Weekly Business Insights from Top Ten Business Magazines – Week 266

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 266 |October 14-22, 2022

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Shaping Section : Ideas and forces shaping economies and industries

Emerging markets look unusually resilient

The Economist | October 13, 2022

For decades, fast-growing middle-income countries have been a source of financial trouble. In the early 1980s, the Fed’s crusade against double-digit inflation sparked a Latin American debt crisis; in the 2010s, the normalisation of policy after the global financial crisis rattled the “fragile five” (Brazil, India, Indonesia, South Africa and Turkey). Much the same might have been expected during present tightening, which is the most intense since the early 1980s. In forecasts published on October 11th, the imf again marked down its projections for global growth, and warned that economies accounting for a third of global gdp are heading for downturns. The world’s very poorest countries are on the ropes. More than a billion people live in economies now facing severe distress.

And yet most big, middle-income countries are weathering the storm. The IMF reckons that emerging economies will substantially outgrow rich ones this year and next, despite a slowdown in China and a contraction in Russia. While the euro, pound and yen are tumbling against the dollar, the Indian rupee and Indonesian rupiah have managed a more graceful decline, and the currencies of Brazil and Mexico have risen. Emergency central-bank intervention is unfolding in London rather than Brasília.

The resilience of the emerging world is in part a story of maturation. Since the crises of the 1980s and 1990s, local financial markets have grown deeper and banks better managed. Policymaking has improved. Officials have learned the hazards of careless budgeting and large current-account deficits. Central banks are more independent, and have adopted the inflation-targeting approaches used in the rich world.  Emerging-market foreign-exchange regimes have also improved. These economies once relied on exchange-rate pegs to contain inflation and secure cheaper credit. But the years of crisis encouraged a move in the direction of floating-rate regimes, in which markets get more of a say over a currency’s value. Now most governments only occasionally intervene to lean against undesirably fast or big moves. Many have paired this with deeper foreign-exchange reserves. These reserves can be deployed to slow a currency’s depreciation when investor risk appetite drops. And emerging economies have addressed their greatest weakness: an inability to borrow in their own currency.

The safety purchased by these innovations is impressive. But in a forbidding economic climate, emerging markets cannot afford a victory lap. Although governments have borrowed more in their own currencies, many companies have not—and if global woes force large firms to seek bail-outs their foreign obligations could become their governments’ foreign obligations. If worsening financial conditions prompt a flight to safety, a Fed focused squarely on high American inflation may not ride to the world’s rescue with a torrent of emergency lending, as in March 2020.  But the stability can also lead to greater risk-taking.

3 key takeaways from the article

1. The script is familiar. A Federal Reserve bent on taming inflation mercilessly raises rates. The dollar soars, global financial conditions tighten and the world economy falls into a broad slowdown. 
2. But this time, there is a twist. Most big, middle-income countries are weathering the storm. The IMF reckons that emerging economies will substantially outgrow rich ones this year and next, despite a slowdown in China and a contraction in Russia.
3. The resilience of the emerging world is in part a story of maturation in policy making and implementation, improved foreign exchange regimes and the emerging economies have addressed their greatest weakness: an inability to borrow in their own currency.  But in a forbidding economic climate, emerging markets cannot afford a victory lap.

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Topics:  Global Economy, Emerging Economies, Recession

How to build geopolitical resilience amid a fragmenting global order

By Andrew Grant et al, | McKinsey & Company | September 8, 2022

Geopolitical risk is at the top of the CEO agenda, according to McKinsey’s latest survey of global economic conditions. In the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience.  To address the geopolitical risks of the present—and future—leaders should challenge their organizations on the following six key dimensions of resilience

