Key Changes in Management:

Implications from the Corona Crisis

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Why are some firms becoming

more successful during Covid-19
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New Thinking at Migrolino

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What Investment Criteria are

Appropriate Today?
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Effective Due Diligence –

often harder than you think!

A SPECIAL COLUMN BY

PETER LORANGE
CHAIRMAN AND CEO OF THE
LORANGE NETWORK

THE NEW STRATEGIC REALITY

THE COVID-19 PANDEMIC

USA $22 EU €17.5
empowering communication globally CAN $22 UK £15
 The European
Business Review
empowering communication globally
NOVEMBER – DECEMBER 2020

BUSINESS MODEL
A SPECIAL COLUMN BY 55 TableTop and Covid19 – It’s no longer an Easy Game!
THE LORANGE NETWORK Uwe Eickert and DR Boris Liedtke
6 Peter Lorange
FUTURE OF BUSINESS
Introduction 60 Managing by Traction (MbT) Reinventing
6 The New Strategic Reality as a Consequence of Management in the Cyber-Age
the Covid-19 Pandemic Mario Raich, Tomasz Krzeminski, Claudio Cisullo,
Simon L. Dolan and Bonnie Richley
Management
10 Key Changes In Management: Implications From SUSTAINABILITY
The Corona Crisis, Particularly On Family Businesses 75 The New Responsibilities of Companies in a Time of
and The Portfolios Of Independent Investors increasing Inequality and Climate Change
Enrico Sassoon
Strategy
16 Why are some firms becoming more successful CIRCULAR ECONOMY
during the COVID-19 pandemic? 82 Crossed Reflections on the Covid Crisis and the
Environmental Crisis. Of the Need to Move Towards
Innovation a Circular Economy Based on Resources
22 New Thinking at Migrolino Stemming from the Karen Delchet-Cochet
COVID-19 Challenge
SUSTAINABILITY
Investment 86 Don’t Cut the Sustainability Budget
28 What Investment Criteria Are Appropriate Today, in Cory Searcy and Payman Ahi
Light of the Coronavirus Threat?
ROBOT LEADERSHIP
Operation 88 Th e Funny Thing about Robot Leadership
34 Effective Due Diligence – often harder than you think Jamie L. Gloor, Lauren C. Howe, David De Cremer,
and Kai Chi (Sam) Yam

STRATEGY DIGITALIZATION
40 Keeping Resilience in VUCA era: The Organization Should Th e Rocky Road to Digitalization Success
93
Learn from the Water’s Wisdom Benjamin Mueller and Jens Lauterbach
Weixu Ding and Jianhua Mao
TEAM MANAGEMENT
LEADERSHIP Advantages, Limits and Strategies for
43 97
What South Africa Can Teach Leaders About Resilience Online and Offline Collaboration
John Luiz Fernanda Arreola and Pierre Daems

FUTURE SERIES SUPPLY CHAIN

46 Going Up! Giving a Lift to Mobility in India 101 Does the Devil Wear Prada? Lessons in Supply Chain
Interview with Gilco Global’s General Director Sustainability from Luxury Fashion
Aman Moudgil and Managing Director Deepak Moudgil Donna Marshall and Hakan Karaosman

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, info@europeanbusinessreview.com, www.europeanbusinessreview.com No part of this publication may be reproduced or transmitted in any form
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All rights reserved. ISSN 1754-5501

empowering communication globally


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 A SPECIAL COLUMN BY THE LORANGE NETWORK
T
he new reality of COVID-19 has been with
us since the end of the first quarter of
2020. This has led to dramatic changes
in several ways:
• For national economies. Growth has suffered
and is now negative (as of the end of 2020) for
most economies, with the exception of China.
• For corporations. A reduction in demand (and
revenue) for most firms, perhaps with the
exception of the larger ones in the high-tech
virtual sector.
• For the family firm. A need to adapt quickly to
the new virtual realities, and thus to abandon
many of its traditional businesses (manufac-
turing, distribution, restaurants, hotels, etc.).
• For the consumer. A move towards virtual reality
(working from home, shopping from home, no
concerts/theatre/movies/sports events, etc.).
New consumer propensities are emerging!
Perhaps the most surprising effect of all
might be how fast, and seemingly how perma-
nent, many of these changes seem to be. We
are all faced with the challenge of being more
adaptive, and even more proactive.
In the enclosed, I have reprinted five arti-
cles. All were written during the coronavirus
outbreak period. They are primarily based on
two sources of input:
• Factors received from my involvement
in Lorange Network processes, above all
through inputs that I have been chairing,
as well as from discussions with individual
managers of the Network.
• Considerations stemming from decisions
taken at my own family investment firm, S.
Ugelstad Invest (SUI).
The five articles all fall into one group, and
were all originally published in The European
Business Review. They all deal with various
consequences of COVID-19, such as working
from home, new challenges for good due
diligence, what types of investment criteria
to focus on now, as well as which factors
now seem to enhance corporate success. A
successful case study is also presented.
As will become clear from this, the very
way we think about corporate strategy may
have to be revised:
• More of a short-term focus
• What are our customers’ key needs
as of today?
• Competitors that are in place are becoming
even more critical, relative to potential
winners sometime in the future.
I hope that you will find the collection
of some use. If you have comments or
questions, please contact me at peter@
lorangenetwork.com
Yours,
Peter Lorange
Küssnacht am Rigi, December 2020
About Lorange Network
The Lorange Network is a digital network based
on an innovative approach to executive education
and business development, for family businesses,
family offices, private investors, entrepreneurs and
high-level executives. The Lorange Network sees
continuous learning and business opportunity
exchange as essential to business success, long-
term value creation and personal development.
“The network
is based on
opportunity as an investor and family business
leader, I often turned to my close professional
contacts for short briefings that resulted in
fresh, current, unique expert advice for my own
queries and thus brought me closer to investment
success. Getting that first-hand knowledge from
key experienced individuals who were already
doing relevant deal types, acquisitions, market
entities or other types of projects themselves, is
what has helped me the most in my family invest-
ment office’s ventures.”

the concept Karin Mugnaini, President and COO, states, “Our

written content is produced by our hand-picked,
that lifelong, independent, leading academic and professional
real-world experts. Themes are family firm management,
learning can wealth management, best practice and govern-
help businesses ance, next-gen and talent-development, as well

with their as social entrepreneurship. Topics include succes-

sion planning, impact investing, philanthropy,
investments to leadership, progression, family values, wealth
become more management and many others. We regularly run
successful.” digital events which host impressive figures from
diverse industry sectors. Our members get inside

“I founded the Lorange Network in mid-2017

with the purpose of providing short, topical
briefings to family businesses, family offices and
investors. Our membership base now also includes
entrepreneurs and top business leaders,” says
Dr. Peter Lorange, Chairman and CEO of Lorange
Network. He adds, “The network is based on the
concept that lifelong, real-world learning can help
businesses with their investments to become more
successful. We offer our members relevant digital
events (webinars, workshops, round tables, special
presentations and investor get-togethers), as well
as succinct, practical and neutral insights (articles,
executive profiles and book reviews). They choose,
via their own PCs, tablets and smartphones, when
they want to learn, interact and network. We offer
the framework, space and content.”
Dr. Lorange explains the origins of the Lorange
Network concept. “When I was exposed to a new
“The energy we promote
at the Lorange Network
reflects forward thinking
and future growth focus.”
outlooks from people at the top. We have also
worked with the Financial Times, Headspring, IE
and other leading organizations.
Per Lorange, Head of Deal Wall and
Co-investments, adds, “We launched a ‘Deal Wall’
back in 2018, where many of our premium members
post projects when they are looking
for co-investors. These co-investors
come from our membership base
of more than 3,000. The Deal Wall
hosts investment opportunities
that cover private equity ventures,
shipping, real estate and other rele- Peter Lorange adds, “This year has gone very
vant opportunities. Up to now, we well for us at Lorange Network, despite COVID-19.
have posted over 35 deals and run Because we have been a networked organisation
seven online investor get-togethers from the start, the switch from mostly digital to fully
supporting those deals, matching digital has been smooth. We have also been able
the entrepreneurs or founders with to help many of our member companies to adapt
potential investors.” quickly to this new business environment.”
Since its October 2017 launch,
the Lorange Network has been
growing steadily. Premium
Dr. Peter Lorange is a successful acad-
membership is priced at USD 500
emician, entrepreneur and owner of a
per year. A free Basic version is also available, but
diversified family business (S. Ugelstad
with only limited access to the network’s features.
Invest). Educated at the Norwegian School
Premium membership includes unlimited
of Economics, Yale University and Harvard
access to the insights and its co-investment Deal
Business School, Lorange is the recipient of
Wall, “Ask Peter Lorange” and “Ask the expert"
a doctorate from Harvard and six honorary
consulting services, other community engagement
doctorates. Lorange has board experience
via discussions, chats and threads, as well as phys-
from several listed companies, including
ical events and digital gatherings.
Royal Caribbean Cruise Lines, Kvaerner,
Karin Mugnaini continues, “The energy we
ISS, Seaspan and Globalpraxis, as well as
promote at the Lorange Network reflects forward
with Copenhagen Business School. Lorange
thinking and future growth focus. We like to
is the former president of IMD in Lausanne,
concentrate on supporting our members to find For more information,
Oslo Business School, and founder and
solutions to dilemmas, and also to create oppor- contact:
owner of the Lorange Institute, which was
tunities for business development. We also work
later sold to CEIBS. He has been a professor
closely with a select group of organisations, Karin Mugnaini
at MIT (Sloan) and at Wharton, and has also
companies and associations who share similar President and COO
been head of the Lauder Institute. He has
values. This provides more stimulating material karin@lorangenetwork.com
authored/co-authored some 20 books and
and input, and opens up networking to broader +41796605568
more than 150 articles.
groups and eco-systems.”

www.europeanbusinessreview.com
www.europeanbusinessrevie 9
 KEY CHANGES IN MANAGEMENT:
IMPLICATIONS FROM THE CORONA CRISIS,
PARTICULARLY ON FAMILY BUSINESSES AND THE
PORTFOLIOS OF INDEPENDENT INVESTORS
BY PETER LORANGE

I
n this paper I shall discuss what I see as some
major implications for management prac-
tices when it comes to several key trends,
which indeed might be seen as representing
clear breaks from the past. I shall further briefly
examine what might be implications from all of
this, particularly when examining recent evolu-
tions of key agents for management change, not
only business schools, management consultants
or key employees, but also other management
practice influencers such as banks or the public
sector.
Let me however first examine what I see as
these major trends, for then to highlight some
of the implications for management practice
when it comes to these developments.
A short discussion is necessary at this
point. While not empirically valid through
large sample testing, all of the issues to be
discussed have been successfully tested on my
wholly owned investment company (turnover
ca. 300M CHF) (Lorange). There seems to be
evidence that the trends hereto discussed have
a consequence in practice, and that the various
new management practices stemming from
these are worthwhile. And, while the content
of this is probably relevant for all businesses, I
am particularly concerned with how these trends
might impact family businesses and the portfo-
lios of independent investors.
The brutal Corona virus pandemic of course
has an effect on my writing. While I have
attempted not to over-stress various impacts
from this, I readily admit that the Corona virus
context may have led to unintended biases.

10 The European Business Review November - December 2020

One important caveat should be made at this
point. This brief article is intended solely as an
overview vehicle. For more in-depth discussions
of the topics identified, I am referring to the
specific references given.
ADVANCES IN COMMUNICATION-RELATED
TECHNOLOGY, AND WORKING FROM HOME
(WFH)
We have seen a revolution when it comes to
advances in these areas. Computers themselves
represent a case-in-point, but we also see dramatic
developments when it comes to mobile technology,
videoconferences, etc. Perhaps the most significant
advances have come in the software side.
There are of-course several fundamental
implications from all of this. I shall here merely
point out three areas.
The age of virtual communication is here
This has opened up for the possibility to
communicate effectively without physically
being together. While we have had traditional
telephony for a long time, we might now
also benefit from video conferencing, mobile
telephony, easy messaging, and so on. The
modern organization clearly looks differently
today than before – less hierarchy, more globally
spread. Marketing becomes different (Lorange
and Rembiszewski) and so does the innovation
process (Christensen).
Interaction
Two-way as well as multiple-way remote inter-
action has now become a reality. We see the
emergence of blogs, APPs, new platforms. etc.
Individuals can post comments, ask questions,
engage in dialogues without being together
physically. This is virtual and is indeed also
often, but not limited to, one-to-one.
Learning
It now seems to become the trend that basic
learning increasingly might take place based
on the computer. This then opens up for more
workshop-like exchanges, say, around key
dilemmas, either face-to-face, or now increas-
ingly also virtually (Lorange). The traditional
university, with business schools included, may
no longer so much be based on lectures by
professors, in traditional classroom settings, but
rather take place through networks built around
computers and learning software (Wilson). We
are seeing a rise in online masterclasses, semi-
nars, learning labs and other formats, both
synchronous and asynchronous.
The way we work, and working from
home (WFH)
One of the most interesting effects from the
corona crisis, stemming from governmental
regulation that most of us should have to go
into self-isolation and, thus, de facto have had
to work from home, is the fact that this mode
of working seems to function quite well. We
are indeed able to conduct effective one-to-one
meetings, engage in project meetings, with say
six to eight different persons, or as noted, taking
part in webinars, with large numbers of people.
And, many of us are finding that all of this has
led to us becoming more effective, in that we
now can avoid unnecessary waste of time, and
non-essential travel costs (save money!). We
tend to be more concentrated and focused!
It goes without saying that effective virtual
communication shall always be based on an
element of trust, which needs to be existing
among those who interact virtually. So, perhaps,
some physical meetings shall therefore also be
needed, although fewer than before. And, social
activities in connection with such meetings, say
business lunches or dinners, may not be that
ineffective, after all.
www.europeanbusinessreview.com 11

LARGE DATA ANALYSIS
We now see the emergence of large data analysis
and so-called “cloud” computing, i.e., based on
the new reality of undertaking non-parametric
data “manipulation” on large data sets (both
online and offline) and with powerful computer
driven systems. Here too, we see several impli-
cations, all having to do with becoming able to
identify patterns which, until now, may have
escaped us. (For a book that gives a good, but
non-technical overview of big data analysis and
cloud computing, see Schmiedel). We are also
at a point in time where maintaining a holistic
view of data is becoming more critical, as well as
creating clear priorities when it comes to predic-
tive data. Let us point out some implications:
Political election campaigns
Political election campaigns. It is now possible
to segment electorates much more finely, based
on large bases of demographic and socio-eco-
nomic data. We have observed dramatic results
from this. Perhaps recent US Presidential
campaigns might provide particularly good
12 The European Business Review November - December 2020
examples. We definitely see a change in the
way democratic election processes are being
handled. Campaign inputs that are tailored
to specific sub-segments of the voters are
becoming the norm (O’Neil).
Marketing and “route-to-market”
With the ability to analyze large consumer-based
data sets, say, from cash register receipts in
retail stores, one might be able to identify new
routes to market (Marmara). The discipline of
marketing is thus changing. As an example,
take the Swiss-based retail chain Migrolino.
Here, based on cloud computing-based analysis
undertaken by McKinsey, four distinct store
ache-types were identified, each with their own
distinctive profiles, serving different customer
groups: grocery shoppers, lunch/snack shoppers,
commuters and “night crawlers” as well as fresh
goods buyers.
More generally we see how leading retailers
such as Alibaba, Yahoo or Amazon.com are
now going for much more tailored promotional
campaigns based on a more explicit under-
We are standing of what might be key preferences of
witnessing the key customer sub-groups. Many companies are
now starting to use data analysis to build special
emergence customer stories as well as to revisit their prior-
of so-called itization of KPIs. The creative role of analyzing
algorithmic “super users” may be increasing in importance
stock trading, during crisis times, given that the faithful
customers or those who keep ordering more
again based can be approached for referral revenues and
on large data uphill revenues. Additionally, companies who
analysis of are either growing during the crisis or main-
taining their businesses, are often digging deep
corporate into all data points, looking at smaller scale data,
performance. “getting into the weeds” and getting raw data to
get better quality insights.
The stock market
The stock market. We are witnessing the emer-
gence of so-called algorithmic stock trading,
again based on large data analysis of corporate
performance. Here the basic premise is to model
customers’ stock trading preferences around key
characteristics of given corporations. So far,
these approaches for investing seem to do rather
well (Mayer-Schonberger and Ramge).
ADVANCES IN BEHAVIORAL SCIENCE
Human cognition is now being studied
on an ever-broader basis than before. Even
key phenomena from nature are now being
analyzed, to search for added insights regarding
cognition. The result from all of this is that the
field of cognition has now started to yield signif-
icant new results. And, new disciplines, such as
behavioral finance, are emerging. Let me point
out three areas, in particular, where increased
understanding of cognition seems to be playing
critical new roles:
How do we deal with risk and uncertainty?
In particular, it seems as if ongoing success, and
its impact on risk-assessment, seems to lead to
increased confidence, and a resulting lessening
of careful assessment of risk (Kahneman), a
quite disturbing insight! Our over-confidence
might take over!
During downward periods,
i.e. when things are deteriorating, many actors
seem to become “paralyzed”, perhaps hoping
that things shall eventually be turning around,
leading to a recuperation of what might have
been lost. Others, however, may perhaps be
U.S-based better at squarely facing up to such realities,
management perhaps by practicing more diligent stop-loss
policies (Kahneman).
teams might We might see cultural differences in play here.
perhaps U.S-based management teams might perhaps
tend to be tend to be acting more promptly than Europeans
acting more when it comes to cutting losses. In general, we
saw during the Corona crisis, that speed and
promptly than resoluteness seemed to be of the essence for
Europeans cutting losses at an early stage.
when it comes
The winning effect
to cutting As already noted, we often can observe that
losses. success might lead to added confidence, perhaps
over-confidence. Bets might be doubled and
doubled again until eventually all might go wrong
and thus be lost. In nature it has, for instance,
been observed that eagles might initially succeed
in protecting their territories, which in turn
might lead them to go further with their expan-
sion of said territories. Eventually, however,
www
www.europeanbusinessreview.com
opeanbusinessrevi .c 13
13
this increasing confidence might then tend to
lead to the death of these eagles - they are more
easily becoming prey to other animals. Over-
confidence seemed to have a tragic consequence!
In business we see this perhaps most clearly in
cases where entrepreneurs might take on addi-
tional debt to be able to expand even faster. From
such over-confidence the break-even point may
become out of control in cases of crises. Interest
payments and rents are indeed coming due!
SOME IMPLICATIONS FOR ACTORS
Let us now discuss four implications from all
of this, which perhaps might impact business
leaders particularly directly:
Now the global consulting firm might be located
in one site, “the global meeting place”, as modern
communication opens up for projects that can be
run from anywhere.
14 The European Business Review November - December 2020
Business executives
It is now feasible to run a business operation
more or less as a network, i.e. without having
large groups of executives co-located in corpo-
rate headquarters or divisional offices. Virtual
communication allows for faster execution and
better follow-up. There will be less traveling,
and also considerable cost savings! There will be
a premium on those executives who are able to
work well in such virtual settings. The age-old
emphasis on years of job experience is likely to
become less critical. What matters now is for
executives to be comfortable with this new way
of working.
Business schools
We have already briefly touched on this, in the
sense that computer-assisted self-learning may
now be a reality, which then, in turn, might
open up for more discussion-oriented workshops
regarding cutting-edge dilemmas. The professors’
roles are changing: more listening, more synthesis,
two-way communication. The student’s role is
changing too, now being able to both work in his/
her job and study at the same time, none the least
due to the added flexibility of learning processes
that now have become a reality. The traditional
auditorium may also be gone. Now, sitting around
round tables in flat rooms may represent the new
learning reality, allowing for better interaction.
Even the traditional black board may be gone.
Now paper postings on the walls may be it, then
to be photographed by the participant with their
mobile phones for then to be entered directly into
their computers.
Clearly, the curriculum shall be changing too.
Fields such as statistics, marketing and finance are
now in rapid development, driven by the three
mega-trends just discussed. They are becoming
relevant and interesting to study, no longer boring!
Consultancies
Traditionally, we have seen leading consultants
being located in specific markets. Global firms,
such as McKinsey or BCG for instance, are
located in a multiplicity of cities, world-wide.
This might be quite analogous to the location
of traditional cement makers, i.e. in the local
markets! Now, however, the global consulting
firm might be located in
one site, “the global meeting
place”, as modern commu-
nication opens up for projects
that can be run from anywhere.
There is no longer a need to be
located locally, on the contrary, a
global location, in one site, might open
up for more powerful cultural understanding,
allowing inspirations from all over the world to
come together in one given office location. A
“global meeting place”.
Management practice providers
We see the emergence of global providers such
as Bloomberg (TV), The Economist (News),
and others. Specialist , data focusing experts are
emerging in different areas, all with global focus
(Marsoft – Shipping Markets). We see that these
providers are now able to entice their customers
to subscribe, rather than outright purchase. The
so-called subscription economy is taking over
(Kellman Baxter). We might expect to see more
of this in the future.
CONCLUSIONS
We have seen that fundamental trends in
technology and scientific insights may have
profound implications for the expansion of the
field of management. We have highlighted three
such areas of innovations, namely advances in
computing / communication, large data anal-
ysis and enhanced insights regarding behavioral
science. And, we have seen profound conse-
quences from these developments when it comes
to agents and processes.
Pe rh aps t he mos t
profound change is the
change to a so-called subscrip-
tion economy, which takes us
away from traditional producing!
Access to a good or service is no
longer dependent on us actually owning.
Rather, it is now a matter of subscribing.
Perhaps a key underlying challenge for busi-
ness shall be that they shall have to break with
these traditional working modes to be able to
address the issues raised in this paper. This may
be particularly hard for tradition-bound family
Perhaps the businesses and idiosyncrasy-dominated private
most profound investors.
change is the References
change to • Christensen, C.M. (1997), The Innovator’s Dilemma,
a so-called Harvard Business Review Press.
• Kahneman, D. (2011), Thinking Fast and Slow, Farrer,
subscription Strauss and Giroux.
economy, • Kellman Baxter, R. (2015), The Membership Economy,
McGraw Hill.
which takes • Lorange, P. (2019), Adaption and Flexibility in the
us away from Family Firm: A Brief History of S. Ugelstad Invest,
Smøyg.
traditional • Lorange, P. (2019), The Business School of the Future,
producing! Cambridge University Press.
• Lorange, P. & Rembiszewski, J. (2014), From Great to
Gone, Gower.
• Marmara, P. (2017), Cloud Computing and Route to
Market, Global Praxis.
• O’Neil, C. (2017), Weapons of Math Destruction,
Penguin Books.
• Ramge, T. & Mayer-Schonberger, V. (2018),
Reinventing Capitalism in the Age of Big Data,
Dow-Jones – Irwin.
• Schweidel, D.A. (2014), Profiting from the Data
Economy, McGraw-Hill.
• Wilson, D. (2013), Presentation at EFMD’s Annual
Conference, Brussels.

About the Author

Dr.Dr.hc. (mult) PETER LORANGE, Chairman, Lorange Network, Emeritus President IMD
(Lausanne). After having sold his shipping company in 2006, Peter has been regarded as one of the
world’s foremost business school academics, holding the position of President at IMD, Lausanne for
15 years, as well as several positions on shipping company boards. His entrepreneurial journey spans
across key areas such as education, shipping, investments, and pre-dominantly Family Businesses.
Peter founded the Lorange Network, a digital learning and networking platform, in 2017. Peter is
Norwegian, residing in Küssnacht am Rigi, Switzerland.

www.europeanbusinessreview.com 15
 WHY ARE SOME FIRMS BECOMING
MORE SUCCESSFUL DURING THE
COVID-19 PANDEMIC?
The COVID-19 pandemic has led to a world-
wide recession of immense proportions. Many
companies are closing down, either for good
or temporarily. The firms affected are largely
those who were heavily dependent on the
“old” way of doing business, with the phys-
ical presence of workers, as well as interaction
between other groups, such as suppliers or
clients. Examples of companies that seem to
be particularly hard hit are firms in the trans-
portation sector (airlines, cruise lines, etc.),
hospitality (restaurants, bars, hotels), health
studios, and manufacturing firms where
social distancing is more difficult to organise
(assembly plant types of business, including
automotive, meat-packing, etc.).
However, there are some winners and, perhaps
unexpectedly, we see that the advent of the
COVID-19 pandemic has led to extraordinary
16 The European Business Review November - December 2020
economic benefits for some, including indi-
vidual investors and corporations.
Statistics, primarily from the US, tell us that
the relatively few “super-rich” have become
significantly relatively richer compared to
the rest of us, who tend to be more directly
affected by the adverse economic fallout from
the pandemic.
When it comes to the corporate sector, too,
we see a similar phenomenon: some firms seem
to be doing exceptionally well these days. Why?
In the rest of this note, we discuss this
phenomenon. Let me hasten to add that
my findings are not founded on systematic
research, but rather on observations that I
have made, as well as significantly based on
my experiences with the various firms that my
investment company, S. Ugelstad Invest (SUI),
has invested in.
B
efore going further, I should point out
an essential difference, learnt from
the public sector. In some countries,
notably Vietnam, there have been signifi-
cant additional investments in the public
health system. This seems to have made this
sector stronger, more able to cope with the
COVID-19 pandemic. In other countries,
notably the UK, there seems to be relatively
less investment in the country’s public health
sector, seemingly leading to a less agile public
health system when it comes to dealing with
the pandemic (CNN). Perhaps we might learn
from this when considering how firms cope
with the emerging COVID-19 challenge;
more direct investments may be key!
Going virtual right from the start
A crucial factor seems to be to what extent a
given business has been conceived of or organ-
ised beforehand as embracing virtuality, and
whether its business model is fundamentally
based on virtuality.
It seems to be the case that firms that have
been built up with a more conventional busi-
ness model, more “physical”, may often have a
handicap when it comes to transitioning to more
virtuality, or to a new virtuality. Some may not
actually not be capable of making an effective
switch at all. Many are burdened by a dual
cultural focus, physical and virtual, often making
the reorientation to a stronger focus on virtual
harder and significantly more time-consuming.
In summary, it seems safe to conclude that
those firms that start out with a virtual business
model tend to be more likely to succeed.
In some companies, perhaps particularly typically
many so-called high-tech firms, a particular
technology may be quite unique for a given
company, allowing this firm to expand relatively
freely, even within a COVID-19 infected space.
Ability to build on relevant previous experience
Tony Robbins is traditionally world-renowned
for organising and implementing large physical
events, with sizeable crowds of attendees gath-
ering in relatively crammed conditions. With
the advent of COVID-19, and with the require-
ment to practise social distancing and to wear
facemasks, he seems to have been successful
in developing a virtual meeting place concept,
drawing on what he knew to be critical success
factors from before. We give examples of this in
our discussion of Case Study A, later.
Ability to take advantage of proprietary
know-how
In some companies, perhaps particularly typi-
cally many so-called high-tech firms, there may
be a so-called “monopoly factor” at work; a
particular technology may be quite unique for a
given company, allowing this firm to expand rela-
tively freely, even within a COVID-19 infected
space. Companies such as Apple or Amazon may
have a unique ability to leverage their proprietary
technologies. Big tech firms thus tend to grow
and show bigger profits! This is also reflected
in many stock markets, with significant value
enhancement among high-tech firms.
The CEO
It seems to be a broadly shared dictum that
the person at the top should ideally be a good
“listener” and be able to adapt relatively quickly
www.europeanbusinessreview.com 17
to what the customers say. However, this prop- cost management. To be in such a good position
osition is based on the realities of the past, i.e. when it comes to establishing a robust break-
before COVID-19. The successful even point is of course vital.
Today’s consumer is perhaps not necessarily CEO today - Negative: With such excessive cash levels, it
as clear when it comes to signalling his or her seems clear that the firm might be able to grow
preferences, except perhaps when it comes to
seems to be an faster and further, but that this potential is not
a strong increase in the focus on safety; virtu- “in-between” being pursued. Is the CEO too conservative? Is
ality is preferred. Beyond this, however, it is type. They the board seeing potential opportunity losses?
perhaps possible to detect or suppose other clearly need Are boards becoming too risk-averse?
emerging/new customer preferences. To cope
successfully in this new context, a successful to be adaptive What is needed?
CEO must perhaps be relatively more stub- and able to What seems to be critical in instances of such
born, even slightly arrogant, when it comes react with an accumulation of cash in today’s COVID-19
to believing in their own vision, ready to stay pandemic context is a clear growth plan:
firm in their beliefs, leadership and company
speed to new - Which are relevant areas to expand one’s busi-
purpose. Hence, the successful CEO today realities. ness through internal means?
seems to be an “in-between” type. They clearly - Then, with a strong growth trajectory established,
need to be adaptive and able to react with what might be good take-over opportunities?
speed to new realities. A growth plan, in this context, is thus very
much a matter of “dressing up” the firm for
Growth, excessive cash amounts in the bank more growth, and thereby being able to make
During the COVID-19 era, most firms have acquisitions to enhance the growth further. In
typically been able to generate a certain amount the end, a sale or an IPO might eventually be
of free liquidity from their operations. One on the cards.
might question whether this is typical, keeping
in mind that most firms tend to experience
demand. And this has commonly been
channelled into new investments
and/or R&D to stimulate further
growth. Alternatively, there may
have been dividend payouts to
the owners. In today’s new reality,
there tends to be a much lower
propensity to invest or to
engage in R&D, often with a
potential payoff relatively far
into the future. Dividends
tend to be trimmed down
or entirely shut off, too. The
result is that many compa-
nies find their cash reserves
increasing significantly.
This build-up of cash
seems to be partly posi-
tive, partly negative.
- Positive: This might
indicate that the firm’s
management is in control,
specifically when it comes to

