Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 229|January 29-February 3, 2022
Markets have fallen because the era of free money is coming to an end
The Economist | January 29, 2022
After the interest-rate cuts and hectic central-bank bond-buying of early 2020, investors came to believe that central-bank stimulus would pretty much last for ever. Today, however, as investors come to terms with the end of the era of free money, financial markets are in spasms. Markets now expect interest rates to increase four times in 2022 as the Fed fights the inflation that has lifted growth in the consumer-price index to 7%, a level barely imaginable a year ago. On January 26th the Fed confirmed that it would end its bond-buying programme and signalled that it would probably raise rates soon.
This hawkish shift is the most important among many to have taken place in the world’s central banks in recent months. But it has only recently begun to bite in asset markets. After reaching a vertiginous high of nearly 40 times earnings at the turn of the year, the s&p 500 index of stocks has fallen by 9% in January (markets in Europe and Asia have fallen too, though by less). Markets’ intraday volatility has been just as striking, reflecting investors’ struggle to digest the consequences of tighter money.
One is the repricing of long-dated assets. As interest rates collapsed during the pandemic, the value of securities with pay-offs stretching far into the future soared. Lately, however, long-term real interest rates have surged in anticipation of monetary tightening, causing a reversal of fortune. The turnaround has been dramatic for the most speculative stocks and novel instruments such as cryptocurrencies.
The effect of higher rates on the real economy is slower-burning and harder to anticipate. Ultra-cheap money let companies raise vast amounts of capital in 2021, a boom that will not be repeated. Homebuyers have assumed big mortgages as house prices have soared. Distressed firms have taken advantage of government-backed loans. Government debt-to- GDP ratios have ballooned, because of large, sustained deficits in the rich world and a collapse in growth in many emerging economies.
High indebtedness makes the world economy more sensitive to changes in monetary policy. Central banks must raise rates enough to quell inflation but not so much that they tip economies into recession as interest burdens rise. As they aim for a narrow landing strip, central banks also face high winds, because of the risk of war in Ukraine and uncertainties associated with the pandemic. They are also grappling with doubts over when consumers will shift their spending back to services, easing the upward pressure on goods prices caused by bunged-up supply chains.
3 key takeaways from the article
- After the interest-rate cuts and hectic central-bank bond-buying of early 2020, investors came to believe that central-bank stimulus would pretty much last for ever. Today, however, as investors come to terms with the end of the era of free money, financial markets are in spasms.
- The uncertainty about the global economy’s strength and its ability to withstand higher rates, combined with central banks’ twitchy trigger-fingers as they worry about inflation, means that markets are entering a new phase.
- During much of the pandemic, cheap money drove asset prices to astonishing highs even as the world economy was in the dumps. Today they are tightly bound to its fate.
Topics: Global Economy, Inflation, Financial Markets
How a Russian cyberwar in Ukraine could ripple out globally
By Patrick Howell O’Neill | MIT Technology Review | January 21, 2022
Russia has sent more than 100,000 soldiers to the nation’s border with Ukraine, threatening a war unlike anything Europe has seen in decades. Though there hasn’t been any shooting yet, cyber operations are already underway. Last week, hackers defaced dozens of government websites in Ukraine, a technically simple but attention-grabbing act that generated global headlines. More quietly, they also placed destructive malware inside Ukrainian government agencies, an operation first discovered by researchers at Microsoft. It’s not clear yet who is responsible, but Russia is the leading suspect. But while Ukraine continues to feel the brunt of Russia’s attacks, government and cybersecurity experts are worried that these hacking offensives could spill out globally, threatening Europe, the United States, and beyond.
On January 18, the US Cybersecurity and Infrastructure Security Agency (CISA) warned critical infrastructure operators to take “urgent, near-term steps” against cyber threats, citing the recent attacks against Ukraine as a reason to be on alert for possible threats to US assets. The agency also pointed to two cyberattacks from 2017, NotPetya and WannaCry, which both spiraled out of control from their initial targets, spread rapidly around the internet, and impacted the entire world at a cost of billions of dollars. The parallels are clear: NotPetya was a Russian cyberattack targeting Ukraine during a time of high tensions. President Joe Biden said during a press conference January 19 that the US could respond to future Russian cyberattacks against Ukraine with its own cyber capabilities, further raising the specter of conflict spreading.