1. Business model resilience.  It starts with the board. To exercise effective oversight and decision making, boards need to first develop an understanding of geopolitical developments that are material to the organization.  One way to focus and structure the board discussion is to identify priority geopolitical risks. Boards could leverage a tiered approach, with tier five denoting markets with the highest level of geopolitical risk and tier one denoting markets with localized risks that can be managed by local leadership and teams.  To do so requires organizations to establish a mechanism to conduct regular global market scans and to assess in a scorecard fashion across internal teams—legal, security, finance, risk, and communications—the aggregate risk (versus opportunities) of operating in a particular market.
2. Reputational resilience.  A first step to building reputational resilience is the organizations need to know what they stand for (and what they are against). A clear stance is a prerequisite for the next step in building reputational resilience: developing a coherent values-driven narrative. Indeed, many organizations today are grappling with how to explain not just their stance but their core identity, notably around their presence in markets governed by authoritarian regimes.  Three potential postures: proactive—for example, engagement is important for companies’ competitiveness and leadership; reactive—for example, principled engagement with close attention to supply chain integrity; or silent—meaning generally avoiding public statements.  Whichever narrative an organization chooses, it needs to bear in mind that, in the age of instant information, the story told in one market won’t stay there. And a narrative that works in one place could inhibit market opportunities in another, or create sensitivities internally and among regions. 
3. Organizational resilience.  External geopolitical pressures are increasingly triggering internal pressures. The days of the borderless executive are receding. Indeed, nationality and cultural relativism are coming to the fore in discussions around stance, narrative, strategy, and risk appetite.  Three approaches can be taken to build organizational resilience. First, organizations need to ensure they have inclusive governance structures, from the board to risk committees.  Second, leaders, starting with the CEO, need to have open and honest dialogues in appropriate fora. Finally, organizations need to consider a range of targeted initiatives to promote connectivity and cohesion.
4. Operational resilience.  A priority area of focus has been and must remain protecting and pivoting supply chains. Supply chain operations should consider a range of resilience measures. In the near to medium term, these include creating a nerve center for the supply chain, simulating and planning for extreme disruptions, revaluating just-in-time strategies, and assessing the resilience of one’s suppliers’ suppliers as part of a full look-through approach. Efforts to diversify and build redundancy in supply chains must critically factor in the political risks of entering any new market through a detailed assessment across multiple risk indicators.  To achieve long-term structural resilience, however, organizations should consider measures such as constructing a “digital twin” of the most critical parts of the supply chain, creating and testing what-if scenarios, and ring-fencing a small part of the supply team to focus on building long-term resilience instead of day-to-day supply chain issues.
5. Technological resilience.  It requires accelerating planning and taking concrete steps in four key areas.  Navigating the “splinternet.” Geopolitical tensions, notably between the United States and China, are resulting in the internet splintering into regional variants and technology stacks. Complying with data localization requirements and managing data access.
6. Financial resilience.  Thinking through crisis protocols in advance and building out an early warning system around macroeconomic challenges are key resilience measures to consider.   Resilience in the face of the growing global weaponization of trade and investment requires not just having a precise understanding of ever-shifting regulatory regimes and a robust compliance capability but also driving a culture of compliance with the organization itself on an issue with no room for error.

3 key takeaways from the article

1. For the past three decades, going global meant unlocking specialization and scale, developing markets, and creating multinational corporations.  But the orthodoxy of globalization is under strain. The latest salvo: multiple disruptions triggered by Russia’s invasion of Ukraine. Looking ahead, the challenges are likely to only become more acute. 
2. Geopolitical risk is at the top of the CEO agenda. In the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience.
3. To address the geopolitical risks of the present—and future—leaders should challenge their organizations on six key dimensions of resilience: business model, reputation, organization, operations, technology, and finance.

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Topics:  Leadership, Resilience, Strategy, Decision-making

Strategy & Business Model Section

What Outperformers Do Differently to Tap Internal Talent

By Nithya Vaduganathan et al., | MIT Sloan Management Review | October 17, 2022

Companies face troubles when career growth opportunities within the organization are misaligned with the needs of employees.  While often overlooked as a lever for talent, offering employees lateral moves can be an untapped gold mine for companies. By adopting leading practices for internal mobility, companies can better deploy existing worker capacity and benefit from more successful hires who hit the ground running in new roles with greater institutional knowledge, higher levels of engagement and retention, and even improved gender equity. At the same time, employees benefit from meaningful skill and career development opportunities that better align with their goals, making this a win-win for employers and employees alike.

Companies that are leading the way as talent mobility outperformers offered four practical insights:

1. Put More Power in the Hands of Employees.  Talent hoarding is one of the greatest barriers to talent mobility. Only 20% of employees feel supported by teams to make an internal move. And many employees — especially women — leave companies without even exploring internal options. Talent mobility outperformers overcome this tension in part by giving employees the ability to browse and apply for opportunities directly on talent marketplaces without first notifying their line managers.
2. Expand the Mobility Option Menu.  While historically many internal mobility programs have focused on permanent job transfers, a growing number of companies are embracing more varied models for lateral mobility — especially through project or internal gig work, in which employees contribute to a project while remaining in their jobs. In fact, most companies that are outperforming in terms of internal lateral mobility based on job changes are also implementing some form of project matching.
3. Take Advantage of Recent Innovation.  Third-party solutions that help companies tap into internal talent have blossomed in recent years. In 2021 alone, $12 billion was invested in the HR technology space. Where companies used to create their own custom technologies for internal mobility, platform developers like Gloat, Fuel50, and Eightfold AI now offer internal talent marketplaces powered by artificial intelligence. Human capital management providers like Workday have introduced talent marketplaces of their own.
4. Integrate Mobility With Other Talent Practices.  In order to build a successful talent program around internal mobility, leaders need to think about bringing these practices into day-to-day routines — such as onboarding, learning and development planning, and performance management. A focused approach to talent mobility can also help companies to integrate talent processes that have historically been disconnected.