18 The European Business Review November - December 2020

We have identified what we see as four issues
closely associated with the creation of economic
value for a firm during the COVID-19 pandemic.
Let us now attempt to illustrate this through
four case studies, all from SUI’s portfolio of
firms. All names are, of course, disguised.
CASE STUDIES
A. The health supplement company
This company, based in one of Europe’s
largest markets, was a leading distrib-
utor of important health supplements
in this sector, largely selling through the many
independent doctors in this market.
An initial effort to expand into a specific region of
another European country, with traditional whole-
salers and distributors, and where the language was
the same as in the company’s home base, failed.
Management seemed to miss the fact that there
were many differences between this market and the
home market that had not been appreciated, such as
national loyalties among the doctors, already close
ties between the various entities in the supply chain,
etc. Language similarity was not enough!
Subsequent efforts to expand into other coun-
tries by focusing entirely on virtual marketing
and distribution seems to be succeeding. The
fundamental link to the independent networks of
doctors was behind it all. This virtual approach
was even launched in the market which had
initially failed and was successful!
Discussion:
- The success of the business model in the home
market, to build on the independent doctors,
was replicated in the new markets. Learning
from experience seemed to work!
- The virtual reality was easily implemented.
There was no strong traditional business model
to be dealt with.
- The CEO was clear when it came to his vision:
grow, based on the successful recipe so far! At
the same time, he took fast action to ameliorate
directions that did not work out.
- Rapid growth was pursued. All available cash
was used for this.
- The end point has not been seen yet but might
involve an eventual sale of the firm.
B. The cosmetics firm
Part of this company’s strategy was to
operate, as well as franchise out, beauty
salons that focused on hair care and nail
treatments, as well as skin care. The company
was also engaged in a virtual business – namely
selling and distributing beauty products, and
services to individuals, as well as to the many
franchise-taking beauty clinics. The company
failed. Why?
The success of - The reality of this complex business model
the business turned out to be close to unmanageable. And
some of its culture was grounded in the “old”
model in the economy (beauty salons), while the rest was
home market, virtual (distance-based sales of cosmetics).
to build on the - The CEO was unable to manage this
independent complexity, exasperated by the fact that several
of the firm’s senior managers were perhaps not
doctors, was on top of their jobs.
replicated in the - The cash-flow burn rate was not under control.
new markets. - Strategy means choice. Instead, the CEO allowed
for even more complexity, such as entering new
Learning from markets, without closing down some of the activ-
experience ities that did not work. The CEO did not seem to
seemed to work! learn quickly enough, or to act in time!
C. The food company
This company was initially launched to
focus specifically on a product named after
a famous classical music composer. To stay
afloat economically, the company then
expanded into various food lines, and into
several countries, including the Americas,
as well as Asia. Then, the company “stumbled
onto” the market for consumers with vegan
eating habits.
The company is struggling economically, being
neither a success nor a total failure, and is now
trying to separate the two different businesses.
Discussion:
- To build on the company’s initial know-how
concerning a given specialty food seems to
work. The vegan food sector line appears to
be growing!
- To expand the product line, as well as geographical
presence, without a clear “strategy means choice”
approach seems to have been less successful.
- The CEO appears to have been more opportun-
istic, active in many markets, rather than focused.
www.europeanbusinessreview.com 19
 D. The discount company
The company was making good
progress when it came to the develop-
ment of its app. However, it turned out
that the customers (consumer-based
companies) were not ready to sign up for the
company’s discount programme, choosing
instead to proceed to offer their products as they
had been doing before. The end result was that
the company ran out of cash, and liquidated.
Discussion:
- The customers seem to have decided to follow
a more conventional way of retailing in the face
of COVID-19. They do not seem to have been
ready for the company’s products. What is the
challenge here?
- The CEO kept on spending to develop the
company’s app, instead of making progress
with its commercial drive to ensure revenue.
He seemed to react too late to what became a
liquidity crisis and was thus not able to sell his
company to one of its competitors. To sell, with
or without COVID-19, is hard, often impos-
sible, when in a crisis!
Conclusions
We have identified four cases of factors that
seem to be particularly critical when it comes
Companies to enabling a firm’s success in the realm of
need to listen COVID-19. And our four case studies seem to
add credibility to this.
more and In summary, companies need to listen
better to their more and better to their current and new
current and new customers, think creatively, maintain
customers, think leadership confidence and move quickly.
COVID-19 has been an accelerator of many
creatively, main- business challenges and dilemmas, in some
tain leadership cases even an instigator of problems or crises,
confidence and but it has also offered incredible opportuni-
ties to those rare firms who had (pre)-invested
move quickly. in digitisation, who were and are close to
their customers and listening to the data, and
who are agile enough to adapt constantly to
changing paradigms!
References:
CNN, 17th October 2020, Christiane Amanpour

About the Author

Peter Lorange, after having sold his shipping company in 2006, has been a successful entrepreneur and
owner of a highly diversified family office. He has been regarded as one of the world’s foremost business
school academics, holding the position of President at IMD, Lausanne for 15 years, as well as several positions
on shipping company boards. His entrepreneurial journey spans across key areas such as education, shipping,
investments, and pre-dominantly Family Businesses. Peter founded the Lorange Network, a digital learning
and networking platform, in 2017. Peter is Norwegian, residing in Küssnacht am Rigi, Switzerland.

20 The European Business Review November - December 2020

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NEW THINKING
AT MIGROLINO STEMMING
FROM THE COVID-19 CHALLENGE
BY MARKUS LAENZLINGER AND PETER LORANGE
T
he present crisis imposed on us by the COVID-19 pandemic is
likely to have a lasting impact on the strategies of retail businesses,
even after this threat is over. We are likely to see more purchasing
online, more home delivery, and more social distancing. The emerging
digital technology revolution also seems key.
In this article, we shall discuss what seem to be several major shifts in
retail firms’ strategies, using Swiss-based retail firm Migrolino as an
example. This company, wholly owned by Switzerland’s largest retailer,
the Migros group, consists of around 330 retail outlets, most of which
are co-located with petrol stations. The typical Migrolino store is thus
relatively small and caters primarily to the convenience-driven shop-
ping needs of customers.
It should be noted that Migrolino was only one of two subsidiaries
of the Migros group which experienced ultra-high growth in the midst
of the COVID-19 threat (the other was a mail order business). Social
distancing was a vital element!
The research methodology adopted in this note can be charac-
terised as pre-paradigmatic (Glaser and Strauss), i.e. intended to
frame key current dilemmas in such terms that they might then,
in follow-up research, be suitable for more conventional empirical
testing. The resource of large sets of data, combined with powerful
computer-based algorithms, has been made use of in our research
(Marmara; Schweidel).
22 The European Business Review November - December 2020
Denis Linine / Shutterstock.com
Migrolino – a brief history
The senior leadership team at Migrolino saw it
as a vital mission to initiate changes, to meet
emerging customer demands (social distancing,
for example) and to change the purchasing expe-
rience in stores, with more relevant product
offerings and a better store layout. At the same
time, adhering to social distancing was crucial.
With help from McKinsey & Co., a set of four
archetype stores were identified. It should
be noted that the general manager (Markus
Laenzlinger) did not foresee a significant demise
of the future role of traditional filling stations,
except for a move to relatively more methane gas
filling, as well as more electric recharging.
So, who are the customers? There seem to be
four major customer groups:
1 Grocery shoppers, who demand, in particular,
a complete assortment of ready-to-consume
goods, as well as convenience.
2 Lunch/snack shoppers, who perhaps particu-
larly appreciate “ready” meals, such as ultra-fresh/
ready-to-eat products, snacks, yogurts or chocolate.
 3 Commuters and night “crawlers”, who
perhaps, above all, look for takeaway coffee,
alcoholic drinks and tobacco.
4 Fresh-goods buyers, who might also be
Markus inclined to go for typically small impulse shop-
Laenzlinger ping, including gifts (such as flowers).
spent much of
New product concepts
his time talking
with customers, Innovations have been perhaps the major
in Migrolino driver of growth for Migrolino, indeed
“inspired” by the new COVID-19 reality:
stores as well
as in those of Inspiration for customers and their competi-
competitors. tion. As an example, Markus Laenzlinger spent
much of his time talking with customers, in
Migrolino stores as well as in those of competi-
tors. The result was a carefully delineated pricing
strategy, so that customers with different means
might find products that fitted their particular
economic reality. To adhere to social distancing
was, however, a common factor for all four types
of stores.
Inspiration from outside organisations, such
as The Retailers’ Forum, as well as US-based
Service Marketeers. Markus Laenzlinger
claimed that he got a lot of useful new ideas
from his active participation in both of these
organisations. COVID-19 was a reality in
many parts of the world, and he could learn by
“cherry-picking”.
One such innovation was the so-called
“Product Picker”, which picked an assortment
of pre-specified products for any given customer.
This concept was tried out in one store, but was
considered to be inapplicable more broadly, in
that the concept did not allow for sufficient
www.europeanbusinessreview.com 23
tailoring to the specific preferences of the various
customer groups in Migrolino’s many stores,
even though it appealed to many customers who
adhered to distance shopping.
McKinsey & Co. spearheaded the delinea-
tion of Migrolino’s customer base by analysing
masses of customer data from the stores’ cash
registers, by applying large-data analysis/cloud
computing, and came up with the four store
archetypes already mentioned.
Research reported on by Lorange and
Rembiszewski indicates that innovations are
more effective if they are also communicated
well to the target customers (Lorange and
Rembiszewski). And, while large, disruptive
24 The European Business Review November - December 2020
innovations might be relatively rare, Lorange and
Rembiszewski found that so-called incremental
innovations might, in effect, add up so as to
become quite similar to disruptive innovations.
The customer in the era of COVID-19
For today’s customer, the concepts of safety and
convenience seem key. Most of the Migrolino
stores are thus located near, or form part of,
petrol stations. So customers can also shop when
they need to put petrol in their cars (there are no
large crowds here!). What might be important
for the modern customer, then? Some crucial
factors might be: safety/social distancing, quick/
 Gaid Kornsilapa / Shutterstock.com
The typical
modern custo-
mer might look
for safety and
high-quality
products, rather
than requiring
a lot of variety easy shopping, healthy food, convenient opening
in offerings. hours, good hygiene, superb location/accessibility,
friendly staff, ease of orienting oneself in stores,
And he or she and perhaps also relaxation zones within the stores.
is relatively The typical modern customer might look for safety
insensitive and high-quality products, rather than requiring a
when it comes lot of variety in offerings. And he or she is rela-
tively insensitive when it comes to price.
to price. They are, however, positively driven by what
they might feel to be innovation and the “modern,
safe profile” of Migrolino. The physical location
is key. In line with this, Migrolino hired a
US-based specialist to work on its store
concept, to develop the so-called “go
further” store. This involved self-ser-
vice checkouts, easier payment
solutions and strong, ultra-fresh
assortments of goods. New packing
designs, above all for the ultra-fresh
world-today-news.com
products, such as sandwiches, salads,
smoothies and ready-to-eat products,
would also be developed. And safety is,
of course, a vital factor when it comes to
all of this.
Communication is particularly crucial
in the COVID-19 era
Communication with customers has so far
largely taken place through the physical layout
of the stores, especially with prominently
located disinfection bottles, floor markings,
posters, etc., but also through conventional
advertising (which was, however, limited by the
relatively small budget for this at Migrolino). As
noted, the advertising was mostly in-store, such
as posters, rack advertising, etc. A local radio
station was also used. Migrolino’s top manage-
ment felt that word-of-mouth advertising would
be a definite strength, above all given the close
link with frequently visited filling stations.
Migrolino’s top management also developed
an innovative new system for communication
with its customers, with special
focus on COVID-19-related
issues. This system was to
be tailor-made to each
of the four types of
stores and would make
broad use of the Web.
For instance, when
approaching a “ready-
to-eat” store site, there
would be an automatic
alert that this given customer
would be coming!
A new store concept
During several months in 2020, since the
outbreak of COVID-19, Migrolino had devel-
oped a novel ultra-compact retail concept, with a
“corner shop” character, i.e. very small. This ultra-
small version of the Migrolino store concept, with
www.europeanbusinessreview.com 25
 retail area from 30m2 to 80m2, was rolled out in
various urban locations, starting in the fourth
quarter of 2020. Small urban locations as well as
the smallest gasoline filling stations were identi-
fied for this. So far the experience with this new
store concept has been positive.
Competition
The main competitor was Pronto, owned by
Switzerland’s second-largest retailer, COOP.
Valora, another convenience-store chain, was
also a competitor. In addition, conven-
tional retailers were also a source of
competition, as well as butchers,
bakers, etc., and other filling-sta-
tion stores, too!
How would these differ
from Migrolino? Pronto had,
in the past, benefited a lot
from being profiled as a food
company, with a clean, “white”
appearance. In contrast, most fill-
ing-station-based stores were seen as
“oily”, with traditionally a heavy domi-
nance of car accessories (batteries, motor oils,
www.lematin.ch
window cleaning fluids, wiper blades, etc.), so
that, to an extent, they were seen as somewhat
less clean, or even less safe! However, Migrolino
followed suit, by developing more of a “clean”
food profile! Its strong emphasis on safety and
fresh products has contributed a lot to this.
One might ask: “Is Migrolino doing things
better than the competition?” Migrolino needs to
be completely focused on its type of retail business
and have total control over all elements of its own
organisation in order to do an effective job in this
regard and, above all, to improve safety measures.
Migrolino also benefited from its parent, Migros’,
strong position in the market when it came to
both its safety image and good quality!
Are there exceptional opportunities
these days?
What might be seen as further opportunities?
To build on the advantage regarding health and
safety in its relatively small stores would be crucial.
Then another key would be to further evolve and
26 The European Business Review November - December 2020
broaden the store concept. In Switzerland, this
might above all imply the introduction of more
ultra-fresh products, including freshly made
gastro-convenience products. Safe wholesale
activities might be a second area of opportunity.
Third, perhaps a convenience house or multi-
brand store-within-a-store type of outlet might
evolve (such as McDonald’s or Burger King), as
well as motoring supplies (wipers, batteries, oils),
tyre-exchange centres and classic petrol outlets.
It should be pointed out that, traditionally,
Migros filling stations (Migrol) consisted of an
outlet for petrol and a store. The parent Migros
organisation then split these two functions and
moved the stores into Migrolino, and thus also
created more “pure” petrol filling stations. The
result was not only added focus, but significantly
added returns in both the filling-station stores
and in the retail stores! And this also made it
easier to implement safety-related measures.
More customer traffic was an essential
element. The more effective the Migrolino stores
were, the better also for Migros. And modern
Migrol filling stations would benefit Migrolino
too! The strategies of the two sister divisions
were becoming increasingly interdependent.
COVID-19-related safety measures seemed to
be key to this.
Conclusions
We have discussed how new innovations,
particularly those related to COVID-19 safety,
have propelled the emergence of new types of
retail purchasing concepts, driven by safety and
convenience. We have seen that the concept
behind Migrolino might represent a full-fledged,
modern, freestanding retail approach of its own,
indeed built on several smaller innovations, and
thus, in total, representing disruptions relative
to traditional retail options (Christensen). The
concept of the large supermarket and shop-
ping-market stores, which in the past drove out
many of the traditional, relatively small retail
stores, may now itself be under pressure, not
least because of safety-related issues such as the
inability to guarantee social distancing. Until
recently, these large stores, typically parts of large
chains (either owned or franchised) would have
 Sorbis / Shutterstock.com

To build on the both a cost advantage and a diversified product

advantage regarding portfolio advantage, but that was before COVID-
19. Now, the concept of safety and convenience
health and safety
associated with the smaller Migrolino-type stores
in its relatively may become the new winners.
small stores would Will this be sustained? We are already seeing
be crucial. Then home-delivery services for several categories,
another key would above all fresh products, made available through
the rise of the modern internet. Shopping
be to further evolve online is becoming more and more key – witness
and broaden the Amazon’s food business! But customers do need
store concept. to purchase petrol. And this could mean that
the Migrolino-type concept might continue to
grow and be viable too. Only time will tell!
REFERENCES
• Christensen, C.M. (2001), The Innovator’s Dilemma:
Where new Technology Causes Great Firms to Fail,
Harvard Business School Press.
• Glaser, B. and Strauss, A. (1967), The Discovery of
Grounded Theory, Weisenfeld & Nicholson
• Gupta, S. (2015), Big Deal or Big Hope? European
Business Review, May-June.
• Lorange, P. and Rembiszewski, J. 2014, From Great to
Gone, Gower
• Marmara, P. (2017), Cloud Computing and Routes to
Market, GlobalPraxis
• Schweidel, D.A. (2014), Profiting from the Data
Economy, Prentice Hall

Peter Lorange, after having sold his shipping company in 2006, has been a successful entrepreneur and
owner of a highly diversified family office. He has been regarded as one of the world’s foremost business
school academics, holding the position of President at IMD, Lausanne for 15 years, as well as several posi-
tions on shipping company boards. His entrepreneurial journey spans across key areas such as education,
shipping, investments, and pre-dominantly Family Businesses. Peter founded the Lorange Network, a
digital learning and networking platform, in 2017. Peter is Norwegian, residing in Küssnacht am Rigi,
Switzerland.

Since 2009, Markus A. Laenzlinger is the Managing Director of migrolino AG, a subsidiary of the
Federation of Migros Cooperatives in Zurich. migrolino AG is a wholly owned subsidiary company
of the Federation of Migros Cooperatives, which has been operating convenience stores under the
“migrolino” brand since 2009. It has in total 326 sites across the nation (as per October 2020).
Mr. Laenzlinger has a Dual MBA from GSBA Zurich/Switzerland and State University New York,
NY, USA, and has completed the Executive MBA from Lorange Institute of Business, Horgen/
Switzerland in 2009.

www.europeanbusinessreview.com 27
 WHAT INVESTMENT CRITERIA ARE
APPROPRIATE TODAY,
in Light of the Coronavirus Threat?
BY PETER LORANGE

28 The European Business Review November - December 2020

INTRODUCTION
In this article, I discuss how the relative impor-
tance of various investment criteria seems to have
shifted as a consequence of the current coronavirus
situation. Specifically, I highlight criteria that
appear to have become relatively more important,
as well as others that apparently are now relatively
less significant.
I shall be drawing heavily on my own experi-
ences from my investment firm, S. Ugelstad Invest
AS (SUI), as well as on discussions with several
members of the Lorange Network. A short note
before we begin: while the various factors I’ll be
discussing are presented in a dichotomised manner,
the reality is that they are typically overlapping and,
further, any one investor will tend to give different
weights to each of these factors from those that
other investors such as myself might do.
So, in the end, what will things be like in a
post-corona world? Are we going to go back to the
pre-corona criteria, or are we experiencing perma-
nent shifts?
Note, too, that all the investment criteria I’ll be
talking about, except for factor 1, in essence repre-
sent “check controls” – are these factors sufficiently
relevant now or not? As such, the criteria represent
qualitative hurdles to satisfy a project’s “goodness”
(or lack of it), complementing the more conditional
discounted cash-flow analysis undertaken under
item 1 below. All the criteria I’ll be discussing in
section 2, though, might fall into this category,
representing additional “go” or “no-go” checks to
complement the fundamental discounted cash flow
analysis discussed in section 1.
I would like to make one more preliminary
clarification, before we go into the specific argu-
ments of this article. Warren Buffett, the famous
US-based value investor, states that when he
buys shares in various companies, he assesses the
attractiveness of such investments as if he were
considering acquiring the entire firm; in other
words, his investment criteria are the same as those
that the leaders of this firm follow in their corpo-
rate strategy. I agree with Buffett here; investment
criteria for buying shares or corporations (or stakes
in such firms) are essentially the same.
Keeping these caveats in mind, let us now move
on to discuss the two sets of investment criteria –
those which seem to be becoming relatively more
important, as well as those with seemingly less rela-
tive importance.
SET 1: SIX INVESTMENT CRITERIA THAT SEEM TO BE
BECOMING RELATIVELY MORE IMPORTANT, IN LIGHT
OF THE NEW CORONAVIRUS REALITY
1. Go for relatively predictable cash flows in the
investment projects being considered. “Cash
is king!” This often implies a reasonable shift
towards being relatively more short-term, in the
sense that shorter-term cash flow criteria are typi-
cally those that tend to be more predictable when
things are “normal”. Moreover, cyclical, as well as
longer-term growth projects, should be avoided
now (see more about this in paragraph 5 below).
As a particular complication, this may also tend
to stress the importance of who is the individual
that is expected to deliver this cash flow – in
other words, more of a “me, me, me” emphasis,
in contrast to the “we, we, we” team thinking that
up to now has been so fashionable. My sense is
that this potential change is positive.
2. Disruptive technology. We can expect that
certain types of technologies will become rela-
tively more important, particularly those that
have to do with digitalisation, i.e. those that
enhance virtuality. More specifically, how can
new technology help ordinary people today?
Technological advances increasingly allow for a
wide array of value-creation, above all when it
comes to “distance”, such as virtual shopping,
but also for so-called distance learning, remote
conferencing and networking, working from
home, and so on. This new wave of technol-
ogy-driven advances, to make the new world
of operating virtually more of a reality today, is
however quite broad. It incorporates the emer-
gence of new cloud-based approaches to “virtual
routes to market”, allowing for new business
approaches to assist other firms in becoming
more virtual, etc.
This new wave of technology-driven
advances, to make the new world of
operating virtually more of a reality
today, is however quite broad.
1
I am thankful to Karin Mugnaini, Anders Endreson and to Henrik Mikkelsen
for valuable comments. www.europeanbusinessreview.com 29
 There are also going to be significant tech-
nological advances in other areas, however,
such as the development of more cost-effi-
cient batteries (power storage, cars with little
or no emissions, etc.), filter technologies, more
efficient combustion, and so on, supporting
ongoing advances in EGS (environment,
government, society), also to be discussed in
more detail under paragraph 6 below.
In general, new technology is going to be
used to a much greater degree than before,
and also much faster. It will be crucial to
have the ability to understand better how
new technology might open up possibilities
for new business, and to take the time to
analyse this. Finally, not to be forgotten is
how technologies may work together in new
ways with traditional methods or systems,
how hybrid systems may be created, and how
unique combinations of ultra-tech solutions
may be merged, added to or streamlined with
the older or more standard systems. In other
words, it may not always be only about the
new, but about how new technologies can be
combined with what worked well beforehand
to make things better and/or faster.
3. Virtual business focus. Businesses that
can be conducted virtually are now to be
preferred. I have already touched upon
aspects of this under section 2, but I high-
light some other aspects here. To respect
social distancing is, of course, a part of this
– in other words, to avoid close face-to-face
interaction. In retailing, a focus on more
basic products that may be categorised as
generic (for example, potatoes or apples)
and/or being associated with a trusted,
well-established brand (for example, Nestlé)
would be central here. Trust and simplicity
are key! Luxury goods, on the other hand,
might be more difficult to promote this
way; physical “inspection” in stores might
be needed, not least in order to trigger more
of the impulse buying generally associated
with non-essential goods. In this case, the
typical customer will not be able to rely on
established brands – at least not to the same
extent – or to draw on what he or she might
understand to be generic goods.
30 The European Business Review November - December 2020
In general, we may safely conclude that
traditional shopping, where products are
researched, seen, touched and acquired
in-store, has declined and will continue to do
so. The new generation is so used to shopping
on the internet from beginning to end, with
post-purchase servicing, further acquisitions,
CRM, communications, etc. all internet-based,
whether via smartphone or PC.
4. Value chains. Can one rely on this? Are
subcontractors able to deliver? (Many smaller
subcontractors may simply not be able to
sustain a long-drawn-out coronavirus!). To
have a degree of direct control over the key
elements of one’s value chain seems critical.
Reliability is at the centre. This implies
that one’s value chain could evolve into
something more local. Reliability might
be emphasised more over cost-efficiency.
Go for relatively It follows that we may see a threat to the
predictable growth of world trade. Specifically, for the
US, to rely on pharmaceutical compounds
cash flows in produced in China, for instance, rather than
the investment in the US itself, might now become less of an
option. It costs more to go more local, but
projects being reliability and control increase! There is less
considered. of a risk of political blackmail.
5. Our core values are changing. People are
becoming more concerned, worried and/or
scared, and will be prepared to invest more
in health, medicine and protective measures.
Moreover, people now increasingly prefer to
stay at home, and invest in business areas that
might contribute to the upgrading of their
houses (decoration, home improvements,
etc.). Real estate in remote, rural areas will
become even more attractive. People are
prepared to invest in ways to both protect and
isolate themselves.
6. Our ways of living, travelling and working
are changing. This trend opens up new
New technology is going to be used to a much greater
degree than before, and also much faster. It will be
crucial to have the ability to understand better how
new technology might open up possibilities for new
business, and to take the time to analyse this.
Categorising growth focus as possibly less important during corona times is based
on the consideration of how we wish to define “growth” in the focus. What was
meant by growth before may be different today or tomorrow.

business opportunities for many. Investing in Of course, categorising growth focus as

areas that might enhance our abilities to work possibly less important during corona times is
effectively from home, to invest in new modes of based on the consideration of how we wish to
remote conferencing, (Zoom, Skype, etc.) repre- define “growth” in the focus. What was meant
sent key opportunities. Areas that match these by growth before may be different today or
new ways of living, socialising and working have tomorrow. And thus, perhaps the word “focus”
the potential to be of great interest. here is also important. The question remains of
how significant growth can be now, but having
Let us now turn to a set of investment criteria a focus is timelessly crucial.
that might have become relatively less important, in 2. The environment. We are, of course, contin-
the new reality of coronavirus. As we shall see, here, uing to see a strong focus on the environment
too, there are at least four key areas. in public debates and in government circles. It
is interesting to observe, for instance, that air
SET 2: FOUR INVESTMENT CRITERIA THAT SEEM TO pollution in general became less severe during the
HAVE BECOME RELATIVELY LESS IMPORTANT, IN THE height of the coronavirus crisis, due to increased
FACE OF THE CORONAVIRUS REALITY. restrictions on travel. The problem, however, is
1. Growth focus. This needs to represent a key whether companies might be able to afford the
criterion during the pre-corona period. The expensive EGS (environmental/governmental/
“problem” with it, however, is that it might be societal) regulations imposed on them in the past.
difficult or impossible to come up with good After all, the requirement to survive may now be
cash flow estimates. Some growth companies the priority for many firms.
may indeed be in a non-profitable stage for long So-called “green-tech” thinking, as well as
periods of time (Tesla and Uber, for example). focus on the so-called “circular economy”, will
These types of investment are tending to look of course continue to be positive. Platforms to
relatively less attractive. support the circular economy will be attractive
Paradoxically, the “we, we, we” culture typi- – simplicity, enabling, sharing based systems
cally associated with long-term growth may
no longer be in vogue. Instead, as discussed in
section 1, the spotlight will now be on the indi-
vidual executive, preferring to “drive” short-term
results, and be accountable for them.
I would like to add one final note with regard
to perhaps, after all, pursuing some growth. There
are always opportunities to make acquisitions
or mergers, i.e. various forms of consolidation
among corporations. This is perhaps a way to
achieve growth in the context of today’s coro-
navirus reality. Members of the organisations
involved are also likely to be more flexible and
open-minded, less driven by conventional pres-
tige or culture-based conservatism. It may be
advantageous to look for such potential candidate
firms for corporate restructuring.

www.europeanbusinessreview.com 31
 and economies (for example, buying used clothes). And
utilising our natural resources better is always going to
be good. The question is whether these aims can now be
pursued with the same vigour as before. My sense is that
such changes tend to be expensive, and that investing in
these types of activities might not be all that attractive, at
least for now.
It remains an open question whether we will be able to
afford to return to the old EGS standards or not. These
clearly continue to be important, but how should they be
financed? Will there be more direct governmental subsi-
dies, including tax breaks, when it comes to pursuing
heavily EGS-driven investment projects?
3. Cyclicality. As already noted, here too we tend to face The world-famous value investor Warren Buffett, for
rather uncertain cash flows. And, it is typically hard to instance, sold all of his airline-based holdings, involving
put a value on such flows. There seems to be a clear trend four major US carriers. His reasoning was that it will take
to swing away from them. a long time, at least, before the social distancing negatives
It could be that an actor might have entered into a might be overcome for this type of business.
long-term contract with a given counterparty, where the
latter is facing cyclical pressures, and thereby might be CONCLUSIONS
tempted to go back on his contractual commitment. This brings us to the end of our discussion regarding how
In shipping, for instance, a charter company might project investment criteria may be reprioritised. But a crit-
be tempted to break a time agreement for this reason ical issue remains: what about opportunism by going “against
(higher freight income elsewhere!), leaving the charterer the stream”? Would there be opportunities to be had by
to cope with what may now have become a significantly being counter-intuitive? After all, most attractive investment
more expensive project. And/or it may be that the projects call for such uniqueness. Perhaps a more in-depth
charter company has simply become too economically analysis of the various factors discussed in this article might
weak to honour its commitment. be called for?
The core issue is, of course, that the underlying cash This is possibly the most important conclusion that
flow streams might be more uncertain than expected – i.e. might be drawn from the above, namely, to treat the set of
a situation to be avoided! identified investment criteria opportunistically, rather than
4. Lack of social distancing. Some businesses require rela- mechanically. Good projects come about this way! But, a
tively large “concentrated” gatherings of people. Social careful analysis of the various criteria is indeed key, in order
distancing regulations might easily be contravened. The to achieve this.
so-called “reopening” of economies is typically faced with
this dilemma: safeguard people’s health by keeping things
closed or stimulate economic activities by reopening. It
Peter Lorange, after having sold his shipping company
is, of course, not only beaches and street traffic that are
in 2006, has been a successful entrepreneur and owner
affected by this dilemma, but also several key business
of a highly diversified family office. He has been
areas, which have now become relatively less attractive
regarded as one of the world’s foremost business school
(retail stores, travel, hotels/restaurants/bars, concerts/
academics, holding the position of President at IMD,
sporting events/religious gatherings, and so on).
Lausanne for 15 years, as well as several positions on
shipping company boards. His entrepreneurial journey
The so-called “reopening” of economies is spans across key areas such as education, shipping,
investments, and pre-dominantly Family Businesses.
typically faced with this dilemma: safeguard Peter founded the Lorange Network, a digital learning
people’s health by keeping things closed or and networking platform, in 2017. Peter is Norwegian,
residing in Küssnacht am Rigi, Switzerland.
stimulate economic activities by reopening.

