utives navigate the wide range of potential understanding both the context of human relative to that task, and what kinds developments in human-AI relations. decision makers, the problem they are of cognitive labour is redundant and To that end, we can synthesise a set of facing, and whether AI is the appropriate constraining that can be automated so general recommendations for managers solution, or aid to a given solution, in the as to enable a human to excel. and executives looking to generate or context of humans and the problem. leverage human-centered approaches to WHO IS THE HUMAN IN AI. In particular, across two key decision For Building and Buying HUMAN-CENTERED? spaces, on what to do when building or Human-Centered AI Even if only understood superfi- what to do when buying. A company which has internal staff cially, human-centricity should serve capable of generating machine learning as an essential design reminder to Managers can follow a general inves- solutions often has a fundamental consider the needs and problems of tigation, in three orienting concerns: advantage over other firms – as solu- real people in real contexts, to under- 1. What is the problem or need to tions are not only difficult to develop, stand how AI will impact how people but often require considerable mainte- actually behave rather than how a which AI will be applied and what is nance. However, most firms lack the company wants them to behave. The the desired outcome? internal capabilities to develop novel approach with the greater probability 2. What kinds of decision are implied by and efficient solutions. As such, most of success is the nuanced approach, the problem and who will be making which understands human centricity those decisions? in terms not only of the wide chain of potential end users but the systems Expectations for AI adoption across industries: Impact on offerings in which they make decisions. To what extent will the adoption of AI affect your organisation’s offerings today and five years from today? So, similar to AI is not just about AI, human-centered AI is not just about INDUSTRY Large effect Large effect the nuances of individual experiences today in 5 years and needs; rather, organisation should Technology, Media, Telecom consider a systemic approach within the Consumer context of understanding how those needs emerge, change, and are suscep- Financial Services tible to change and manipulation. Professional Services The argument here can be put Health Care directly – AI can be fully expected Industrial to shape how people’s needs are Energy expressed, understood, and changed. As such, organisations have a demand Public Sector and a responsibility to understand not only how to address those problems OVERALL but how any methods might create unintended consequences in turn. 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of respondents who expect a large (“a lot” or “great”) effect on five-point scale Source: https://sloanreview.mit.edu/projects/reshaping-business-with-artificial-intelligence/ www.europeanbusinessreview.com 21
Future Series firms tend to use externally sourced off-the-shelf University and has been on the faculty of Harvard Humans understood solutions, developed with a mind towards opti- University since 2011. Mark is the co-author of the that the real power mising labour costs. The following are some ideas bestsellers “Understanding How the Future Unfolds: of this technology is worth exploring, as managers attempt the integra- Using DRIVE to Harness the Power of Today's not for the sake of tion of the symbio-intelligence that the human Megatrends” and “The AI Republic” which received technology, but for centered AI can foster: global accolade. the improvement of 4. Ensure cognitive diversity in design and imple- social constructs and Terence Tse, Ph.D is a co-founder and paradigms, currently mentation teams to avoid blind spots of Executive Director of Nexus Fron- so needy of a true experience, considerations, and understanding of tierTech, a London-based tech company reset button. human experience. specialising in the development and inte- 5. Ensure the management and external firm staff gration of AI solutions that help have a common understanding of the problem, organisations save time, money and resources by needs, and value the AI can supply. tacking process inefficiencies and data waste. He is also 6. Avoid introducing ‘artificial stupidity’ into your a Professor at the London campus of ESCP Europe business by clarifying more precisely what AI Business School. Terence’s most recent book is “The is supposed to do, and how people will interact AI Republic: Building the Nexus Between Humans and Intel- with it in the context of existing processes. ligent Automation”. He has written more than 110 articles 7. Establish clear processes for ‘changeability and regularly provides commentaries on the latest management’ to control and frame any updates current affairs including technology-driven transfor- from new training and data to the AI system. mations, future of work/education, artificial 8. Establish clear processes for assessing mental intelligence and blockchain in many outlets and act as models across user chain. speakers on these subjects around the world. Aurelie Jean, Ph.D has been working Conclusive Thoughts for more than 10 years in computa- The road ahead is impervious and not easy to tional sciences, applied to engineering, decipher. There are challenges that can only be medicine, education, finance, and jour- understood as certain milestones will be achieved nalism. Aurélie worked at MIT and and new ethical and societal falls, brought down Bloomberg. Today, Aurélie works and lives between by the art of good practice and inspired lead- the USA and France to run In Silico Veritas, an ership. But still, the amount of collective thinking agency in analytics and computer simulations. ahead will become a required competitive necessity Aurélie is an advisor at the BCG and Altermind, a to acquire and fulfill, if we want the next decade, mentor at the FDL at NASA, and an external the one that will be marked in history as the period collaborator for The Ministry of Education of where humans understood that the real power of this France. Aurélie is also a science editorial contrib- technology is not for the sake of technology, but for utor for Le Point and Elle International, teaches the improvement of social constructs and paradigms, Algorithms in Universities, and conducts research currently so needy of a true reset button. on predictive algorithms. Josh Entsminger is an applied About the Authors researcher in technology and politics. He Mark Esposito, Ph.D is Co-founder currently serves as a fellow at the of Nexus FrontierTech, a leading global PublicTech lab, senior fellow at Ecole firm providing AI solutions to a variety des Ponts Business School, and fellow at of clients across industries, sectors, and Nexus FrontierTech. He is currently a doctoral regions. In 2016 he was listed on the candidate in public sector AI at UCL’s Institute for Innovation and Public Purpose. Radar of Thinkers50, as of the 30 most prominent business thinkers on the rise, globally. Mark has References worked as Professor of Business & Economics at 1. https://www.latimes.com/archives/la-xpm-1999-oct-01-mn-17288-story.html Hult International Business School and at Thunder- 2. https://o.canada.com/news/spain-builds-submarine-70-tons-too-heavy bird Global School of Management at Arizona State 3. https://www.wired.com/brandlab/2018/05/ai-needs-human-centered-design /https://www.wired.com/brandlab/2018/05/ai-needs-human-centered-design/ 22 The European Business Review November - December 2019
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Supply Chain BY MARK BALTE Executive Vice President of Research and Development, Logility A ccording to a recent International Data digitise their business. However, it is critical to realise Corporation (IDC) Digital Economy Model, that access to data alone does not equate to insight by 2023 over 50% of all worldwide nominal or value. Humans have a limited ability to understand gross domestic product will be driven by digitally what data is important and to conduct the analysis transformed enterprises. And, by 2025, at least necessary to quickly make the right decisions. The 90% of new enterprise apps will have embedded ongoing challenges to attract and retain talent, meet AI capabilities.1 Gartner estimates that by 2021, AI rising customer expectations and stay ahead of fierce augmentation will generate $US2.9 trillion in busi- competition and pricing pressures means companies ness value and recover 6.2 billion hours of worker are missing opportunities for improved margins, productivity.2 In study after study, there is evidence reduced working capital investments and greater of the growing use of AI across all business func- service levels. The convergence of increased data tions, including the supply chain. Yet, with all of the availability and technology advancements, makes the fervor and excitement around AI, many don’t fully time right to embrace an AI-powered supply chain as understand what it is and how it can help improve we can now uncover key insights from the terabytes operations including margin growth, service levels of data available to us. and risk mitigation. AI helps organisations overcome the shortage of This article discusses the importance of supply chain talent. Some experts estimate that there embracing Artificial Intelligence (AI) in supply is only one qualified supply chain planner/analyst for chain planning operations and why the best time to every six openings. To make matters worse the most embrace AI capabilities is right now. We will explore experienced workers, those currently between 55 and the capabilities available today to help you improve 75 years of age, are retiring at a rate of 10,000 every productivity, accuracy and speed as well as explore day. AI enables the capture of knowledge, the auto- some of the technologies companies are working on mation of repeatable processes and the augmentation today that will power the supply chain of tomorrow. of complex decision making to smooth the transi- tion to Generation Z, those born after 1997, who are The Future is Now now entering the workforce. This generation, we call The phrase digital transformation is all around us and “Digital Natives,” have grown up always connected many companies have embarked on their journeys to with access to anything and everything at a moment’s 24 The European Business Review November - December 2019
