Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 247 | June 3-9, 2022
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Shaping Section : Ideas and forces shaping economies and industries
A recession in America by 2024 looks likely
The Economist | June 3, 2022
Not long ago recessions seemed to strike America roughly once a decade. But only two years after the first lockdowns, the business cycle is turning at a sickening speed and another one already seems to be on its way. If you are like most people, your memory of downturns will be dominated by the past two—the financial heart attack in 2007-09 and the pandemic-induced collapse in 2020. Both were severe and highly unusual. By their standards, America’s next recession will almost certainly be milder and more pedestrian.
The trouble is that even a mild American recession would expose glaring fragilities. One is the commodity-price crisis in much of the world, the result of Russia’s invasion of Ukraine. Countries from the Middle East to Asia are facing severe food shortages and soaring fuel bills. The euro zone is dealing with an especially sharp energy shock as it weans itself off Russian oil and gas. Around the world, household incomes are collapsing in real terms.
An American recession would land another blow on vulnerable parts of the global economy by curbing demand for their exports. Tighter monetary policy at the Fed and the resulting strength of the dollar would also compound what has already been the biggest sell-off in emerging-market bonds since 1994. The IMF says that about 60% of poor countries are suffering debt distress, or are at high risk of it.
Another weakness lies closer to home, on Wall Street. So far in 2022 the American stockmarket has fallen by 15%—comparable to the decline during the mild recession that started in 1991. The sell-off has been orderly and America’s banks are stuffed with capital. But after over a decade of cheap money, no one can be sure how stratospheric asset prices will be affected by the combination of higher interest rates and a Fed-induced recession. Stocks are pricey relative to long-run profits.
A final fragility is America’s hyper-partisan politics. A recession would probably strike by the end of 2024, colliding with campaigning for the presidential election. If the economy is shrinking, the race for the White House in 2024 is likely to be even more toxic than expected. If America’s economy does shrink in the next year or two, it could even alter the country’s long-term direction.
3 key takeaways from the article
- Not long ago recessions seemed to strike America roughly once a decade. But only two years after the first lockdowns, the business cycle is turning at a sickening speed and another one already seems to be on its way.
- By their standards, America’s next recession will almost certainly be milder and more pedestrian. But because the world economy, asset markets and America’s politics are all fragile, it may yet have nasty and unpredictable consequences. Do not underestimate the perils that lie ahead.
- If America’s economy does shrink in the next year or two, it could even alter the country’s long-term direction.
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Topics: Global Economy, Recession, USA
IPO Disclosures Are Ripe for Reform
By Aswath Damodaran et. al., | MIT Sloan Management Review | June 01, 2022
In theory, disclosures required of would-be public companies should provide investors with the critical information needed to determine whether they want to buy in, and at what price. Less obviously but equally important, disclosures should bolster good management practices by establishing sound performance metrics. However, existing disclosure regulations fail on both counts. They are outdated, and it is time for them to change.
Current rules were designed for a different era, when the companies going public were more established and had proven business models. Today’s companies, in contrast, often have untested business models. What companies disclose about their customers is completely voluntary, so executives can — and do — select data that paints their companies in the best possible light. Their disclosures are bloated, uninformative, and often misleading, and investors lack the data they need to make informed decisions or to hold managers and board members accountable.
As an alternative to one-size-fits-all disclosure rules, the authors propose triggered disclosures tailored to the value drivers of the company going public. Under these disclosures, claims about customer value and potential market size must be supported by a consistent, objective collection of baseline data related to those claims.
Triggered disclosures model four guiding principles are: keep the rule book lean, require more information about valuation, standardize the share count, and require companies to tell the whole story. The model‘s five required disclosure are: total addressable market, ratio of subscriptions/subscribers, ratio of transactions/users, ratio of advertising/users, and information about the lenders.
Different revenue models should lead to different disclosure requirements to provide the most relevant information to investors. These slimmer, more focused disclosures would provide investors with a better basis for valuing and pricing today’s companies. They also could force founders and managers to tell more realistic stories about their businesses, not fairy tales, while holding them accountable for delivering on their promises.
3 key takeaways from the article
- In theory, disclosures required of would-be public companies should provide investors with the critical information needed to determine whether they want to buy in, and at what price. Less obviously but equally important, disclosures should bolster good management practices by establishing sound performance metrics. However, existing disclosure regulations fail on both counts.
- As an alternative to one-size-fits-all disclosure rules, the authors propose triggered disclosures tailored to the value drivers of the company going public.