32 The European Business Review November - December 2020

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T
o undertake due diligence (“DD”)
when considering investing in
a new project is paramount.
However, in reality, to do this well can
often be harder than one imagines, due
both to the amount of time, energy
and money required to carry out full-
fledged DD, and also to the fact that
a project’s promoter typically tends to
set rather tight deadlines which, if not
adhered to, can lead to the loss of this
“great” opportunity!
Actually bringing together the two
sides, a project’s management and one
or more investors, is, in the end, what
dictates the project’s success. Giving
weight to relatively similar DD factors
34 The European Business Review November - December 2020
BY PETER LORANGE
from both sides is perhaps the most crit-
ical factor in making this happen. DD
congruence is key!
Finding a solid and comprehen-
sive approach to the execution of DD
can be a challenge. On the one hand,
there should be enough rigour for the
investor to feel reasonably confident
that he/she is not taking bigger risks
than necessary. On the other hand, a
realistic DD process should be relatively
speedy and smooth, and not require
excessive resources.
How might one cope with this
dilemma? Here is my own experi-
ence from S. Ugelstad Invest (SUI).
A caveat may be needed at this point,
before going further. Smaller, rela-
tively entrepreneurial organisations
like SUI may find some relevance in
what I am about to share. Speed is
very important, but it’s also necessary
to be relatively rigorous and not to
use resources excessively. After all, this
ability to move fast may be one of the
key advantages of small, non-traded
firms. More extensive DD processes
tend to be for larger, publicly traded
firms. Here, too, there often tends to
be a “political” dimension at work,
namely the “cost” for a hired executive
to have to take the responsibility, and
at times a particular investment might
not work out as hoped. For a smaller,
family-managed firm, this is typically less of
an issue, as roles often cross and/or are shared
amongst a tight group of executives, as in the
case of SUI.
My experience has left me with two sets of
factors which for me seem particularly important:
• The manager. What about the manager who
will be in charge of running the venture in
question? Who is he/she? Does he/she possess
the required skill sets, strategic and/or opera-
tional outlook, drive, etc. to do the job right?
• The market side. Is there a set of customers,
and is the value proposition that the venture
offers realistic when seen from the target
customer’s side?
Before discussing each of these two consid-
erations further, let us hasten to add that there
will of course be several other issues that may
be critically important, but nevertheless subordi-
nated to the above two. We shall briefly mention
several such factors later.
A realistic tively low costs, only planning to scale up
when success allows for this? Thus, is he/
due diligence she able to manage the burn rate in such
("DD") process a way that break-even might be reached
relatively soon? Growing too fast and/or
should be spreading oneself too thinly may hamper
relatively the business’s potential success.
v. Does he/she appear to be relatively flexible?
speedy and Trying to stick to unrealistic initial plans
smooth, and for too long may be disastrous. Does the
not require candidate show sufficient aptitude regarding
learning and revising?
excessive vi. Does he/she appear to be “honest”? This
resources. includes only asking for relatively modest
personal remuneration. And spending on
personal items is certainly out. As this may
be hard to assess upfront, one could at least
call for tight credit card practices. And is his/
her compensation modest?
vii.Is the apparent work ethic of this individual
acceptable or in line with the owner’s or
company standards? Any issues found in the
past, for instance, would count negatively.

Such an extensive set of factors is meant to

help the DD assessor to get an overall general
view of the manager in question. Does the
manager represent something attractive, some-
thing unique, an asset? The above should not

A. The Manager
I see a total of seven subgroups of factors here, all
to be raised with the promoter of a given project:
i. The manager�s track record. Has he/she been
successful before? Why? If he/she has been
involved in past failures, why? Is the manag-
er’s post-job experience relevant? And what
about his/her educational background?
ii. Is he/she able to inspire other people
(employees, customers, etc.)? In line with
this, is he/she a team player, not a super-ego
person (“we, we, we” versus “me, me, me”)?
iii. Does he/she have significant financial “skin
in the game”? In other words, has he/she
already invested, or committed, as much as
he/she can?
iv. Burn-rate discipline. Is he/she planning to
run the business in a “lean” manner, at rela-

www.europeanbusinessreview.com 35
be treated as a simple, mechanical checklist, however. In the
end, it is the assessor’s consolidated analysis that matters.
There is certainly a degree of subjectivity here, and the
assessor’s previous experience clearly matters. Nevertheless,
consideration of the above seven factors may at least give
some assurance of objectivity.
B. The Customer Base/Market Side
Here we pinpoint a set of five factors that we consider to be
of key importance:
i. Is there already a revenue stream, or is the proposed
project nothing more than a “good idea”, i.e. an early
start-up? Being able to document a specific cash flow
from existing customers is, of course, important!
ii. How robust is the order book? In my opinion, the lack
of an order book, at the extreme, is indeed particu-
larly negative. But also, are we talking about “promised
orders”, even wishful thinking by the manager, versus
firm orders? And what is the quality of these customers?
iii. What is the attractiveness of the proposition from a
customer’s viewpoint? It may make good sense to take
the time to actually discuss this with several customers.
iv. Are the liquidity reserves sufficient to operate for several
months? This does indeed have a great deal to do with
whether this particular project is built on a solid revenue
stream projection, and also on the manager’s ability to
manage the burn rate, as discussed in “A-iv”. Aiming
to grow too fast, and therefore spreading oneself too
thinly, is often deadly! (“Strategy means choice!”)
v. Are there any apparent threats potentially impacting the
expected order flow, such as:
• Technological developments?
• Competitor moves?
• Regulation?
Conversely, are there opportunities for scalability and/or to
leap on to a new technology (e.g. virtual)?
In the end, what matters is to develop an overall view here,
and not to treat the above as some sort of mechanical checklist.
36 The European Business Review November - December 2020
C. Other Factors That May Also Be Critical
I have come to believe that there are at least seven factors
in this category. This list is clearly not comprehensive,
however. Clearly, others may focus on alternative factors
in their DD analysis.
i. Is the business scalable and/or based on the latest tech-
nology? We have discussed this already under issue B-v,
but there is more. Are there other candidate firms that
might be acquired and/or combined with? Is there room
for relatively rapid international expansion, assuming
that one’s own product and/or service is already fully
developed? Is the technology grounded on IT and/or
virtuality?
ii. The injection of new capital is almost certainly a require-
ment for most ventures, i.e. future financing rounds.
Who is likely to provide this capital? Are there individuals
or groups among the present investors that might have
sufficient financial strength to be open to such follow-on
investment?
iii. Competition. How are those already established in the
target niche likely to react? See “B-v”.
iv. The project’s valuation. Investments have undoubtedly been
made in a project already before it lands on our desk, both
in terms of funds, as well as time spent by the founders. To
 what extent are these investments still valuable?
Initial investments that turn out to represent blind
alleys should not, of course, count as part of a real-
istic valuation. And, in general, realistic valuations
are central! The promoter’s optimism and enthu-
siasm regarding this should not be allowed to
distort what might be a realistic project valuation.
v. Related to the above, financial injections so far
are what would count. In my book, so-called
investments in time and effort by the founder
and others should generally not count towards a
project’s valuation!
vi. Similarly, salaries and compensation, real as well
as options and/or bonus-related, must be real-
istic, also from the point of view of the investor!
See “A-iv” and “A-vi”.
vii.Is there a clear exit strategy? Here a typical
promoter and/or project manager might tend
to take a longer-term point of view, while many
investors might look for an exit within a rela-
tively reasonable time. Is there a plan for exit and/
or for “dressing the project up for sale” within
a reasonable time period, say through growth
(acquisitions or internally), as well as sale to an
identified entity/industry?
The above factors are typically critical indeed,
and might be part of a realistic DD. Here, too,
however, the key is for the assessor to come up
with a synthesis, rather than treat each of the above
factors as checklist items.
D. Some Examples Where Projects Did Not Work
Out as Expected – Weak DD Analysis at the Roots?
In the following, we briefly list seven unsuccessful
projects, why they failed in four cases and, in three
more cases, why they may be failing. Poor DD seems
to be at the root of all of this. For obvious reasons,
the names of each specific entity to be discussed have
been anonymised. Let us first discuss four projects
that might be characterised as total failures.
i. CO2 Capture Project
We missed out in our DD primarily for
these reasons:
• The manager was not honest and, for
instance, made use of company credit cards
for his private purposes. His annual remu-
neration was also excessively high.
• The potential customers were large corpo-
rations, and the product the company was
offering was also an expensive one. All in
all, for a small start-up to offer such “big”
untried solutions was not credible in the view
of potential customers.
• The product was not operational, and no
orders or revenues had been secured.
ii. Offshore Oil Drilling Project
This project was focused on offshore drilling for
hydrocarbons in ocean waters west of Scotland.
The project failed and DD was not done well.
• SUI invested in the project based on the
recommendations of the promoter, as well
as the experience and track record of the
manager. Both the promoter and the manager
had some of their own funds invested in the
project. There was heavy pressure from the
promoter that we should decide to invest
quickly or risk losing the opportunity.
iii. Solar Electric Power Generation in Germany
This project was based on using solar-panel-
generated electric energy to be injected into
Germany’s electricity grid. The manager was
slow and was not able to secure feasible
space to install solar panels when there was a
“window of opportunity” on the part of the
German government. Later, this opportunity
disappeared. The manager was no longer able to
raise new capital.
iv. The Beauty-Sector Project
This project was focused on developing and
running beauty clinics in Switzerland and
Germany, including franchising. Also, the
company distributed a range of beauty prod-
ucts virtually. The clinics combined a focus
on hair, nails and skin, and the company
was the largest entity in Switzerland with
this combined business. The company failed
because of the following reasons:
www.europeanbusinessreview.com 37
 • Ineffective management of burn rate.
• Too little attention to the hiring of employees by
the manager.
• A lack of overall focus.
E. Problematic Business Projects
Let us now discuss three projects that are still running, and
which hopefully might work out fine. However, there were
shortcomings with our DD process here, too.
i. The Gourmet Food Projects
This initially focused on filled chocolate medallions
featuring a famous classical music composer. Later,
a line of vegan chocolates was launched. A few other
types of speciality products were also introduced. The
target market initially was Norway, but gradually other
European markets and the US, as well as China, were
targeted. All production was outsourced.
The company ran into trouble for several reasons:
• Too-wide market focus, ignoring that “strategy means
choice”. In general, a lack of focus by the manager, too.
• Too little market support on each of the key
product lines.
• Inability to raise more capital. There were no solid
investors for follow-on financing rounds.
• Perhaps in general a “me too” product idea. The first
medallions were quite similar to another well-known
chocolate with a different shape but similar positioning.
ii. A Consumer Product through the Awarding of
Discount Points
This company had developed its own app for consumers
to follow in order to qualify for discounts regarding
specific products listed on the company’s app. The
company had problems making its business model work
and ran into an acute cash squeeze.
• The manager was slow in adapting, seeking ways to
combine with others while the firm still had its own
funds available.
• A resistance to an emergency round of financing,
implying that present shareholders, including the
manager himself, would face a wipe-out.
38 The European Business Review November - December 2020
iii. A Used-Book Company
This company sells used books online, primarily to the
Norwegian market, but also to Sweden. The company grew
quickly but has yet to show a profit. The company’s situation
may be seen as precarious for the following reasons:
• The managers negotiated with two industrial players,
and risked losing both, but in the end, were thankfully
successful. The management team (of two) was too
inexperienced, and too greedy!
• The company has not yet been able to modify its busi-
ness model to become profitable.
• The raising of new capital, above all to support the
firm’s rapid growth, was seen as difficult, especially if
the industrial actor, already significant on the owner-
ship side, turned out not to be ready to invest more.
As we can see, the DD process seems to have been less
thorough than it should ideally have been in all of the seven
examples given. Above all, it seems that we can trace this
back to the way the manager/management team went about
running its business, as well as a lack of understanding of the
specific market in which each firm is operating. The revenue
expectations were not realised!
In summary, our experience indicates the serious need for
deep DD. Do not try to take shortcuts in your methodical
investigation. Having a measure of understanding and prudence
can make or break an investment. Remember to be thorough
in assessing all the aspects of a potential acquisition (customer/
market orientation, the manager, financial, legal, operational,
organisational, etc.), but, as indicated, the factors around the
manager and the market side may be the most critical in deter-
mining the benefits, liabilities, risks and opportunities. We live
in a complex world, and a good DD can bring clarity and a more
unbiased review of the opportunity at hand, as well helping the
investor both to determine whether the proposer’s assumptions
are true and fair, and to discover unknown issues.
Peter Lorange, after having sold his shipping company in
2006, has been a successful entrepreneur and owner of a
highly diversified family office. He has been regarded as one
of the world’s foremost business school academics, holding
the position of President at IMD, Lausanne for 15 years,
as well as several positions on shipping company boards.
His entrepreneurial journey spans across key areas such
as education, shipping, investments, and pre-dominantly
Family Businesses. Peter founded the Lorange Network, a
digital learning and networking platform, in 2017. Peter
is Norwegian, residing in Küssnacht am Rigi, Switzerland.
 EXECUTIVE
TRANSITION PROGRAM
Prepare for the highest level of leadership

TOP 10
WORLDWIDE

EXECUTIVE EDUCATION
RANKING 2020
execed.esmt.berlin/etp
 Strategy
KEEPING RESILIENCE IN VUCA ERA:
THE ORGANIZATION SHOULD LEARN
FROM THE WATER’S WISDOM
BY WEIXU DING AND JIANHUA MAO
T
he COVID-19 outbreak started at the end
of 2019 that has hurt the world’s economy,
cultural exchanges, people’s healthy life.
People’s unknown of this novel coronavirus makes
it challenging to adopt efficient methods and can
successfully predict and prevent the development
of the outbreak. The current world is exception-
ally similar to the circumstance of VUCA(volatile,
uncertain, complex, and ambiguous) that term has
been initially coined by the US military school in the
1990s to describe the chaotic and uncertain environ-
ment(Schoemaker, Heaton & Teece, 2018). Deep
uncertainty is commonplace in current intercon-
nected and interdependent economies undergoing
rapid technological change(Teece, Peteraf & Leih,
2016). Teece, Peteraf & Leih(2016) discriminate
the conceptually different between risk and uncer-
tainty: A risk is a probabilistic event, but uncertainty
is ‘unknown unknowns’ that is limited to use the
same way as to deal with risk.
The COVID-19 outbreak, a kind of interna-
tional emergency, is such an uncertain and complex
case, that is hard to use traditional methods such as
data analysis to predict the future outcome. Some
governments have taken emergency measures due
40 The European Business Review November - December 2020
to the rapid spread of the epidemic, such as quar-
antine and city closure. Many enterprises, such
as the catering industry, hotel industry, and the
tourism industry, have been significantly impacted.
Therefore, besides the threat to people’s health,
COVID-19 has inflicted heavy losses on the real
economy. COVID-19 is a microcosm of VUCA’s
complexity and uncertainty. In today’s situation,
There are two enterprises should be resilient enough to survive.
core pieces of The discussion of organizational resilience can be
information dating back to the 1990s. Since the famous study on
that can be the Mann canyon fire in Montana by Weick(1993),
management scholars gradually concern the ways
summarized
to make organizations more resilient. Western stra-
to keep tegic thinking (e.g., Hamel & Valikangas, 2004)
resilience: believe resilience is not a response to a crisis; It is
one must be about continuing to anticipate and adjust to long-
adaptable term trends. In short, there are two core pieces of
to adjust; information that can be summarized to keep resil-
the other is ience: one must be adaptable to adjust; the other is
the need to the need to continue.
In the eastern, the metaphor of resilience is like
continue.
the characteristics of water. Dao Te Jing(Lao,1993),
an ancient Chinese philosophic book, described
as ‘The highest excellence is like water.’ Water can
adjust and fill the containers according to their
shapes, but it can keep its original intention
of "benefiting all things without competition"
(Lao,1993). This paper roughly classified water’s
characteristics into two main parts (virtues and
strategy). Followed this way, the five charac-
teristics of water summarized by Li (2016) are
divided into two groups: 1) the water’s virtues
include ‘altruism and helpfulness,’ ‘modesty and
prudence,’ ‘honesty and transparency’; the strat-
egies include ‘flexibility’ and ‘overcoming the
toughness with softness.’ Respond to emphases
of the resilience by Hamel & Valikangas(2004),
in strategy, the water’s adaptive and flexible
supports it can adjust to changing environment.
In terms of how to help firms survive sustain-
ably. This paper suggests organizations to learn
from the water’s virtues as well. Kazuo Inamori,
a Japanese business philosopher, proved the
importance of virtue by saying, "self-interest
leads to prosperity, altruism to longevity." After
all, many enterprises are commercial organiza-
tions, and we cannot ask them to give up profits
selflessly. Corporate altruism is more about
their sense of social responsibility. Nonaka
& Takeuchi (2019) believe that a wise leader
should make judgments while taking a higher
point of view and do something beneficial to
society. Thus, to be as flexible or adaptable as
possible can make enterprise fast respond to the
external changes; being altruistic and socially
beneficial helps the enterprise to be harmonious
to the environment and survive sustainably.
Saying is easier than doing. In reality,
there may sometimes produce paradoxes
between ‘social responsibility’ and ‘flexibility.’
Maintaining enterprises’ social responsibility
may sometimes limit the choosing direction
of the enterprises to adapt to environmental
challenges flexibly. On the other hand, the
pursuit of ‘flexibility’ to be a better adaptation
to the external environment sometimes may
weaken the enterprise’s social responsibility
considerations. Thus, how to coordinate the
duality that may also changeling the modern
organization’s wisdom. Thus, in the VUCA era,
modern organizations are suggested to have
both social responsibilities and to become ‘flex-
ibility.’ When there are paradoxes that occur
between ‘social responsibility’ and ‘flexibility,’
organizations also need to find wise solutions
to a tradeoff that helps them not merely flex-
ible to adapt, but provoke enterprises’ social
responsibility and have a good impact on the
environment to be sustainable.
This time’s COVID-19 is a typical example of
the VUCA era. Both enterprises and our society
are facing an enormous challenge. So, enterprises
should learn from water’s virtues to have a social
responsibility and flexible strategies (adaptable).
BYD group gives a good example during the
COVID-19 outbreak in China. In the past, the
core businesses of BYD are manufacturing cars
and batteries. When this COVID-19 comes,
BYD fast response and set up new production
lines to produce masks. BYD achieved the record
of "three days for finishing engineering drawings,
seven days for equipment installation, ten days
for commissioning and delivering products." It
takes 24 days for BYD to become the world’s
largest mask manufacturer with a daily output
of 5 million pieces (SZNEWS, 2020).BYD is an
excellent example of balancing flexibility with
social responsibility well. Nevertheless, not all
companies can do smoothly and successfully, like
BYD; they may face relatively serious paradoxes
in managing flexibility and social responsibility.
Thus, how to solve the paradox may become a
derivative problem for enterprises.
In order to solve the paradoxes, enterprises
may need to scarify some profits to tradeoff.
For example, Xiaomi's mission is to provide
"cheap but high-quality" products so that
everyone in the world can enjoy a good life
brought by the development of science and
technology. A smartphone is the first product
of Xiaomi. Before the Xiaomi smartphone,
there were two main types of products in
China’s smartphone market: high quality and
To be as flexible or adaptable as possible can
make enterprise fast respond to the external
changes; being altruistic and socially beneficial
helps the enterprise to be harmonious to the
environment and survive sustainably.
www.europeanbusinessreview.com 41
 Strategy
This paper illustrates that in the
current VUCA era, uncertainty is
commonplace. This time COVID-19 is a
typical example since it cannot predict
future outcomes by using traditional
probabilistic methods.
high price, such as the iPhone; the other is low
quality and low-price smartphones. Lei Jun, the
founder of Xiaomi, is determined to develop a
cheap but high-quality smartphone, and he hopes
that most Chinese can afford a good smartphone.
When the external environment changes such as
COVID-19, production costs may change. If the
bottom line of social responsibility is maintained,
the flexibility and extent of price adjustment
will be restricted. These years, Xiaomi still holds
the line and accelerated the popularity of smart-
phones, as well as the rapid development of the
mobile Internet in China. Xiaomi achieved his
social responsibility by giving up most of its
profits. However, Xiaomi is not an organization
of NGOs; thus, it must flexible adapt itself to
the challenges of the external environment. Thus,
42 The European Business Review November - December 2020
learn to scarify some profits to achieve ‘Meager
profit but high turnover’ to tradeoff may be a way
to solve paradoxes.
From the two cases of BYD and Xiaomi, we can
learn that it is essential for a company that wants
to be great to build a mission with social responsi-
bility, which is the prerequisite for the company’s
long-term development. Also, companies need
the strategy should be flexible to adapt to changes
in the environment or to sense the business
opportunities presented by social trends. If para-
doxes occur between the virtues and the strategy,
a practical solution may be requested to balance
the two. The strategy of maximizing profits may
not work. Scarify some profits to achieve ‘Meager
profit but high turnover’ to tradeoff may be a way
to solve paradoxes.
To conclude, this paper illustrates that in the
current VUCA era, uncertainty is commonplace.
This time COVID-19 is a typical example since it
cannot predict future outcomes by using traditional
probabilistic methods. This paper suggests organi-
zations to keep resilience by learning from water’s
wisdom to be both flexible and sustainable. When
the paradoxes occur, organizations are suggested to
sacrifice some profits to tradeoff.
Dr. Weixu Ding is an academic
researcher in knowledge management,
Organizational studies, and Business
Innovation. He got his master's degree
from the University of Manchester, and
a Ph.D. in Technology management
by Ritsumeikan Univerity of Japan.
During 2018-2019, he conducted
visiting research at Univerity of
California, Berkeley.
Mr. Jianhua Mao is the founder of
the Shanghai Key-leading consulting
firm. He got his MBA from the
University of Manchester. Currently,
He has also been invited as a visiting
professor at the Shanghai Institute
of Technology. He makes plenty of
attempts to combine the manage-
ment theories with practices.
 Leadership
What South Africa Can
Teach Leaders About Resilience
BY JOHN LUIZ
T
In an he COVID-19 pandemic has overturned the
environment idea of ‘business as usual,’ exposing many
like South Africa, vulnerabilities within social, business, and
characterised economic systems.
by high levels A recent global survey by CEMS, the Global
of inequality Alliance in Management Education (of which the
and economic University of Cape Town Graduate School of Business
dualism there is a member) found that it is no longer enough for
is also a global business leaders to focus on the bottom line, or
recognition that rely on technical skills. The human skills of resilience,
such a concept
empathy, cultural intelligence, and the ability to
communicate are key to survival in this ‘new normal.’
of ‘business as
In particular, resilience has tripled in importance
usual’ is neither
since the crisis began. Tricky to develop; at a basic
possible nor
level resilience is the ability to recover quickly from
wanted.
turbulence. The ability to reinvent yourself, your
business and even core model during tough times
(and do this repeatedly if required).
Global leaders can look to South Africa for guid-
ance when it comes to developing resilience.
The power of the 6 billion
The extremities of South Africa are often more
apparent in Cape Town because of its extraordinary
physical beauty, which seems to magnify the country’s
high inequality. Just driving from the international
airport to the stunning location of the University of
Cape Town reveals the realities of doing business in
what is actually the majority of the world – these
extremes are prevalent in many, if not most, parts of
the developing and emerging markets.
Just over 1 billion people live in advanced econo-
mies whilst over 6 billion live in emerging economies.
The new markets and frontiers for business lie with
the 6 billion. A few years ago CK Prahalad wrote
about the fortune at the base of the pyramid and
whilst this has proven much tougher to realise, it
has unleashed a recognition of the immense entre-
preneurial capabilities and buying power of these
billions of people, revolutionising how to do busi-
ness in these environments.
These emerging markets are often less contested
and saturated but require a deeper understanding
of the challenges that consumers face and the insti-
tutional constraints requiring innovative solutions.
Getting the opportunity to study, live or work in
this environment is an experience like no other for
leaders, as they are able to develop extreme levels of
resilience in a world which, due to the pandemic,
has become infinitely more difficult to predict.
The rules change mid-game
This is because doing business in
emerging markets such as South
 Leadership
Africa entails operating in environments where the
rules of the game are constantly changing. Business
leaders need to be agile and resilient enough to be
able to adapt. In South Africa leaders generally
know how to do this, because they have had to do
it repeatedly.
Ask business students in advanced econo-
mies whether they want more or less government
regulation the answer invariably is less. If you ask
someone from an emerging economy, you will get
the common response of “aah it depends doesn’t it?”
They will point out that they want less in some areas
and more in others, because very often the regulatory
and institutional environment in these countries is
opaque and difficult to anticipate.
Consider the notion of volatility which has become
part of the new normal. Enterprises in emerging
markets such as South Africa have been operating
in such milieus for ages. Contemplate something
which is taken for granted in advanced econo-
mies - namely a fairly predictable exchange rate. In
emerging markets exchange rates can depreciate or
be devalued by 50% on a dime and business needs
to adapt. Again leading within this environment
requires a level of resilience unlike anywhere else.
Interdependency of business,
government, and society
In an environment like South Africa, characterised by
high levels of inequality and economic dualism there
is also a recognition that such a concept of ‘business
as usual’ is neither possible nor wanted. The inter-
dependency between business and government and
society is critical to the functioning of the broader
political economy. For example, in many ways South
African business is miles ahead as regards recognising
44 The European Business Review November - December 2020
that shareholders are only one of a group of broader
stakeholders that business is accountable to.
Furthermore, where state capacity may be lacking
in certain areas, business often steps in. In an area of
economic deprivation, where a business may be the
single employer (as in a mining company in more
remote regions) and where the state may be unable
to provide appropriate housing, schooling and
healthcare, business may need to assume responsi-
bilities regarded as uncharacteristic elsewhere.
At the height of the AIDS epidemic in South
Africa for instance, where the government was
initially reluctant to roll out the provision of antiret-
Cape Town, roviral treatments, some of the largest employers
South Africa took the lead in developing treatments for their
workers. Local communities and civil society also
have high expectations for businesses operating
in their communities and as a result business is
expected to be embedded much more deeply within
social structures. Business students from advanced
economies who come to study at the UCT GSB tell
me that they never want to do ‘business as usual’
again, even if it were possible.
A model for future business
Resilience
There is a saying about New York that if you can
has tripled in
make it there you can make it anywhere and, with
importance
respect, I would challenge that and say that if
since the crisis you can make it in South Africa you can make it
began. Tricky anywhere. You will have been exposed to everything
to develop; at that can possibly come your way.
a basic level Reflecting on these South African experiences
resilience is can help business leaders globally develop resil-
the ability ience– even if they are not able to physically work
to recover or study there right now. They can gain an under-
quickly from standing of emerging markets and their complexity,
turbulence. but also reflect on what future business models
should look like and how traditional capitalist
systems in a post-COVID world need to adapt, to
be more socially relevant and accountable.
John Luiz is Professor of Management at the University
of Cape Town Graduate School of Business, which is
the latest school to join the CEMS Global Alliance in
Management Education. He specialises in International
Business Strategy; Business, Society, and Government;
Institutions and Emerging Markets.
Saving Lives
every day

- part of Blue Ocean Robotics

Future Series

GOING GIVING A LIFT

TO MOBILITY IN

UP! INDIA
Interview with Gilco Global's
General Director Aman Moudgil and
Managing Director Deepak Moudgil

Some six years

ago Indian mobility
solutions company
Gilco Global was born
out of an alliance
with Spanish vertical
transportation
provider Orona. Here,
General Director
Aman Moudgil and
Managing Director
Deepak Moudgil
recount the origins of
the company and fill
us in on the state of
the mobility sector in
India today.