An AI powered demand outlier adjustment solution reduces time spent on history data manipulation, freeing up planner time to work on more value-adding activities. notice. Digital Natives expect the same AI empowered experi- Forecast Parameter Optimisation continuously senses, ence at work as they have in their personal lives. To attract the analyses and updates forecast planning parameters used for best and brightest Generation Z candidates, companies need trend, seasonality, smoothing, etc. to improve forecast accu- to embrace advanced technologies including AI. racy and ensure the supply chain operates at peak performance. Often these parameters are set during the initial implemen- Customer expectations for low cost, high quality and instant tation of a supply chain solution and left alone because availability drives the need to compress time throughout the valuable resources are focused on the day-to-day supply chain entire supply chain from product design to customer avail- operation. This is a significant untapped opportunity for the ability. AI enables time-compression through automation, majority of supply chains. Logility PulseWise™, for example, augmentation and the ability to make better decisions faster. is an AI-driven solution that autonomously analyses demand Companies that don’t significantly accelerate process times signals against actual performance to proactively adjust fore- may be at a serious competitive disadvantage. cast algorithm parameters. By removing the need for human interaction, the vital adjustments can be made leading to 20 Finally, today’s high-powered and inexpensive computers percent or more accuracy improvements. enable advanced supply chain solutions that could only be dreamed about a few years ago. Think of all the power Demand Outlier Adjustment capabilities automatically Google Assistant or Amazon Alexa brings to you every detect anomalous demand history data points and substitutes day? Now, imagine that built for the rigors of the enterprise a corrected value. A great amount of time and effort can powering your operations. be spent correcting and adjusting data history to account for anomalies due to stock outs, competitor actions, unplanned Here are just a few of the AI-powered capabilities avail- disruptions or non-repeating events. Using machine learning able to you today: we can now analyse both uncorrected and corrected forecasts to ‘learn’ what bad data looks like and make substitutions for Optimised Forecast Algorithm Selection automati- anomalies that improve forecast accuracy. An AI powered cally selects the best forecast algorithm whenever new data demand outlier adjustment solution reduces time spent on is added to demand history. It is fairly common today for history data manipulation, freeing up planner time to work companies to select an algorithm (or two) and stick with on more value-adding activities. it across a product’s entire life-cycle. The algorithms are rarely reviewed or updated. Leading companies use what Demand Sensing from Unstructured Data capabil- is commonly referred to as a ‘Best-Fit’ algorithm. This AI ities use machine learning pattern recognition and natural powered capability automatically compares the forecast accu- language processing to read and analyse ‘Big Data’ to recog- racy for every item across all available forecast algorithms, nise complex patterns and provide data insights. In today’s and chooses the algorithm that minimises forecast error. social media driven economy, consumer likes and wants can ‘Best-Fit’ forecast algorithm selection ensures that forecast shift very quickly. It is nearly impossible for planners and accuracy is optimised throughout the product life-cycle. analysts to stay abreast of all the latest social media data when all it takes is a celebrity tweet about their favorite product to spike demand. Advanced solutions like that available from Logility automatically analyse terabytes of unstructured data to determine “sentiment” and quickly predict an impact on short and longer-term demand. Probabilistic Demand Simulation uses machine learning to understand forecast variability at the record level. In contrast to single-valued forecasts, probabilistic demand simulation builds a range of possible demand forecasts. Advanced solutions use this understanding of variability to create randomised forecasts which are used in n-tiered, supply constrained ‘Digital Twin’ simulations to predict www.europeanbusinessreview.com 25
Supply Chain supply chain resilience. The incorpora- Building a strong foundation Scenario Selection Augmentation tion of product level revenue and profit information into these Monte Carlo of people, process, data and utilises advanced cognitive capabilities type simulations enables a risk assess- to develop new insights and augment a ment of meeting both volumetric and solutions, and taking advantage planner’s ability to make well-informed financial targets within the expected and decisions fast. ‘What-if ’ scenario range of demand probabilities. of purpose-built, industry-leading analysis can help analyse tradeoffs and make better decisions. However, As the saying goes, bad data in leads supply chain technologies, like identifying the right information to to bad data out. If the information you make a decision can be difficult and use to generate plans has errors, the accu- those offered by Logility, can build building ‘what-if ’ scenarios can be racy and efficacy of those plans will be time-consuming. AI powered scenario severely compromised. Automatic Data your expertise and accelerate your selection augmentation can autono- Cleansing and Parameter Population mously search for the best solutions uses machine learning to recognise move up the AI maturity curve. for disruptions and opportunities and incomplete or inaccurate data and either provide the planner with a set of the best automatically applies the correct data deployed and it will significantly change alternatives to accelerate decision making. or alerts the appropriate data manager the way company’s plan and manage to take corrective action. Advanced their supply chains. Today’s innovative Demand for new products is often solutions such as Logility AdapLink™ solution providers are actively devel- difficult to forecast. Product Life- automatically cleanse data and populate oping new AI powered capabilities that Cycle Profile Optimisation improves supply chain parameters to ensure timely automate planning operations and forecast accuracy for items through and accurate data is available for supply augment planner capabilities. Here AI powered attribute-based modeling chain planning operations. are a few AI capabilities you should techniques. Attribute-based mode- keep an eye on and evaluate how they ling involves creating demand profiles, The AI Crystal Ball can fit into your operations. assigning a profile to a new item, IDC forecasts that spending on AI and ongoing accuracy assessments and machine learning will grow from $8B Cognitive Analytics, the most automatic profile revisions. Product in 2016 to $47B in 2020.1 According advanced type of analytics, enable life-cycle profile optimisation solutions to Gartner, “The deployment of AI users to identify ‘New Insights’ through learn from previous product introduc- has tripled in the past year – rising the use of AI, Machine Learning, and tions to optimise the profile shape and from 25 percent in 2018 to 37 percent Natural Language Processing. Cognitive volume for new product launches. today.” Gartner states, “The reason analytics enable autonomous anal- for this big jump is that AI capabilities ysis and response to free up valuable Supply Parameter Optimisation have matured significantly and thus resources to work on more value- enterprises are more willing to imple- adding activities. Additional cognitive continuously senses, analyses and ment the technology.”4 AI is being analytic capabilities are being developed updates supply planning parameters to to automatically sense, analyse and improve supply optimisation and help respond to unplanned disruptions and ensure the supply chain operates at opportunities helping to minimise risk peak performance. As on the demand and maximise company benefits. 26 The European Business Review November - December 2019
side, supply planning parameters are rarely reviewed solutions. Encourage your teams to explore the or adjusted to reflect the actual state of the physical current solutions they have in place; chances are supply chain. This AI powered capability auton- there are AI capabilities available that are not omously analyses the current supply chain state fully utilised. against supply planning parameters populated in the • Most importantly, focus on your talent. Train supply chain ‘digital twin’ to automatically update them, let them build experience and pursue areas these parameters to optimise supply chain response. where AI can add value. Probabilistic Supply Simulations is an The introduction of AI into supply chain advanced AI powered capability to understand vari- operations can propel your business into the future– ability in supply capacity to build a range of possible harnessing automation, optimising supply chain supply responses. Randomised supply capacities are planning, and evaluating multiple scenario outcomes used when running simulations on product level to boost your confidence in decision-making. revenue and profit data which can be incorporated Building a strong foundation of people, process, data to enable risk assessment in financial terms within and solutions, and taking advantage of purpose-built, the expected range of supply possibilities. industry-leading supply chain technologies, like those offered by Logility, can build your expertise and accel- The first wave of Gen Z’s are entering the work- erate your move up the AI maturity curve. Imagine force and they expect to have the same Natural saying, “OK Logility, how’s my supply chain?” and Language Interface capabilities available to them the system informing you of all potential issues, what in the workplace that they grew up with. Advanced the system has already implemented and then to solution suppliers are developing natural language provide a list of prioritised items which require your interfaces that will allow the users to converse with attention. That’s a powerful future. their platform as easy as we converse with mobile devices and home assistants today. References 1. Worldwide IT Industry 2020 Predictions: IDC FutureScape, Frank Summary Gens, SVP & Chief Analyst, October 29, 2019 Artificial intelligence is a software that learns, 2. https://www.gartner.com/document/3889586#dv_2_survey_ai analyses and adapts as new data is absorbed. AI 3. CEO’s expectations for artificial intelligence in the supply chain - Supply solutions can understand complex concepts, solve Chain Insights; Gartner Research 2018 – 2019 complex problems and make complex decisions. 4. https://www.gartner.com/en/newsroom/press-releases/2019-01 - 21 Some forms of AI mimic the human brain, learning - gartner-survey-shows-37-percent-of-organizations-have and evolving over time. According to Supply Chain Insights, “CEOs expect supply chain leaders to prepare for digital business and want to know how they intend to develop capabilities and use advanced technologies like artificial intelligence to create a flexible, agile and responsive digital supply chain.”3 As business leaders, here are a few ways you can help your supply chain team get started with AI: • Identify the big problems you want to solve and the big opportunities you should embrace. These problems and opportunities might be areas where AI could make a significant impact within your company. • Provide your team the opportunity to do their research and learn what benefits AI capabilities provide to other companies. • Empower your team to start now with purpose- built and embedded AI solutions. Measure results to build the business case for more AI powered www.europeanbusinessreview.com 27