- The triggered disclosures model’s four guiding principles are: keep the rule book lean, require more information about valuation, standardize the share count, and require companies to tell the whole story. The model‘s five required disclosure are: total addressable market, ratio of subscriptions/subscribers, ratio of transactions/users, ratio of advertising/users, and information about the lenders.
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Topics: Public Companies, Disclosure, Initial Public Offerings
Leading & Managing Section
How Can You Build Visibility into a Hybrid Workplace?
By Gabriela Mauch | Harvard Business Review | June 06, 2022
Flexible work arrangements have become part of today’s organizational design and the extent will only increase. Flexible work arrangements can pose a challenge when it comes to measuring and tracking performance, as traditional approaches often rely on the assumption that the majority of work is conducted in person, during regular working hours. To make flex work work, leaders may need to rethink what kinds of visibility their organizations need to succeed. Based on research, the author and her team have helped us better understand how teams are navigating and responding to the challenges of hybrid work — and identify the best practices that can benefit everyone.
Ensuring productivity, achieving business objectives, and meeting the needs of your workforce all require visibility into your organization. But how you maintain that visibility depends on the type of flexibility you intend to implement. A few common types are: universal flexibility, variable, case-by-case, and fluid flexibility. Once leaders have clearly established the kind of flexibility they intend to offer, they can shift their focus to understanding how employees work within that paradigm, and what it will take to support them effectively in this new flexible setting.
Different people have different visibility needs to do their jobs effectively. For instance, Senior leaders need visibility to ensure strategic alignment, effective cross-collaboration, and coordination across the organization. Mid-level managers, on the other hand, need more granular visibility. Individual contributors also have visibility needs that can be challenged by the shift to flexible work. Data about peers’ focus times and schedule preferences can help employees communicate and work together more effectively.
Performance measurement strategies must be carefully designed. Data has the potential to be tremendously useful and produce relevant, actionable insights — but without the right approach, it can also be overwhelming and even misleading.
As with any major transition, developing and maintaining mutual trust is critical to ensuring success when launching a new approach to visibility. Specifically, there are three components that are necessary to build trust during this shift: transparent communication, Access to data and insights, and action and real-time adjustments. This will help you to pursue three strategies i.e., informed, engaged, and empowered.
3 key takeaways from the article
- Flexible work arrangements have become part of today’s organizational design and the extent will only increase. Flexible work arrangements can pose a challenge when it comes to measuring and tracking performance, as traditional approaches often rely on the assumption that the majority of work is conducted in person, during regular working hours.
- To make flex work work, leaders may need to rethink what kinds of visibility their organizations need to succeed. And different people have different visibility needs.
- Leaders need to establish clearly the kind of flexibility they intend to offer, shift their focus to understanding how employees work within that paradigm, and what it will take to support them effectively in this new flexible setting. And data is the blood of this new organizationa design. Right data can help performance measurement which will also lead to trust.
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Topics: Leadership, Organizational Design
How to be a great 21st-century CEO
By Gautam Kumra et al., | McKinsey & Company | June 3, 2022
What do CEOs do? Why do they do it that way? And what matters most? The authors, based on their research, found a distinctive set of mindsets which separate the best from the rest.
- Be bold. In times of uncertainty, it can be tempting to minimize the downside. However, that all but guarantees either mediocrity or decline. Successful CEOs want to avoid making mistakes, of course, but they also act boldly, actively seeking significant opportunities. They raise the aspirations of the company, and they look for intersections where the business and the market meet. In effect, they are excellent futurists and thus can define the right vision.
- Treat the soft stuff as the hard stuff. Only one in three strategies is successfully implemented—in large part because change generates resistance. That is why the “soft stuff”—that is, matters related to people and culture—can be the hardest stuff of all to get right. To carry their organization with them, leaders need to make the case for change, and then keep track of results.
- Solve for the team’s psychology. To build high-performing leadership teams, the best CEOs start with roles, not people, asking what the most important jobs are and then finding people who can do those jobs. And they design for overall functionality, bringing in a wide range of expertise. CEOs must engage with each individual while keeping some distance.
- Help directors help the business. The board is the CEO’s boss, but an awkward one—a lot of people, infrequently seen. Like any relationship, the bedrock is trust. That means being open, honest, and prompt about plans and problems. CEOs should establish a strong relationship with the lead director and check in with other directors once or twice a year. Finally, introduce the board to the company by connecting the board to managers.
- Start with “Why?” The best CEOs ask themselves why their company exists, then make purpose an intrinsic part of the business model, knowing that testing strategy against purpose can open up new areas of growth.