No one fully understands what goes into Moscow’s math in this fast-moving situation. American leadership now predicts that Russia will invade Ukraine. But Russia has demonstrated repeatedly that, when it comes to cyber, they have a large and varied toolbox. Sometimes they use it for something as relatively simple but effective as a disinformation campaign, intended to destabilize or divide adversaries. They’re also capable of developing and deploying some of the most complex and aggressive cyber operations in the world.
The knock-on effects for the rest of the world might not be limited to intentional reprisals by Russian operatives. Unlike old-fashioned war, cyberwar is not confined by borders and can more easily spiral out of control.
3 key takeaways from the article
- Russia has sent more than 100,000 soldiers to the nation’s border with Ukraine, threatening a war unlike anything Europe has seen in decades.
- Though there hasn’t been any shooting yet, cyber operations are already underway.
- But while Ukraine continues to feel the brunt of Russia’s attacks, government and cybersecurity experts are worried that these hacking offensives could spill out globally, threatening Europe, the United States, and beyond.
Topics: Cyberwar, Russia, International Politics
Busting the five biggest B2B e-commerce myths
By Manu Bangia | McKinsey & Company | January 26, 2022
Once seen as secondary to in-person sales, the e-commerce channel has rocketed to the forefront since 2020 and is now a key purchasing gateway for many corporate buyers. Despite this, misconceptions abound, with a number of B2B companies telling us that “customers aren’t ready” and “e-commerce is an immature space for businesses like ours.” McKinsey & Company’s latest B2B Pulse helps put 5 myths squarely to rest.
Myth #1: Most B2B companies don’t offer e-commerce. Wrong. Nearly two-thirds (65 percent) of B2B companies across industry sectors now offer e-commerce capabilities, defined as fully executing a sales transaction online. This is up from 53 percent in early 2021. Overwhelming customer demand is a key reason for this uptick.
Myth #2: B2B buyers prefer face-to-face interactions. Not so. Two-thirds of corporate customers intentionally reach for digital or remote in-person engagement when given a choice. Moreover, they’re doing so at every stage of the purchasing journey. In all, e-commerce has surpassed in-person as the single most effective channel.
Myth #3: Just a basic e-commerce site can suffice. False. McKinsey’s research shows that the majority of B2B companies are treating e-commerce as a full-service channel—and investing accordingly. While proponents of this myth take a “slow and steady” approach to their e-commerce build-out on the assumption that developing digital capabilities and managing channel conflict makes it necessary, the rest of the field is tackling these issues head on.
Myth #4: E-commerce is only for repeat or low-ticket purchases. Not anymore. Business buyers have shed whatever concerns they may once have had about completing major transactions online.
Myth #5: Digital marketplaces are a next-level ‘nice-to-have.’ B2B buyers say the opposite. They see digital marketplaces as an important part of the purchasing mix. A sizable 60 percent of B2B buyers indicate they are open to purchasing on digital marketplaces, roughly the same percentage as those who buy from supplier-branded websites.
This is the time for B2B sales leaders to set aside outdated myths and embrace these five actions: lean into B2B e-commerce or be sidelined, win the journey, not just the transaction, don’t settle for easy, design the online experience to support big- and small-ticket sales, and recognize that e-commerce is an ecosystem play.
3 key takeaways from the article
- Once seen as secondary to in-person sales, the e-commerce channel has rocketed to the forefront since 2020 and is now a key purchasing gateway for many corporate buyers.
- McKinsey & Company’s latest B2B Pulse helps to put five myths about B2B’s online buying squarely to rest. These are: most B2B companies don’t offer e-commerce, B2B buyers prefer face-to-face interactions, just a basic e-commerce site can suffice, e-commerce is only for repeat or low-ticket purchases, and digital marketplaces are a next-level ‘nice-to-have.’
- Five actions required are: lean into B2B e-commerce or be sidelined, win the journey, not just the transaction, don’t settle for easy, design the online experience to support big- and small-ticket sales, and recognize that e-commerce is an ecosystem play.