Procurement The Procurement Call for Agile, What does it mean? BY ANDRESSA REIS AND HERVÉ LEGENVRE Today, Procurement teams need to embrace The key for short daily stand-up meetings where people share the agile ways of working in order to work in strategic agility feedback on projects and prioritise their next steps. synch with their stakeholders. The present is to recognise Agile project management is an iterative devel- article describes how an agile vendor selec- external changes opment process, where feedback is continuously tion process has been adopted by a Software early enough gathered from users and stakeholders to create procurement team. It describes its advantage, and to allocate the right user experience. This is very common how it is performed and when it is relevant. resources to for software development. Developers focus on This methodology can be adapted to other adapt to these producing manageable chunks of projects; they market domains if the mindset and the success changing update their priorities daily, thanks to the feedback factors are maintained. environments. provided to them. Different methods can be used to perform an Agile process, these include Scrum, A gile methodology has been rocking the IT eXtreme Programming, Lean and Kanban. Supply World in recent years. Companies use it chain agility is the ability of a supply chain to for developing software; it helps them to cope with uncertainty and variability on offer and be more collaborative and effective when uncer- demand. An agile supply chain can increase and tainty prevails. The Agile transformation is now reduce its capacity rapidly, so it can adapt to a calling for change in the Procurement function as fast-changing customer demand. Finally, strategic the standard supplier selection process does not fit agility is the ability of an organisation to change the agile mindset. The present article will outline its course of action as its environment is evolving. what agile means for procurement; how a Software The key for strategic agility is to recognise external Procurement team has embraced agile to select changes early enough and to allocate resources to suppliers; and what the success factors for agility in adapt to these changing environments. procurement area Why must Procurement become Agile? What is Agile? For many market segments such as software, antici- The word agile appears everywhere today. On a day pating the needs of our stakeholders and delivering to day basis, being agile is often associated with the right value to each of them is an ongoing 28 The European Business Review November - December 2019
challenge. Over the years, Procurement teams have We can gain efficiency and speed while being more By making the moved well beyond placing orders and helping to collaborative. And as we do it well, everyone will supplier selection finalise contracts. They support the business. They gain motivation and engagement will be reinforced. process agile, wae deliver value. They help to gain new competitive The following diagram explains the core princi- can investigate advantages. Saving is no more the sole focus and the ples behind implementing an agile vendor selection new ideas while unique yardstick of Procurement teams. They need process. It works well when requirements are diffi- strengthening to bring speed; expertise and to actively manage cult to formalise due to the diversity of users and the our relationship demand. Moving towards an Agile vendor selection variety of solutions available. To address this unpre- with “business process is one of the steppingstones that can help dictability, we need face to face interactions and owners”. procurement teams with this. Mirko Kleiner, Agile teamwork with internal stakeholders and representa- Enterprise Coach and co-founder of Flowdays, tives from suppliers. Collaborating is the only way to pioneered the introduction of agile to Procurement generate feedback, transparency and to ensure adjust- by implementing Lean in the supplier selection ments are rapidly taken on board as people learn process. He describes it as transforming months into days, from each other. Working like this is an opportunity wants into needs and pain into fun. The traditional supplier to simplify how we work; the quality of the discus- selection process we use today remains useful in a sions across all parties involved helps to focus on the predictable and easy to understand world. Procure- essentials and to spot issues early. This creates speed ment teams can focus on exploiting what they know and efficiency as the team progress at a steady pace about the needs and the market, to come up with the with deep engagement. It also generates motivation best and most economical solution. However, such as people feel safe to speak and enjoy working in an a process is becoming less relevant as companies are environment that fosters engagement. All this rein- changing at a rapid pace. They become more digital forces the spirit of collaboration and creates speed, and employee centric. Solutions evolve fast and new value and satisfaction. ideas pop up across global and dynamic business ecosystems. In this context we need to re-invent the Agile Vendor selection: How does it work? supplier selection process to rapidly explore opportu- In an Agile vendor selection process, the same steps nities. By making the supplier selection process agile, are followed, but these steps are performed with a we can investigate new ideas while strengthening our different mindset and approach. A dedicated team relationship with “business owners”. We can create with full decision-making power is established from more value while simplifying our ways of working. the start of a project. Each step of the process Figure 1: The principles behind an agile supplier selection process Efficiency and Speed Working at a steady pace with deep engagements favors productivity and speed. Unpredictability Collaboration Simplification Value Requirements are difficult to Face to face interactions The quality of exchange Increased value for clients and formalise due to the diversity generate feedback, helps focus on the essentials satisfaction for the users. of users and novelty. transparecy & adjustments. and indentify issues early. Motivation People feel safe to speak up and work in an environment that foster engagement. www.europeanbusinessreview.com 29
Procurement becomes a sprint performed in a collaborative Agile vendor selection process. The Core Team mode. Responsibilities are clear from the start and presents the goals of the project, the project team, everyone has visibility on what takes place from the agenda of the Agile vendor selection event and the beginning to the end. Face to face team meet- the needs. The “User Journey” presents both the ings enable creativity, efficiency and rapidity. And touch point where humans meet and the virtual as the Team members complete the tender process interactions. Everything is summarised in one in about 10 weeks, they can focus on the project page. This helps everyone to be concise and to during this short time period. focus on the key points. The agile vendor selection process can now Step 4: The Agile vendor selection event be described: A two-day event is organised with all the suppliers, the agile vendor selection team (also called Core Step 1: Preparation Team) and some end-users. This event is an oppor- The team consists of representatives from the tunity to stimulate competition amongst suppliers, business, Procurement, IT technical team, Data while favouring collaboration with them. It is also Protection Officer, Legal department, etc. During a great opportunity to have a “live” presentation the preparation stage, responsibilities are assigned of the solutions and direct exchanges with the to them. A project plan is developed to ensure each suppliers. The agenda of the Agile vendor selection responsibility is performed with the right mindset. event consists of: The development of a team charter brings strategy • A plenary session to present the event and its goals alignment and builds the foundations for effective • A description of the needs, the “Personas” and teamwork. Requirements are expressed as user needs. They are not technical specifications, but the “user journey” “personas” that describe the users and “user jour- • Suppliers are given some time to adjust their neys’ that illustrate a desirable user experience. One of the business owners within the Core Project solutions. They call the Core project team to ask team described the benefits of this: “This process is additional questions. pragmatic and focused on the user needs. Before we used to • Individual sessions with each supplier take describe in detail all the requirements as they came into our place. Members of the Core Project team eval- heads, now we don’t spend hours writing detailed require- uate the suppliers on technical and business ments that were rarely fully considered by the suppliers”. requirements, on commercial, legal, data privacy, security and implementation matters. The focus Step 2: The invitation letter is on how to be successful together. Having all The suppliers receive an invitation letter requesting the suppliers and the Internal subject matter their participation in the agile vendor selection experts in the same room helps avoid misunder- process. This letter outlines the “5 WH” of the standing and vague answers to questions tender (Who? What? When? Where? Why? How?). • Individual final presentation of the offers to the The user needs are communicated with the invita- Core Project team by each supplier. tion letter. Suppliers are asked to focus on how they • During these events you get capture the real can integrate them in their systems. creativity from the suppliers. This prevents copy paste solutions. One of the Core Project team Step 3: Briefing and Q&A call members we interviewed for this article is very Following the invitation letters, suppliers are keen on the agile vendor selection event. “There invited to a conference call to further explain the is no misinterpretation thanks to the prototypes and the exchanges. We can perform on the spot clarifications if This Agile vendor selection process is first a mindset change. The Team members lead together the tender thanks to the support of a Procurement facilitator. They are empowered, equally considered and they feel safe to intervene. 30 The European Business Review November - December 2019
needed. As a point is mentioned by one supplier you can facilitator. They are empowered, equally considered easily check with another. This helps solve problems fast. and they feel safe to intervene. It also creates high It is very powerful”. The Legal teams also appreciate degree of engagement and ownership. The Agile having breakout sessions with each supplier. This vendor selection process helps gain considerable helps to gain speed on the contract side, related speed. The team focuses on the major commercial blocking points are discussed on the spot. It also aspects that matter and low importance details are helps to understand if the negotiation will be put on a back burner. This improves tremendously demanding or not. the efficiency and speed. Agile vendor selections also provide transparency for both Core Project Step 5: Evaluation teams and suppliers on the needs, and the deci- Following the presentation of the offers during the sion-making process during the call for tenders. agile vendor selection event, the Core Project team This transparency stimulates competition between develop a consensus on the findings and evalua- suppliers as they are physically face to face to win tions. Some calls to reference customers provided by the project. By adopting an agile approach, internal suppliers can be placed to validate key assumptions. stakeholders perceive a heightened value delivered by the procurement teams. The following cases Step 6: Contract Negotiation and Final Offer illustrate when and how the agile vendor selection This step enables the conclusion of contractual process has been used when Selection Software negotiations, building on all the discussions that Vendors for a large Company. have already taken place during the Agile vendor selection event. This is the opportunity to negotiate Case 1 – Real time Employee Performance the supplier's final offer. Management Solution First, the Agile vendor selection process was applied Step 7: Award to select a Software Vendor for Real Time Perfor- Following the negotiations with the suppliers, mance Management. Four vendors were invited to the project team selects the contract this process. Their size, scope and solutions were awardee. Feedback is shared with the other quite different from each other. During the Plenary suppliers who participated in the vendor Session of the agile vendor selection event a Busi- selection process. ness HR Executive presented the business view of the current problems, existing processes and expecta- The benefits of an Agile vendor selection process tions around the solution. One of the vendors invited This Agile vendor selection process is first a was an internal area who developed its own solution; mindset change. The Team members lead together however, they were also considered as a vendor on the tender thanks to the support of a Procurement the selection process and no favourite approach was given to them. The Core Project Team and the suppliers saw this project as innovative, fun, moti- vating and collaborative. One of them concluded “Without the agile vendor selection event, we would have received a lot of nice slides, but slides don’t tell you what it is like to work the vendors. With such project you need to be sure you can work in a collaborative mode with the supplier.” Case 2 – Asset Management Solution The second case is the purchase of an Asset Management solution. The agile vendor selec- tion event took place in an Indian office in since key decision stakeholders where based out there. The team members were engaged from the begin- ning even if Internal workshops were carried out www.europeanbusinessreview.com 31