- Do what only you can do. Being a CEO is a 24/7 job, but no one can work that way. Great CEOs make it a priority to manage themselves to ensure that they are not being pulled apart. Some commonalities are there. The most important is self-discipline, particularly regarding the use of time. Old-school techniques such as lists, stars, and color-coding crop up often as time-management techniques. At the same time, the CEOs also build flexibility into their schedule—to respond to the unexpected or simply to think. Many combine high-intensity work with recovery periods, whether that is a ten-minute break between meetings or playing the piano. Ultimately, managing personal effectiveness is about developing a sense of perspective, and then using that to see into the future.
2 key takeaways from the article
- What do CEOs do? Why do they do it that way? And what matters most? The authors, based on their research, found a distinctive set of mindsets that separate the best from the rest. These are: be bold, treat the soft (people & culture) stuff as the hard (priority) stuff, solve for the team’s psychology, help the directors, start with “Why?” and do what only you can do.
- In a sense, all CEOs have the same responsibilities, such as working with the board, engaging stakeholders, setting direction, and creating a positive culture. What separates the best from the rest is how they approach these tasks. All excelled at some, were good at the rest—and knew the difference. All are world-class integrators. And all applied a distinctive set of mindsets against these responsibilities.
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Topics: Leadership, Culture, Strategy
5 Easy Ways to Create Stronger Workplace Connection
By Kerry Siggins | Entrepreneur Magazine | June 8, 2022
Connection is the secret. The connection between employees and management. The connection between each other as peers and human beings. So, how do you go about building strong workplace connections? Here are five things you can start doing now:
- Make connecting a priority. Start every meeting off with a check-in. Encourage employees to state how they are feeling and why, and it’s wonderful how this helps foster connection and empathy. Additionally, at the beginning of the monthly company meetings, employees could meet in virtual breakout rooms to share personal stories, give an update,and express gratitude to people on their team.
- Encourage storytelling. Sharing stories with vulnerability and openness sparks curiosity, helps people understand each other and makes people feel like they belong. During weekly team meetings, you can take turns telling a personal story. It’s incredible what we learn about each other, and the newfound insight helps us work through conflict and issues.
- Give all new employees a culture buddy. Employees are more likely to stay with a company if they experience great onboarding. A good onboarding process involves helping new employees feel connected to their peers and supervisors. In a remote or hybrid work environment assign new employees a culture buddy with whom they can connect every day to ask questions about where to go for information and how to navigate the culture.
- Create more dialogue. Most people crave more interaction with leadership, so create opportunities to have more dialogue with your employees. The best way to foster a connection is to have a conversation. Pick up the phone to see how someone is doing. Go for a walk with a colleague.
- Rally around teamwork. To foster connection across the broader organization, you must codify what it means to be part of the team. One idea could be rally around a “One Team” mentality, which helps people understand that we are all in this together and must work as one united, company-wide team rather than a set of individual teams.
3 key takeaways from the article
- Connection is the secret. The connection between employees and management. The connection between each other as peers and human beings.
- So, how do you go about building strong workplace connections? Five things you can start doing now are: make connecting a priority, encourage storytelling by the employees, give all new employees a culture buddy, create more dialogue, and rally around teamwork.
- Helping your employees build workplace connections is critical if you want to attract and retain talent. People who feel like they belong and have workplace friendships are happier, healthier and more engaged. It takes time and intention, but it’s worth the effort — connection is how you build a great place to work.
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Topics: Teams, Organizational Behavior, Culture
Entrepreneurship Section
‘Day Of Destiny’: How One Apartment Formed The Blueprint For Korea’s Top Lifestyle App
By Catherine Wang | Forbes Magazine | May 31, 2022
The inspiration behind Korea’s largest lifestyle and decorating platform struck during a “day of destiny” for oHouse founder and CEO Seungjae Lee, who was visiting a friend’s home when he fell in love with interior design. “I had looked at many architecture photos on Pinterest, and felt that beautiful houses were only possible in the Western world,” Lee says. “When I visited [my friend’s] house, I realized it was possible in Korea … I thought that these kinds of places could make people’s lives better.”
Lee, 34, launched oHouse in 2014 after graduating with a degree in chemical and electrical engineering from Seoul National University. It began as a community to share interior design ideas, evoking the wonder he felt when exploring his friend’s well-designed rooms. The app is now one of the most popular on the Korean internet, with over 20 million downloads – almost half of Korea’s total population – and 10 million monthly active users across the app and website. “oHouse is not only transforming the home furnishing industry but also reshaping the e-commerce customer experience,” says JP Lee, CEO of SoftBank Ventures Asia, in a statement about the latest funding.