3 key takeaways from the article

1. Companies face troubles when career growth opportunities within the organization are misaligned with the needs of employees.
2. While often overlooked as a lever for talent, offering employees lateral moves can be an untapped gold mine for companies. By adopting leading practices for internal mobility, companies can better deploy existing worker capacity and benefit from more successful hires who hit the ground running in new roles with greater institutional knowledge, higher levels of engagement and retention, and even improved gender equity. 
3. Companies that are leading the way as talent mobility outperformers offered four practical insights:  Put More Power in the Hands of Employees, Expand the Mobility Option Menu, Take Advantage of Recent Innovation and Integrate Mobility With Other Talent Practices.

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Topics:  Organizational Performance, Persona, Development, Career Development

Leading & Managing Section

The CEO Letter To Shareholders: A Great Vehicle To Convey Your Corporate Narrative

By Adrian Dearnell | Forbes Magazine | October 19, 2022

If you’re top of class in producing corporate annual reports, your company’s last one probably looked a lot different from those of a decade ago. Graphically, it was more engaging and eye-catching, thanks to a streamlined layout and playful use of color to highlight important information. The content had changed as well, with the use of storytelling to communicate your brand story. And the opening CEO letter had taken on new importance as a key to conveying that narrative.  When drafting the letter, here are three key things to keep in mind:

1. You are communicating to a much broader range of stakeholders, including employees, suppliers, and customers—all with different information needs.  What’s more, the digital revolution has democratized your audience, giving all stakeholders permanent online access. A huge mass of investor data on companies is available from formal and informal sources, including data mining techniques, allowing investors to assess how well a company is doing. All of this makes it more difficult to control the narrative.  A good CEO letter, then, should treat all readers as partners looking for a deeper understanding of the business. This means having a compelling story that goes beyond the numbers and explains clearly and truthfully how the company is creating value.  One way you can tell your story is to make it personal.
2. Your company is now expected to show good corporate citizenship.  Companies are under increasing pressure to provide non-financial information that supports sustainable business practices and value creation. This means giving greater attention to both Environment, Social and Governance (ESG) reporting metrics and Corporate Social Responsibility (CSR) in the letter.
3. When you address your shareholders today, you’re speaking to your employees.  The rise of employee shareholding has been significant. According to the European Federation of Employee Share Ownership, in 2021, 88% of all large European companies had employee share plans of all kinds.  The CEO letter then needs to speak to employees in clear, jargon-free language that both acknowledge their contribution to the company’s progress and gives them a big-picture vision that inspires trust.

2 key takeaways from the article

1. If you’re top of class in producing corporate annual reports, your company’s last one probably looked a lot different from those of a decade ago. Graphically, it was more engaging and eye-catching, thanks to a streamlined layout and playful use of color to highlight important information. The content had changed as well, with the use of storytelling to communicate your brand story. And the opening CEO letter had taken on new importance as a key to conveying that narrative.  
2. When drafting the letter, here are three key things to keep in mind: You are communicating to a much broader range of stakeholders, including employees, suppliers, and customers—all with different information needs; Your company is now expected to show good corporate citizenship; and when you address your shareholders today, you’re speaking to your employees. 

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Topics: Leadership, Organizational Performance, Annual Reports, Stakeholders

Strategy in a Hyperpolitical World

By Roger L. Martin and Martin Reeves | Harvard Business Review Magazine | November–December 2022 Issue

Almost everything about business today is political, in the sense that it requires consideration of a wide range of often controversial ethical, social, and ecological issues. The stakes for skillfully managing this situation are higher than ever.  The assumption that business and politics can and even should be separate is no longer realistic—especially where values, identity, and security are concerned. To make and implement the best strategic choices in this environment, leaders will have to consider 5 strategic actions:

1. Develop Robust Principles.  The aspects of business that can become politicized, and the ways in which that can occur, are so numerous that you can’t foresee every challenge. Even some companies that invest in scenario planning failed to predict the Russian invasion of Ukraine. But you should try to anticipate the challenges that are most likely to touch your operations and devise principles that will address them.
2. Address Ethical Issues Early.  Anticipating and shaping ethical challenges requires a delicate balancing act. Individual companies may be able to move earlier and with greater control, but eventually complex issues may necessitate collective action, often initiated by a market leader. Sometimes a combination of collective and individual initiatives can build momentum, influence the issue, and offer advantages of differentiation for the initiator.
3. Consistently Communicate and Implement Choices.  Principles are credible only if they are consistently applied. So they must be part of the everyday making of business decisions, not simply called up in response to pressure after a situation has exploded. Navigating the political dimensions of business is hard enough without also having to explain and remedy inconsistent communication or application. And principles that mainly inform communications but not action will not be credible over time or effective in navigating risk.  Principles will often collide with reality in either the day-to-day operations or the future planning of an organization and should therefore be communicated to and understood by all employees. Because they will influence the expectations of stakeholders outside the company, they should also be publicly transparent.
4. Engage Beyond the Industry.  There are limits to the power that companies can exercise individually or even in cooperation with competitors, and they will often need to work with civil society and government on the hardest and most deeply entrenched issues to effect change. Therefore they should actively participate in existing solution forums and where necessary help create new ones. 
5. Learn from Mistakes.  Even if you have the best intentions and analysis, political and social issues are intrinsically complex and unpredictable, making surprises and missteps inevitable. When they occur, it’s important to extract and incorporate lessons and leverage crises to good effect.

3 key takeaways from the article

1. Almost everything about business today is political, in the sense that it requires consideration of a wide range of often controversial ethical, social, and ecological issues. The stakes for skillfully managing this situation are higher than ever.
2. The assumption that business and politics can and even should be separate is no longer realistic—especially where values, identity, and security are concerned. So what does that mean for strategy?
3. To make and implement the best strategic choices in this environment, leaders will have to: develop robust principles to guide strategic choices, address ethical issues early, consistently communicate and implement their choices, engage beyond the industry to shape the context, and learn from mistakes to make better choices in the future.

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Topics:  Strategy, Business Model, Decision-making, Uncertainty

The Wharton School’s Dean on what it takes to become a prepared leader

By Fortune Editors | Fortune Magazine | October 20, 2022

On this week’s episode of Fortune’s Leadership Next podcast, Alan Murray talks with Erika James, Dean of the Wharton School of the University of Pennsylvania and coauthor of the book The Prepared Leader, about the ways leadership has changed in recent years. An extractive summary of the talk is shared here.  The question they talked more is how CEOs can lead in the context of disruption and evolving societal expectations.

At the end of the day, leadership is relatively fundamental. You have to inspire people, you have to have a message and a vision that is compelling for people to follow your direction or to follow your lead. So that’s been true since the beginning of time. More recently, what we’re seeing is different is there’s so many more stakeholders that one needs to be responsive to, and that there’s so much more information accessible immediately that one has to attend to. And that comes with some leadership challenges in that we have to know how to cipher through information in a way to make reasonable decisions. And we have to be mindful that any one decision might work well for one group of stakeholders, but not well for another group of stakeholders. So we have to know how to mitigate some of the issues connected with with those changes.

A prepared leader is someone who knows how to identify vulnerabilities in the organization; is someone who is looking at ways to mitigate those vulnerabilities; is someone who a priori builds the kind of high-quality trusting relationships that will be necessary when a threat does hit an organization. You want to have your key counterparts and support system already in place. And a prepared leader is someone who is trusted by his or her workforce.

You’ll know if you’re a prepared leader if you have strong relationships within your organization, and people have demonstrated a willingness to follow you even in non-threatening times and in non-crisis times. You’ll know that you’re a prepared leader if you have identified the ways in which your organization is vulnerable to a variety of different threats. If you can’t identify and talk through and share with your colleagues some of the things that you need to be looking out for then you’re not prepared for some of those things that are likely to happen to your organization.

2 key takeaways from the article

1. At the end of the day, leadership is relatively fundamental. You have to inspire people, have a message and a vision. What has changed is we have so many more stakeholders that one needs to be responsive to, and that there’s so much more information accessible immediately that one has to attend to. 
2. To cope up one needs to be a prepared leader.  Someone who knows how to identify vulnerabilities in the organization; is someone who is looking at ways to mitigate those vulnerabilities; is someone who a priori builds the kind of high-quality trusting relationships that will be necessary when a threat does hit an organization. You want to have your key counterparts and support system already in place. And a prepared leader is someone who is trusted by his or her workforce.