Procurement remotely. Due to the complexity of the case and remarkable. When they shared the results, it was good to to the number of suppliers invited, the event see they understood the requirement.” was performed over three days. Seven vendors were invited and were extensively questioned Agile vendor selection: Four success factors on the architecture of their solution, on their Building a great team implementation strategy. They had to perform Throughout an agile vendor selection, the a demo using the “personas” and “user cases” right people need to be involved from begin- shared with them in advance. The three days ning to end otherwise the process can easily enabled the selection of the right solution that derail. Everyone within the team needs to be matches the requirements and the creation of a fully engaged and to fulfil their role. It requires straightforward relationship with the vendors. business owners with the right expertise and One team member was enthusiastic “the event the power to take decisions. The Procurement was memorable; the vendors were surprised It was great Project Manager is there to orchestrate the work to discuss with them and to see their reactions. Vendors of the team and to promote the agile mindset. did a great work. It was motivating on both sides. I was impressed by the change procurement had brought Diversity and attitude to the process” An agile vendor selection brings together a diverse set of skills capable of tackling the complexity and Case 3 – Procurement Source to the uncertainty of the project. Team members Contract Solution need to be proactive, open minded, capable of In this case, the Agile vendor selection process challenging their initial assumptions and flexible was used as a second round of a request for enough to tackle issues as they emerge. They are proposal that was not providing the expected guided throughout the process, but they need to outputs. The first round of the procurement be at ease with working in an informal process. project had covered all the standard process steps of sending the written requirements to the Company readiness vendors and receiving their formal responses Company readiness is essential to succeed with with lots of documentation to evaluate. The an agile vendor selection, you need a supportive outcome was unsatisfactory, and the Agile approach was adopted to rebuild the interest Figure 2: When is the agile vendor selection process relevant? of the suppliers and reduce the full cost of the software adoption. The three finalists from the High Agile vendor selection Open Innovation Process first round were invited to the event. They had Best suited for a specific Stage gate process the opportunity to exchange with Core project team members and to align on multiple fronts Saas function Multiple validation loops including technical, business and commercials Innovation workshop aspects. Best and final offers were presented Novelty during the second day of the event. The Core Best suited for a customised Project team could see that vendors had aligned software solution their proposals to the information received and that they decreased their price. A considerable Tactical buying Process Classic Tendering process amount of misunderstanding about the needs Anticipation had been adjusted thanks to the event. The Standard - automated intimacy established with the vendors contrib- Low Best suited for off the Systematic planning uted to better contract negotiation and a more Best suited for Outsourcing collaborative finalisation of the project. One of shelves solutions the Core Project team members summarised it deals “We were able to demonstrate that competing vendors could be in the same event. The energy in the room was Low Risks & Stakes High 32 The European Business Review November - December 2019
business sponsor. An agile vendor selection no room for political manoeuvres. Nothing The Agile vendor process is not suited to a risk-averse culture. is hidden. You see the limits and the future selection process is a great Everyone should be ready to embrace changing perspectives of each of the suppliers. The way to meet a small number requirements and to transform mistakes into quality of the decision-making is enhanced, of suppliers in a short amount opportunities in order to do better. and it creates great conditions for a quick of time. This avoids all the start after the tender is completed. This helps emails; the long-winded Logistics to gain time for everyone. The requirement conversations; the full process The logistics of an agile vendor selection event collection phase avoids going into details that can be completed in are essential, the facilities need to be right. don’t add value. The supplier assessment can less than two months. Performing it in an innovation centre with the be performed without re-assessing consist- support of facilitators is ideal. It is demanding in ency along disjointed flows of information. terms of organisation as it is essential to ensure It also saves time as you can quickly start a that everyone attends the full event. collaborative project with the supplier. But most importantly, it is a fun and enjoyable When Is an Agile vendor selection team experience where everyone ends with the right approach? a great sense of achievement. The CPO of Not all RFPs can be performed using an Agile Capgemini, Emmanuel ERBA, sees the agile methodology. The following picture can help assess vendor selection process as a great asset for his when it is best suited. The agile vendor selection organisation. It is for him a mean to address process is well suited when there is a high degree complex cross-functional topics: “Describing of novelty in what is purchased, but a limited set of real life user journey, confronting in an open risks and stakes associated with the purchase. way the service delivered by vendors and walking the participants from several func- The Agile vendor selection process is tions through a process is a rapid and valuable particularly compatible with projects that selection process. Obviously, it won't replace are inherently low risk and that do not meet hard commitments, but it will bring an organ- highly technical and demanding requirements. isation more efficiently towards the most The agile vendor selection team needs a good viable solution in a given environment. knowledge of the problem that needs to be solved, and the suppliers need to be able to About the Authors rapidly demonstrate an effective response to Andressa Reis has worked as an IT the problems. When higher stakes and risks Procurement buyer in several indus- are at play, if the solution is easy to develop, a tries over the past 7 years. She has a classic tender process performed in a system- Master in Computer Science for atic way is best suited; if the problem is hard Business Management (Brazil) and to define, the solution very new, this requires a comprehensive open innovation process with works as a Global Category Buyer in Heineken multiple workshops that help stimulate crea- Global Procurement (Netherlands) specialised tivity and ensure solid validations in Software and IT purchases. She developed the Agile Vendor Selection process in 2018 while Conclusion concluding her certification of Purchasing The Agile vendor selection process is a great Manager in EIPM. way to meet a small number of suppliers in a short amount of time. This avoids all the Hervé Legenvre is Professor and emails; the long-winded conversations; the Research Director at EIPM, an full process can be completed in less than Education and Training Institute for two months. It makes the selection fair as you Purchasing and Supply Management. can collect comparable information across He manages educational programmes vendors on the spot. It provides an objec- for global clients, conducts researches and teaches tive view of which one is the best and leaves on innovation and purchasing transformation, Hervé holds a PhD from Université Paris Sud. www.europeanbusinessreview.com 33
Data Management BY MOSTAFA SAYYADI Once the important paradigm of knowledge manage- organisation.2 Individual knowledge can, therefore, become a ment was accepted by both the scholars of the valuable resource by developing an organisational climate of academy of management and executives, knowledge openness for members to exchange their ideas and insights. cycle model began to make sense. The focus of this Executives must create a climate of trust and openness for article is based upon the critical role of knowledge individuals to share individual knowledge. New technologies cycle model which allows a rich basis to understanding drawing on social-software systems through sharing indi- the mechanisms by which knowledge management vidual knowledge around the organisations can positively and operations risk is influenced. contribute to create collective knowledge. Therefore, execu- tives should build an atmosphere of trust and openness and A Birds-Eye View of Knowledge use technology to convert individual knowledge into valuable Knowledge, with its wide classifications, can be classified resources for their organisation to close the performance gap into individual and collective knowledge. Executives recruit and help organisations prosper. followers based on their individual knowledge which refers to the individual’s skills, prior-knowledge, and proficiencies or Knowledge can also be classified using individual, social, sometimes referred to competencies. Collective knowledge, and structured dimensions. Executives can categorise followers on the other hand, has been defined as “organising princi- based on their human knowledge which focuses on individual ples, routines and practices, top management schema, and knowledge and manifests itself in individual’s competencies relative organisational consensus on past experiences, goals, and skills. This form of knowledge comprises the skills gained missions, competitors, and relationships that are widely by individual experiences, and learned as rules and instructions diffused throughout the organisation and held in common formulated by executives for followers to use as a guide. Social by a large number of organisational members.”1 Thus, knowledge, on the other hand, is categorised as individual collective knowledge is part of the executive’s protocol and knowledge that is shared so that it can become collective comes fairly natural at the higher echelons of the organisa- knowledge. Executives can use structured knowledge that tion. Executives follow Thomas Davenport and Laurence emerges in formal language from annual reports, memos, and Prusak’s concern that concludes that if an executive cannot other means of communication to be represented as state- inspire its followers to share their individual knowledge with ments. Therefore, executives can classify knowledge in this others, then this individual knowledge is not valuable to the way so that it emerges at three levels – individual (i.e. human), group (i.e. social) and organisational (i.e. structured). Knowledge, with its wide classifications, can be classified into individual and collective knowledge. Knowledge can also be classified using individual, social, and structured dimensions. 34 The European Business Review November - December 2019