Hello to you both. Thank you for taking the
time to talk to us. Just to put us in the picture,
can you give us some background on the origins
of Gilco Global?
Gilco Global was founded in 2014 out of
a collaboration with the Spanish elevator
group Orona. I and Gaurav were already from
the construction sector through our various
ventures with specialization in engineering
design and project management consultancy
and had been working on specialized projects
from concept to commissioning in the hospital,
hospitality and infrastructure sectors. Hence,
we were accustomed to buying elevators and
mobility solutions for our customers in the
past and were well aware of the customer’s
perspective and technology requirements for
the market in India. As a result of our strong
experience in the real estate and infrastruc-
ture sectors, Orona extended the invitation
to collaborate, which we accepted by creating
this company. Additionally, my father, i.e. Sh.
Deepak Moudgil, who had retired as Director
(Projects) with the oil and gas consultancy
Engineers India Ltd, joined us after his retire-
ment and brought with him vast leadership
experience across all levels and complexities.
We began the journey facing several challenges
in creating the resources required to sustain
marketing, sales, aftersales and back-office
processes. However, the biggest challenge was
raising awareness of the Orona brand, which
was not known in India, although on a world
level it is rated amongst the top elevator compa-
nies, has a strong network of over 250,000
solutions running in over 100 countries and is
the largest complete lift production capacity in
Europe. In fact, one in every 10 lifts in Europe
is an Orona. The biggest USP that Gilco Global
extends to the Indian market is that represented
by Orona, we are selling solutions which are
a 100% European product and conform to
the EN 81 lift standard with great emphasis
on passenger safety and comfort both. Gilco
Global has an exclusivity arrangement with
the Orona Group for the entire Indian market.
Orona is the first company to be certified under
ecodesign (ISO 14006). Gilco Global repre-
sents the philosophy and quality of Orona in
India and has had a strong presence there for
over six years now, providing both a quality
product and quality services to its customers.
What services does the company offer today?
Gilco Global specialises in the field of
mobility solutions for a variety of applica-
tions, including elevators, escalators, moving
Gilco Global walkways, dumb waiters, car elevators, car
represents the docks, and automated car parking solutions
for urban infrastructure (for use in hotels,
philosophy hospitals, residential housing structures,
and quality of commercial, industrial, etc.). We also supply
Orona in India solutions for the aviation sector, including
and has had a automatic baggage handling systems, baggage
scanning, gate seating, mechanical sweepers
strong presence for runway applications and specialised equip-
there for over ment for ground handling. We are committed
six years now, to sincere business and customer satisfaction
and have strategic alliances with leading solu-
providing both a tions providers from Europe. Some of our
quality product USPs include:
and quality • We are a comprehensive mobility solutions
services to its service provider, having expertise in systems
ranging from elevators and escalators to
customers. mobility solutions for the aviation sector
(such as baggage handling, etc.) through stra-
tegic alliances with the best in the world.
www.europeanbusinessreview.com 47
 Future Series
We are one of the very few companies here
in India who have expertise and experience
in assisting customers in coordinating and
executing design and civil works so as to install
mobility solutions that meet their requirements.
• Customisation. This is one of the big USPs that
separates us from the competition. We can tailor
solutions according to our customers’ requirements.
• Comprehensive support. In addition to our capa-
bility in the solutions that we supply, we have
proven experience in supporting our customers
in integrating mobility solutions at their sites by
applying our know-how to the design and imple-
mentation of civil structures.
What were the drivers behind going into part-
nership with Orona? What were the attractions of
the lift industry for you?
We already had a strong foothold in the
construction industry and benefited from the
decades of leadership experience of Deepak
Moudgil (who headed one of the largest oil and
gas consulting firms for over 40 years). Moreover,
our other venture, i.e. Global C was founded
by myself and Gaurav and is currently amongst
leading Project management firms in India. It has
experience spanning 60 million sq. ft. of urban
infrastructure and strong associations in the
Maldives, Italy, Spain and the Netherlands. We
were approached by Orona through our acquaint-
ances in Spain, as they were looking for a credible
and established partner to help them set up in
India and to be responsible for the Indian market
(which happens to be the second-largest elevator
market in the world, after China) and also to help
their vision of expansion into SE Asian countries.
The lift industry was already very well known
to us. Although we had experience of procuring
them for our projects in the past, we analysed the
market more carefully by having market research
done through a globally renowned company,
whose findings stimulated our interest in the busi-
ness venture. Through series of discussions and
evaluations in India and Spain, Gilco Global was
officially created in January 2014.
How do the company’s consulting services fit
in with the manufacturing side? Are these sepa-
rate facets of the business, or do they complement
each other?
Gilco Global renders comprehensive support,
which includes learning the customer’s requirements
and mapping the right solution for them, taking site
measurements and whatever is required to design a
solution that meets the customer’s needs. We ensure
that the correct solution is manufactured through
persistent follow-up between the design offices in
India and Spain, coordinating the logistics so as to
ensure timely & safe delivery of the manufactured
solution. We then undertake the installation of the
solution, as well as its subsequent maintenance.
Hence, it’s a perfect marriage of consulting and
manufacturing support going hand in hand, with
the sole objective of customer satisfac- Seminar meet of technical team no 1.
tion. Apart from this, we are one of
the very few companies here in India
who have expertise and experience in
assisting customers in coordinating and
executing design and civil works so as
to install mobility solutions that meet
their requirements. In this regard, we
serve as a one-stop service provider for
their building mobility needs.

Deepak Moudgil, you are the

managing director of Gilco Global.
You came from a very broad back-
ground spanning a wide variety of
industries, including infrastructure
and petrochemicals. What would you
say are the chief benefits that your
earlier experience has enabled you to
bring to Gilco Global?
Over 40 years of rich experience in
managing mega-projects with large
complexions from concept to commis-
sioning helped in setting up this venture
and establishing its good practices,
systems and processes with a “first time
right” approach for Gilco Global, giving
immense value for money to clients, as
well as in-house staff development.
How would you characterise compe-
tition within your sector in India?
With all the global giants having
already been present in the Indian
market for decades, and with most
of them manufacturing the solutions
partly in their factories in India, the
competition here is fierce. Furthermore,
the “cheapest is the best” mentality of
consumers here makes the task even
more difficult for us, as we offer a
superior product of the same speci-
fications we are providing in Europe
and other markets. While we have
very competitive prices to strengthen
our foothold in this interesting
market, we are more on the lookout
for value-conscious customers here
who consider their purchases wisely
and do “apples with apples” and “life
cycle cost” comparisons for evaluation.
What are some of the factors that
differentiate your company from the
competition?
Some of the salient facts about our
organisation and our USPs from the
competition here are:
• Among the top elevator companies
in the world.
• The quality of solutions offered here
is the same as offered in Europe.
• Competitive pricing for the
Indian market.
• Comprehensive support (we render
support in civil works and structure
design of hoistways, too).
• Fast in-house installation team.
• Eco-friendly, highly energy-ef-
ficient solutions (ISO 14006
certified and VDI 4707 Class
AAA BREEM rated).
• Customised and personalised
services for our existing and
potential customers.
• Strong and growing presence in
India for more than six years.
Are there significant differences
between the European lift market and
that of India?
Yes. The European lift market
is more focused on sustainability
and efficiency with minimal
environmental impact and total
ownership cost for the customer. On
the other hand, the market in India
is driven more by the need for faster
elevator solutions (which may not
be efficient) to cater for the rising
skylines of cities here. Furthermore,
a higher population density with
diverse etiquettes in India puts more
pressure on elevator systems, which
have to be more robust, if not efficient
or environment-friendly.
We serve as a
one-stop service
provider for
their building
mobility needs.

www.europeanbusinessreview.com 49
 Future Series
Are there any peculiarities of the require-
ments of the Indian market that weren’t
originally served by the Orona product list?
We have been serving the Indian market with
the same product as offered in Europe and the
rest of the world. Our technological advance-
ment and solutions using all technologies and
systems, including traction-based, hydraulic
and/or rack-and-pinion-based systems, make
us capable of meeting the diverse needs of the
Indian market.
Orona was the first lift manufacturer
to achieve the ISO14006 ecodesign
certification. Could you tell us some-
thing more about that, and is this a
significant factor in the Indian market?
While the Indian market is very
price-conscious and not as aware as
Europe, which lays more emphasis on
sustainability and life-cycle assessment
when evaluating and making purchases,
including elevators, there is a growing
awareness of these factors in the Indian
market. With our competitive pricing
for this market, these factors give us an
edge over the competition with regard to
the total ownership cost of our elevators
compared with other solutions selling
here. We have to make great efforts to
educate the clients on these aspects.
Sustainability is of great interest in many areas
of industry these days. Do you attach importance
to the issue and, if so, how do you approach it?
50 The European Business Review November - December 2020
We have been serving the
Indian market with the same
product as offered in Europe
and the rest of the world.
ORONA is the first company, in the sector
worldwide, to be certified under Eco design
(ISO 14006). With this certificate, Orona
goes beyond expressing its commitment to the
environment. Independent certifying entities
accredit that Orona products meet the require-
ments of ecodesign due to clean management
in all product phases, from design and devel-
opment through to recycling and recovery of
materials at the end of the product life cycle,
as well as minimal emissions, good production
practices and reduced consumption.
The Orona 3G X-10, X-15 and X-16
solutions have achieved Class AAA energy
certification under the VDI 4707 guideline in
all five established usage categories. This
is the top energy rating that a lift can be
awarded. The VDI 4707 guideline eval-
uates a lift's energy consumption when
it is in standby mode, as well as when
it is operating. In usage category 1 (low
traffic), consumption in standby mode
is given more importance. In category 5
(very high traffic), consumption during
operation is given more importance. The
Orona 3G solutions have achieved Class
A certification in both situations and in
all usage categories, which confirms the
high levels of energy efficiency achieved
by the lifts in standby mode, as well as
during operation.
The Class AAA ratings were achieved
with installations where the Orona 3G
solutions possessed the following charac-
teristics and options:
• Gearless drive
• Automatic standby for car lighting, ventila-
tion, displays and actuator
• LED lighting in car
• Orona Grid energy regeneration system
 The installations were examined and certified by
the prestigious entity Liftinstituut B.V., Europe's
foremost specialised safety authority for lifts and
other equipment used for vertical transport of
people and goods.
Do you have plans to bring any lift-manufac-
turing processes to India? Presumably there could
potentially be cost savings?
As we have an edge over competition here in
terms of quality of products, solutions and services
we offer and our current pricing very close or at
times narrowly beating the competition, a further
price reduction could give us an exponential
increase in sales. Despite challenges posed due to
fully imported solutions and inherent benefits from
local manufacturing, there are no such plans known
to me as of now (which only ORONA management
can decide (if at all)).
Could you tell us something about your compa-
ny’s non-lift offerings? What is the split between
lift and non-lift business?
Apart from building mobility solutions, where we
have a strong presence in the Indian market, we are
keen on promoting our world-class aviation solu-
Elevator mechanic checking lift.
Our factory in Hernani,
Gipuzkoa, near San
Sebastian, adopted strict
measures to prevent any
spread of coronavirus
within our factory. People
with symptoms were asked
to work from home, and
only a limited number of
people were allowed to
come to the factory.
A Technician maintaining lift
during pandemic times
tions in the airport sector in India, which is poised
to grow, due to the government’s strong initiatives
to render connectivity to every remote part of the
country under the ambitious UDAN scheme.
Of course, the world has been preoccupied with
the coronavirus pandemic in recent months, and
the aviation and construction industries have been
particularly badly affected. What have been the
main challenges arising from this for the mobility
solutions industry?
While COVID-19 has both short-term and long-
term psychological and financial impacts, I feel that
the short-term impact has been very severe for our
industry, which was already reeling with multiple
challenges from lack of capital and credit avenues
to insolvencies, multiple frauds and the regulatory
burden of the Environment Laws and the Real Estate
(Regulation and Development) Act, 2016, and there
seems to be no likely relief in sight. To contain the
pandemic, like many nations, the government of
India also imposed a lockdown, restricting the move-
ment of people and gatherings. In the construction
sector, hordes of workmen toil together to meet the
timelines. However, due to the restrictions put in
place by the government, all construction activity
and most of the business activity across the country
has come to a halt. There are multiple consequences
of the lockdown that could further aggravate the
situation for the sector, such as reverse migration
www.europeanbusinessreview.com 51
 Future Series

Here in India, while we continued to

and disruption of supply chains, among others.
Cumulatively, the above circumstances could present
obstacles in meeting the obligations of construction give support to hospitals where our
and engineering contracts, and could lead to multiple
legal wrangles for the industry following the lifting lifts are installed, we kept a check on
of the current restrictions. To say that companies
engaged in the construction and engineering sector
our installations remotely through
will be affected as a result of the current unprec- our people who were working from
edented situation would be an understatement.
The various restrictions put in place by the govern-
home during the lockdown.
ment to control the effects of the virus may trigger
shortages of raw materials and manpower, and cautions as per guidelines issued from the MHA,
disrupt supply chains, further creating handicaps in Govt of India) from 3rd May 2020. In India, we
performing contractual obligations. Contraction in are working strictly to maintain the following set
demand would be the least of the sector’s worries. of guidelines as defined under MHA. These are
Some elements in construction and engineering are some of them:
imported from countries which may be affected • Social distancing, both in offices and at work sites
worse, creating a domino effect on the entire sector. • Ensuring that all our workforce are wearing
However, one must safeguard against the inevitable masks and keeping hands clean with the sani-
by adopting corrective measures in time. The first tiser provided. We have ensured that a sufficient
step is to evaluate contract clause(s) to ascertain quantity of sanitiser is maintained in all work
the extent of liabilities upon breach, and the last areas, and pocket sanitisers have also been issued
step is to proactively adopt all measures to mitigate to every person.
liability by invoking the correct legal mechanisms • All persons are screened at the main gate and
in good time. their temperature recorded.
• We are using a workforce tracker app to record
And what have been the issues of coronavirus for attendance automatically. The use of attendance
you within the company? How has manufacturing punch machines has been discontinued.
been affected?
Although the entire world has been badly hit by
COVID-19, our offices here in India adopted strict
measures to prevent any spread of coronavirus in
our workplaces (offices & sites). People with symp-
toms were asked to work from home, and only a
limited number of people were allowed to come to
the workplaces. No visitors or any other employees
(other than those with permission) were allowed
to enter the premises. Additionally, periodic sani-
tization, the observation of social distancing, and
staggering of lunch hours for workers are being
strictly maintained. While the whole of India
was under a strict lockdown for some weeks, our
workers were working from home and rendering
support in the best possible manner. While we
continued to give support to hospitals where our
lifts are installed, we kept a check on our instal-
lations remotely through our people who were
working from home during the lockdown. We
revived our operations completely (adopting all

52 The European Business Review November - December 2020

• Any person with fever or any symptoms is prohib-
ited from entering and is asked to stay at home.
• No visitors are allowed in the office.
• All workers are advised to wash their hands
periodically with soap and follow all the neces-
sary precautions.
• Lunch times are staggered, ensuring the
minimum number of people in the cafeteria at
the same time.
Do you see any possibility of turning the
coronavirus challenges into opportunities in the
future? Would you say that technological innova-
tion has something to offer in this regard?
The first part of 2020 was a rough period for
the industry and the challenges are not over yet,
but we had already secured more orders compared
with the previous year, which we are in process of
executing this year. Hence we are focused on deliv-
ering them to ensure that 2020 doesn’t put a brake
on our run of growth in India. The product quality
demonstrated by the completed installations is the
best testimony and is helping us with continuous
referrals, in addition to other initiatives from our
marketing team.
Even though our solutions carry the latest
certifications in line with best practices to support
energy efficiency and climate action (our prod-
ucts carry CE, ISO 14006, BREEM Class AAA,
etc. certifications), the spread of the COVID-19
pandemic helped us promote the contactless
solutions and sterilisation features that our part-
ners had designed in their R&D facilities some
time ago (obviously having no knowledge of
the COVID-19 scenario, but having the shift to
voice-activated devices, etc. in mind). These solu-
tions have now been tailored for such applications
to promote sterile operations and they have been
implemented for some of our customers who had
a requirement for them.
The spread of the COVID-19 pandemic
helped us promote the contactless
solutions and sterilisation features
that our partners had designed in
their R&D facilities.
Executive Profiles
Aman Moudgil, BE (Hons), MPM®, CIPM®, MIE is
one of the founding directors of Gilco Global.
He has rich experience in leading multi-sectoral
businesses in the fields of construction project
management, e-commerce, industrial processes,
and manufacturing. He is a key member of the
development & implementation of six sigma in
various processes along with the implzementation
of ERP which has been crucial in various stages
of the company's output. He is also a Partner in a
leading Project management company, Global C.
He has been recognized through various forums
as a young emerging leader and has authored
several international papers in technical journals
and conference proceedings.
SH. Deepak Moudgil serves as the Mentor and
Managing Director of Gilco Global. He has over
50 years of experience covering the entire
management chain from Marketing, Project
Management, Procurement, Costing, Planning,
Construction Management, Technical Auditing,
and Corporate Administration. He has wide
project management experiences in infrastructure
(airports, urban development, green buildings,
highways, water, and waste management,
etc.), refineries, petrochemicals, cross country
pipelines, gas processing, offshore platforms,
terminals & storages, and non-ferrous metallurgy.
He is recognized for sound, practical management
style centred on impact-driven models and
strategies and contributed to futuristic strategies
of EIL diversification, corporate rolling plan,
human resources planning.
www.europeanbusinessreview.com 53
 Cooperative Play
Players: 1-4
Playing Time: 1-2 hrs
MSRP: $75.00
Code: AYG 5400

Slavery and what it embodied had been a point of contention since the founding of
the United States. Thanks to the efforts of men and women across the country, it was
abolished. In FREEDOM: THE UNDERGROUND RAILROAD, players take
on the role of these brave Abolitionists. They attempt to end the institution of slavery
by influencing pivotal events of the time, raising funds for the Abolitionist Cause, and
helping slaves as they make their way to freedom in Canada.
• Teamwork - Cooperative play against the game. Players take
on the roles of important historical Abolitionist characters.
• Engagement - Easy rules with continual involvement by all players.
• Educational - Learn about this important chapter
of American history between 1800 - 1865.
www.AcademyGames.com
 Business Model
TableTop and Covid19
– IT’S NO LONGER AN EASY GAME!
BY UWE EICKERT AND DR BORIS LIEDTKE
The raging pandemic has swiftly shaken up
many business models around the globe thereby
creating a number of instant winners such
as technology giants and those distributors
who managed to switch to online commerce.
However, it also decimated companies in the
hospitality and tourism sector or even your
local family shop around the corner. Sometimes
though, the impact has created some surprising
results. The pre-Covid19 booming board game
industry is no exception.
T
he board game industry has been growing
above 10% p.a. and reached an annual value
of USD10bn. The USA has become the
largest market followed by Germany, UK, France,
Italy and Spain. Even people in Asian countries
like Japan, Korea, and China have discovered
the joy of sitting around a table drawing cards
and rolling dice to collect victory points or push
military counters. The game industry has long left
behind children and adolescents as their key client
segment and instead has followed Generation X
and Millennials into their adulthood with ever
more sophisticated games and higher price tags.
Mark Zuckerberg and Reid Hoffman have made
no secret that they are lovers of classic board
games such as Catan and Risk.
Naturally, one would expect that the lockdown
phase in many European and Asian countries would
have led to a growth bonanza in the industry where
people sit at home, dusting off old games and
rediscovering the joys of a virtual world that can
be experienced without technological devices. The
assumption certainly holds true for companies such
as Ravensburger, which apart from being a global
board game publisher, is also the leader in the
booming Jigsaw Puzzle segment. However, many
of the smaller publishers in this creative industry
are struggling and have had to adapt their business
models to the new circumstances or face extinction.
There are several reasons explaining this phenom-
enon. The challenge starts with the designers, i.e.
the people coming up with the original creative
The game industry has long left behind children
and adolescents as their key client segment and
instead has followed Generation X and Millennials
into their adulthood with ever more sophisticated
games and higher price tags
www.europeanbusinessreview.com 55
 Business Model
idea for a game. Famous designers such as Uwe
Rosenberg (Agricola), Reiner Knizia (Euphrates &
Tigris), Stefan Feld (Burgundy) or Vlaada Chvatil
(Codenames) cannot operate in the lonely vacuums
of their homes. Unlike creative work such as
painting a picture or writing a novel, the design of
a game requires plenty of human interaction to play
test a game again and again to find design shortcom-
ings. This is crucial to balance and refine the original
game idea. While there are technological platforms
such as “Tabletopia” that allow designers and play-
testers to meet virtually to play test, the truth is
that the face to face experience which customers
crave is almost impossible to recreate through a
Zoom call and a virtual version of the game. Thus,
instead of enhancing the quantity of games designed
throughout the lockdown period, the virus has had
the opposite impact.
Secondly, margins in the board game industry are
tight for the designers or publishers and only start
to widen out at the end of the value chain for retail
distributors. Similar to other creative artists, most
designers are in it less for the financial reward and
more for the satisfaction of seeing their idea come
to fruition. The game publishers, just like movie
producers or book publishers, need to select their
projects carefully from among thousands of ideas.
Each project is a drain on their limited resources of
time and money. Large firms such as Ravensburger,
Hasbro and Asmodee might have the financial
and project management means to continue oper-
ating in lockdown with little loss to productivity.
However, leading up to 2020, the industry has
been fragmenting into ever-smaller firms similar
to market trends observed in other creative indus-
tries. Operating under a lockdown business model
has become increasingly difficult for these firms. In
addition, publishers typically work with a manu-
facturer in China or other foreign manufacturing
countries. Trips abroad to deepen relationships
with the outsourcing partner have become almost
impossible, while costs of shipping end products
from the manufacturing countries to distribu-
The game publishers, just like movie producers or book publishers, need
to select their projects carefully from among thousands of ideas. Each
project is a drain on their limited resources of time and money.
56 The European Business Review November - December 2020
tors has followed global shipping rates, increasing
tremendously, thus eating into thin margins. A
number of firms are likely to leave the field as a
result of Covid-19.
Marketing new game ideas has also gone through
radical changes. Traditionally, publishers could rely
on a number of global Game Conferences which
brought them together with designers, distributors,
the press and retail clients. In 2020, Essen Spiel,
by far the largest such conference with close to
200.000 attendees, was cancelled and GenCon, in
Indianapolis, with an estimated 75.000 attendees
followed suit. Instead, the use of the online
“Kickstarter model” to raise funds and aware-
ness for a product has taken off. Kickstarter is a
successful crowd-funding platform, which focuses
on raising money for creative projects ranging
from film, music, and publications to video and
board games. By the end of 2019, it had secured
almost USD5 billion for 450,000 projects. Those
who have embraced it successfully have savoured
its advantages while some of the more traditional
companies are running the risk of falling behind.
The skill-set to raise retail and distribution interest
online with a game concept is certainly different
from presenting a prototype at a game conference.
The “Kickstarter”crowdfunding model is also a
two edged sword. While designers and publishers
can reach out to retail clients directly, they are
cutting into the once lucrative retail distribution
network. Publishers need to carefully balance
the interests of retail clients supporting a game
on Kickstarter early and thus gaining access to
free Stretch Goals, versus distributors who typi-
cally brought in the most money. While there
have been many successful Kickstarter launches
like Exploding Kittens or the Zombicide-series,
many designers and their publishers need to
change their operation model to accommodate
this growing distribution channel.
This brings us to the next radical change, which
Covid-19 has accelerated – the retail distribution
channel. The days of people wandering into their
local toy-shop to select a game among
50 products on the shelf including last
year’s “Spiel des Jahres” are long gone.
The model was already under pres-
sure as the sheer volume of new games
overwhelmed most shop’s inventory
capacity. Last year a staggering 7000+
new board games hit the market.
Distributors and shop owners strug-
gled to keep up with finding marketing
budgets and shelf space to accommo-
date the latest products. While in the
past a game could be a top seller for
9 months or more, nowadays this has
dropped to barely 5 weeks. Customers
demand the latest and when the distrib-
utors have a choice between selecting
to restock a recently successful game
or the latest product, they inevitably
choose the latter thus reducing the sales
of individual games tremendously. This
in turn is forcing game publishers to
ensure that they can be profitable with
a project during the first wave of selling
when the game is still considered novel
and “hot”.
Additionally, online discount sites
started to undercut the bricks and
mortar competition with lower prices,
broader selection and convenient
In times of change,
the need to rethink
your entire business
model can lead to
some very unusual
new opportunities.
home deliveries. Covid-19 could be
the final nail in the coffin of the tradi-
tional distribution channel.
Many shops attempted to counter
this trend by converting part of their
office space into a “play area” thus
enticing customers play and buy during a
number of evening or week-end gaming
sessions. Similarly, some cafes started to
cash in on the explosive trend of playing
games by becoming board game cafes.
Needless to say that these board game
cafes and shops have struggled during
the last months of lockdown. People
preferred or were forced to stay at home
playing with family and close friends.
With closed shops and a lack of
people strolling around downtown, retail
customers have learned to increasingly
order online or directly from Kickstarter.
Unfortunately, distribution through
shops was also a profitable sales channel
for publishers and, with its reduced
importance, they will have to concen-
trate on restructuring their businesses to
begin marketing and selling directly to
the end users online through Kickstater,
Amazon or their own websites. The old
school model of needing distributors and
stores to sell their products is quickly
fading away. While in the past these
middlemen were needed to connect
with end customers, technology has
made them almost superfluous. This
trend is nothing new and can be
observed throughout the economy.
One only needs to think about
the book publishing industry and
the revolutionary changes brought
about by Amazon. This new reality
of direct distribution and faster,
more numerous, product launches
has a broad and profound impact on
the cost and revenue model of each
company in the value chain, forcing
them to adapt accordingly.
In times of change, the need to
rethink your entire business model
can lead to some very unusual new
opportunities. While all companies
in the industry need to fundamentally
adapt to the obvious changes in tech-
nology and customer behaviour, some
have discovered that the revolutionary
trends, which impacted their industry,
have also changed other sectors of our
economy. Linking the new technolo-
gies and customer behavior together
in a constructive and novel way can
lead to unique business strategies and
should become an active strategic step
forward rather than a passive reaction
to the challenges of the future.
Academy Games is one such firm
that is well on its way to explore these
opportunities in the educational and
gaming industry. Long before “Black
Lives Matter” became a household
expression, the firm published a game
www.europeanbusinessreview.com 57
 Business Model

called “Freedom: The Underground Railroad”. Perhaps board are they pre-empting history while America is
In the game players take on the rolls of aboli- facing a pending struggle between moderate
games can
tionists to help bring an end to slavery in Democrats, progressive Democrats, and
the United States. The game features historic teach us not AntiFa on one side and moderate Republicans
figures and events spanning from the early only about the and loyal Trump supporters on the other?
independence period until the Civil War. As past but give us Perhaps board games can teach us not only
players cooperate in the game, they learn not warnings about about the past but give us warnings about the
only to balance financial needs with benev- future too. Either way, one thing is for sure, the
the future too.
olent behaviour but are also introduced to booming board game industry has long aban-
enlightening historical facts. This hits a soft doned the innocence of “just” driving your
spot in the education industry where teachers competition into financial bankruptcy through
at high schools and Universities are increas- a real estate MONOPOLY or of “just” taking
ingly stressing the fact that teaching requires a RISK to destroy your opponent’s army and
more than pre-recorded YouTube videos or Academy Games, Birth of
conquer the world. Covid-19 has only acceler-
Zoom calls. Sitting down and exploring in a America ated this trend.
group the historic dilemmas, which people
faced in the past, is a unique and in-depth
learning experience. Building on their early
success, Academy Games has launched an
equally popular game series called – “Birth
of America”, which features games about the
French-Indian war, the American Revolution,
and the War of 1812. Yet they are not content
with just bringing new educational methods
to the American school rooms. Last year they
launched “Birth of Europe” with a game about
the Viking Invasion of England in 878. It is
even rumoured that a game about the 1936
Spanish Civil War is in the works pitting armed
militia from the Republican, Communist and
Anarchist side against the forces of a dictator
and his fascist allies. Is it just coincidence or

Uwe Eickert is the CEO and Co-Founder of Academy Games. Uwe built up and sold several
successful businesses before he figured out that game designing and publishing is the path to riches
and fame. Since then he has appeared on the Oprah show, been offered the position of Secretary
of State, acted in a major motion picture with Brad Pitt, and is in a think tank with Ernest T. Bass,
among other notables. He has a degree in Mechanical Engineering and an MBA specializing in
corporate finance and strategy. His hobbies include soccer, playing the violin, martial arts, painting,
sailing and is an amature plum pit spitter, under the tutelage of Master Spitter Brian Bennett (Note,
plum pits have more mass than cherry pits and are thus classified in a different competitive category.)

Boris Liedtke is a Distinguished Executive Fellow at INSEAD Emerging Markets Institute and
has over twenty years experience in the financial sector. He was the CEO of international banks
around the world and has served on the boards of directors for companies throughout Asia, the
US and Europe.