Through the app, oHouse users browse photos of other users’ designs for inspiration and purchase items similar to those in the photos. The startup claims that a furniture item is purchased through their platform every seven seconds, driving annualized gross merchandise volume to a record $1.7 billion in 2021.
In Korea, where half of the population lives in the capital city of Seoul, interior design requires creativity for small and often expensive apartments. Additionally, as the pandemic required many employees to work from home – Korea’s quarantine and virus prevention measures ranked among the strictest in the world, with the country only opening to foreign tourists last month – living spaces were reconsidered, and often redesigned.
The company believes that some of the behaviors that we’ve learned during the pandemic, like spending more time indoors, working from home, and making personal spaces more comfortable … are here to stay. The self-described “lifestyle superapp” is eyeing global expansion, starting with Southeast Asia, the United States and Western Europe – the company’s English-language website states it will be available in the U.S. by this summer.
3 key takeaways from the article
- The inspiration behind Korea’s largest lifestyle and decorating platform struck during a “day of destiny” for oHouse founder and CEO Seungjae Lee, who was visiting a friend’s home when he fell in love with interior design.
- oHouse begins as a community platform to share interior design ideas. The app is now one of the most popular on the Korean internet.
- Through the app, oHouse users browse photos of other users’ designs for inspiration and purchase items similar to those in the photos. The startup claims that a furniture item is purchased through their platform every seven seconds, driving annualized gross merchandise volume to a record $1.7 billion in 2021. The self-described “lifestyle superapp” is eyeing global expansion, starting with Southeast Asia, the United States and Western Europe.
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Topics: Entrepreneurship, Startup, Technology
How Airbnb, Dropbox, and Reddit Got Their First Customers
By Rebecca Deczynski | Inc Magazine | May 31, 2022
Even when you think you have a brilliant idea, it can take some convincing to get others on board. Just ask some of today’s most successful founders. Airbnb, Dropbox, and Reddit are just a few companies that used some far-out-of-the-box strategies to get their very first customers before becoming household names. Three strategies are:
- Creating a viral moment that targets a specific community. Sure, they aren’t easy to pull off, but viral moments can be crafted with some strategy and dedication. Dropbox unable to find new uswer even after running a Google AdSense campaign, co-founder Drew Houston decided to show, not tell. He made a video to demonstrate exactly how its storage worked, and posted it on the news aggregator Digg. Users on Digg quickly upvoted the video, and by the next day, the site had 70,000 new sign-ups. One standout strategy: Dropbox ran a campaign that offered users 128 megabites of storage, in return for sharing a referral link on Facebook and Twitter. Within just 30 days, Dropbox users sent out 2.8 million invites, which greatly bolstered the site’s user base.
- Pulling from another company’s user base. Poaching customers from another business may sound like playing dirty–but it’s often a reality of business. When developing their apartment-sharing platform, Airbnb’s founders thought about what alternative a prospective short-term renter might use without their service. The answer: Craigslist. So, co-founders Brian Chesky and Joe Gebbia, both 40, developed a software that allowed them to extract the contact information of property owners on Craigslist and ask them to advertise their property. What’s more, it launched with a feature that allowed users to simultaneously list their property on both Airbnb and Craigslist. Property owners leaped at the chance to advertise their properties on both Craigslist and Airbnb.
- Creating the illusion of an already-existing audience. When it comes to growing a social media platform, users are critical–it’s far easier to persuade people to join a site that already seems popular than it is to get them to sign on to something completely new. That’s why Reddit’s co-founders found a way to make it seem like their website already had an active user base, even when it had only just launched. Co-founders Steve Huffman and Alexis Ohanian filled Reddit with submissions under fake usernames, which made the site seem more popular than it really was.
3 key takeaways from the article
- Even when you think you have a brilliant idea, it can take some convincing to get others on board. Just ask some of today’s most successful founders. Airbnb, Dropbox, and Reddit are just a few companies that used some far-out-of-the-box strategies to get their very first customers before becoming household names.
- Lessons from three companies are: Dropbox unable to find new uswer even after running a Google AdSense campaign, co-founder Drew Houston decided to show, not tell. Airbnb, co-founders developed a software that allowed them to extract the contact information of property owners on Craigslist and ask them to advertise their property. And Reddit’s co-founders found a way to make it seem like their website already had an active user base, even when it had only just launched.
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Topics: Entrepreneurship, Startups, Technology, Marketing
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