Moreover, there is a scientific, phil- finding, integrating and networking. Can Knowledge Cycle osophical, and commercial side to The knowledge accumulation process in Model Create A Sustainable knowledge that executives should at least knowledge cycle model plays an impor- Competitive Advantage? be aware of in today’s hypercompetitive tant role for organisations through Executives know that discontinuity exists business environment. Scientific knowl- acquiring knowledge and information at all levels of product and services and edge is objective and manifests itself as from the external business environment they do not want to find themselves provable and verifiable knowledge or and developing the capabilities to create caught off guard and become obso- truth, while philosophical knowledge clar- new knowledge within a company. lete. To remain competitive, executives ifies that “truth is embedded in language realise that they have to quickly create and therefore inaccessible.”3 The key for A further step to implementing and share new ideas and knowledge to executives is that commercial knowledge, knowledge management is to integrate be more responsive to market changes. unlike scientific and philosophical knowl- knowledge within companies. Executives Importantly, knowledge held by organ- edge, focuses on enhancing effective can synthesise new knowledge and infor- isational members is the most strategic performance. Answering the questions mation to improve the effectiveness of resource for competitive advantage, executives often ask: “What works?” organisational processes and the quality and also through the way it is managed Based on this view, this kind of knowl- of products or services. The key here is by executives. Executives can enhance edge empowers the capabilities of an to internally integrate knowledge so that knowledge accumulation which is asso- organisation, and actively improves its it is quickly retrievable at the right time ciated with coaching and mentoring competitive advantage in the market- and place. Knowledge cannot be used activities by sharing experiences gained place. Executives are already aware that adequately if it takes time to acquire by imitating, observing and practicing. commercial knowledge takes an objective it. Expert systems can provide kiosk Executives can, in fact, help followers approach and can positively contribute to like knowledge databanks and intranet add meaningfulness to their work in ways a firm’s performance. The key is how to searches to retrieve information from the enhancing a shared understanding among use this knowledge, enhance it, distribute knowledge bank quickly and effectively. members to enhance engagement. it, and capture it. Moreover, competing organisations In the integration process, organ- Executives now have a good handle find ways to share common knowledge isational knowledge is articulated into on knowledge in corporations. It is safe so that it can be used by industry alliance formal language that represents official to say that knowledge is a component of when the information is non-specific to statements. Organisational knowledge is the more importance competence of a a certain organisation. For example, two incorporated into formal language and leader which is knowledge management. prominent scholars by the names of subsequently becomes available to be This next section provides a formalised John Davies and Paul Warren highlight shared within organisations. Executives application that can be implemented by how organisations must collaborate with have their internet technology depart- executives when developing knowledge other companies, and share their knowl- ments to create a combination which management within companies. edge with them to improve community reshapes existing organisational knowl- issues and global problems in a manner edge to more systematic and complex Implementing Knowledge Cycle that solves problems and creates solutions forms by, for example, using internal Model: 3 Simple Steps when necessary.4 This is called “knowl- Executives are perplexed by the amount, edge reconfiguration.” The key kernel Knowledge both depth and breadth, of knowledge for executives is that knowledge is shared Accumulation management models and applications. with other organisations to recognise the A new model that can easily be applied changes occurring in external environ- Knowledge Knowledge that takes into consideration some of the ments and respond to them quickly and Reconfiguration Integration major tasks that executives must consider effectively. Figure 1 depicts this knowl- is needed. A good example of this, execu- edge cycle model. The key point in this Figure 1: Knowledge Cycle Model tives can look at three step processes of model is the knowledge accumulation knowledge accumulation, integration, section coupled with integration and and reconfiguration. Knowledge manage- reconfiguration to ensure that the knowl- ment in enterprises can be evaluated by edge is actually helping the organisation measuring the processes of knowledge grow both professionally for individuals and profitably for all stakeholders. www.europeanbusinessreview.com 35
Data Management Organised knowledge can be disseminated and searched by others. Most importantly, in knowledge integration, organisational knowledge is internalised through learning by doing which is more engaging. databases. Organising knowledge using databases and associated with knowledge management at the organ- archives can make knowledge available throughout the isational level are handled at different points on the organisation – organised knowledge can be dissemi- organisational chart. Therefore, in order for execu- nated and searched by others. Most importantly, in tives to lead between the lines, they need to focus knowledge integration, organisational knowledge on the interactions among the facets of knowledge is internalised through learning by doing which is to minimise the possible limitations of managing all more engaging. It is important to note that executives facets or the business units and components on an have found that shared mental models and technical organisational chart. Knowledge cycle model focuses know-how become valuable assets. Organisational on knowledge flows that executives use through knowledge, which is reflected in moral and ethical embracing the processes of knowledge manage- standards and the degree of awareness about ment for strategic management decision-making. organisational visions and missions can in-turn be This model takes a task-based approach by trans- used in strategic decision making. Organisational lating the management of knowledge into various knowledge can be, therefore, converted to create organisational processes. Accordingly, knowledge new knowledge that executives can view and imple- cycle model develops a firm-specific approach by ment immediately in managerial decision making. which organisational knowledge provides a signifi- Applying knowledge aimed at providing better deci- cant contribution to business objectives through the sion-making and work related practices and creating context-dependent way it is managed. This model new knowledge through innovation. can also help organisations identify their inefficien- cies in each process, and subsequently recover them Finally, when executives agree to share knowledge on an instantaneous basis which enables executives with other organisations in the environment, studies to prevent further operational risk. have shown that that knowledge is often difficult to share externally.5&6 One reason is that other organisa- About the Author tions have too much pride to accept knowledge or Mostafa Sayyadi, CAHRI, AFAIM, are apprehensive to expose themselves to the compe- CPMgr, works with senior business tition. Therefore, executives may lack the required leaders to effectively develop innovation capabilities to interact with other organisations. in companies, and helps companies – Learning in organisations is the ultimate outcome of from start-ups to the Fortune 100 knowledge reconfiguration by which organisational knowledge is created and acquired by connecting – succeed by improving the effectiveness of their knowledge with other companies that want to share leaders. He is a business book author and a long-time successes and failures. This leads to converting contributor to HR.com and Consulting Magazine acquired knowledge into organisational processes and his work has been featured in these top-flight and activities to improve processes that contribute business publications. success. Executives can now see that a company's capability to manage organisational knowledge cycle References is the most crucial factor in a sustainable competitive 1. Matusik, S.F. (1998). The Utilization of Contingent Work, Knowledge Creation, and advantage. This core-competitive advantage relies Competitive Advantage. The Academy of Management Review, 23(4), 680-697. within and among people. 2. Davenport, T.H., & Prusak, L. (1998). Working knowledge, Boston, MA: Harvard Business School Press. In Conclusion 3. Demarest, M. (1997). Understanding knowledge management. Long Range Planning, Executives are aware that activities related to managing 30(3), 374-384. knowledge at the individual level and the practices 4, Davies, J., & Warren P. (2011). Knowledge management in large organizations. In J. Domingue, D. Fensel, & J.A. Hendler, (Eds.), Handbook of semantic web technologies, Berlin: Springer-Verlag. 5. Jianbin, C., Yanli, G., & Kaibo, X. (2014). Value Added from Knowledge Collaboration: Convergence of Intellectual Capital and Social Capital. International Journal of u- and e- Service, Science and Technology, 7(2),.15-26. 6. Zehua, Z. (2012). Knowledge Collaboration (KC) and the relationship between KC and some related concepts. Library and Information Service, 8, 107–112. 36 The European Business Review November - December 2019