58 The European Business Review November - December 2020

Future of Business

MANAGING BY TRACTION
(MbT)
REINVENTING MANAGEMENT
IN THE CYBER-AGE
MARIO RAICH, TOMASZ KRZEMINSKI, CLAUDIO CISULLO,
SIMON L. DOLAN AND BONNIE RICHLEY

V OLATILITY
C OM P L E X I T Y

U NCERTAINT
Y
A MBIG
UITY
ABSTRACT
“We are at a critical turning point in human
history! We are all prisoners of our paradigms.
And as managers, we are captives of a paradigm
that places the pursuit of efficiency ahead of every
other goal.”1
(hereafter referred to as MbT). MbT is a frame-
work that is a powerful enabler for management
in the cyber-age. It is based on a short and simple
feedback loop.
INTRODUCTION

I
n a world of ambiguity and increasing “Imagination is the source of new, unexpected and
instability, we urgently need to review and often better solutions, fuelling bold visions.”
reinvent management, and that includes
ways of doing business. We need to exercise new The strategic All human actions have an implicit or explicit
leadership competencies and review manage- planning purpose. But only a meaningful purpose may be
ment paradigms, relevant processes, tools and process should attractive and sustainable, and thus provide trac-
instruments that are still valid in today’s volatile, tion to others.
uncertain, complex and ambiguous (VUCA)2 be reinvented The ever-changing complexity in which we
environment and in our highly technological to become live and operate in both our personal and busi-
and global world. We argue that there is a great
need to adopt bold new ideas and concepts
a dynamic- ness lives can be captured by the future design
framework (i.e., preceding the setting of a
and not merely change existing terminologies. direction direction). Once a direction is defined, we can
The time has come for a clarion call for a new operation move directly to an action or action(s) which
management framework. Our framework of are continuously assessed to verify alignment
the new management approach is through the
involving with the direction, while also being sensitive
lens of strategic planning, since it plays a key ‘planning by to the need to change direction if corrections
role in management success. We argue that the interactive are required. Action and direction are not new,
strategic planning process should be reinvented yet they have concurrent impact on the future
to become a dynamic-direction operation action direction. What is new is the fact that our turbu-
involving ‘planning by interactive action processes’. lent environment and key players are constantly
processes’. Employing such a dynamic focus
would also mean that performance reviews will
embed concepts such as value creation. In this
way, the direction becomes an active part of
action, where action can continually reshape
the direction. It is highly important to know
which direction to choose, why it has been
chosen and how to get there.
Often, the selected direction is more of a
guiding star than a road map to follow. This also
helps to define a dynamic assignment of resources
and means, which is a prerequisite to following
the selected direction. Actions would include
delivering ongoing constructive feedback about
the feasibility of the selected direction. In this
way, the selected direction defines the desired
future, and action is the actual creation of it.
Direction is always future-oriented and action is
focused on current activities and results.
What we describe in this article is the essence
of what we label ‘Management by Traction’

www.europeanbusinessreview.com 61
 Future of Business

changing, generating a feedback loop that is mation in all key aspects of human life: society,
both constructive and dynamic. Such a feedback
Beyond economy, business, science, technology, educa-
loop is needed now more than ever. In business understanding tion and politics (Raich, Eisler and Dolan, 2014).
strategy terms, one can say that feedback is being the immediate Thus, there is a quest for new ideas about
driven by a pull strategy far more than by a push how to cope with the emerging different worlds
strategy (see: https://keydifferences.com/differ-
business we live in. The governance and management of
ence-between-push-and-pull-strategy.html). context, it is organisations is becoming messier, and the clas-
This pull strategy is applicable to all core vital to have sical corporate forms, structures, processes, tools
management processes, including strategy devel- and instruments are increasingly becoming inca-
opment, planning and implementation. The solid insights pable of coping with these complex challenges.
pull strategy that we offer differs slightly from about the future In a state of permanent transition, it becomes
classical pull strategies. We call this pull strategy at two levels: extremely difficult to predict where things are
‘smart strategy’, because it encompasses all three headed. The number of different factors to be
phases: development, planning and implemen- the emerging taken into account is drastically expanding.
tation, linking theory and practice. Moreover, future and the Contextual changes are becoming one of the
smart strategy is applicable for corporate
more remote driving forces of transformation. In such an
environment, people are eager to implement
governance, resource allocation, performance
management, corporate structure, talent devel- future. ideas and projects as fast as possible, in order
opment, deployment and all other management to adapt and to attempt to gain a sense of secu-
processes. Thus, this paper focuses mainly on rity, or to survive. Beyond understanding the
smart strategy. It may help leaders to learn a new, immediate business context, it is vital to have
simplified and very efficient way of developing solid insights about the future at two levels: the
and deploying ‘strategy’. It may allow a concur- emerging future and the more remote future.
rent bidirectional influence in the development This makes the traditional strategic development
of direction and the deployment of actions. process not only complex and difficult, but also
Direction can be developed using Raich’s increasingly more irrelevant.
user-friendly ‘Future Design’ Framework, and
its actions can follow the practice which was
implemented successfully by Xellect (a Polish-
based consulting company: www.Xellect.com).
Raich’s Future Design Framework is based on
the ability and practice to dive deep into the
current context and move on to emerging and
future contexts. More detail is offered in a later
section of this article.
Numerous creative solutions are usually
needed to develop and sustain the attractiveness
of a chosen direction. Many years of experience
have shown that the ability to shift the focus
from searching towards finding is more impor-
tant than lots of creativity.
The pace and scope of change today are in
permanent acceleration. Additionally, there are an
increasing number of key technologies that will
be converging during the next decade. We are
moving, perhaps, into the fastest, most encom-
passing and deepest transformation in human
history, for better or for worse. This will most
likely lead to growing disruption and transfor-

62 The European Business Review November - December 2020


Therefore, organisations are seeking simpler,
faster and more efficient ways to replace the classic
strategic thinking and strategic management, so as
to be able to cope with increasing complexity and
uncertainty. Education also needs to make a big
leap in order to catch up with the new emerging
reality. It needs a paradigm shift from the tradi-
tional approaches towards a new future-oriented
core curriculum.
One of the key questions about future manage-
ment is whether strategy can still be the right way
to lead an organisation in the cyber-age. Obviously,
we can call everything we do ‘strategy’ (even a
state where there is no existing strategy), and wait
patiently while doing nothing, until an ‘opportun-
istic strategy’ emerges, or an ‘ad-hoc strategy’. In
essence, the terms ‘strategy’ and ‘strategic’ are very
malleable concepts, used whenever something seems
particularly important. The question arises: is a
classic ‘strategy’ really useful in times of VUCA and
permanent transformation? We argue that today we
need to make it possible (and even necessary) for
non-experts in the organisation to participate in its
forward thinking.
In most cases, once a strategy is developed and
agreed upon, it is not flexible to some key factors
that may have changed in the context. In principle,
the process needs to be started again based on the
reframed context.
In a constantly globally transitioning connected
world, people are eager to implement ideas and
projects as fast as possible, even when some risk
might be involved. Take, for example, the rush to
develop and use a vaccine to solve the COVID-19
pandemic. There are ample examples where new
In a constantly globally transitioning connected world,
people are eager to implement ideas and projects as fast as
possible, even when some risk might be involved.
ideas are deployed, including new processes,
new tools in order to deal quickly and easily with
emerging problems, and challenges.
And closely related to this approach is the need to
engage in new governance principles, and to set up
agile structures. Some initial new approaches towards
a new governance, business structure and organi-
sation have already been presented by Raich et al.
(2019)3 in previous issues of The European Business
Review. In this paper, nonetheless, we present and
elaborate on the MbT framework, which is focused
on Direction and Action embedded in a loop,
running concurrently. We hope that this framework
addresses the implicit and/or explicit purpose of a
21st-century organisation.
REALITY CHECK: WE ARE LIVING IN AN
AGE OF RADICAL TRANSFORMATION
“Everything flows, but it flows in a very
disruptive manner!”
The present is not what we expected it to be, and
the future is even more uncertain and is changing
continuously. We are in midst of the transition
from the industrial to the cyber-economy. We are
discovering that reality is non-sequential, non-sys-
temic and asymmetrical. Models and concepts
based on former thinking cannot cope with what is
happening around us. Thus, we need to change our
mindset about the world. The business world (as well
as political leaders) are also desperately looking for
new concepts and models that are characterised as
organic, systemic, and employing holistic thinking.
Indeed, the ‘new reality’ will generate more ques-
tions than answers (e.g., the management of the
COVID-19 pandemic). However, it is more impor-
tant to identify and define the right questions than
to get answers that may become obsolete tomorrow
(for example, managing the initial eruption of the
COVID-19 did not guarantee proper management
of the second wave of infections).
www.europeanbusinessreview.com 63
 Future of Business
Transitioning from the industrial age into the
cyber-age is a huge challenge, but it also offers
unique opportunities for enterprises and corpora-
tions. It requires foresight, appropriate education,
and the proper use of the necessary technological
infrastructures, as well as a strong dose of entrepre-
neurial spirit.
We need to be constantly reminded that our
world is not only global, but also highly complex,
dynamic and interconnected. We are not used to
planning actions for a global and systemic world.
We have been educated to use converging thinking
with the promise of "a solution" at the end. The
world around us is full of diverging and disrupting
events and happenings. We need to change our view
of the world forever. We must learn to find the right
questions and adequate creative solutions.
“What we have ahead of us is one of the
biggest transformations ever! We have
to face a tsunami of changes; people are
yearning for more certainty and meaning
in their life and work amidst the chaos.”
“It is vital to understand what is going on around us!”
Today, with advances in technology, meaningful-
ness in work is vanishing (Forbes, 2018, based on
the work of Ulrich and Ulrich). In addition, people
are anxious about automation based on intelligent
machines, intelligent programs and robots, which
seem to be the principal workforce of tomorrow.
Intelligent programs and robots are becoming
an integral part of the workforce and of our lives.
Therefore, it is necessary to understand what is
happening around us.
The highly uncertain and fragile future will lead
to restructuring and increasingly change the purpose
of companies aiming to survive (and prosper)
depending on the opportunities created. A good
example is Amazon, which started as a book/music
virtual store but, from the opportunities presented,
today sells almost anything and anywhere. Uber is a
company that started competing with taxi services
64 The European Business Review November - December 2020
but has now expanded to include land and air trans-
portation and food delivery. These are only two of
many examples that support our argument.
The ‘danger zone’ we need to cross (environ-
mental degradation, social unrest, conflict, fast
technological advances, unprecedented levels of
inequality, and polarisation) could mean that global
disruptions are becoming the rule, rather than
exception, in the coming decades. We need the
courage to move beyond our comfort zone into the
unknown and unexplored territory, to discover what
has never been thought of before. It is time to bring
connected (holistic and systemic) spiritual, physical,
psychological, philosophical and social thinking to
the transformation of science and our world view.
REINVENTING MANAGEMENT IN
THE CYBER-AGE
“The future is not just happening… people make
it happen.”
Cyber-reality influences the transformation of work
in the cyber-age due to automation and virtual-
isation based on artificial intelligence (AI). This
means that many work activities (not just manual),
will be automated, digitised and virtualised. As a
consequence, many new jobs related to technology
will be created. Virtual reality will also be a driving
force in the transformation of work.
“Our future economy will shift from growth to
sustainable transformation and innovation.”
We argue that our future economy will shift from
growth to sustainable transformation and innova-
tion. We further think that the purpose of business
will be to provide solutions that create value and an
increased quality of life for everyone. We will witness
completely new and different business models. We
speculate that the digital value platform (and later on
the hybrid value network) will be the most important
structure of organisations. However, organisations
have to focus on developing individuals to be better
at adaptability, innovation and execution. Richley
and Lingham (2015) have developed integrated
theories and concepts from learning, creativity,
design thinking, innovation and work motivation
to create a measure to assess, coach and develop
individuals to be more adaptive. Further, their
work identifies tendencies when innovating and
executing, especially when working on projects.
As more individuals are assessed, coached and
developed, it strengthens the organisation to
innovate and provide solutions that will align
with the shift in our economy from growth to
sustainable transformation. Richley and Lingham
(2020, forthcoming) have further elaborated on
the importance of this approach in our current
organisational and global contexts.
We put forward that business in the future will
need to have two executive leadership teams: 1.
agile and transforming ongoing business; and 2.
preparing new business ventures for emerging and
uncertain businesses. These executive leadership
teams will also need to be assessed, coached and
developed to attain higher quality of engagement
and improved capacity to innovate and execute
following the two-phase approach to achieve
‘high-impact engagement’ in organisations
(Lingham & Richley, 2018). Due to the constant
transformation in the business corporate
environment, strategic entrepreneurship will
become a principal driver of business. Early
attempts have been made to focus on sustainability
in the corporate business environment. However,
it is only recently that a model of social business
innovation, or SBI, was introduced by Richley
(2009) in order to help organisations consider
their strategic entrepreneurship and thus expand
and add value at the intersection of business and Automated Guided Vehicles
moving shipping containers
society. The seven characteristics of SBIs should to and from gantry cranes in a
be introduced as part of an organisation’s strategic port container terminal.
entrepreneurship as a main driver of business, so
as also to benefit society. In addition, corporate
leaders will have to become enablers of education,
as the cyber-organisation will become a ‘hyper-
education community’. Each organisation will
also have to actualise its own ‘future intelligence’
to enable the exploration of ideas and solutions
that will have the biggest impact in both the short
and long term.
STRATEGY IS SHIFTING TOWARDS
MANAGING BY TRACTION, I.E.
DIRECTION AND ACTION
Costas Markides, a professor at the London
Business School, argues that there is little
agreement among academics as to the purpose
of strategy. He also points out that most exec-
utives would define strategy as how to achieve
the company’s objectives. According to him,
As more individuals are assessed, coached and
developed, it strengthens the organisation to
innovate and provide solutions that will align
with the shift in our economy from growth to
sustainable transformation.
www.europeanbusinessreview.com 65
 Future of Business

that is a technically correct definition, The cyber-age creates, huge chal-

but it is so generic that it is practically lenges and opportunities for humanity,
meaningless. but it calls for a deep transformation of
The conventional process of setting business and society, enabling them to
goals, developing a strategic plan,
converting it to an operational plan,
The conventional harness the power of digital technol-
ogies. We can leverage ‘creation’ as a
and finally executing the approved plan process of setting goals, driver to have a positive and meaningful
does not work very well today. developing a strategic impact on education, culture, business
For several decades, annual strategy and society. We can bring meaningful-
planning has been an essential part of plan, converting it to an ness back into politics and the economy.
corporate liturgy. Organisations would operational plan, and
spend months developing their corpo- “The unfolding fourth industrial revolution
rate strategy, followed by operational finally executing the has the potential to revolutionise the speed
planning and budget allocation. This approved plan does not and scope of creation and destruction. The
approach has worked for many years
and is taught in business schools around
work very well today. convergence of new technological solutions
will alter our life and work far beyond
the globe. The accumulated corporate and where business is driven by AI and our expectations. It will also change poli-
bureaucracy creates corporate entropy cyber-reality, we urgently need to review tics and the role of governments. Virtual
and gets in the way of the required and reinvent the way we conduct busi- reality and artificial intelligence are adding
agility and resilience towards unex- ness, lead and manage processes, tools, a new dimension. The impact is difficult to
pected changes and disruptions. instruments and structure. This deep imagine today, but it will be very deep, way
In a VUCA world, planning is transformation of the business and beyond anything we can imagine today!”
becoming obsolete. In 1994, Henry the business context will inadvertently
Mintzberg, the leading management affect work and education. Permanent A Future Design Framework
guru, observed that the process of stra- disruptions and transformation in a
tegic planning was effective for about multi-reality world require new ways “In a world in transition, we need a
25 percent of companies. The majority to lead and to manage society and process focused on the desired future and
found it to be ineffective. To reiterate, in organisations. We need management not just on the expected one.”
a world that is constantly in transition by traction (MbT).
To aim at the desired future, we need
to define the direction. In the following
paragraphs, we describe how to develop
Key premises in “Management by Traction” the direction and make the transition to
• Business in the cyber-age creates and sustains the action. ‘Direction and action’ are based
attraction of customers, talents and investors. This is the on the future design framework. Once
overall direction. the direction has been designed, it will
• People in charge of business need to create traction in run in parallel with the action.
order to get attraction. There is a dramatic shift from To cope with the environment in
transformation we need a future design
push to pull in all areas of management (e.g., marketing, framework which can help us to cope
recruitment, supply chain, production, etc.). This is with the ever-changing future and allows
essentially “Management by Traction”. us at the same time to continue with
• Work is performed by humans and machines (which is meaningful actions. The traditional
core to the concept of “intelligent collaboration”) to management process can be replaced by
deploy the actions necessary to create value and shape MbT, which is based on the future design
the next direction. framework, having dynamic direction
• The term “at-tr-action” contains Attraction, Traction and interactive action processes at its
core. In MbT, the direction becomes
and Action.
an active part of action, which can in

66 The European Business Review November - December 2020

turn continually shape the direction. Direction and
action therefore operate in tandem. Direction shows
the way for the action, and actions shape direction
based on the outcomes.
It is critical to know which direction to choose,
which choices to make and why, and how to get
there. As mentioned earlier, the selected direction is
often more of a guiding star, rather than a road map
to follow. This also helps to define the resources, the
corresponding means and the tools which will be
required in order to follow the defined direction.
Figure 1: Future Design Framework: Exploring the context
DYSTOPIA UTOPIA DYSTOPIA
Unknown
Speculations
FUTURE
Fiction FUTURE CONTEXT FUTURE CONTEXT
EMERGING CONTEXT EMERGING CONTEXT
Unknown
Imagination EMERGING
ACTUAL CONTEXT
ACTUAL
Unknown
Legacies Legacies
KNOWN
Unknown PAST
HISTORY
Speculations
We need to develop ‘empathy’ towards the future”.
To get a better understanding of the future, we need
first to overcome our limitations in order to perceive
the reality around us, as well as the deformation of
our perceptions due to our cultural and personal
biases. We need to develop ‘empathy’ towards the
future. Studying our history, international experi-
ences, other people’s views (even controversial), and
the use of many different sources (often contradic-
tory) can help shape our view as well. In addition,
the development of imagination and intuition is
important. We need to overcome our current reality,
as it may unconsciously limit our perception based
on our dominating world view, our biases, what we
consider possible and impossible, acceptable and
unacceptable, likes and dislikes, our mental comfort
zone, etc. We also need to overcome the human habit
of projecting past experiences and present status into
the future. Finally, we need be aware of the human
habit of generalising experiences and views and pref-
erences, expecting other people to think and behave
similarly. To get meaningful insights about the future,
it is necessary to release the past, to explore the rele-
vant actual context, and go beyond to the emerging
and future context. Is it even possible?
Journey into the unknown
Exploring the future in a fast-changing environ-
ment challenges traditional intuition, patterns and
wisdom. It is pushing people and organisations
beyond their comfort zone. For ‘future explora-
tion’, it is useful to create a ‘mental framework’,
(i.e. a generic representation of the ‘scenario’ and
the ‘space’ we want to consider). We suggest that we
Unknowna
Speculations should move from linear simple logic and structures
Fiction
to one that is complex and systemic.
It is a journey into the unknown (unexplored and
Unknown uncharted), where the paths to follow have often to
Imagination
be discovered or even created. A multi-reality world
in transition requires constant focus on the actual,
ACTUAL CONTEXT the emerging and the future context. It also requires
Unknown
constant awareness about contextual changes and
how they might affect our future orientation.
Businesses that are too focused on past successes will
Unknown
have no future. Everything can change in an instant.
As a first step of the entire process, we need to elab-
Speculations
orate a generic context framework beginning at the
actual level and then moving towards the emerging
and future levels. A look at the mega-trends (including
industry or other specific mega-trends) can offer deep
insights into the actual context by constantly gath-
ering and clustering insights and information. As we
move toward the emerging and future contexts, what
we know gets smaller as the unknown increases.
Bear in mind
The further you move into the future, the less factual
information is available, and intuition and imagination
increases. This also means that we have to engage more in
speculation. For future design, we need lots of information
and insights, and a well-developed imagination and
intuition. All this requires smart clustering and a persistent
meshing of ideas and information.
www.europeanbusinessreview.com 67
 Future of Business

To observe the contextual changes, we need to This means the ‘direction’ and the ‘action’ processes
promote and create a culture of exploration. Every are running in parallel across all three levels.
key function with contacts to the outside of the This framework focusing on ‘direction’ and
enterprise (board of directors, executive board, ‘action’ is particularly useful for businesses in highly
procurement, R&D, marketing, sales, services, HR) volatile industries, businesses at risk of disruption,
should participate in a constant exploration of the entrepreneurial organisations, and any organisa-
ever-changing context. Pay attention to the changes tion that might want to go beyond the traditional
of the external context bringing in connected strategy development process.
(holistic and systemic) spiritual, physical, psycho-
logical, philosophical and social thinking to the
transformation of science and our world view. Such
a design would further link to MbT, supporting Figure 2. The Traction Loop Between
“high-impact engagement” (Lingham & Richley,
2018), and align with the seven characteristics
Direction and Action
outlined in social business innovation (Richley,
2009) as organisations explore new ideas, possibili-
ties and approaches to engage and thrive in the both
the emerging and future contexts.
Fortunately, the fastest and most efficient way to
leverage and to deploy the growing power of AI is
the close collaboration of humans and intelligent Intelligent
machines, leveraging the best from both sides. But Collaboration
this also means heavy investment in the further
development of AI and the enhancement of human
capabilities in parallel. DIRECTION TRACTION ACTION

MBT FRAMEWORK
Resources
To leverage ‘creation’ and bring back meaningfulness Results
into politics and the economy, we have developed the
MbT framework based on two core elements: direc-
tion and action. Once the direction is established,
the actions will then lead the process, which then
continues as an interaction between the direction and
action at three levels: actual, emerging and future.

Bear in mind
• Future design is challenging traditional intuition patterns and wisdom
• It is pushing people and organisations beyond their comfort zone
• We need to move from a simple, linear to a complex and systemic view
• When we are moving into the future, the part of the unknown is growing bigger and faster
• Moving forward into the future, we need to start with deep insights into the actual context
• Designing visual models helps to make the insights more intelligent
• Be curious, reframe your business, try out, and test. If necessary, get help and create alliances (that is,
collaboration is imperative in this new dynamic). We need to know where we are going – or, at least,
where we want to get to, but the directions may be changing.

68 The European Business Review November - December 2020


Table 1. The MbT core components
1. Principle hypothesis
A word in constant transformation loop
2. Future Design Framework
Actual context exploration
Emerging context
Future Context
3. Defining Direction
Process to define exploration
Stage 1: Launch
Stage 2: Exploration
Stage 3: Outcomes
Concurrent process of direction and action
4. Defining ang deploying Action
Tools and instruments for the dfeployment of
the action
Stage 1: Creo Camp
Stage 2: Flow Session
Stage 3: Strategic Sprint
5. Creative Solutions
Stage 1: Reality → Exploration
Stage 2: Imagination → Discovery
Stafe 3 Fiction → Quest
The core MbT Framework is basically made up
of five core elements: an understanding of the world
in transition (i.e., driving forces, enablers and mega-
trends, and the transformation loop); the future
design framework; the direction, the action; and a
method to find creative solution
Table 2. Defining Key Direction (Steps and Stages)
Define team and team leader
• Define specific focus
• Once what will be the focus of the exploration is
Stage 1:
decided, it is necessary to create a specific context
(Launch) framework around the selected topic
• Elaborate the context of the selected topic at three
levels: first on the actual level followed by emerging
Stage 2: and future levels.
(Exploration • Dive into the actual context of the selected topic
and Design) • USe collaboration and collaborative intelligence
whenever possible
• Direction: Crossing first the "Danger Zone" (i.e.,
dealing with the degradation of the environmen,
social unrest, conflicts, and wars) to move
towards a a Meta-Mind Society
• Cluster collected information and knowledge
• Based on the collected information and knowledge
from the actual context, describe the view of the
emerging and the future levels in a short summary
of 1-2 pages
• Use creative problem solving where creative
solutions are required
• Use imagination and intiution as well
• Three possible paths seem visible: Two dystopias
Stage 3: (powerful Lords, technology-controlled world)
and one utopia of Ω-Mind. The paths may merge
(Exploration
and mix depending on our process.
and Design)
• Ideas, suggestions, key issues,
• Business Cases
• Proposals for projects
• Proposals for actions and action plans
• Plenty of actions and projects are necessary. The
two most urgent are bringing climate change
to a standstill and the deployment of the core
curriculum based on human uniqueness leading
to Superminds.
• Proposals for innovations
• Use whenever it is appropriate the framework of
the business case
• Transit to the ongoing loop of Direction and Action
• Focus on action until a new Direction is required
• Use the concept of the transformation,
Stage 4:
the transformation double loop and the
(Transit) transformation chain when appropriate
• Leverahe genetic and individual entrepreneurship
for implemantation
www.europeanbusinessreview.com 69
 Future of Business
ACTION AND RESULTS
Direction-driven workflow – toward
future and results
Direction-driven workflow is an agreed-upon
and designed way for the teams and leader
to plan and implement the strategy. It is a
management system derived from OKR tech-
nologies. OKR stands for ‘Objective and Key
Results’. OKR was created by Andy Grove4 at
Intel. The system is fixed and visualised in the
form of a process, its tools and methods. Tools
are sets of templates (canvases), especially GO
Model Canvas5, that help you design, fix and
visualise your prepared concepts.
Direction-driven workflow is a standard of
collaboration tailored to the needs and capa-
bilities of the team. Importantly, this standard
is flexible and easily modifiable. This translates
into the possibility of an adaptive approach
and an agile working style. The composi-
tion of the elements contained in it helps the
leader and the team to prepare for the effective
implementation of the strategy in the VUCA
environment. These elements support not only
the management of the task flow, but above all
at the level of intellectual work of a conceptual
nature. This type of work is necessary to create a
direction and continuously refresh it. The more
vulnerable the team's work environment is, the
shorter will be the prospect of planning goals
and strategies, and thus there will be a need to
refresh the strategy more frequently.
Direction-driven workflow captures and
systematises the intellectual activities on which
the future of the company depends and the
ability to survive the VUCA environment. It
introduces new rules to the work culture and
70 The European Business Review November - December 2020
involves preparing an appropriate approach to
planning, providing feedback and evaluating
results and actions to make decisions and, above
all, to build a learning organisation.
STAGE 1
Flow Session. This is a workshop where the
team learns about the direction-driven work-
flow concept and prepares its first version. The
next design steps are for Zone 1 Runway, Zone
2 Feedback Loop, and Zone 3 Service. Flow
Session is a workshop meeting. The design and
fixation of a direction-driven workflow by one
team and leader may require a 1-3 session. The
wavelength caused by direction-driven work-
flow can range from 1-3 weeks. In the first
approach, the team will need more time than
in subsequent cycles, which will only serve
to modify and improve the direction-driven
workflow model.
STAGE 2
Creo Camp. This is a series of team meetings
focused on planning and finding solutions.
At Creo Camp, the team uses everything they
agreed to design direction-driven workflow for
Zone 1, RUNWAY. The result of each Creo
Camp is the goals and strategy saved using
OKR technology. Creo Camp can last from
2 to 4 weeks. The more levels of management
there are, the longer the planning process will
Figure 4: Workflow Benchmark Stages
3. Strategic Sprint
2. Creo Camp
1.Flow Session
1 | RUNWAY 2 | FEEDBACK LOOP 3 | SERVICE
be. It should start in the last month of the
quarter – depending on its length, it may be
the first or second week of the month. It may
be completed in the first or second week of the
following quarter. Creo Camp is an event that
triggers a wave of creative thinking and plan-
ning. At Creo Camp, the team and leader will
define the objectives and key results (OKR)
by submitting them into a coherent strategic
concept. They will start looking for solutions
that will then be transformed into projects
supporting the achievement of the objectives.
STAGE 3
Strategic Sprint. This is the stage of the action
leading to the implementation of the planned
strategic concept. It focuses on the implemen-
tation of tasks, monitoring and evaluation of
results. What is most important at this stage
is working on the basis of agreed principles.
The team and the leader should first and fore-
most focus on achieving the planned results
and, of course, solving current problems. The
direction and priorities of the action are set
out in the OKR and, in addition, tools to help
you plan your projects. The team is precisely
focused and prepared for work. During the
operation, the team will carry out periodic
monitoring of their activities and make the
necessary adjustments required to stay on
course. In each of the subsequent sprints, the
team and leader will gain more and more skills
and experience in addressing the challenges of
the VUCA environment and following in the
designated direction.
The Significance of Collaborative
Intelligence in Creating
Breakthroughs in TrAction
“Humans can experience great peace of mind from
the feeling of union with the universe!”
We are at the beginning of the age of collabo-
rative intelligence, since humans and smart
AI-based machines have started working
together. Collaborative intelligence (CQ)6 is a
combination of human mind (HM) (individual
and collective) and artificial intelligence (AI) in
different forms and at different levels. It delivers
the best results by leveraging the most appro-
priate abilities of both sides.
The collaboration of humans with smart
machines and programs creates new solu-
tions, way beyond our imagination, leading to
meaningful quality of life, and enhancement
of products, services and experiences.7 Super-
minds together with AI-based machines will be
able to create ‘meta-minds’, thus leading to a
‘meta-mind society’.
“Humanity urgently needs a new direction
built on a new big dream and accompanied by
bold actions!”
Figure 5: Collaborative Intelligence to a Meta-Mind Society
Human Abilities Artificial Intelligence
Human Uniqueness Human Uniqueness
COLLABORATIVE INTELLIGENCE
Development & Enhancement Development towards
towards Super Minds General Artificial Intelligence
JOINT DEVELOPMENT & ENHANCEMENT
Self-Development Smart machine
Individual transformation own development
META-MIND SOCIETY
Later, when the general AI is well developed
and most of the world highly connected, a state
of ‘fusion-mind’ may result. The final aim would
be the development of the ‘Ω-mind’, a perfect
globally connected alignment of natural and
artificial intelligence.
A major achievement will be reaching the
meta-mind society. The separated and the joint
developments are still ahead of us. Collaborative
intelligence will lead to major breakthroughs
for TrAction, in the development of direction
and the deployment of action, and finally in the
concurrent development of both.
www.europeanbusinessreview.com 71
 Future of Business
IMPLICATIONS AND CONCLUSIONS
“What’s lacking is not insightful analysis, but truly
bold and imaginative alternatives to the manage-
ment status quo – and an army of innovators who
have the stamina to reinvent the management from
the ground up.”
Here are some suggestions which can help
an organisation to survive and thrive in a fast-
changing context:
• Create a culture of exploration
• Create an open digital platform with all
information about relevant context changes
accessible to all employees. Keep them always
with the source, and the name of the provider.
• Encourage employees to follow contextual
changes and make leadership interest visible
• Make the exploration competitive and attrac-
tive, with prizes for best contributions
• Organise regular reviews of the input and
create follow-up actions and projects
• Engage students for specific exploration jour-
neys (e.g. to explore the future of your business)
• Build an enterprise-specific network for
‘future ideas’. Involve people from the corpo-
rate eco-system to participate
72 The European Business Review November - December 2020
• Use parallel governance – one for the actual
and emerging contexts and one for the
future business.
Collateral • Don’t forget to watch start-ups relevant to your
industry and your business. They are an impor-
development is tant early indicator of new developments.
spreading and
sharing practices Be aware! There is permanent transition on all
levels. Get ready for the unexpected.
and know-how People will be permanently moving:
upwards, • From one education phase to another within
downwards, a lifelong education framework
• From one job to another. A job for life is the
and laterally exception.
to peers. It is a • From one geopolitical constellation to another
way of infusing • Between different realities: our reality, digital
reality, augmented reality, and virtual reality
practices into an • AI will be moving toward GAI
organisation’s
culture. Companies will change structure and organ-
isation according to their actual purpose. They
will use collateral education and development
to create organisational future orientation
built through a set of practices that permit the
identification and interpretation of changes in
the environment and drive adequate actions to
ensure long-term survival and success.
 Collateral development is spreading and
sharing practices and know-how upwards,
downwards, and laterally to peers. It is a way
of infusing practices into an organisation’s
culture. It may be useful to have a direction for
the actual and emerging business, as well as one
for the future business.
Call for action
“The status quo isn’t worth protecting. It’s easy to be in reaction,
to be defensive, fighting for the world we had yesterday. But we
must fight for something better, something beyond what we
know or have seen, but something we have to invent.”
• Keep in mind that we are in the transition period on the route
towards ‘seamlessness’ of the different realities of cyber-reality
• Develop future thinking skills for selected people and let them
pread them across the organisation
• Create and sustain a portfolio of new business opportunities
• Care about collaborative intelligence and be aware of
management reinvention
• Test ’direction and action’ based on future development
• Use ’direction and action’ for talent development
• Experiment with parallel top management teams – one for
current business and one for future business
References
1. Hamel, G. (2007). The Future of Management.
2. VUCA is “Volatile, Uncertain, Complex, and Ambiguous.
3. Beyond Collaborative Intelligence we can see a Meta-Mind
Society Surfacing and we can dream about of a Ω-Mind,
Mario Raich, Dave Ulrich, Simon L. Dolan, Claudio
Cisullo, Bonnie Richley, The European Business Review,
September-October 2019
4. Grove, Andrew (1983). High Output Management.
5. Source: https://www.gomodelcanvas.pl
6. Collaborative intelligence, https://en.wikipedia.org/
wiki/Collaborative_intelligence Christopher Isak, What
is Collaborative Intelligence? https://techacute.com/
what-is-collaborative-intelligence/
7. Beyond Collaborative Intelligence we can see a Meta-Mind
Society Surfacing and we can dream about of a Ω-Mind,
Mario Raich, Dave Ulrich, Simon L. Dolan, Claudio
Cisullo, Bonnie Richley, The European Business Review,
September-October 2019.
• Collaborative intelligence, https://en.wikipedia.org/wiki/
Collaborative_intelligence
• Forbes (2018) The Why Of Work: Purpose And Meaning
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www.europeanbusinessreview.com 73
 Future of Business
Mario Raich is a Swiss futurist, book author
and global management consultant. He
Mario Raich is a Swiss futurist, book author
and global management consultant. He was
a Senior Executive in several global finan-
cial organisations, and Invited Professor to
some leading business schools like ESADE
(Barcelona). He is the co-founder and
Chairman of e-Merit Academy (www.emer-
itacademy.com), and Managing Director
for the Innovation Services at Frei+Raich
Ltd. in Zurich. In addition he is a member
of the advisory board of the Global
Future of Work Foundation in Barcelona.
Currently he is researching the impact of
Cyber-Reality and Artificial Intelligence on
society, education, business and work.
Tomasz Krzemiński - Business Designer,
consultant, trainer. Has implemented dozens
of projects on strategy improvement in
various industries, including banks, manu-
facturing companies, trading companies, and
insurance. Author of innovative manage-
ment methods and tools: GO Model Canvas,
Stragiler, Extreme Strategy Design, Strategic
Workflow Design. Have participated in the
Polish-Swiss Government Project concerning
the development of entrepreneurship. More,
in: https://www.xellect.com
Claudio Cisullo is a Swiss-based serial
entrepreneur and investor. He is the
founder and Chairman of CC Trust, a
family office invested across the biotech,
leisure, pharmaceuticals, professional
services, real estate and technology
sectors. Among his most recent invest-
ment is Chain IQ Group, a globally active
provider of procurements services.
74 The European Business Review November - December 2020
Simon L. Dolan is currently the president
of the Global Future of Work Foundation
(www.globalfutureofwork.com ). He used
to be the Future of Work Chair at ESADE
Business School in Barcelona, and before
that he taught for many years at McGill
and Montreal Universities (Canada),
Boston and University of Colorado (U.S.).
He is a prolific author with over 75 books
on themes connected with managing
people, culture reengineering, values and
coaching. His full c.v. can be seen at:
www.simondolan.com
Bonnie A. Richley is the Co-Founder and
Chief Design and Innovation Officer for
Interaction Science, LLC. She previously
was an Associate Professor and Chair/
Program Director for the Department
of Business and Entrepreneurship at
Chatham University, the AVP of HR and
Asst Professor at Case Western Reserve
University. Her work involves positive
organization development with exper-
tise in Appreciative Inquiry; executive
coaching as a trainer and master coach;
and adult learning theories and compe-
tency development.
 Sustainability
THE NEW RESPONSIBILITIES OF COMPANIES
IN A TIME OF INCREASING
INEQUALITY AND CLIMATE CHANGE
Time was, when it was generally accepted
that companies were only there to generate
wealth for their shareholders. Now, in a more
nuanced world, many believe that companies’
obligations can and should go beyond mere
profit. Enrico Sassoon, editor-in-chief of the
Harvard Business Review Italy, documents the
landfall and passage of the winds of change
over the modern business landscape.
T
he Business Roundtable manifesto, and
other similar manifestos published over
the last two or three years, have, inevi-
tably, opened the floodgates of a debate which
has now raged for a hundred years, over what
the aim (or “purpose”, as it is fashionable to call
it nowadays) of a corporation is. For many, the
change, which merely appears to be innovative,
in the manifesto signals the end of the mantra
of maximising shareholder value and guiding
businesses towards an era focusing more on
safeguarding stakeholder interests. Among
these, first and foremost, has emerged the
global environment, an element which appears
to be more highly ranked than the others. In
other words, stakeholders no longer take into
account just the social groups represented in
and by the company, such as the employees,
the suppliers and the customers, but also the
surrounding reality, ranging from that which
BY ENRICO SASSOON
Global is most restricted and consists of the local and
regional community, to the widest of all, i.e.
environment, an nothing less than the future of the planet in the
element which current context of climate change.
appears to be It is clear that this new normal is turning
more highly the long-running debate over “classic” posi-
ranked than tions on its head. Here, I’m not talking about a
comparison of the Marxist vision of the objec-
the others. In tives of business and entrepreneurs with the
other words, neoclassical view. In the former, the objective
stakeholders no is defined as the surplus obtained from the
longer take into exploitation of employed labour paid at a level
account just the below the “value” produced, while, according
to the latter, profit is essentially a premium on
social groups entrepreneurial courage linked to the contribu-
represented tion of capital and the assumption of risk. In
in and by the the current debate, it is more useful to compare
company, such as the visions which, from a certain moment
the employees, onwards, emerged during research on modern
managerial capitalism and the aims and respon-
the suppliers and sibilities of businesses and their representatives.
the customers. As Roger Martin emphasised in 2014,
modern capitalism has lived through two prin-
cipal epochs, in which two seminal academic
studies are rooted. The first was that of mana-
gerial capitalism. This began in 1932 and was
distinguished by the notion, radical at the time,
that businesses should be managed profession-
ally. The second, shareholder value capitalism,
began in 1976. Its central premise was that the
www.europeanbusinessreview.com 75
 Sustainability
Change should not be feared, as it would
generate a new courageous era of economic
expansion (postponed, however, by some
years due to the Great Depression).
goal of any business should be to maximise the
wealth of its shareholders. If companies follow
this objective, it was affirmed, then both the share-
holders and the company will derive a benefit.
Neither of these two epochs paid particular
attention to the shareholders and the conditions
surrounding the company, let alone the natural
environment, except for the indisputable assump-
tion that when a business and its representatives
fulfil their duty to create wealth through profit
and employment in the marketplace, they are
meeting their objectives. These include, however,
guaranteeing the satisfaction and well-being of
citizen-customers by selling the right products and
services at the right price.
As previously mentioned, the first two epochs
were heralded by significant academic research.
In 1932, Adolf A. Berle and Gardiner C. Means
published their well-known treatise, The Modern
Corporation and Private Property, in which they
affirmed that the management of a company
should be separated from its ownership. The busi-
ness world should no longer be dominated by
76 The European Business Review November - December 2020
owner-managing directors such as the Rockefellers,
the Mellons, the Carnegies and the Morgans.
Instead, companies should be guided by external
figures – in other words by a new class of profes-
sional CEOs. Change should not be feared, as it
would generate a new courageous era of economic
expansion (postponed, however, by some years due
to the Great Depression).
The “vision” certainly appeared to be convincing
and, while owner-shareholders continued to exist,
it was the professional managers who were starting
to run the “control centre”. Entrepreneurs were
welcome to launch new business activities but,
once the business had grown to a significant size,
it was seen as wise to delegate these activities to the
more reliable and less fickle management profes-
sionals. This idea was successful, and for around
half a century the management professional was
established and evolved, without there ever being
clarity over the reciprocal responsibilities between
the board, the shareholders and the management,
and without any clear demarcation between entre-
preneurs and professional managers, in a concealed
but continuous competition for leadership which
has never been fully smoothed over.
The second phase began in 1976, when mana-
gerial capitalism was subjected to harsh criticism
in the article “Theory of the Firm: Managerial
Behavior, Agency Costs and Ownership Structure”
by Michael C. Jensen and William H. Meckling,
which is among the most quoted business academic
papers of all time. The authors referenced what
was known as the “theory of agency”, according to
which professional managers who, although they
should be acting in the interests of the owner, actu-
ally look after their own interests. In this regard,
in fact, the two scholars observed that, normally,
companies’ management tended to pay little atten-
tion to the interests of the owners, since it basically
focused on improving its own economic advantage
to the detriment of the economic-financial benefit
of the shareholders. Jensen and Meckling argued
that this constituted harm for the shareholders and
was a source of waste for the economy; manage-
ment would be able to steer the business and its
resources in a way that supported its own interests.
A process of realignment was therefore required.
Their criticism initiated the era of shareholder
value capitalism, which was authoritatively supported