Topics: Marketing, Selling, Technology
When a Major Life Change Upends Your Sense of Self
By Madeline Toubiana et al., | Harvard Business Review | January 28, 2022
Human beings have a complicated relationship with change. While it is both inevitable and essential for growth, change can also be deeply uncomfortable — especially if it feels involuntary, or out of our control.
The authors have spent the last ten years studying how people react to drastic changes in their lives and identified five strategies that can help anyone come to terms with a new identity.
- Mark a Distinct Break with the Past. If you’re struggling to disentangle your past and present selves, see if you can define a moment that can be imbued with significance, and articulate that to yourself and those around you. Simply recognizing a specific moment as a divider between the past and the present can help you extricate yourself from an identity that is no longer relevant to your life.
- Craft a Story to Tie the Past and Present Together. Your past is a part of you, and a new identity can only take hold if it’s connected to your prior identities. As such, it is important to link your present to your past by crafting a narrative that’s compelling, believable, and easy to share with others.
- Acknowledge and Work Through Challenging Emotions. The people who were best able to embrace their new identities were those who recognized the emotions holding them back and proactively worked through those feelings. One of the most effective strategy that can help when it comes to transforming negative emotions was to intentionally activate an opposing, positive emotion.
- Focus on Meaningful, Non-Work Identities. It’s very possible to have multiple, coexisting identities at the same time. As such, if you’re uncomfortable with your current identity at work, focusing on other aspects of your identity can be an effective strategy to help you get through a difficult transition. Reminding yourself of your full range of identities can help you focus on the positive, realize that you’re more than what you do (or used to do), and keep moving forward.
- Don’t Be Afraid to Fantasize. Some of the people who were most comfortable in their new identities were those who imagined that their current circumstances were only a stepping stone on the path to their ultimate (if objectively unrealistic) future. The surprising element of this strategy is that it still seemed to work even if the world they imagined was truly a fantasy.
3 key takeaways from the article
- Human beings have a complicated relationship with change. While it is both inevitable and essential for growth, change can also be deeply uncomfortable — especially if it feels involuntary, or out of our control.
- The authors have conducted hundreds of interviews with people who lost a desired identity. Based on these interviews the authors identified five strategies: mark a distinct break with the past, craft a story to tie the past and present together, acknowledge and work through challenging emotions, focus on meaningful, non-work identities, and don’t be afraid to fantasize.
- These strategies can help anyone come to terms with a new identity (whether you’re happy about the change or not) and move forward on a path of identity growth rather than identity paralysis.
Topics: Personal Development, Leadership, Crises Management
A Little Rudeness Goes a Long Way
By Shannon G. Taylor and Lauren R. Locklear | MIT Sloan Management Review | January 24, 2022
As the COVID-19 pandemic lingers, so too do exceedingly high levels of stress and uncertainty in the workforce. Hopes for an imminent return to a “normal” workplace have evaporated. Even in the best of circumstances, companies and their employees face many unknowns. All of this takes a psychological and behavioral toll: Research shows that uncertain environments make people more likely to engage in rude, uncivil, and disrespectful behavior — and they make targets of incivility more vulnerable to it. And that’s more detrimental to organizations than you might think. Employees who experience incivility at work perform worse in their jobs, are less helpful to colleagues and are more likely to steal from their employer. Rudeness also hurts employee retention and the bottom line.
So, what should managers do with findings of this study? The authors offer three recommendations based on their current results, what they have seen so far in follow-up studies, and their observations from their consulting work with organizations.
- Develop strong shared expectations for how people should behave. Managers play an important role in creating organizational norms in many areas of work life — for instance, attendance, safety, creativity, and performance — by providing a positive example with their own behavior. It should come as no surprise, then, that they can also set a civil tone in this way. Evidence suggests that company policies against incivility are most effective when managers clearly define what bad behavior entails. Otherwise, those policies will sound like empty slogans.
- Provide targeted training. Because rudeness ultimately stems from relationships, the authors recommend targeting incivility training to benefit employees who are engaged in dysfunctional dynamics. This approach is more cost-effective than blanket training for the whole company and more easily customized to address the relationship problems employees face.