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Decision Making Scandinavian secure-sharing software as a service: The ultimate solution for decision-makers BY MØYFRID ØYGARD, MANAGING DIRECTOR AT ADMINCONTROL Our philosophy is Admincontrol provides software solutions dog, and a light breakfast, accompanied by a simple: if what we do for secure collaboration and easy sharing of glass of water. doesn’t enhance the documents in business processes, such as moment of a decision, board and management work. In this inter- You mentioned that decision-making nowa- we don’t do it. view, Managing Director Møyfrid Øygard days is harder than ever before. Can you tell us gives us an insight into what has made the how Admincontrol’s solutions empower deci- company an ongoing Nordic, as well as sion-making? What are the unique features European, success story. that set you apart from your competitors? Good day, Mrs Øygard. It is a pleasure We believe that good decision-making is to have this interview with you today. Can all about accessing the right information at we start by asking how do you jump-start the right time. In Admincontrol, our mission a busy day to make sure that you are best is to provide the ultimate solution for deci- prepared to make quality decisions? sion-makers. If what we do does not enhance the moment of a decision, we don’t do it. On What I need to make a good decision is top of that we have passionate staff who are simple: a good night’s sleep, a walk with my always ready to help their customers. The enthusiasm our employees show towards our customers every day is truly unique. Decision-making is a crucial process that can lead to the success or failure of any organisation. As an expert in enhancing decision-making, would you tell us some indications that business leaders are making bad decisions? How can we avoid habits that could lead us down the wrong path? We provide an effective channel and tool for sharing and collaboration between the board, management and other stakeholders but, at the end of the day, it is the business leaders who are making the decisions. Indicators of a company not making good decisions are often seen in the financial developments, the culture and the employee turnover. 38 The European Business Review November - December 2019
Admincontrol offers web-based solutions as well as a separate iPad and iPhone app for secure collaboration and easy sharing of documents in business processes such as board and management work, due diligence, capital injections and stock exchange listings. Users save time, gain better control and are better prepared, which in turn results in better decision-making. Admincontrol was founded in 2005 in In my opinion, this is the best feedback we can It is our passionate Norway and has since become established get. It is our passionate employees who make the employees who make across the Nordic region and in selected difference. And our solutions help people to have the difference. And our markets in Europe. Would you tell us about better, more efficient workdays. solutions help people the story and the vision of the company and to have better, more some important milestones so far? Continuous innovation is the key to efficient workdays. sustaining the success of a company. How We were fortunate enough to get a major listed does Admincontrol leverage the latest tech- company as a client early on. They had experi- nologies to innovate and what else can your enced a leak ahead of a quarterly presentation customers expect in the near future? and being on the stock exchange, needed to find a secure solution for their board documents. We have been cloud-based since inception Admincontrol came up with a digital solution and have a great team that continuously works for sharing information and knowing who it had on improvements in our solution. We are been distributed to. Getting this listed company bringing AI integrations and new apps to the as a client was clearly a major turning point for market next year, meaning exciting times ahead us. Other important factors are that, early on, we for our customers. Software as a service is by delivered one of the first serious business apps default a promise of continuous innovation; and a succeeded with our internationalisation you have to deliver on year-on-year, and we do process. I also think it is worth mentioning that our very best every day to make this happen. we have performed well and delivered consist- ently across three different ownerships. Companies in the Nordic regions are well known for being at the forefront of prac- Admincontrol has secured exceptional tising sustainable development. Can you satisfaction rate from its customers, with a tell us how Admincontrol contributes to 98-per-cent customer renewal rate from year to this philosophy in terms of its products and year. Would you share with us the best feed- corporate strategies? back you have received so far? The Nordic region is also known for being Daily, we get direct feedback from our in the forefront of practising digitalisation. customers about how helpful our employees are. Admincontrol has been a big contributor towards We provide an effective channel and tool for sharing and collaboration between the board, management and other stakeholders but, at the end of the day, it is the business leaders who are making the decisions. www.europeanbusinessreview.com 39
Decision Making making due-diligence processes and If you take a closer look at successful companies While we are on the topic of mergers and boardrooms more digital, which repre- and their strategies, you`ll find they have made acquisitions, deciding to buy another company sents sustainable development. some good decisions along the way. Yet, deci- is not always a smart decision. According to sion-making is not easy today, in fact, I would Harvard Business Review, the failure rate for Admincontrol has become a data argue it’s harder than ever before M&A sits between 70 per cent and 90 per cent. room provider for companies with You should do your due diligence thoroughly successful merger and acquisition Hundreds of emails every day are cluttering and make sure you’re get these decisions right. deals and other complicated busi- our inboxes, 24 hour news cycles, a constant flow ness-critical projects. Can you tell us of social media updates and smartphones always HOW DO WE FACILITATE how your solutions contribute to the at hand. The information overload is paired GOOD DECISIONS? success rate of such processes? with megatrends such as globalised competi- tion, disruptive technologies and new threats in So, how exactly can companies increase the Security, efficiency and confiden- the form of cyber-attacks, fake news and more. speed of decision-making and the quality of tiality are key words. Word-of-mouth I'm sure we can agree that our decisions are their decisions? recommendations for our expertise in influenced from left, right and centre, and that this process is also crucial. decision-making is in fact hard. When it comes to making good decisions, there are many factors that come into play. Lastly, can you give us a glimpse BAD DECISIONS – BIG Much is, of course, depending on the quality into how Admincontrol’s manage- CONSEQUENCES of the decision maker(s), that they are able ment team make decisions? What is to analyse, reflect and adapt. It is also about the best decision you have made so In this day and age, it should be no surprise that timing, guts and sometimes luck. far for yourself and for the company? bad decisions are as common as good decisions. When McKinsey surveyed 2207 senior executives, And not to forget, the ability to act. Having In Admincontrol, we are using our 72 per cent of respondents said they thought bad the ability to make decisions quickly and effec- own solutions, we have a great deal strategic decisions were about as frequent as good tively is a trait many successful decision makers of openness, and involve each other ones or were the prevailing norm in their organisa- have in common. Research from Harvard in discussions and in making good tion. Can you imagine the impact this can have on Business Review finds that people who were foundations for decision-making. The crucial areas such as growth, revenue and culture, described as “decisive” were 12 times more likely best decision I have made is to say yes not to mention the very future of the company? to be high-performing CEOs. to becoming Managing Director of Admincontrol in 2018. As a company, History is full examples of bad business Some even go as far as to say that it’s we dare to be ambitious and to make decisions. I’m sure you have heard of many. better to make a decision, good or bad, than tough decisions. I also think geographic One example is Kodak, which actually had the not to make a decision. “Fail fast” has become expansion has been important and a inventor of the first digital camera on its payroll a mantra in the startup-world. result of being ambitious. but decided not to continue developing it. Ultimately it is about information at hand. Thank you very much Mrs Another example is the former video rental At Admincontrol we believe that good decision Møyfrid. It was a pleasure speaking giant Blockbuster. The board and manage- making is all about accessing the right infor- with you. ment at Blockbuster were failing to see how mation at the right time. the industry was shifting, first when Netflix EXECUTIVE PROFILE disrupted the market by launching its DVD-by- «CRAZY ABOUT DECISION-MAKING» mail business, and later on, as Netflix moved Møyfrid Øygard, on to streaming. It does not stop there; did you At Admincontrol we are passionate about deci- know that Blockbuster early on had the oppor- sion-making. It is in our DNA, it is at the core of Prior to joining tunity to buy Netflix but decided against it? our company. Our philosophy is simple: if what Admincontrol early 2017, we do doesn’t enhance the moment of a deci- Øygard worked as Country Blockbuster filed for bankruptcy in 2010, sion, we don’t do it. Because we believe that Manager Norway for the while Netflix’s estimated value today is $159.57B, our future depends on the quality of decisions Swedish IT company Apsis. which is more than 10 times what Blockbuster and our ambition is to be a world-class enabler She has 20 years of sales was worth at its peak. of decision-making. We offer a smart and secure and sales management collaboration platform for boards, management experience. and other key stakeholders, where they can access, share, discuss and process information efficiently. Have you made any good decisions lately? 40 The European Business Review November - December 2019
Our Future Depends on the Quality of Decisions REQUEST DEMO OF OUR BOARD PORTAL OR DATA ROOM We provide the ultimate solution for decision making www.admincontrol.com
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Leadership The Essential Qualities of Leadership in the Digital Age By Katharina Lange Transforming an organisation is never an have a clearly defined long-term aspiration that easy task, especially when competitive enables them to effectively manage short-term pressure becomes merciless. There always uncertainty. They are self-aware and do not seems to be a faster, better, bolder, brighter become defensive when receiving feedback. business model emerging in the digital Instead, they humbly acknowledge that others age: Asset-light and hyper-agile new busi- know more than they do and adjust their way nesses attack incumbents and fight for of working and thinking. They remain curious market space and customer attention. and are willing to take risks, such as making Competitive advantages erode even faster a mistake or appearing non-expert in public. because (almost) everything can be copied. Their inquisitive mind keeps them ahead of the This digital business landscape demands knowledge curve3. different, agile and hyper-aware leaders and forces organisations to transform and Agile leaders are, first and adapt at an ever-increasing speed. But foremost, good learners. how much agility can one organisation generate? When does it become breath- In addition, agile leaders are hyperaware. less activism? And how do agile leaders They scan internal and external environments manage their energy and resources? Is it constantly to anticipate and navigate oppor- time to pair agility with resilience? tunities and threats in a disruptive, digital environment. They take evidence-based deci- A gile leaders are, first and foremost, good sions, making use of data and information, learners. Research shows that the qualities and execute fast, often valuing speed over of nimble leaders match traits associated with people who are successful in learning1 2. Both www.europeanbusinessreview.com 43