by Milton Friedman and the Chicago
School. CEOs quickly understood the
need to pledge loyalty to “maximising
shareholder value”, encouraged by
eminent consultancy companies (first
and foremost McKinsey) and by boards
of directors that were eager to reassert
their prerogative to align the interests of
management with those of the owners,
linking management remuneration to
shareholder value. Martin summed it
up: “No longer would the shareholder be
abused: the shareholder would be king.”
And, until a short time ago, that is
how it was. At least most of the time,
and not without noteworthy excep-
tions, even in Italy, where the Olivetti
model is still little known and, even
though admired, little used in practice.
It is difficult and misleading to try to
identify the moment the era of share-
holder-before-all started to show cracks.
However, one important turning point
was clearly the 2007-2008 subprime
crisis, and the subsequent economic
crisis. But this point, although impor-
tant, is not the only one. It is clear that
the crisis led to an impoverishment of
the middle classes and a widening of
Companies’ management
tended to pay little
attention to the interests
of the owners, since it
basically focused on
improving its own economic
advantage to the detriment
of the economic-financial
benefit of the shareholders.
the income gap. However, since the
beginning of this century, the digital
“fourth industrial revolution” (or the
third, according to some), has also
carried increasing weight in terms of its
profound modification of the labour
market, pressure on wages and salaries,
a demand for new skills that is often
not met by the education system and,
therefore, an increasing misalignment
between new job opportunities and
the capacity of many workers to match
these effectively.
In other words, over the last twenty
years, the conditions have been created,
for various reasons, for the “pauperisation”
of large segments of the labour force, in
a context of great change and, often,
general economic crisis (Piketty, 2018;
Collier, 2018). Other components of
this pressure, defined generically as an
“increase in inequality”, have been the
strong and barely controlled migration
flows and their economic – as well as
social and political – consequences,
and the crisis related to climate change.
Last but not least, the current health
crisis, whose effects are starting to be
seen and which will have increasing
impact in the future.
And it is in this context that it
would seem to be a good moment to
consider the turning point, real or
imagined, represented by the Business
Roundtable manifesto. When, in
1989, Fukuyama expressed the concept
of the “end of history”, given that the
fall of the Berlin Wall and the end of
communism would unfurl a golden
future under the banner of a trium-
phant capitalism, this did not cause
much damage, because, basically, few
believed it. However, it did create some
damage, because, along with other
trends, such as, for example, those
that had already been expressed at the
highest political level by Reagan in the
USA and Thatcher in the UK, many
reached the conclusion that the capi-
talist system had indeed triumphed
and now had no adversaries. It could
now express itself with neither limits
nor obstacles in the area of produc-
tion as well as in the area of finance.
Friedman certainly sang its praises, as
did Arthur Laffer and the other gurus
of supply-side economics in the late
1970s and early 1980s.
The last ten years have, in fact,
seen a prevailing trend of managing
companies with a view to maximising
shareholder value, although we are not
talking about a predominance that has
been uncontested or absolute. At the
same time, doubts over the wisdom
www.europeanbusinessreview.com 77
 Sustainability
or appropriateness of this approach
have emerged, both with regard to
the management of companies by
professional managers whose aim is to
reward shareholders – thereby increas-
ingly rewarding themselves – and with
regard to the wider context of greater
emphasis being placed on the interests
of stakeholders.
These are the years in which there
is growing sensitivity to a compa-
ny’s social responsibility. Initially, this
challenged the simple and simplistic
notion that paying a little attention to
society through more or less generous
acts of philanthropy could be suffi-
cient. Gradually, there has been a move
towards a new conception of greater
involvement of the company as a key
player in society with a specific duty to
share the value created. This concep-
tion has become well known, thanks to
Porter and Kramer, through the expres-
sion “shared value”.
One might ask, before enquiring
if the representatives of the Business
Roundtable actually intend to put
into practice the intentions they have
expressed in the manifesto, whether
Porter might expect that, quite apart
from corporate social responsibility,
businesses of the world might end up
embracing the idea and objective of
shared value with regard to the purpose
of a corporation. Even for the sceptics,
little willing to acknowledge that organ-
isations have the capacity to express
ethics or morals, the response appears
to be broadly positive. Despite much
proof to the contrary, there are many
companies, entrepreneurs, shareholders
and professional managers who place, if
not at the centre, at least in a pre-em-
inent position, the idea that creating
There are many companies, entrepreneurs, shareholders and professional managers
who place, if not at the centre, at least in a pre-eminent position, the idea that
creating value should go beyond generating and maximising profit.
78 The European Business Review November - December 2020
value should go beyond generating and
maximising profit, before dividing it
up in various ways according to various
negotiations, between the shareholders
and the managers themselves.
The point is that, as has been the
case since the times of Adam Smith, we
are not talking about an objective or a
moral conscience (or at least, not only
that), but of a need to react both to
pressures relating to the business or its
various stakeholders, and to the compa-
ny’s real interest in the new context in
which it is carrying out – and most of
all will continue to carry out – its busi-
ness activities in a global and a local
context. An interest that, as may be
clearly shown, cannot be met by making
short-sighted or short-term choices, and
even less by adopting sly marketing and
communication measures. Instead, stra-
tegic choices are required of great and
growing significance. throughout global society, and trying to
Perhaps it is not possible – and may avoid it would be as futile as it would be
never be possible – to compare the dangerous. The emphasis placed on these
Business Roundtable manifesto with the change processes does not seem exces-
great turning points of 1932 and 1976 sive. The reasons are multiple.
that spring to mind, but it is certain that The signatories to the manifesto are
it cannot be underestimated. At least, best placed to take note of the enor-
for now, it is a document that expresses mous pressures that are growing on
a strong desire for change on behalf of businesses. Until not so long ago, it was
almost 200 major global companies. possible to pay attention to, and control,
These include companies headed by public opinion, for each individual
some of the highest earners in the world, organisation as well as for a group of
generally from the digital revolution, organisations, in a partial or incomplete
with personal wealth that is in line with manner. Lack of information, or rather
the GDP of some countries. It is worth information asymmetries, was the order
repeating that the appeal that has been of the day. This no longer holds true
launched has not appeared suddenly out in companies in which information is
of the blue, but it would be silly to claim global and instantaneous. Social pres-
that it is not having and will not have a sure on business, often from the new
significant impact. generations, is continuously increasing
The change asked of the business world – even faster than the already great and
is set within a context of general change intense forces of transformation.

For companies, from an internal point of
view, another type of pressure is rising. This
regards less the strategic purpose of a busi-
ness, and more certain management practices
applied more often in the recent past, and still
dominant today, that result in additional dispar-
ities in incomes and relationships between top
management and employees in general – most
of all, the well-known tendency of management
to privilege short-term objectives over long-term
objectives and practical ways to implement the
relevant choices. Short-termism, more common
in the USA than in Italy and the rest of Europe
(and found more in listed companies than in
family-run businesses), often leads to company
leadership that is, in practice, in conflict with
the long-term interests of the stakeholders. Even
so, it is best not to underestimate the complexity
of the task faced by responsible management in
reconciling the pressure from analysts and hedge
funds to reach short-term market objectives, and
the expectations of shareholders and the board
to achieve results that are sustainable over time.
Managers need to have the talent to be almost
cross-eyed, combined with an acrobatic ambi-
dexterity to marry together objectives that seem
to be in conflict with one another.
It is well known that an obstacle to developing
that healthy squint and that desirable ambidex-
terity comes from the consequences anticipated
by Jensen and Meckling, which have produced
two significant effects. These were the adoption
of stock options as the basis for management
remuneration, often leading to short-term
choices in order to maximise share value in the
short term, and the practice, less analysed and
debated, of resorting increasingly to widespread
buy-back, essentially for the same reasons. Taken
together, these two practices had the effect of
artificially inflating share value, rewarding both
shareholders and management in the short term,
while at the same time reducing the resources
available to dedicate to sustainable investment in
the long term and to the well-being and profes-
sional development of the employees.
Companies, in particular larger ones,
that wish to follow the prescriptions of a
purpose-oriented manifesto should, therefore,
examine and review mechanisms for govern-
ance and manager incentivisation to create, in
agreement with the shareholders and without
penalising the market, shared and sustainable
long-term value. Furthermore, this requires
reflection on the stellar compensation paid to
the “champions” of management, probably
unjustified in relation to their actual contri-
bution to the results of the business, and
fundamentally unjustifiable for most of public
Managers need to opinion (not just those who adopt obvious and
have the talent to unpleasant demagogic positions).
But the emphasis placed on the change
be almost cross-
generated on a global scale would seem exces-
eyed, combined sive if limited to the type of pressures described.
with an acrobatic The much wider question is that, in relation to
ambidexterity to the great changes under way, the actions of the
marry together vast majority of companies and their leaders
still seem to be totally insufficient, if not irrele-
objectives that
vant. And these changes primarily involve two
seem to be in factors. The first consists of the growing gulf
conflict with that has been created between those who have
one another. benefited from the great economic and techno-
logical transformations of the last few decades,
deriving from the great push towards globalisa-
tion, and those who have remained excluded or
penalised. The second refers to what was previ-
ously seen as an overarching factor compared to
www.europeanbusinessreview.com 79
 Sustainability
Millions of people took to the streets to
demand action on climate change; many of
them emphasised the long-term impact that
this phenomenon will have on economic
growth and prosperity – a risk that markets to
date have been slow to reflect.
others, in other words the global environment or, to
be precise, climate change.
The economic aspect is a determinant. Over the
last few years, the mechanisms of the market and,
at times the same mechanisms of democracy, have
come under fire from growing criticism, on the
back of those issues which, rightly or wrongly, have
been called the “effects of globalisation” (Stiglitz et
al). The various causes mentioned previously have
generated discontent and mistrust in large swathes
of the population in all major countries, including
Italy. There followed growing calls for safeguarding
and protection that, in a context of fast technolog-
ical transformation and economic crisis, have only
partly been answered, leaving space for a protest
reaction whose political expression has often moved
in the direction of either right-wing or left-wing
populism (Judis, 2016), as may clearly be observed
both in Europe and in the United States.
Without going further into the merits of these
phenomena, what stands out is that the business
world and, most of all, the financial world, have
been and still are the objects of strong criticism,
often amplified by unscrupulous media coverage of
80 The European Business Review November - December 2020
incontestable realities such as widening inequality.
It is clear that, on top of the pressures that have
already been listed, further aspects should be added;
and these require increasing attention from business
and its representatives. The Business Roundtable
manifesto may, to a certain extent, be viewed as part
of a wider reaction that sees business as central to
offering an appropriate reaction to the difficulties
expressed in various ways by various strata of the
population. In this sense, it could certainly repre-
sent a significant event, although for now it is still
incomplete and insufficient in relation to the causes
that induced it (Henderson, 2020).
The second factor – climate change – may not
seem an obvious candidate for insertion into a
discussion driven by the Business Roundtable state-
ment, the contents of which are also fairly similar to
the appeal launched by the World Economic Forum
in early 2020. The two manifestos share not only the
same objectives with regard to safeguarding stake-
holders’ interests, as has been explained in depth,
but also the fact that neither takes into considera-
tion, apart from their widespread use of the term
“sustainability”, climate change and the change of
direction that this is imposing, and will impose even
more in the future, not only on government policy
and individual choice, but also on the strategic
choices made by companies (Serafeim).
This is a significant and fairly serious shortcoming
if compared with a statement of no less importance
and impact made in the same period: the letter to
shareholders from the CEO of BlackRock, Larry
Fink. The financial services company, which is the
biggest private financial asset manager in the world,
managing USD 5 trillion, makes what is now an unequivocal
statement: “Climate change has become a defining factor for
society and should be taken into account when developing
long-term strategies (...). Millions of people took to the
streets to demand action on climate change; many of them
emphasised the long-term impact that this phenomenon will
have on economic growth and prosperity – a risk that markets
to date have been slow to reflect. But awareness is rapidly
changing, and I believe we are on the edge of a fundamental
reshaping of finance.”
He continues: “The data on climate risks oblige investors to
reconsider the very foundations of modern finance (...). Investors
are increasingly being forced to face up to these questions and,
more and more, they are realising that climate risk means invest-
ment risk (...). We believe that sustainable investment is the solid
foundation which will allow client portfolios to grow. BlackRock
has announced that it is making sustainability an integral part
of portfolio construction and risk management; exiting invest-
ments with high risks related to sustainability, as in the case of
thermal coal producers; launching new financial products on the
market that will explicitly take into account the use of fossil fuels;
and reinforcing our commitment to sustainability and transpar-
ency in our investment management activities.”
This is the position of the major private investors of the
world, although it is not dissimilar to the positions that have
been expressed for some time by large banks and financial
institutions, as well as by big insurance companies such as
Generali and Allianz – no longer prepared to insure busi-
nesses which are not committed to demonstrably sustainable
activities. However, probably even more significant from this
point of view are the decisions taken, as has been well noted
by Jeremy Rifkin in his recent book, The Green New Deal,
by the large global pension funds which together manage the
savings of company employees of the order of USD 40 tril-
lion, as well as by certain sovereign wealth funds, in particular
those from Norway. These funds have already decided to
gradually divert their investments from companies that are
excessively linked to the carbon economy, judging the risk
of their progressive decline and loss of value (stranded assets)
to be too high. They are directing their investments towards
companies that are committed to energy transition, in other
words to lower and decreasing levels of CO2 emissions, until
greenhouse gas emission neutrality has been achieved.
It is becoming increasingly clear that climate change and
the war against carbon emissions – decarbonisation – is under
way. The EU has launched its Green Deal, in China similar
colossal programmes are in progress and, even though it’s
a long way behind in federal terms, the United States has
demonstrated great activism both at local level (e.g. New York
Climate change has become a
defining factor for society and
should be taken into account when
developing long-term strategies.
City) and, in many cases, at state level (e.g. California). But,
even more than laws and economic measures at national and
international level, what could radically change the responsi-
bilities, and therefore the purpose, of corporations, will be the
new frontiers of global financial investment.
In the light of this, one should ask oneself to what extent
the perception of this phenomenon is widespread and, above
all, to what extent it is shared; and, in the second case, to what
extent companies, their managers and their shareholders are
prepared for the change. The fate, not only of the current
stakeholders, but also of future generations, will depend
greatly on the answer given.
References
1. A. A. Berle, G. C. Means, The Modern Corporation and Private Property, Transaction
Publishers, New Brunswick, 1932; Italian translation: Società per azioni e proprietà privata,
Einaudi, Turin, 1966.
2. Paul Collier, The Future of Capitalism, Penguin Random House, 2018.
Larry Fink, A Fundamental Reshaping of Finance, 17 gennaio 2019, https://www.blackrock.
com/corporate/investor-relations/larry-fink-ceo-letter.
3. Francis Fukuyama, La fine della storia e l'ultimo uomo, Rizzoli, Milan, 1992.
4. Rebecca Henderson, “Tocca alle imprese salvare la democrazia?”, in Harvard Business Review
Italia, June 2020.
5. Michael Jensen and William H. Meckling, “Theory of the Firm: Managerial Behavior,
Agency Costs and Ownership Structure”, in Journal of Financial Economics, vol. 3, n. 4, 1976.
6. John B. Judis, The Populist Explosion, Columbia Global Reports, New York, 2016.
7. Roger L. Martin, “L'ascesa (e il probabile declino) della Talent Economy”, in Harvard Busi-
ness Review Italia, October 2014.
8. Thomas Piketty, Il capitale nel XXI secolo, Bompiani, Milan, 2018.
9. Michael E. Porter and Mark R. Kramer, “Creare valore condiviso”, in Harvard Business
Review Italia, Jan.-Feb. 2011.
10. Jeremy Rifkin, Un green new deal globale, Mondadori, Milan, 2019.
Paul Craig Roberts, The Supply-Side Revolution, Harvard University Press, 1984.
11. Enrico Sassoon, “Responsabilità sociale ed etica: un’evoluzione che riporta al passato”, in
Elio Borgonovi et al., Etica, responsabilità pubblica, imprenditorialità e management, Franco
Angeli, Milan, 2019.
12. George Serafeim, “Attività a impatto sociale che creano valore reale”, in Harvard Business
Review Italia, October 2020.
13. Joseph E. Stiglitz, La globalizzazione e i suoi oppositori, Einaudi, Milan, 2018.
Enrico Sassoon is Editor-in-Chief of Harvard
Business Review Italy, CEO of StrategiQs
Edizioni srl, CEO of Eccellenze d’Impresa srl,
and Chairman of Global Trends srl. He is a
board member of the American Chamber of
Commerce in Italy (of which he has been CEO
from 1998 to 2006), of Aspen Institute Italia,
and of Sirio, a company listed on the Italian
Stock Exchange.
www.europeanbusinessreview.com 81
 Circular Economy
CROSSED REFLECTIONS ON THE COVID
CRISIS AND THE ENVIRONMENTAL CRISIS.
OF THE NEED TO MOVE TOWARDS A CIRCULAR
ECONOMY BASED ON RESOURCES
BY KAREN DELCHET-COCHET
Our current economic model, based on a linear
approach and organized in a globalized and
financialized manner, has reached its limits.
More and more researchers, politicians and
business leaders are becoming aware of this.
But the Covid crisis has highlighted some
important points regarding the viaibility of a
circular economy that are worth returning to.
THE COVID CRISIS AND THE ENVIRONMENTAL
CRISIS: SOME TEACHINGS
The speed and violence with the one the pandemic
of Covid 19 imposed global economic effects,
invites us to reflec and gain awareness. First of
all, we must realize our vulnerability. A virus
caused the confinement of almost all of humanity
in a few weeks. The economy stopped, forcefully
demonstrating that we are not above nature nor
that we are in control of it. Many ecologists point
out that this health crisis is first and foremost
an ecological crisis1 and that many other crises
could emerge if we fail to transform the existing
model. Moreover, this crisis has reminded us that
our destinies are linked internationally, and that
82 The European Business Review November - December 2020
we all inhabit a global village. Goods and people
move quickly, sometimes showing us our tremen-
dous solidarity. But viruses also circulate quickly.
The unbridled pace of our exchanges therefore has
direct consequences, and not only positive ones.
This crisis has also made some people realize the
potentially dramatic consequences of the distance
The economy between production and consumption areas. This
stopped, distance, which exists for reasons of profitability
forcefully and competitiveness, leads to dependence. Such
demonstrating conditioning proved its limits when it came down
that we are not to access to masks, chemical reagents for tests or
above nature medicines. And this is without integrating the envi-
nor that we are ronmental aberration that it can also mean. Here
we have experienced it for health reasons, but envi-
in control of it.
ronmental reasons or energy costs could lead us to
experience this kind of limitation in the future.
Indeed, this profound health crisis has some
common points with the environmental crisis
that is looming. Both have a vital character. The
two involve reconfiguring globally for a more
local approach. They underline the urgent need
for profound change, with ambitious, not to say
radical, sobriety objectives, both in terms of impacts
on the climate and on biodiversity. And finally, they
lead us to think in terms of solidarity, new forms
of collaboration between actors from a diversity of
territories and generations. It shows us that is the
time to prepare to what many have called “The
World After”.
But in order to conceive this new reality we
must be careful in choosing the right answer to
the right question. Some suggest that the question
is one of supply (as with the example of masks)
and therefore the answer is to diversify the sources
of supply to reduce the question of dependence.
In economics and classical strategy, this is a good
option. But forgetting the environmental question
would be a huge mistake. Therefore the real ques-
tion seems to be how can the production come
closer to demand, in a way that we can integrate
a holistic view of the issues of global warning and
the limited nature of resources. It is therefore a precisely what we experienced with the COVID
question of as Edgar Morin rightly points out.2 crisis. The economy alone cannot do everything.
It is therefore necessary to choose a devel-
TOWARDS A CIRCULAR ECONOMY opment strategy based on the environmental
From a macroeconomic point of view, Robert Boyer, issues that takes into consideration the question
economist, invites us to « return to the sources of of growth. This means growth in some sectors will
political economy (to) forge the concepts and decline and will continue to develop in others.
methods that make it possible to overcome the most The question of externalities must of course be
fundamental problems of each society »3. This makes integrated into these considerations.
us think of the circular economy, which seems to This also implies structuring the relocation of
be a promising model from a sustainable develop- a certain number of activities, particularly the
ment perspective. This implies a redesign of our most strategic ones (food, healthcare in particular,
linear economic system into « a regenerative system but also the development of renewable energies),
in which the input of resources and waste, emissions both in terms of independence and reducing our
and energy losses are minimized by slowing down, carbon impact. The question of territory is central.
closing and narrowing the loops of materials and Without a territorial articulation strategy we are
energy. This can be achieved through sustainable about us to experience the risk that we know today
design, maintenance, repair, reuse, remanufac- for sustainable development: a promising concept
turing, refurbishment and recycling »4. This model but one that is struggling to induce the necessary
involves rethinking priorities through the prism of changes in the field and in our daily lives.
energy and resource issues also integrating the major But we must of course accompany this transi-
social and solidarity principles of sustainable devel- tion, from an economic and social point of view,
opment, making it a powerful source of solutions to
the problems we face.
States and international organizations have a Structuring the relocation of a certain number
major responsibility as regulators to drive these of activities, particularly the most strategic
major changes and give priority to these sectors
that are vital for our future. But vital does imply ones (food, healthcare in particular, but also the
thinking in terms of strong sustainability. In the development of renewable energies), both in terms
long run, there will be no economic develop- of independence and reducing our carbon impact.
ment without this reconnection to nature. This is