- Encourage gratitude and appreciation. Research shows that employees who spend a few minutes each day journaling about the people, events, and things they’re grateful for are less rude to coworkers. But organizations can’t just hand employees a gratitude journal and expect their behavior to improve. Instead, managers need to do two things: regularly encourage employees to express gratitude and appreciation to one another, and show them how.
3 key takeaways from the article
- As the COVID-19 pandemic lingers, so too do exceedingly high levels of stress and uncertainty in the workforce.
- Research shows that uncertain environments make people more likely to engage in rude, uncivil, and disrespectful behavior — and they make targets of incivility more vulnerable to it.
- So, what should managers do? Three recommendations are: develop strong shared expectations for how people should behave, provide targeted training, and encourage gratitude and appreciation.
Topics: Organizational Behavior, Incivility, Personal Development
Discover This New Leadership Mindset to Exponentially Grow Your Business
By Marcel Schwanties | Inc Magazine | January 22, 2022
Exponential growth is a key goal for almost any emerging venture. While it may seem elusive to some, turbocharging your growth potential is a matter of approach. Start with a strong mission posture and focus, and the right leadership mindset to go with it. Serial CEO Frank Slootman has done exactly that in three consecutive companies over an 18-year period. In his new book Amp It Up: Leading for Hypergrowth by Raising Expectations, Increasing Urgency, and Elevating Intensity, Slootman shares his proven approach to unlocking any company’s growth potential to win competitive advantage. He details key steps to drive meaningful change, including these five principles:
- Raise your standards. Too often, our daily existence feels like going through the motions, checking boxes, and getting things off our desks. Good enough has become the standard. It sucks the life out of organizations. It doesn’t take that much more mental energy to raise the bar. “Expect and demand that we’re excited and thrilled about what we’re doing,”. “The standard is not passable. It should be what the late Steve Jobs called insanely great. Try applying that standard on a daily basis.”
- Align your people. The lack of alignment in organizations is everywhere because it doesn’t just happen by osmosis. Humans are not known for pulling on the same oar in the same direction. “A lack of alignment results in friction and low productivity, and marginal progress becomes exponentially more pronounced as organizations grow in numbers.
- Narrow your focus. Most organizations don’t have much orientation. They try to progress with a million things to do, a mile wide and an inch deep. It feels like swimming in glue, moving like molasses. “Narrow the plane of attack. Instead of moving in parallel, sequence the priority. Figure out what needs to happen first, now, what doesn’t at all.
- Pick up the pace. Absent leadership will cause people to move at a glacial pace. Because there is no purpose, no direction, no urgency, so naturally things slow down to a trickle. Start compressing time frames and question and challenge timelines at every turn. It’s actually quite easy, because most people do not know why they are timelining things a certain way. They are after comfort, not purpose.
- Transform your strategy. Most of Amp It Up is execution-centric, but there obviously is a strategic vector as well. The issue is that execution comes first. you cannot transform strategy without optimizing execution because it is impossible to know what is ailing. Why transform strategy when you are merely a lousy executer? You will become a much better strategist as you become a better operator because it will sort and magnify the issues properly.
3 key takeaways from the article
- Exponential growth is a key goal for almost any emerging venture. While it may seem elusive to some, turbocharging your growth potential is a matter of approach.
- Serial CEO Frank Slootman in his new book Amp It Up: Leading for Hypergrowth by Raising Expectations, Increasing Urgency, and Elevating Intensity, shares his proven approach to unlocking any company’s growth potential to win competitive advantage.
- Five principles to win a competitive advantage are: raise your standards, align your people, narrow your focus, pick up the pace, and transform your strategy.
Topics: Competitive Advantage, Leadership, Entrepreneurship
Four Reasons Deals Fail To Close
By David W. McCombie III | Forbes Magazine | January 28, 2022
So, you’ve completed the letter of intent (LOI) stage of trying to sell your business. While signing the LOI is a crucial stage in the sale process, over half of transactions still fail to close after reaching this point. The author covers the four primary reasons why deals fail to get across the finish line.