Leadership Digitalisation means speed. Firms need to be faster at implementing their ideas and bringing them to market. The customer experience is about instant fulfilment. Organisations must be equipped with the ability to make rapid decisions – on all levels. perfection4. Agile leaders engage with hanging the rules of communication built-in flexibility is key. In such an others, motivate and inspire. on each conference room wall. Such environment, teams form and disband gestures help to create a community quickly and continuously. New struc- Transforming organisations towards and cultivate a sense of belonging in a tures emerge and vanish out of, and more agility virtual world. into, ambiguity in response to customer In a recent study5, we asked how C-suite and market trends. Roles become loca- leaders transform their organisations Digitalisation means speed. Firms tion agnostic and hierarchies become to make them fit for the digital age. need to be faster at implementing less steep; they move ‘from pyramid to The overwhelming response was that their ideas and bringing them to pancake’. Fluid and flat becomes the cultural components by far outweigh market. The customer experience is new normal. In a fluid organisational technological aspects. Ultimately, digital about instant fulfilment. Organisations structure, traditional hierarchical rela- transformation is about the people must be equipped with the ability to tionships become less important, and involved, their cultural readiness, and make rapid decisions – on all levels. the formal structure needs to reflect the the mindset for transformation. Incumbents strive to cultivate the distribution of accountability. At the entrepreneurial spirit associated with same time, leaders need to decentralise Four components emerged from the a start-up culture to drive innovation. empowerment and localise responsibility study that shape cultural transforma- Many organisations encourage small- clearly. Central governance guides and tion in the digital age: scale experiments and prefer them to acts as a counterbalance. Behavioural 1. Corporate values that drive collabora- enterprise-wide approaches. A proven differences and cultural barriers do not concept is to rapidly construct a hypoth- disappear in digital transformation and tive behaviour and continuous learning esis, build prototypes, test them, gather need to be addressed and managed. If 2. An adaptable organisational struc- and analyse data, and refine. This data- leaders manage these cultural differences driven decision-making culture has to well, digital transformation can over- ture with in-built flexibility be embraced and modelled at the top come barriers. In our study5, we found 3. Processes that connect the organisa- of the house to be successful. that digital transformation provides the opportunity to overcome existing tion synergistically At the same time, the ‘hardwired’ cultural barriers or legacy rifts to create 4. Advanced communication protocols structure of an organisation is critical organisational alignment. for its digital readiness. While clear roles that connect individuals and responsibilities are required, having Agile leaders need to build their individual traits into the organisa- tion. This can be most effectively achieved through engaging and effec- tive communication. The mindful use of digital tools can amplify reach and serve to create a community. At the same time, it is important not to cut back on human interaction and to be aware of silos that can be created by an overemphasis on technology. For teams that are widely spread out and work mostly virtually, leaders need to create familiarity and psychological safety to achieve results. It has become good practice to visualise communi- cation norms and protocols, such as 44 The European Business Review November - December 2019
For the digital world, Arie de Geus’ statement Taking a step accept – the reality of their situation. They do rings true that the ability to learn faster than the back and not fall into coping or denial mechanisms but competitor may be the only sustainable compet- reflecting face reality, as grim as it might be. itive advantage in the future6. Agile leaders (in silence) • Second, they hold a deep belief that life is mean- inculcate a culture of agility and learning, rather becomes as ingful, supported by a strong purpose9 and than protecting. With traditional structures and value set. Resilient people can see meaning in business models disappearing, entire organisa- important as hard times and emerge from catastrophes even tions are dealing with ambiguity and insecurity on driving and stronger. They see hard times as an opportunity a larger scale. They are in learning mode and out accelerating. to learn, not to whine. of their comfort zone most of the time – if not • And lastly, they have a talent to improvise and adapt. constantly. From psychology, we know that it is They make the most of what they have, intuitively pain or a sense of urgency that motivates us to inventing solutions that help solve problems. change and learn. Change is critically important for survival. However, most people hate change that is The parallels between characteristics of resil- imposed on them; they question and resist it. And ient people and the initially described traits of if you don’t get a chance to ‘refreeze’, you may learners and agile leaders are not coincidental. never know what worked or not. How can leaders It takes resilience to learn as the learner has to keep up with this continuous sense of pain and overcome the “slight” of admitting to not having urgency without burning out the workforce? known. And though some people are born with a greater capacity for resilience, it is a capability that Taking a step back and reflecting (in silence) can be learned and taught – on an individual as becomes as important as driving and accelerating. well as an organisational level. Studies have shown Despite the perceived ‘need for speed’, learning that resilience and transformational leadership are and experimentation will take time, may lead to positively related to work engagement10. Resilience mistakes, and will be productively ‘unproductive’. prepares us to cope with and adapt to future crises, Changes in customer-facing functions might require chronic stresses and acute shocks11. a higher speed, whereas safety-related processes may not. New value propositions need time to develop. Organisational resilience is an organisation’s Leaders need the discipline to execute and deliver ability to absorb strain and preserve or improve results, while, at the same time, making space and functioning, despite the presence of adversity12. It time for learning and experimenting7. is influenced by governance processes, leadership practices, organisational culture, human capital, Bouncing forward social networks, and collaboration. An organ- In a fast-fail, experimental work culture, leaders and isation’s capacity for resilience also enhances organisations alike need to be resilient and to have through preparing and planning, collateral path- the ability to bounce back. Resilience is the ability to ways and redundancy. This is where the common fully recover after hardship and adversity, to accept concept of an agile organisation deviates: “Slack” negativity as a reality in life. Theory concurs that (redundancy) and planning do not necessarily resilient people possess three characteristics8: match our idea of agility. However, they make • Firstly, they have a clear sense of reality and are companies more robust and resilient. It becomes a strategic decision where to strike the balance aware of what is going on. They keep on asking between lean efficiency and robust preparedness themselves if they truly understand – and for survival. In a fast-fail, experimental work On an individual level, resilience training tech- culture, leaders and organisations niques can improve engagement and help people alike need to be resilient and to overcome their fears about change. Resilience is have the ability to bounce back. a way of combating stress factors at work and in life. It can help employees deal with adversity and change in a way that not only allows them to bounce back but to bounce forward13. www.europeanbusinessreview.com 45
Leadership Transmitting an Building organisational robustness through solutions to situations that others might find over- organisation’s individual resilience whelming or overly complex. A system thinking purpose and Communicating purpose approach has proven useful in these situations. strengthening An openly shared and well-communicated purpose corporate social continues to have the strongest impact on culture. Self-composure and self compassion fabric requires Why are we doing what we are doing? The younger In the digital age, leaders must also be able to skilful, engaging workforce wants answers to this question, and manage stress and remain calm under pressure. communication senior management needs to provide a credible Simply recognising stress triggers is a good start and positive response. Transmitting an organisation’s purpose in maintaining your own productivity. Composure relationships. and strengthening corporate social fabric requires helps people moving forward productively when skilful, engaging communication and positive rela- faced with disruption – for example, by creating tionships. Leadership qualities in such a purpose-led reflexive loops and moments of pause. Making organisation include the courage to challenge the room for breathing space for the self, retreating status quo, and to say “no”. Leaders who can effec- consciously to reflective loops and escaping the tively initiate and manage difficult and courageous perpetual stream of work pressure is essential to conversations elevate their influence and are more stay focused. Introducing disciplines such as yoga, productive. In this way, urgent issues are dealt with mindfulness, meditation and resilience training can in an open, candid and appropriate way, even in help employees and organisations improve their challenging circumstances. emotional health. A simple technique is to dedicate a certain time – maybe the first 15 minutes in the Translate ambiguity into clarity morning – to one`s own agenda. Before answering Leaders need to recognise that digitalisation could emails, calls or other requests, sit down and work weaken their organisation’s cultural fabric, and need on agenda items that are important for you. Ticking to consciously address and manage the fear that these items off at the start of the day gives a deep comes with ambiguity and change. They need to sense of accomplishment and the feeling of being translate ambiguity into clarity, converting unstruc- in control. For once. tured events into an emerging and flexible structure. Crucially, this means developing the ability to References solve complex problems and help people identify 1. Monique Valcour, “4 Ways to Become a Better Learner”, Harvard Business Review, December 31, 2015. About the Author 2. Erika Andersen, “Learning to Learn”, Harvard Business Review, March 2016. Katharina Lange joined IMD as Professor of Leadership 3. Tiziana Casciaro, Amy Edmondson, Sujin Jang, “Cross-silo Leadership”, in September 2019. She has taught executives globally, Harvard Business Review, May-June 2019. specializing in self-leadership and cross-cultural team 4. Redefining Leadership for a Digital Age, Rainer Neubauer Andrew Tarling leadership in times of Change. Before joining IMD, Michael Wade, IMD Global Center for Digital Business Transformation, 2017 Katharina led the Office of Executive Development at 5. Transforming your organization for the digital age, Katharina Lange et al, Singapore Management University (SMU). Prior to her Asian Management Insights, Nov 2019 (forthcoming) experience in Asia, Katharina was Program Director and 6. Arie de Geus, “Planning as Learning”, Harvard Business Review, March 1988. 