www.europeanbusinessreview.com 83
 Circular Economy
with the identification of new areas of expertise in particular
and a very important role for education and training. It
means walking together to talk about new business models
and strategies. “It’s a business model based on longevity,
renewability, reuse, repair, upgrade, refurbishment,
servicing, capacity sharing, and dematerialization. »5
Each actor (individual, company, community) must
therefore take ownership of the subject. But to do this we
need clear incentives, tools and reading grids, of course, but
also facilitators, people who give impetus and make people
want to be a positive player in this change. Not everything is
science, and I say that as a scientist. There is also a sociolog-
ical, philosophical and political dimension, in the sense of the
life of the city, to be reinvented.
To conclude, we can clearly see the limits of our model.
Some authors invite us to see the COVID crisis as an early
warning signal6. But not all the limitations experienced
during this crisis were negative, a fertile breeding ground for
change. We were also able to experiment with a refocusing on
basic needs, such as food, health care and sharing things with
loved ones and neighbors. This has underlined the impor-
tance of solidarity (with the caregivers and all the essential and
primary jobs, but also with the most fragile) without which
it is impossible to survive. We have lived in greater geograph-
ical proximity, especially with regard to our supplies, which
also induces real solidarity, especially with local producers
while reducing the carbon impact. We have mobilized for
others and others have mobilized for us. The example of the
We have experienced the fact of
consuming less of products that are
not basic necessities... and of realizing
that it is possible
84 The European Business Review November - December 2020
Dr Karen Delchet-Cochet is an
environmentalist. She was first a
consultant and auditor, accompanying
and evaluating companies' CSR
strategies. Since 2010, she has been
Professor in CSR at ISC Paris. She has
written several academic articles on
these subjects and has just edited
a book published by ISTE / WILEY
« circular economy from waste
`reduction to value creation »
mobilization of our industry, particularly the textile
industry, is important in this context. We have expe-
rienced the fact of consuming less of products that
are not basic necessities... and of realizing that it is
possible. It is a form of detoxification. It can open
some perspectives to question our own potential of
sobriety. And above all, we have individually and
collectively asked ourselves the question of meaning.
This awareness is therefore a warning signal,
but above all an opportunity for businesses to
take action.
References
1. https://theconversation.com/covid - 19 - ou - la - pandemie - dune -
biodiversite - maltraitee - 134712
2. Morin E. (2016) Ecologiser l’homme, Lemieux éditeur
3. https://www.lemonde.fr/idees/article/2020/03/27/coronavirus - cette
- crise - inedite - adresse - un - redoutable - avertissement-aux-econo-
mistes_6034592_3232.html - author’s translation
4. https://www.ellenmacarthurfoundation.org/explore/the-circular-eco
nomy-in-detail#:~:text=A%20circular%20economy%20is%20a,the%20
consumption%20of%20finite%20resources.
5. Esposito M., Tse T., Soufrani K. (2018). Introducing a circular economy:
new thinking with new managerial and policy implications. California
Management Review, 60, 3, 5-19.
6. https://theconversation.com/epidemie -de -covid -19 -un -signal -precoce -
nous -alertant-de-latteinte-des-limites-planetaires-145227
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 Sustainability
T
he coronavirus pandemic has stretched
companies around the world to their
financial breaking point. BP, Renault, and
Lufthansa are just three big name companies that
have slashed their workforces over the last few
months, and thousands of other businesses may
never return. In such an environment, it’s not
surprising that companies would consider cutting
their spending on sustainability initiatives.
A recent survey by Globescan and BSR found
that nearly half of 102 participating compa-
nies expected their sustainability spending
to be reduced over the next 12 months. This
is despite the fact that the same survey found
that the majority of participants believed the
pandemic will enhance the need and relevancy
of corporate sustainability. The urge to reduce
sustainability budgets in a crisis is understand-
able: they were also reduced in many companies
following the financial crisis over a decade ago.
Undoubtedly, companies must prioritize their
immediate survival and protecting the jobs,
health, and safety of their employees during
this difficult time. While the value of sustaina-
86 The European Business Review November - December 2020
DON’T CUT THE
SUSTAINABILITY
BUDGET
BY CORY SEARCY AND PAYMAN AHI
bility programs for business and society has been
previously recognized, many sustainability initi-
atives may seem superfluous with Covid-19 still
raging. Companies should do what they reason-
ably can to preserve and extend these efforts.
Sustainability initiatives can better prepare
companies to deal with the pandemic’s after-
math, as well as unknown crises in the future.
Companies The business case for sustainability is well-
must prioritize developed, with common benefits focusing on
their immediate improving competitive advantage, risk manage-
ment, and innovation. Arguments are also being
survival and mounted to defend against budget cuts during
protecting the the crisis. For example, a recent online article
jobs, health, by Clément Fournier argued that responsible
companies can better recover consumer confi-
and safety of dence, anticipate regulatory changes, build
their employees resilience, and prepare for lasting change. The
during this Covid-19 crisis has shown that the case for
difficult time. sustainability initiatives in a company’s supply
chain is particularly strong.
Sustainable supply chain initiatives can
protect a company’s long-term viability by
preparing it to withstand unexpected shocks.

Sustainability initiatives should be embraced
by companies, however, they are not a
panacea and they come with no guarantees
of business continuity or expansion.
Sustainability initiatives in the supply chain empha-
size, for example, visibility throughout the entire
chain, including the ability to track issues such as
raw material extraction, manufacturing, and product
transportation. A clear line-of-sight throughout the
entire supply chain is critical to identifying problems,
but this gets more difficult in lower tiers of the chain.
Closely connected to supply chain visibility are issues
such as the need for strong supplier development and
collaboration, monitoring and measuring supplier
performance, and ethical sourcing. All of these require
up front and ongoing investments.
Sustainability priorities can vary widely between
companies, but one prominent long-standing focus
is supplier working conditions. Discoveries of poor
working conditions, even deep in the supply chain,
often attract widespread negative attention. The
pandemic is further exposing dire working condi-
tions and has underlined the need to intensify focus
on issues such as worker health and safety, emergency
response, and living conditions for on-site workers.
Reducing budgets for sustainability initiatives could
potentially expose a company to long-term reputa-
tional risks or supply disruptions. More importantly,
it could unnecessarily expose workers to risks to
their health and safety.
Sustainability initiatives should be embraced by
companies, however, they are not a panacea and
they come with no guarantees of business conti-
nuity or expansion. Moreover, what counts as
sustainability spending can be debatable, and initi-
atives can also vary widely in their scope, emphasis,
and desired outcomes. Companies will need to be
proactive in identifying their sustainability issues
that matter most, whether they are focused on some
or all of working conditions, emissions, resource
use, or other issues. The pandemic has highlighted
the need for all companies to revisit their strengths
and vulnerabilities. Sustainability initiatives must
continue to play a strong role in corporate planning,
due diligence, and improvement.
Of course, in many companies, budget cuts
will be unavoidable. Managers faced with difficult
decisions may have no options other than cutting
some sustainability initiatives. But, it is critical
that companies fully understand the value of their
sustainability initiatives before doing so. Cutting
or reducing key sustainability initiatives could have
unanticipated consequences, particularly over the
long-term. Spending on sustainability initiatives is
often portrayed as discretionary, but remember it
may be critical to the company’s ability to maintain
or resume its core activities.
Cory Searcy is Professor of Industrial
Engineering and Environmental
Applied Science & Management at
Ryerson University in Toronto, Canada.
His research focuses on sustainable
supply chains, performance measure-
ment, and auditing. He is currently
serving as the Vice-Provost and Dean of
graduate studies at Ryerson.
Payman Ahi is Full Sessional Lecturer
of Global Management Studies in the
Ted Rogers School of Management
at Ryerson University. His research
focuses on sustainable supply chains,
sustainability metrics, and sustainable
business practices.
www.europeanbusinessreview.com 87
 Robot Leadership

THE FUNNY THING

G ABOUT
ROBOT LE
LEADERSHIP
BY JAMIE L. GLOOR, LAUREN C. HO
OWE,
DAVID DE CREMER, AND KAI CHI (SAM)
( YAM

A
re today’s employees getting “soft”? All signs suggest
that employees should: soft skills may be the neces-
sary advantage modern employees need to survive
and thrive in the future of work. Recruitment experts and
professional organizations alike predict1 that soft skills such
as emotional intelligence, creativity, and social influence
will increase their value2 in the coming years. Strengthening
soft skills is touted as “one of the best investments one can
make in their career.”3 For leaders in particular, gaining soft
skills is seen as essential for the future.4 Underlying these
bold claims is the assumption that artificial intelligence (AI)
and AI-powered robots cannot–and will not–approximate
humans’ soft skills mastery, as the same voices broadcasting
the soft skills reskilling imperative for the “future of work”
claim, “the rise of AI is only making soft skills increasingly
important, as they are precisely the type of skills robots can’t
automate5” and “with the rise of robots comes the rise of soft
skills6”. But is the widespread assumption that “robots don’t
have soft skills7” accurate? Or could robots soon step into
roles where soft skills are imperative – even leadership roles?
AI-powered robots are already effortlessly taking over some
management roles in notable organizations. For example,
Ray Dalio, founder of Bridgewater, openly discussed8
the “Book of the Future” they were developing to provide
employees with “GPS-like directions” throughout the
day, including how they should spend their time down to
details like making a phone call. Amazon9 already replaced
their front-line managers with robots that track employee
productivity and even dismiss underperformers who fail to
meet their quotas. But when experts forecast that “AI will
redefine management”10, their number one projection is AI
will take over administrative tasks. In contrast to manage-
ment, which includes administrative and organizational
tasks,11 leadership implies a more dynamic process of social

88 The European Business Review November - December 2020

If robots can master
humor, this suggests that
they could be positioned
to step into more-
human roles that require
exemplary soft skills, like
leadership roles.

www.europeanbusinessreview.com 89
 Robot Leadership
their robot with sarcasm32 to increase its likeability
and acceptance to perform its core task of delivering
negative feedback – which, as irony bot might put
it, is certainly one of the most prized and exciting
tasks that leaders would surely be devastated to hand
over to robots. In all seriousness, as giving negative
feedback is one of the most difficult and emotionally
draining tasks33 for human leaders, having humorous
robots play a role in this task could be a boon. While
the idea that bad news delivered with humor eases
the blow seems intuitively reasonable, research also
supports this idea. For example, Pete McGraw and
colleagues34 found that negative, 1-star reviews like
those on Google35 or Yelp36 were deemed more posi-
tive when made with humor. Similarly, Brad Bitterly
and Maurice Schweitzer37 found that acknowledging
a personal weakness with humor made the admission
seem less genuine, protecting applicants’ positive
impressions from taking a hit when admitting a flaw
in a job interview. So humorous robots are tapping
into an effective social strategy that makes them able
to handle difficult situations.
Indeed, humor is a strategy for skillfully dealing
with a wide variety of situations that arise at work,
including some of the most challenging ones. In the
words of two humor scholars38, humor can be used
“to criticize without alienating, to defuse tension
Humor is a strategy for skillfully dealing with
a wide variety of situations that arise at work,
including some of the most challenging ones.
90 The European Business Review November - December 2020
or anxiety, to introduce new ideas, to bond teams,
ease relationships and elicit cooperation.” Using
humor could thus open up new doors that were
previously thought shut for robot leadership: from
providing critical feedback as part of an annual
performance review, to confronting discriminatory
comments or behavior, to arbitrating a conflict
between co-workers, to employee onboarding and
team-building.
What could the world look like if socially-skilled
robots step into leadership roles that we normally
reserve for homo sapiens? Let’s consider some pros
and cons.
1
Cutting down leaders’ to-do lists: Socially-
skilled robots don’t necessarily have to replace
leaders. Advocates of augmented intelligence39
propose that AI should be implemented in ways that
enable humans to achieve more and complement
human intelligence, rather than independently
functioning and taking over human tasks. Building
on this idea, robot leaders who master skills like
humor could be made responsible for some of the
less-desirable or less-meaningful tasks that leaders
face – like our example of giving negative feedback
– and help leaders to manage their consistently-too-
2
long to-do lists.40
Stepping in for “bad” leaders: We can all
think of examples of people who were in
leadership positions, but who lacked crit-
ical socioemotional skills or leadership training
and handled situations poorly, or who didn’t seem
to consider themselves as leaders and failed to act
as such. Leaders who act in socially destructive
ways41, or even who simply don’t provide leader-
ship,42 damage both followers’ and organizational
outcomes. In fact, more damage may be done by
bad leaders than good is incurred by good leaders.43
Thus, organizations and the people they employ may
make particularly notable gains if robots either step
in to take over some tasks from or replace managers
3
who don’t effectively lead.
Improving human interactions: Robots
lack the social inhibitions that humans often
have – for example, when it comes to admit-
ting our mistakes at work. So socially-skilled robots
could act in ways that helpfully nudge humans.
For example, a series of experiments44 found that
robots who admitted their mistakes in a humorous
way (“I know it may be hard to believe, but robots
make mistakes too!”) during a group task helped the
humans in that group to communicate and collab-
orate45 more effectively with each other, and also
prevented people from getting stuck during prob-
4
lem-solving, thereby increasing team performance.
Reducing bias: Robots and the AI that fuels
them are not perfect, but they may be less
biased than their human counterparts. With
the proper safeguards in place, one can also interro-
gate particular decision processes46 in algorithms to
investigate potential cases of bias and discrimination and taking
– an impossible feat for human decision-makers. So
robot leaders may be fairer and more transparent
than humans in terms of prominent gender and
race-based biases, which entails advantages for lead-
ership effectiveness47. Despite its higher rationality,
though, AI can also come to biased conclusions, for
instance, if it draws on biased datasets. So in cases
like this, a blend of robot and human leadership
may be the optimal solution48.
1
Machines and mortals are not (yet) created
equal: Even though AI might be able to effec-
tively engage in leadership tasks, the human
targets of this leadership may not respond in the
same way as to a human leader. People prefer inter-
49
acting with humans over AI, and treat AI differently 50
from humans (as long as they know about a bot’s
true identity). While robots may be able to objec-
tively acquire the socioemotional skills necessary for
leadership, people may not feel that these behaviors
and the feelings that underlie them are authentic51,
but rather simple imitations of human skills. For
instance, negative feedback may feel less thoughtful
and considerate, and ultimately have less of an effect
on employee behavior, when it’s presented by a
robot rather than a human. Thus, socioemotional
skills may be less impactful when they are enacted
by robots rather than humans, making robot leaders
less influential than human leaders. (However,
there may nonetheless be a powerful role for AI as
an ‘invisible leader’ – such as when Netflix52 uses
algorithms to guide your choices and behaviors in a
2
subtle and implicit way.)
AI should be Making human leaders obsolete: In contrast
implemented to the clear advantage of replacing leaders
in ways that who lack socioemotional know-how, if it
enable humans automates an entire profession, AI may also (inad-
vertently) replace leaders who have highly developed
to achieve
socioemotional skills and had a positive effect on
more and followers and within their organizations. Thus, some
complement leaders who were inspiringly effective may have to
human look into continuing education or re-training53 on
intelligence, more technical, hard skills to craft a relevant space
3
rather than for themselves within their profession.
independently Social robots ≠ social interactions: People
are social creatures who crave interactions with
functioning other humans. So, if one’s workplace represents
a key source of an employee’s social circle, they may
over human particularly miss social interactions if their leader
tasks. is replaced by a robot. This may particularly be the
case for remote employees (due to the COVID-19
pandemic or otherwise) for whom the leader is often
a primary or sole social contact, reducing a central
source of social contact during an already trying time
for many. Although social robots have shown success
in other areas (e.g., elderly care54), they are an insuf-
4
ficient replacement for all social interactions.
Diminishing returns: If robots’ soft skills
such as humor elicit positive effects at least
in part because they are surprising – not only
because they are effective – they may lose their punch
over time. However, if robots are at least partially
autonomous, they may continue to learn and improve
their soft skills in unexpected ways with more
interaction and experience. Yet again, this kind of
unsupervised learning tends to lead people to distrust
robots and might ultimately undermine human-robot
interaction quality. Thus, only time will tell…
www.europeanbusinessreview.com 91
 Robot Leadership

As robots increasingly master soft skills such as Jamie L. Gloor is a Senior Lecturer at
humor, they become more like humans and leaders. the University of Exeter Business School
Moving forward, we should consider how these gains and a research fellow of the University
in soft skills can increase robots’ “leadership potential,” of Zurich’s Digital Society Initiative
into which of leaders’ (many) everyday tasks these robot who researches gender/diversity, leader-
leaders could fruitfully be incorporated, and how we ship, and humor.
could take advantage of these technological advances to Lauren C. Howe is an Assistant
improve the way that leadership is enacted at work. Professor at the University of Zurich
who researches the future of work.
References
1. https://www.pewresearch.org/internet/2017/05/03/theme-2-learners -must - culti-
David De Cremer is a Provost’s chair
vate - 21st%E2%80%91century-skills-capabilities-and-attributes/ and professor in management and
2. https://www.weforum.org/reports/the-future-of-jobs-report-2018
3. http://linkedin.com/pulse/skills-companies-need-most-2019-how-learn organizations at NUS Business School,
-them-paul-petrone National University of Singapore. He is
4. https://www.businessinsider.com/soft-skills-leaders - need - for - success - 2016
-4?r=US&IR=T the founder and director of the Centre
5. https://www.linkedin.com/business/learning/blog/top-skills-and-courses/the-skills -
companies - need-most-in-2019-and-how-to-learn-them
on AI Technology for Humankind at
6. https://www.weforum.org/agenda/2018/07/the-skills- needed - to - survive NUS Business school. Before moving
- the-robot-invasion-of-the-workplace
7. https://learning.linkedin.com/resources/workplace-learning-report- 2018
to NUS, he was the KPMG endowed
8. https://www.theguardian.com/technology/2016/dec/22/bridgewater - associates chaired professor in management studies
-ai-artificial-intelligence-management
9. https://www.theverge.com/2019/4/25/18516004/amazon - warehouse - fulfillment at Judge Business School, University
-centers-productivity-firing-terminations of Cambridge. He is named one of the
10. https://hbr.org/2016/11/how-artificial-intelligence - will - redefine - management
11. https://hbr.org/2016/12/the-pros-and-cons-of-robot-managers World’s top 30 management gurus and
12. https://allwork.space/2019/11/future-of-work-ai-is-reshaping-managers speakers in 2020 by the organization
- traditional-role/
13. https://www.harriman-house.com/Leadershipbyalgorithm GlobalGurus and recently published the
14. https://imotions.com/affectiva-requestdemo/ book “Leadership by algorithm: Who leads
15. https://edition.cnn.com/style/article/sophia-robot-artificial-intelligence - smart-
creativity/index.html and who follows in the AI era?”
16. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.385.1776&rep=rep1
& type =pdf
Kai Chi (Sam) Yam is an Associate
17. https://www.youtube.com/watch?v=Bg_tJvCA8zw Professor in management and organ-
18. http://www.marilynmonrobot.com/about/
19. https://www.ted.com/talks/heather_knight_silicon_based_comedy ? language = en izations and Dean’s Chair at NUS
20. https://www.degruyter.com/view/journals/humr/16/3/ Business School, National University
article-p297xml?language=en
21. https://dl.acm.org/doi/pdf/10.1145/3123266.3123410 of Singapore.
22. https://www.jbe-platform.com/content/journals/10.1075/pc.5.2.06bin
23. https://dl.acm.org/doi/10.5555/3306127.3331678
24. https://journals.aom.org/doi/10.5465/amr.2005.18378877
25. https://globalnews.ca/news/5116642/ai-humour-research-field/
26. https://www.theverge.com/2019/4/25/18516004/amazon -warehouse - fulfill- pdf&Expires=1602853377&Signature=Up5vNM3Ra6OVq88VQNE8zaMwYU7-c4cPshvnsMpf
ment - centers -productivity-firing-terminations yTkGWrgv~vQjLE7wiVOq7CEA7j~3ga6zz4xGiVTJBBJb802fVvrtn~52f9zqBk-CQR17YzOX-a-
27. https://psycnet.apa.org/record/2019-05155-001 7x4PX2v6eEmAL0VnQYfcrIaz0mGzIMzG4A4zXNAcGc1vQg38oUMF2Q6b2tJSxOlMH8peJm-
28. https://journals.sagepub.com/doi/full/10.1177/2041386619846948 6bXkuM-3mCxssO2FORosvJ6J2FA0Unf0Ln~zMcanAne~FrRYOU8YgXIZUBVpvgC~rr7O5DU
29. https://www.jstor.org/stable/257094 SBnhH7Q7KXHXHrADGfrv9hLnneeIlMOmjeBVnFZpu303yqUCxUHk~5uslXflYtvtwq9ZrI2d
30. https://journals.aom.org/doi/10.5465/amj.2014.0358 2Wp-HmYN9UKblQ__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
31. https://psycnet.apa.org/record/2016-54537-001 41. https://assets.csom.umn.edu/assets/71516.pdf
32. https://www.thedailybeast.com/scientists-developing-robots-that-are-ironic-funny 42. https://www.theatlantic.com/magazine/archive/2019/04/robots-human - relationships /583204/
33. https://journals.sagepub.com/doi/pdf/10.1177/0893318997104002 43. https://www.pnas.org/content/pnas/117/12/6370.full.pdf
34. http://leeds-faculty.colorado.edu/mcgrawp/pdf/mcgraw.warren.kan . 2015.pdf 44. https://www.nber.org/papers/w25548
35. https://www.sciencedirect.com/science/article/pii/S0749597817306325 45. https://www.sciencedirect.com/science/article/pii/S1048984310000500
36. https://www.degruyter.com/view/journals/humr/16/3/article-p297.xml? language = en 46. https://hbr.org/2020/09/what-does-building-a-fair-ai-really-entail
37. https://www.forbes.com/sites/cognitiveworld/2020/01/12/is-there-a-difference - 47. https://www.forbes.com/sites/gilpress/2019/10/02/ai-stats-news-86-of-consumers-prefer-to
b i d i lli d i lli / -interact-with-a-human-agent-rather-than-a-chatbot/
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49. https://journals.aom.org/doi/10.5465/amd.2017.0002
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 Digitalization
THE ROCKY ROAD TO
DIGITALIZATION SUCCESS
BY BENJAMIN MUELLER AND JENS LAUTERBACH
INTRODUCTION
While digitalization has been on the mind of many
executives for a while now, 2020 has brought about
an unprecedented and often unanticipated boost
to many digital initiatives. From public admin-
istrations to the fine arts, from not-for-profits to
plain old businesses, almost all organizations felt
the pressure to leverage digital technologies when
the first wave of CoViD-related lockdown meas-
ures hit. And the inevitable economic downturn
notwithstanding, a surprising number of organi-
zations found that they managed to employ some
digital trick or another to muddle through – often
even succeed in this new environment.
If your organization is one of these, you might
also have used the temporary respite before the inev-
itable uptake of infections that is now ongoing to
take stock and reflect on a way forward. In doing
so, our experiences suggest that you will likely come
across a realization that many of the organizations
we worked with share: Sustained digitalization is a
very rocky road indeed!
Thus far, you may have succeeded in safe-
guarding business continuity and have built up
a bit of rapport in terms of reacting to ad-hoc
crises using digital tools (from video confer-
encing to social collaboration technologies).
But your ability to keep this momentum going
forward and make for more impactful changes
depends on recognizing one simple truth: Digital
transformation needs to be more than just the
digitization of products and services. Similarly,
the implementation of technologies that climb
Gartner’s Hype Cycle – from machine learning
Digital and IoT platforms to the blockchain – by itself
transformation is not digitalization. In our view, more than just
needs to be fancy technology is required to achieve true and
more than just sustainable digitalization.
the digitization In this, we see three highly interrelated issues
of products and that are instrumental if companies want to over-
come some of the stumbling blocks on the road to
services.
digitalization success: (1) coherent business strategy
operationalization and execution, (2) novel IT manage-
ment, and (3) effective use of digital innovation.
www.europeanbusinessreview.com 93
 Digitalization

COHERENT BUSINESS STRATEGY

OPERATIONALIZATION AND EXECUTION If your structures, people, or processes are not
The first of the issues identified above, coherent busi- all aligned with your company’s new digital
ness strategy operationalization and execution, needs to
be understood as the cornerstone of every business capabilities, misfits between the elements
transformation – and the digital kind is no excep- of your business model and your company’s
tion. At the latest since Porter’s 1996 take on “What
is Strategy?”, managers need to understand that operating model will wear the company down.
strategy is about clever and sustainable positioning
in the market and – equally important – about a fit processes that perform poorly as is will just cost
of all of a company’s activities to that position as well a lot of money, without resulting in any tangible
as amongst each other. This results in two simple benefits for the business side.
recommendations. Second, maintaining fit among activities
First, companies need to think about a coherent requires knowledge about a company’s activi-
approach that transforms their business model and ties and how they match across various strategic
prepares customer engagement, value proposition, and operational layers. It is surprising how many
and operations for the digital age. They need to companies wander into the new digital world
think about how their (even completely non-dig- without having any clear mapping between strat-
ital) business model will perform in the digital egies and business processes on one side and
world of the future. If they don’t, competitors services, applications, and infrastructures on the
or new entrants will, and companies left behind other. While the fairly classical topic of Enterprise
will have troubles competing in future markets. Architecture Management is perhaps not as sexy
In this, a simultaneous and careful refinement as anything that usually comes with the label
of all elements of a business model is required. ‘digital,’ it turns out to be an essential prerequisite
For instance, many organizations have built-up before trying to transform anything.
social-media-enabled engagement models with If architecture management is not taken seriously,
their customers these past few months in order to many companies will experience a stark fragmentation
compensate the decline in possibilities to directly
interact with their clients. But engaging your
customers through social media – from comple-
menting the after sales process of physical goods
to plain customer service – requires the people
and processes to deal with your customers’ input.
Otherwise your company will most likely make a
fool of itself (like Amtrak in this little episode)1.
If your structures, people, or processes are not all
aligned with your company’s new digital capabili-
ties, misfits between the elements of your business
model and your company’s operating model will
wear the company down.
Often this reengineering of the business model
is hard to achieve in companies with long-estab-
lished and rigid organizational structures. No
surprise that quite a number of digitalization
initiatives in established companies result in spin-
offs (e.g., TRUPF’s AXOOM platform or Mærsk
Tanker’s ZeroNorth initiative) or are realized via
acquisitions (e.g., Bayer’s acquisitions in the digital
farming domain). Similarly, digitizing business