- The LOI Was Poorly Drafted. If you do not clearly outline the conditions the sale is predicated upon, there’s a meaningful risk that disagreements could cause the deal to fail. While it may be tempting to leave some detail out in an effort to move negotiations forward, it is nearly always better to hash these details out early to determine if a critical issue is a deal-breaker. Remember your negotiating leverage declines significantly once the LOI is signed.
- Poor Communication During Due Diligence. Readily communicating and being responsive to requests will foster good-will and give the other party to the transaction confidence that they are working with someone they can trust. A key component of good communication is organization. The due diligence process is highly comprehensive, and the buyer will need all kinds of detail about financial results, human resources, business operations, insurance, legal information, and so on. Having this information well organized and clearly presented from the start allows you to quickly respond to requests and helps the buyer find what they are looking for without unnecessary effort.
- Outside Advisors Hijack the Process. The sale process involves multiple outside advisors, each with their own set of incentives and objectives. Continually challenge your advisors to frame hotly contested negotiations from a cost-benefit standpoint, discussing both the likelihood and magnitude of various theoretical risks. Tell your advisors what you want so they can get you the best possible result on your terms.
- Business Performance Declines. Nothing will shake a buyer’s confidence like seeing numbers come in under budget during the closing process. During this phase, the buyer is watching everything with extreme scrutiny and looking for any reason to pay less for the business. Any short-term decline in business during the closing process will likely force the buyer to extend their due diligence to ensure that this is a temporary blip and not a trend that will continue after the transaction closes.
3 key takeaways from the article
- While signing the LOI is a crucial stage in the sale process, over half of transactions still fail to close after reaching this point.
- The four primary reasons why deals fail to get across the finish line are: the LOI Was Poorly Drafted, Poor Communication During Due Diligence, Outside Advisors Hijack the Process, and perceived Business Performance Declines by the buyer.
- Selling your business is a once in a lifetime event for most owners, with significant value at stake— Sweat the small stuff, focus on the details, and you will significantly increase your chances of successfully closing the deal.
Topics: Negotiations, Selling, Communication
3 Keys to Leading a Business Through a Crisis
By Greg Friedlander | Entrepreneur Magazine | January 29, 2022
The Covid-19 pandemic happened to be the kind of crisis that can shake up the entire world economy. The kind that forces business leaders to rethink and reevaluate our overall approach to facing a crisis. Sadly, for many, this exercise was more of an autopsy — looking back in regret at what you wished you would have done differently. Others were luckier — able to scrape by but now well aware that deep changes are needed. As a business leader, the past two years weren’t without their uncertainties, but according to the author he found that these three things made all the difference.
- Keep the core intact. When the full economic impact of the pandemic reared its ugly head, many companies immediately furloughed or laid off employees to cut costs. If a crisis strikes, and the first thing your people are wondering is, will I still have a job next week or next month, then they’re not going to be focused or engaged in the problem-solving effort. If your business does onboarding and hiring the right way — that is, you invest time and resources in seeking out candidates who are the perfect fit for your company culture — then you must recognize this as your greatest asset. If you’re in a service-driven field, then you understand that the experiences your people create for your clients is everything. In times like these, you have to do everything you can to keep your team intact.
- Be ready to pivot. When the world effectively shut down overnight, it was instantly clear that this breakdown of virtual to in-person events was going to be flipped on its head. These kinds of shifts are really opportunities for your business to be an industry leader — if you can pivot your approach quickly and decisively. Companies that put this into practice will come out ahead in times of crisis.
- Set the tone. Your employees will take notice of how you respond to times of challenge. It will come through equally in the way you communicate as well as the actions you take. In the midst of a crisis, business leaders must be able to set the tone for the rest of the team.
2 key takeaways from the article
- The Covid-19 pandemic happened to be the kind of crisis that can shake up the entire world economy. The kind that forces business leaders to rethink and reevaluate our overall approach to facing a crisis.
- The three differences between the businesses which regret what they should have done differently and the others who were well aware that deep changes are needed are: keep the core intact (if these are your employees, don’t fire them), be ready to pivot if required and set the tone for the rest of the team.
Topics: Entrepreneurship, Crisis, Uncertainty, Strategy