7. Jeanne Ross, “Digital is about Speed–But it takes a Long Time”, MIT Sloan Head Life Science Industries at the European School of Management Review, April 5, 2018. Management and Technology (esmt), Berlin, where 8. How resilience works, Diane Coutu, Harvard Business Review. May 2002, Vol. 80 she directed and taught in executive and degree Issue 5, p46-55 programs. Before her career in business education, 9. What We Can Learn About Resilience from Female Leaders of the UN, Katharina worked 9 years with Arthur Andersen and Monique Valcour, Harvard Business Review Digital Articles. 9/28/2017, p2-6. Deloitte Consulting. Her PhD in pharmacology adds the 10. Resilience, Leadership and Work Engagement: The Mediating Role of Positive empirical lens of a natural scientist to her profile. Affect. Wang, Zhen et al, Social Indicators Research. Jun2017, Vol. 132 Issue 2, p699-708. 11. What Is Resilience and How Can It Be Nurtured? A Systematic Review of Empirical Literature on Organizational Resilience. Edwine Barasa et al International Journal of Health Policy & Management. Jun2018, Vol. 7 Issue 6, p491-503. 12. The Geography of Strain: Organizational Resilience as a Function of Intergroup Relations. Kahn, William et al, Academy of Management Review. Jul2018, Vol. 43 Issue 3, p509-529. 13. Changing how people feel about change, C. Mulqueen, Chief Learning Officer. Jan/Feb2018, Vol. 17 Issue 1, p40-43. 46 The European Business Review November - December 2019
Digital Leadership BUSINESS SOFTWARE We define three Michał Sztanga, managing director of Polish success and grow it sustainably by helping our fundamental software developer Future Processing, explains clients to achieve their success. values that we offer our how his company takes “getting alongside the As for the morning routine, in my case I need clients: software some time to actually wake up. So I either do sports development customer” to a whole new level. Coming up with before work, or some simple housekeeping stuff. expertise, Sometimes I also like to spend a few minutes in long-lasting the right solutions,, he says, involves – first and silence to register my emotional and mental state partnership and and make peace with it, before I start loading being like a foremost – asking the right questions. myself with new information and external stimuli. partner next door. Finally, as often as possible, I hug my wife and son. That puts a smile on my face, which then helps Thank you so much for sharing your time greatly during the day. with us, Mr Michał Sztanga. To start with, for a Future Processing has grown immensely successful business leader like you, what are the and expanded its reach to over 150 clients globally. What have been Future Processing’s best morning routines to jump-start a busy day milestones, in your opinion? and your quick tips for improving productivity There have definitely been several milestones in our history, probably some on different levels for a day’s work? You are welcome. Thank you very much for considering me a successful business leader – I prefer to think of myself as a member of the successful Future Processing team, who just happens to have a responsibility to do what he can to help our team and organisation to maintain our 48 The European Business Review November - December 2019
Our ambition is to ask the right questions to bring our clients tangible results in the form of reliable, high-quality and sustainable software that is delivered on time, right first time. of the organisation that I am not even aware The Future Processing those great visions, buzzwords and megatrends of. From my perspective, one of the key Way, which is our are nothing without reliable delivery. It’s in our moments was when we explicitly defined our own distinct way of DNA to be honest and transparent and commu- FP company values in a huge team survey, working, a combination nicate openly. We feel very motivated when, as a as this became a strong guiding influence in of methods, tools and result of working with us, our clients get peace our fvuture decision-making. Another one behaviours that helps of mind from knowing that their projects are would be professionalising our sales and our clients achieve in the right hands, so they can focus on their marketing functions, which helped us to create great results through business challenges. It is obvious to us that we another growth wave. We added a more busi- our partnership. will succeed only through the successes of our ness-oriented arm to our purely engineering clients. To make our philosophy more tangible, organisation. Recently we have been reorgan- we have created The Future Processing Way, ising ourselves into more specific and decoupled which is our own distinct way of working, a business units, each of which focuses on specific combination of methods, tools and behav- industry segments and has its own business iours that helps our clients achieve great results strategy, and therefore slightly different internal through our partnership. structure and processes. Technology is continuously changing the I imagine that we will go though many more world and the way business and industries milestones, during which we will change and operate. How does Future Processing redefine what we do and how are we doing it. leverage the latest technology to continu- The one constant that I see through the years ously innovate and ensure that its services is our dedication to creating a positive atmos- and solutions will always remain cutting- phere of cooperation, an environment in which edge and relevant? people passionate about technology can meet with people passionate about business and In my mind, being relevant and being able to together create great results, great software. generate real value to the business are even more important than being cutting-edge. When it makes Future Processing has been recognised as the top software developer in Poland for THE FUTURE PROCESSING WAY four consecutive years and recently ranked second in the Real IT Awards 2019. Can you Technical Trustworthy tell us what are the inimitable features of expertise partnership your software solutions and what sets Future Processing apart from the competition? Predictable and high-quality delivery I am very happy and proud that we are being recognised by the industry. We define three Operational Strong fundamental values that we offer our clients: agility work ethic software development expertise, long-lasting partnership and being like a partner next door. Our ambition is to ask the right questions to bring our clients tangible results in the form of reliable, high-quality and sustainable software that is delivered on time, right first time. I person- ally think that sometimes we all forget that all www.europeanbusinessreview.com 49
Digital Leadership sense and is justifiable, it is worth considering the latest At the end of the ecosystem, so I would only be able to offer you my technologies, as they may give possible solutions that day, our people’s personal impressions on the subject. With regard were previously unavailable. However, in majority ability to work with to our position in the IT outsourcing industry, of cases, I believe it is more important to choose the new technology we position ourselves as software development a technology that can be implemented within the will determine experts who build long-term relationships with our given time and budget, and which can be actually its impact on our clients and who are a partner next door. I would consumed. Before putting a cherry on top of your businesses, our lives be very happy if our people-centric DNA proved technological cake, make sure you have the cake. and the world. to be a great business foundation for FP in the long term, regardless of the specific services and Finally, I would not underestimate the human markets we operate in in the future. factor, when it comes to changes that are being, or might be, introduced by technology. At the end of What changes do you foresee in the business the day, our people’s ability to work with the new sector in terms of outsourcing and software technology will determine its impact on our busi- development? How will Future Processing nesses, our lives and the world. We as humans must address evolving software technology needs, want it and must understand it, and it must be trans- changing market conditions, and the growing parent to us, so that we can trust it. demands of the different industries in the coming years? Poland, where Future Processing is I think that because there is basically insufficient expertise and skills on the market to serve the ambi- based, established itself long ago as a significant tions that businesses have, we will continue to see a growing base of software vendors and it will become hub of advanced science and technology. Can you even harder to distinguish yourself from the crowd, and for the clients to choose the best match for them. describe Poland’s tech start-ups ecosystem and I would like FP to combine a down-to-earth approach with good understanding and awareness of the evolu- the Polish outsourcing market? How would tion of technology, so that we are in a good position to give advice to our clients on what the best options Future Processing position itself as a global for them are, when it comes to technology selection. I wouldn’t like to get over-excited and over-optimistic leader in the IT outsourcing industry? about partial technologies. I prefer to see technology as a means to an end, focusing on setting a clear end As a business, we do not operate in the start-up and then choosing the right means to get there. Best Nearshore Member of 6 +350 Future Processing has consistently lived Team 2019 business and IT training courses up to its philosophy: “Great software because named by GSA outsourcing bodies in 2018 we put people first”. How do you create and ensure a healthy workplace environment for 2000 We have worked for your employees? How would you describe your corporate culture? Founded in 2000 150 global clients on over We respect each other and, where possible, take almost 20 years care of each other. We try to take into considera- 500 tion that everyone in the workplace is still a whole of experience projects human being, with all their associated characteris- tics – some very helpful in doing business, others established by today maybe not so much. In many cases, such a perspec- tive helps to remove unnecessary emotions from the 2 people 800 people on equation. We also promote a culture of open and board constant feedback. All of this may sound simple, 4 times 518 8.1 people named Top Web & business trips to our is the average size of Software Developers in clients in 2018 software development Poland by Clutch team 50 The European Business Review November - December 2019
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