1. http://www.washingtontimes.com/news/2016/sep/7/amtrak-re-
94 The European Business Review November - December 2020 plies-womans-stuck-elevator-tweet-nearly-/
of their business strategy’s operation-
alization and execution. For instance,
business intelligence systems to support
decision making only make sense if your
company has a clear approach to data
management (from master data to data
generation, processing, storing, and
retiring), and if business processes, roles,
and IT infrastructure coherently reflect
this approach. Similarly, if many of the
ad-hoc solutions introduced in the last
couple of months are not consolidated
and integrated properly, security vulner-
abilities or inabilities to collaborate on a
common platform will likely result (to
name but a few examples).
NOVEL IT MANAGEMENT
Facing these issues is a first important
step to identify the most common
stumbling blocks on the road to digi-
talization success. But to make a true
impact, your company’s approach
to IT management and how serious
you are taking it to be part of your
overall business need to step into the
spotlight as well. And this means two
important things: managing your IT
per se, and rethinking the role of IT
in your company.
So what does IT management mean
in the age of digitalization? When it
comes to digitalization, many IT
and innovation managers keep their
organizations busy by scouting,
customizing, and implementing inno-
vative technologies and emulating the
Valley’s business models. In this, they
too seem to be so much attracted the
promises of digitalization that they
forget the complexity of their compa-
ny’s legacy infrastructure and processes
(also compare to Jeanne Ross’s recent
comments)2. As long as the focus is on
the classical plan, build, run for the
new technology, what is already there
will be overlooked.
But especially in cases where estab-
lished companies attempt digital
2. https://sloanreview.mit.edu/article/your-business-is-too-complex-to-be-digital
3. https://sloanreview.mit.edu/article/building-digital-ready-culture-in-traditional-organizations
transformation, this usually does not
come in the form of a clean slate on
which to build a new world of systems
and data. Quite to the contrary, old
systems have to be maintained and
retired carefully and data needs to be
cleaned up and migrated if they are not
supposed to become stumbling blocks in
their own right. Because of these difficul-
ties, many companies are easily tempted
to simply “plug on” social-media-based
channels to their customers or data
analytics solutions, to name only a few
pertinent examples.
Beyond the traditional
technology focus,
IT today needs to
be understood as
an integral part
of the business,
intimately woven into
its structures and
processes.
But digitalizing the outermost layer
of a system landscape and continuously
placing more and more new systems next
to the legacy ones will only contribute
to the friction among activities
discussed above. If a well - documented
and well-managed enterprise architec-
ture is to be fruitful, business and IT
managers are well-advised to recognize
the imperative nature of application and
infrastructure portfolio management!
While virtualization of systems into the
cloud or an on-premise integration layer
are important tools in the transforma-
tion journey, they by themselves are not
the solution; are not digitalization. If an
organization is not able to manage its
legacy IT landscape well, there remains
a lot of homework before digital trans-
formation should even be attempted.
This has clear implications on the role
of IT in your company, too. Beyond the
traditional technology focus, IT today
needs to be understood as an integral
part of the business, intimately woven
into its structures and processes. Rather
than falling for what the literature
calls ‘magic bullet thinking’ – that is,
believe that just buying an innovative
piece of technology will mean that you
are digitalized – you need to recognize
that IT is now an inseparable part of
your digital business strategy, and no
longer a mere functional strategy. You
also need to be aware that it is not the
technology per se that will heal all that
ails, nor a mere local adaptation of and
to the technology. What is needed is an
infusion of digital ideas and capabili-
ties into the thinking of everyone that
works for you. This points towards an
approach to digital innovation that is
akin to cultural transformation more
than to just technology implementation
(also see the comments by Westerman
and colleagues on this matter here)3.
EFFECTIVE USE OF DIGITAL
INNOVATION
In this spirit, digital transformation is
not just about digitizing the interface
with the customer or some forms used
internally, but must also be about the
effective use of digital innovation, for
example in the context of workplace
transformation. In this, we are guided
by the insight that no technology will
create any impact if not used effectively
in the organization. Such strategic fit
requires a careful mapping of strategy
and processes to tasks, roles, and goals.
Providing innovative digital technolo-
gies without rethinking the work done
in an organization will likely turn into
an expensive infrastructure project, but
will not have any sustainable impact
in terms of economic potential. While
www.europeanbusinessreview.com 95
 Digitalization
To make sure that technology that fits the company’s
strategy is used effectively, individuals and their
workplaces need to be transformed as well.
less noticed, past technology hypes (e.g., service-ori-
ented architecture) have shown the mismatch
between promise and actual benefit delivered if this
line of thinking is not taken seriously.
To make sure that technology that fits the
company’s strategy is used effectively, individuals
and their workplaces need to be transformed as
well. First, this applies to basic design and setup
of tasks, processes, and physical (or virtual)
workplaces. But it also entails training and
Digitalizing enablement that empower employees to truly
a company – draw on the technology’s potentials. For example,
and not just just providing a digital collaboration platform
glossing over without transforming the way people work (from
an outdated basic skills to incentive systems) will not result in
any impact. Or advancing pharmaceutical devel-
organizational
opment by drawing on real-time computing to
core with replace costly chemical lead optimization with
some fancy model-based simulations only makes sense if the
technology – product engineers and managers understand the
is an endeavor output of the algorithms and can truly enhance
that requires their decision making with it. Otherwise compa-
diligence, nies will soon find themselves run by algorithms
persistence, they do not really understand.
strategic
CONCLUSION
vision, and Taken together, our discussion highlights the
very careful gravest stumbling blocks organizations face when
planning. trying to turn their current digital momentum
into the first steps of a more comprehensive
and sustainable journey towards digitalization.
Carefully rethinking strategy, vision, and business
models is just a first step and needs to be comple-
mented by architecture and portfolio management
as well as workplace transformation and employee
enablement. Similarly, the nature and role of IT
and its management in organizations need to
be rethought and updated. Of course, this shift
from the what and why of digital transformation
96 The European Business Review November - December 2020
towards the how comes with a lot of very hard
groundwork. But in the long run, investing this
work now can turn stumbling blocks into step-
pingstones towards digitalization success.
Again, just because something is as hard as digital
transformation should not mean that it must not
be attempted. Quite to the contrary, many organ-
izations are well advised to face digitalization head
on if they want to avoid imminent digital disrup-
tion. But truly digitalizing a company – and not
just glossing over an outdated organizational core
with some fancy technology – is an endeavor that
requires diligence, persistence, strategic vision, and
very careful planning. But if done well, the efforts
of the past months showcase the enormous poten-
tial that true digitalization holds.
Prof. Dr. Benjamin Mueller is an
Associate Professor of Digital Innovation
and Design at the University of
Lausanne, Switzerland, and a member of
the Enterprise for Society (E4S) center
founded by UNIL, EPFL, and IMD.
His research focuses on how advanced
information and communication tech-
nologies transform organizations and
augment work.
Dr. Jens Lauterbach is an independent
advisor for digital and organizational
transformation projects. Jens mainly
works at the intersection of business and
information technology and helps organ-
izations to establish structures that lead
to the effective implementation and use of
digital technologies.
 Team Management
ADVANTAGES, LIMITS AND STRATEGIES
FOR ONLINE AND
OFFLINE COLLABORATION
BY FERNANDA ARREOLA AND PIERRE DAEMS
During the period of confinement, organiza-
tions around the world were forced to develop
new tactics and strategies for orchestrating new
forms of work and collaboration. This extreme
situation, that we can observe as a natural exper-
iment forced companies to try a fully virtual
work environment. In this article, we share our
views of 10 managers around the world, who
were forced to engage in new ways of collabora-
tion with their teams, gained a new perspective
towards the limits, opportunities and new chal-
lenges of virtual coordination.
Motivation in the workplace
The study of motivation in the workplace had
its formal beginnings in the theories of Abraham
Maslow1, who contended that motivation is the
natural desire of humans for always wanting
to improve their belongings or to satisfy more
ambitious needs. The research on motivation
has therefore acknowledged that we all are at
different levels of a “needs pyramid” and that
our demands belong to the desire to achieve a
superior level of accomplishment of such needs.
Research on engagement at work also
acknowledges that, the needs of the workplace
are composed by different aspects of our envi-
ronment that pertain to at least three domains:
the fit with corporate values and the strategic
sense we find in what we do (“want”), the
support, empowerment and collaboration to
The research
be able to concretize our work (“can”) and
on motivation the consideration and recognition we receive
has therefore (“be”)2. Other studies signal, that a “good place
acknowledged to work” is one in which we are able to, other
that we all are at than finding sense to our contribution, we can
profit from a social environment where we are
different levels
able to collaborate and a leadership that drives
of a “needs us in the right direction3.
pyramid” and But for all of this variables, the undergoing
that our demands confinement conditions make us consider if a
belong to the virtual collaboration is a good enabler of the
central items in the motivation or engagement
desire to achieve
at work framework. This is because, while online
a superior level of collaboration can bring beneficial effects to the
accomplishment incorporation of new practices, the improve-
of such needs. ment of the efficiency of more available teams
(less concerned by travelling or transport times)
and more information for managers (thanks to
an increased number of meetings4) other more
human and practical aspects of face to face collab-
oration, may have been endangered or disrupted.
www.europeanbusinessreview.com 97
 Team Management
A multi-country perspective:
learnings and practices in a fully
virtual environment
For our study, we interviewed 10
managers with direct reports around
the world, who worked under confine-
ment conditions, in order to evaluate
if their perspectives and experiences,
brought a similar and comprehensive
understanding to the challenges and
opportunities of working online.
During the confinement, working
fully online, our interviewees experienced
the following advantages and limits:
Advantages
• More efficiency when working on
specific task - in the finance team of
a French Insurance company, 40% of
managers said that remote working
is more efficient than working from
the office, particularly for produc-
tion work – excel sheets – only 3%
consider it less efficient.
• More engaged teams – in the same
finance team of a French Insurance
Company, 35% of managers said that
teams are more engaged with remote
working – only 3% less engaged.
98 The European Business Review November - December 2020
• Increased personal well-being -
depending on individual situations,
for example, people appreciated
working from home if they had a
house with a garden and a desig-
nated workspace/office.
• Openness of managers for
encouraging alternative ways of
collaboration including letting
people work on less traditional sched-
ules – for example a manager shared
that he let his web designers work
from 1pm to 10pm every day, which
fit their preference and lifestyle.
In observing some
of the advantages
and disadvantages
experienced during the
confinement period, we
notice that it is essential
to connect online and
offline collaboration
practices to the employee
experience and a
firm’s culture.
• Increased transparency in the
communication – one of the
managers expressed that for his
company it was fundamental to be
open about the number of COVID
cases, the financial state of the
company and the strategic steps
taken during the period. This reas-
sured workers and made them trust
their management.
• Shorter and more efficient meetings
– for example, a manager expressed
that it’s the first time that meet-
ings are starting on time and that
everybody is focused on achieving
objectives in the best possible timing
• Discovering people (or rediscov-
ering) – a manager in a service firm
said she was pleased to see many
people, who would usually be on
the field and therefore hard to cross,
connected to virtual meetings
• Discovering humanity (the personal
lives of others) – a great majority of
managers shared that, in looking at
the personal lives of others (pictures,
kids crossing, decorations, pets and
other) they felt a redeemed proximity
and a more human interaction.
• Boosting creativity in some tasks
– a manager said that he saw a
peek in the ability of marketing
designers to create nicer visuals
(the employee said he felt more
comfortable working in a dark
room from his home). This was
also the case for another manager,
who’s marketing budget was cut
by 25% and saw his team’s imple-
menting free digital tools that led
to a similar number of leads than
with the previous budget.
• Team’s cohesion – a feeling of fair-
ness and shared situation was seen on
the majority of managers, expressing
it as a sentiment of “being on the
same boat”.
• The Hero’s syndrome – some
employees gathered a sentiment of
 heroic or exceptional performance, which, boosted by a feeling
of recognition, boosted the confidence of many employees.
Limits
• Personal well-being – many managers talked about a
decrease in their employee’s (and their own) well-being,
either for having uncomfortable settings (lack of appro-
priate chair, or work space) or for the loss of some services
(a manager in IT said that now, she had to spend one hour
cooking, when before she had a very good cafeteria on site,
where she could eat for free in 20 minutes) about people
being in uncomfortable personal positions that (depending
on individual situations - e.g. not for women ).
• The personal schedule interrupting the day – many
managers discussed the lack of separation between private
and professional life.
• Lack of personal interaction with colleagues and clients -
managers mentioned that because of the need to schedule
a meeting the informal interaction became non existing
(small talks – coffee machine + share and help each other)
• Lack of willingness to cooperate – many managers expressed
some employees were too impacted by the sudden change
and conditions and felt unable to collaborate.
• Lack of competence for working from home – some
managers discussed that some of their employees were
simply not fit to work from home. A manager even
mentions a case of an employee drinking an alcoholic
beverage during a meeting.
• Lack of tools – many managers said they were simply
not ready from an IT perspective, to face the online
environment.
• Lack of trust – some managers mentioned they were still
dubious of the fact that their workers were doing their
activities as expected.
• Lack of accompaniment – managers said that they had
received complaints about a feeling of “loneliness” from
their direct reports, who did not feel the same level of
follow up and availability from their managers.
• Very difficult to welcome and integrate new employees
– a manager said that newcomers had a specially hard
time understanding the organization and taking confi-
dently over their new job.
• More difficult for teams to work on projects, espe-
cially when practicing the agile methodology - manager
mentioned that It’s very difficult to work remotely at the
beginning of a project.
What we know and how to make our work better?
The list of the activities and actions that are more likely to
engage collaboration and enhance performance, gives us an
idea of the considerations that companies must have when
rethinking the future of online and offline collaboration.
In observing some of the advantages and disadvantages
experienced during the confinement period, we notice
that it is essential to connect online and offline collabo-
ration practices to the employee experience and a firm’s
culture. Following, we make some recommendations on

Choosing the right practice (online, offline or hybrid) for the right moment is
not an easy task. This requires a strong organization of work that can assure that
employees are on site when the moment requires physical connection (meet a new
employee, seminar, creativity session, …) and online when they must work remotely.

www.europeanbusinessreview.com 99
 Team Management

the considerations companies must have if they

decide to permanently change their online and

offline collaboration practices.
• A firm’s online/offline practices must be adapted
to the overall working conditions of the individ-

    

uals that make part of each team (personality  
 
 
types – DISC, personal situation – home/ 
   

family, type of function in the organization, …).

   
Neglecting the fact that individuals are limited    


 
 
by their personal environment, can lead to ineffi-
ciencies in teams were wide gaps of accessible or
appropriate resources and competences exist  


 
 
• A firm’s online/offline Practices should be
adapted to the different moments of the

 
  

employee experience ( production of a docu-

ment, meeting to discuss a project with
colleagues, seeking help, welcoming a new
employee, evaluating a team member, fostering
small talk amongst colleagues, hosting a crea-
tivity session, leading a seminar, holding an
executive committee meeting, animating a
workshop on engagement/values, ….)
• A firm’s online and offline practices should
acknowledge the cultural adaptation curve. This
curve explains to us that peaks of frustration
and of excitement exist in the deployment of a
novel cultural environment. During the Covid
firms experienced such curve, and therefore
they may be capable of determining at which
phase of the curve they are located, in order
to avoid overcharging teams during periods of
frustration or confrontation.
In conclusion, choosing the right practice
(online, offline or hybrid) for the right moment is
not an easy task. This requires a strong organization
of work that can assure that employees are on site
when the moment requires physical connection
(meet a new employee, seminar, creativity session,
…) and online when they must work remotely.
It also demands a lot of flexibility and trust so
that employees can adapt their agenda to be either
online or offline. Managers must also leave space
for employees to adapt to these new methods,
and avoid taking the upper phases of the cultural
adaptation curve, as the new level of performance
expectations. Managers should therefore acknowl-
edge that more virtual exchanges do not mean
increased productivity for all.
References
1. https://sg.inflibnet.ac.in/bitstream/10603/7182/7/07_chapter%202.pdf
2. Based on the MC2 model available on https://www.aubeconseil.com/docu-
ments/Fiche_MC2_Aube_Conseil.pdf
3. https://www.greatplacetowork.com/best-workplaces - international /world - s -
best - workplaces/2019
4. https://hbswk.hbs.edu/item/you - re - right - you - are - working - longer - and
- attending - more - meetings
5 https://www.mckinsey.com/business-functions/organization/our-insights/covid
-19-and-the-employee-experience-how-leaders-can-seize-the-moment

Fernanda Arreola is the Dean of Faculty & Research at ISC Paris. She is also a Professor of Strategy,
Innovation & Entrepreneurship and a researcher that focuses on service innovation, governance and
social entrepreneurship. Fernanda has held numerous managerial and possesses a range of international
academic and professional experiences.
Pierre Daems is CEO of Aube Conseil, a strategy and management consultancy based in Canada and
France . Pierre is a certified expert in Customer Experience Management (CCXP) and co-founder of the
CXPA (Customer Experience Professional Association) in Montreal and Paris. He contributes to make
organizations more sustainable helping them to develop a purpose that takes in consideration the experi-
ence of all stakeholders (« Human Experience »).

100 The European Business Review November - December 2020

 Supply Chain
DOES THE DEVIL
WEAR PRADA?
LESSONS IN SUPPLY CHAIN
SUSTAINABILITY FROM
LUXURY FASHION
BY DONNA MARSHALL AND
HAKAN KARAOSMAN
In this article, we present the results of a
five-year ongoing research project, with
multiple companies in the luxury fashion
industry. We uncover the new strategic
dimensions driving these companies:
innovation, exclusivity, and consciousness
and provide a radar for capturing sustainability
practices along the dimensions of strategy,
production stage and capability. In order to
help senior managers who want to embed
sustainability into their strategy and translate
this into the right practices for their company,
we also provide a sustainability practice
decision-making matrix.
INTRODUCTION
Fashion is more than just clothes. It is one
of the world’s most influential industries,
inspiring trends, capturing imaginations
and blending art and production in creative
and innovative ways. If the fashion industry
is a trend-setter and innovation leader, then
luxury fashion is the engine of the fashion
industry. Luxury fashion is at the forefront
of innovation with their catwalk designs and
campaigns copied and emulated by the rest of
the fashion industry. Individuals, regardless of
their social status, are wealthier than at any
other time in history1, which has led to the
growth of the luxury market to an estimated Luxury
€1.2 trillion globally in 2018 and the personal fashion offers
luxury goods industry: apparel, textiles and innovation
footwear, alone, reached €260 billion in 2018,
representing 6% growth2.
and excellence
However, while luxury fashion items are based on
made to last due to high-quality and durable rare and
materials, luxury fashion brands promote an high-quality
insatiable appetite for consumers to buy new
clothes with capsule items, cruise collections materials.
and celebrity-endorsed limited-edition ranges. However,
Consequently, the global luxury fashion raw material
industry’s environmental and social costs, high-
lighted by NGOs and consumer groups, are a
production
huge burden on society. and processing
Examples include luxury fashion brands stages generate
burning excess stock, polluting the environment substantial
with hazardous chemicals, excessive water usage,
paying less than a living wage and producing environmental
elsewhere whilst at the same time labelling and social
items ‘Made in Italy’. These costs along with the impacts.
www.europeanbusinessreview.com 101
 Supply Chain
increase in automation and new norms in terms of owner-
ship and transparency, have unsettled luxury fashion industry
managers and left them seeking answers to difficult questions.
Our research finds that some companies are leading the
way in sustainability with sustainability-embedded corpo-
rate strategies and strategically-derived environmental and
social best practices that fit with their values and goals. We
call this new wave of companies: responsible luxury. These
companies are the focus of this article in order to bring a
unique sense of style and invention to the world of sustain-
able supply chains. We provide the results of our ongoing
research with more than 15 luxury fashion companies
(around 40 brands) and their suppliers, creating a network
constituting hundreds of managers. We conducted in-depth
case analyses of these companies including a detailed
content analysis of their communications and sustainability
reports. We also gathered insights from our annual respon-
sible luxury workshop and workshop focus groups, which
attracts an average of 300 participants from the world’s
luxury fashion companies. With these findings, we highlight
the sustainability-embedded strategies and practices used by
luxury fashion companies that senior managers from other
industries can learn from and apply in their own industries.
In this article, we pinpoint three key strategies driving
sustainability in luxury fashion and a decision matrix that can
be used by other industry leaders to shape their sustainability
strategies by focusing on developing the right practices for
their specific needs.
STRATEGIC DIMENSIONS FOR LUXURY FASHION
Luxury is meant to last and be timeless. Products must be
guilt-free as luxury means consumers want the comfort of
knowing there is no environmental harm or questionable
social or ethical issues in the supply chain of their favourite
luxury brands. Responsible luxury companies understand
that today’s actions will be part of their brand’s heritage for
the next fifty years. Therefore, brand heritage must embed
environmental and social responsibility in strategy, design,
production and supply chain processes. Our research finds
that there are three key strategic dimensions of sustainability
102 The European Business Review November - December 2020
that luxury fashion companies focus on: Innovation,
Exclusivity and Consciousness.
Innovation
Luxury fashion offers innovation and excellence based on rare
and high-quality materials. However, raw material produc-
tion and processing stages generate substantial environmental
and social impacts. Most raw materials are acquired from
nature, which is affected by climate change hazards such as
drought, biodiversity degradation and water scarcity. To illus-
trate, cotton, one of the most widely used raw materials, is
incredibly water intensive and cotton’s growing conditions are
heavily affected by temperature and soil moisture. Cashmere is
also dependent upon water availability and constant tempera-
tures and the quality of cashmere fiber is expected to decline
due to water scarcity and global warming3. Furthermore,
responsible luxury does not rely on one creative designer but
uses the whole supply chain to innovate and experiment with
social and environmental innovations.
Exclusivity
In luxury fashion, inherent scarcity and exclusivity of pres-
tige goods satisfies the need for uniqueness4. However, the
democratization of luxury has reduced the exclusivity of
features and their esthetic distinctions. Responsible luxury
companies know that to secure the best materials into the
future they must move away from arms-length and dictatorial
to collaborative relationships throughout their supply chains.
Responsible luxury companies are working closely with their
suppliers and their subcontractors to create compatible poli-
cies and shared value. Unfortunately, many companies still
do not know who or what is in their networks, meaning that
actual supply chain risks are almost completely unknown.
Supply chain integration and communication are therefore
imperative in ensuring exclusivity and enabling a comprehen-
sive picture of what and who is in your supply chain.
Consciousness
Consciousness is now emerging as a crucial driver of
sustainability in luxury fashion supply chains. Generation
Y (Millennials) and Generation Z (Centennials)
will represent 45% of the global personal luxury
goods market by 20255, however the character-
istics and values of these groups conflict with
the business models of many traditional luxury
brands. Luxury products have long attempted to
encapsulate quality traits such as exclusivity and
premium features, and innovative characteristics
focused on uniqueness and emotional appeal,
e.g., investing in retail operations that provide
exquisite customer experiences, including deliv-
ering products in packaging that is much bigger
than necessary. Responsible luxury companies
have now realized that the purchasing habits of
younger customers are shaped by other, more
intangible, values, such as legitimacy and trans-
parency. Luxury fashion companies operate in
complex supply chains with a range of stakeholders
demanding information on their environmental
and ethical actions. Supply chain visibility is a
key concern and managers need tools to under-
stand practices that will maintain or build their
sustainability credentials and bring competitive
advantage through cost savings and new product
and market development.
THE RESPONSIBLE LUXURY RADAR
We designed the Responsible Luxury Radar,
through interactions with responsible luxury
companies and their senior management. The
radar and the practices are determined by the
strategic outcomes the companies are trying to
achieve: innovation, exclusivity or conscious-
ness; the production stage that the companies
focus on: end product or production processes;
and the companies’ key capability: technology
Material or people. When these are taken together,
innovation the radar is founded on four essential pillars:
refers to Materials Innovation, Clean Production, Ethical
environmentally Leadership and Supply Chain Transparency.
and socially Platform 1 Material Innovation: Creating envi-
ronmentally and socially innovative materials, which
innovative go directly into the end product, and reimagining
materials, which design with the lowest impact
go directly into Platform 2 Clean Production: Creating a system
the end product. to better manage product stewardship, water and
energy efficiency and to combat resource scarcity
Platform 3 Ethical Leadership: Creating prod-
ucts that are free from social harm and that actively
create social good and future talent
Platform 4 Supply Chain Transparency:
Visualizing supply chains and production processes
in more holistic and inclusive ways
Using the Responsible Luxury Radar, compa-
nies can not only examine their current practices
but can also look for future sustainability and
advantage opportunities.
Material Innovation
Material innovation refers to environmentally
and socially innovative materials, which go
directly into the end product. In this dimension,
responsible luxury companies use their techno-
logical expertise to develop eco-friendly materials,

  responsible packaging and less harmful chemicals.
 Raw material quality is the essential component of



the luxury fashion business model. From natural
  fibers like cotton and animal fibers, such as silk,
to leather, exotic skins and precious metals and
 

stones, luxury fashion is dependent on materials.
The responsible luxury sector provides exam-
ples of innovations that reduce impact without





 


 
compromising product quality.

Clean Production
  Luxury fashion companies create brand value
through timeless products. However, their
 
 production processes create long-term envi-


ronmental and social harm. The fashion sector
  is one of the most polluting industries because

www.europeanbusinessreview.com 103
 Supply Chain
The fashion industry also understands the need
for radical transparency and to re-establish trust
with consumers and other stakeholders; therefore,
depicting honest, transparent and relatable
stories can be vital in strengthening brand value.
not only has clothing production more than
doubled since 2000 but, in 2015, it generated
over a million tons of CO2, accounting for over
5% of global carbon emissions6. Waste, water
and energy are growing challenges with 20% of
global freshwater pollution coming from textile
treatment and dyeing. In 2016, fashion waste was
estimated to be over 800,000 tons with 440,000
tons occurring during the preparation of fibers
when creating yarns and garments7. Responsible
luxury, however, is focusing on supply chain
processes and technological developments in
clean production such as using luxury waste as a
resource, guaranteeing future water supplies and
mitigating energy throughout the supply chain.
Ethical Leadership
Responsible luxury companies need to look
fundamentally good in the eyes of their discerning
customers, therefore their products must be free
from social harm and be actively creating social
good not only for ethical reasons but to ensure
their luxurious image supports their reputation.
Responsible luxury companies that focus on
the end product and use their people-oriented
capabilities, do this through the development
of unique talent generation programs, efforts to
ensure skills and resources and community devel-
opment projects.
Supply Chain Transparency
Supply chain transparency and visibility of the 
the distributed ledger technology, which transfers
material data across the supply chain, appears to
be growing in use across the industry to improve
traceability. To illustrate, De Beers who created
Tracr, an inclusive mine-to-customer traceability
solution for the diamond industry. In 2015,
Everledger began to track and trace the authenti-
cated source of diamonds, by closely working with
manufacturers and retailers, it has now encrypted
the source of more than 2 million diamonds.
LESSONS LEARNED: HOW TO UNLOCK
SUSTAINABILITY ACROSS SUPPLY CHAINS
Responsible luxury companies, like many other
companies, are dealing with a range of emerging
issues in sustainability. Many of the exemplar
firms in our research have shown how to navi-
gate through difficult circumstances using their
strategic direction, focus and capabilities. The
fashion industry also understands the need for
radical transparency and to re-establish trust
with consumers and other stakeholders8; there-
fore, depicting honest, transparent and relatable
stories can be vital in strengthening brand value.
By using the lessons of the responsible luxury
companies, managers from other companies can
use the insights from this paper to cope with
rapidly changing business pressures while at the
same time advancing supply chain sustainability.
Environmental and social responsibility is
a system of sustainability practice identifica-
tion and exploitation. Following the example of
responsible luxury, companies should consider a
number of factors:
1. Does your differentiation or critical focus depend on
innovation, exclusivity or consumer consciousness?
2. Is it more important for you to focus on the product
itself or the process for creating the product?
    
 
 
luxury production process is of growing concern.   
Many luxury brands act as coordinators for  

independent networks where various functions 

 


    
    
 
are outsourced to suppliers. Responsible luxury 
  


companies are visualizing their supply chains and     
     


 
production processes in more holistic and inclu- 
 
sive ways and are using their supply chain focus  






and people-oriented capabilities to ensure sustain- 
ability and competitive advantage. Blockchain,

104 The European Business Review November - December 2020

 
 
 

 and Clean Production tend to reinforce
     each other. Materials Innovation is the

 
  heart of new product development
      while Clean Production ensures the
 
        

processes used to make these new prod-
  ucts are as effective and sustainable as
           possible. Ethical Leadership and Supply
 


Chain Transparency can supercharge

 the societal actions needed to not only
do less harm but also do more ‘good for
  
 
communities and people in the supply
   chain’. Without technical capabilities,
 
  
 companies would focus more on social


 

 problems while ignoring environmental
          actions; without relational capabilities,
 
    
   
  the technical innovations would only
   reach superficially into the supply chain
    
        without systemic or meaningful change.

     
   For senior managers to apply the

 radar to their own companies and
    supply chains they must understand
the key variables for sustainability
and competitive advantage. For many,
3. Are your capabilities technological innovation is the key strategic outcome, that is now a balance of production
or relational? Natural Chemicals, Societal Benefits, stage, technical and relational capa-
Energy Mitigation and Community bilities and strategic focus. There are
For example, companies can start Involvement are key aspects. Where huge opportunities, as illustrated by
with a product focus, and concen- exclusivity is the focus, Sustainable the responsible luxury sector, in terms
trate on the Material Innovation Packaging, Biodiversity Protection, of costs savings and developing new
and Ethical Leadership categories. If Water Guarantee and Origin Guarantee products and markets, however, that
companies are more production-ori- play a significant role. If companies window of opportunity is closing with
ented, they should emphasize Clean are looking to support their brand increased regulation and demands for
Production and Supply Chain image, reputation and legitimacy due information and ethical behavior from
Transparency. While Materials to the emerging consciousness of their investors, customers and other stake-
Innovation and Clean Production are customers, they should focus on Unique holders. If companies act now, they
for technology-oriented companies Materials, Talent Generation, Waste can not only reap the financial rewards
and challenges and Ethical Leadership Use and Total Ownership initiatives. that sustainable advantage can bring
and Supply Chain Transparency are The decisions above are important but also know that they are helping
more related to those with relational for companies starting their sustain- both people and the planet.
capabilities. ability journey, however, responsible Responsible luxury tells us that no
The strategic outcomes cut across luxury companies show us that used one size fits all, either in the way they
the production stage and capability together these four pillars underpin and focus on different elements of the radar
dimensions. For companies where support each other. Materials Innovation at different times, or that elements

Responsible luxury tells us that no one size fits all, either in the way they focus
on different elements of the radar at different times, or that elements suddenly
become more important or give opportunities that had not been thought of before.

www.europeanbusinessreview.com 105
 Supply Chain
For senior managers to apply the radar to their own companies and supply chains
they must understand the key variables for sustainability and competitive advantage
suddenly become more important or give oppor-
tunities that had not been thought of before. It
is a dynamic process of awareness, choice and
management. One thing is clear, they do not
cherry pick among the practices but are aware
of and are managing each one. Other managers
using the responsible luxury radar should see
the elements as a system with distinct parts that
can align with their strategy but will be most
powerful when used holistically. Our advice is
to be like the responsible luxury industry, find
sustainable fashion trends in your market that
suit your strategic outcomes and use them to
your advantage.
References
1. Karim Benammar, “Abundance and Scarcity. Concepts and
Rhetoric in Ecology, Economics, and Eco-Ethics.” In Beyond Green:
Sustainability & Fashion, edited by J. Brand, T. Luyt, and M. Vos
(Rotterdam, 2008): 40–52
2. Claudia D’Arpizio, Federica Levato, Filippo Prete, Elisa Del-Fabbro,
and Joelle De-Montgolfier, “The Future of Luxury: A Look into
Tomorrow to Understand Today.” (Milan, 2019)
3. Helen Crowley, Christine Driscoll-Goulay, Elisa Niemtzow, Tara
Norton, Emilie Prattico, and Bryndis Woods, “Climate Change:
Implications and Strategies for the Luxury Fashion Sector.” BSR
Working Paper in Collaboration with Kering, November (2015)
4. Franck Vigneron, and Lester W Johnson, “A Review and a
Conceptual Framework of Prestige-Seeking Consumer Behavior.”
Academy of Marketing Science 1 (1) (1999): 1–15
5. Claudia D’Arpizio, and Federica Levato, “The Millennial State of
Mind.” (Milan, 2017)
6. Fashion Revolution, Fanzine #001 “Money Fashion Power.” Edited
by Sarah Ditty. Fashion Revolution (London, 2017)
7. WRAP, “Valuing Our Clothes: The Cost of UK Fashion.”
(London, 2017)
8. Business of Fashion, and McKinsey&Company, “The State of
Fashion 2019.” (2019)
106 The European Business Review November - December 2020
Donna Marshall is Professor of Supply Chain
Management, Head of Research, Innovation and
Impact, Director of the Centre for Business and
Society (CeBaS) at College of Business University
College Dublin, and President of the International
Purchasing and Supply Education and Research
Association (IPSERA). She publishes regu-
larly in high impact publications such as Sloan
Management Review, Journal of Business Ethics,
and Journal of Supply Chain Management and
advises organisations such as the UN, govern-
ments, companies, NGOs, and the media on
supply chain management, sustainability and
transparency issues.
Hakan Karaosman is an academic researcher
focusing on environmental and social justice in
fashion supply chains. He has published a number
of academic papers, teaching cases and indus-
trial reports and has several collaborations about
sustainability, circular fashion, climate change and
transparency with organisations including the UN,
NGOs, fashion companies and media platforms.
In February 2020, European Commission Research
Executive Agency awarded Hakan with the prestig-
ious Marie Skłodowska-Curie Individual Fellowship
award for his project, FReSCH (Fashion’s Responsible
Supply Chain Hub) that he conducts with Prof.
Donna Marshall.
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