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Topics:  Leadership, Uncertainty, Volatile, Ambiguous, Environment

Entrepreneurship Section

Giant Companies Are More Vulnerable Than You Think

By Eren Bali | Inc Magazine | October 2022 Issue

Udemy, was a tiny education startup and Google announced Course Builder. It was like the worst-case scenario investors pose when you’re fundraising: What if Google takes your idea and launches a competing product? But here’s the thing: Course Builder went nowhere. Then came Google Help­outs, plus several attempts to monetize learning content on YouTube. None of those ever became a significant threat to Udemy.  It’s true that the Googles of the world have vast resources. But, giant competitors–the Goliaths to your David–are far more vulnerable than many entrepreneurs assume. In fact, entrepreneurs have some advantages against them.

For one thing, it’s a good bet your Goliath has already sold out its customers. Big companies spend years establishing market dominance by creating something that customers love. But when they reach the limits of their original customer segment and their growth inevitably slows, they often start doing things that customers don’t love–layering on fees, for instance. Everyone knows customers hate fees, but the money is more important to a Goliath.  That’s one of your biggest advantages. If your competitor is unwilling to sacrifice a revenue stream that’s bad for customers, avoiding it should be one of your priorities. 

The second advantage is just as simple. When the top people at a big company focus on defending what they have, their execution on new initiatives tends to fall short. Experimental projects are often the domain of midlevel teams, which can’t move nearly as quickly as a startup. The best thing you can do: Don’t change a thing and just execute.

Finally, you can seize a third advantage if you can identify any customer segments that straight up would not use your Goliath’s product. Then ask yourself: Is there a version of the product that’s an order of magnitude better for this group? Existing players often ignore segments they find unattractive. But if the incumbent finds a segment unattractive, there’s clearly some problem they haven’t solved. And entering a vertical that is poorly served by incum­bents should be at the top of your to-do list.

Remember: Your biggest legacy competitors likely sold out your customers a long time ago. They’re playing defense. And they have blind spots. Don’t try to be like Goliath. Win as David.

3 key takeaways from the article

1. Giant competitors are far more vulnerable than many entrepreneurs assume. In fact, entrepreneurs have some advantages against them.
2. These advantages are:  First, when large businesses reach the limits of their original customer segment and their growth inevitably slows, they often start doing things that customers don’t love–layering on fees, for instance. If your competitor is unwilling to sacrifice a revenue stream that’s bad for customers, avoiding it should be one of your priorities. Second, when the top people at a big company focus on defending what they have, their execution on new initiatives tends to fall short.  Third, existing players often ignore segments they find unattractive. There’s clearly some problem they haven’t solved. And entering a vertical that is poorly served by incum­bents should be at the top of your to-do list.

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Topics:  Startups, Entrepreneurship, Competition

Why You Should Approach Your Business Like an Artist

By Jodie King | Entrepreneur Magazine | October 20, 2022

Creativity is not just for the arts. You don’t have to be a “creative” person to harness that sense of energy, wonder and imagination — and apply it to your business.  No matter what you do and who you serve as an entrepreneur, you can channel your inner artist to build a successful business. Four suggestions on how you can adapt an artist mentality to establish an on-brand, genuine business are

1. Be true to yourself and your brand.  Why did you strike out on your own in the first place? What made you take that leap of faith and launch your own business?  It’s because you wanted to create something of your own — something original and honest. Maybe you also wanted the freedom to pursue an idea and be your own boss, too.  Artists do this with every new piece they create, whether it be painting, film, photograph or sculpture. They have a unique vision in their heads that needs to be brought to life through their art.  What true artists don’t do is set out to create an exact copy of something in the world that already exists.  So pave your own way.
2. Trust your skills and ideas. Worry about your skills, ideas, and opinions not being good enough? Trust.  They are good enough. You are good enough. Your vision for your business is valid. Your voice should be heard. You have the skills and qualities to make it happen.
3. Create something you need.  You want to execute your art (or the vision for your business) authentically, but your purpose matters, too. Create an experience for yourself first and foremost, knowing that what you produce will resonate with other people.  Putting yourself first can feel uncomfortable if you’re not used to it. But discomfort and dealing with the unknown is actually a crucial part of creativity. It takes practice (and a little faith) to trust your creative process and your vision.
4. Look at your business with the eye of an artist.  When business is booming, your days can fly by in an instant. Depending on what you do, you might sit at your desk for hours on end, spend most of your time traveling or get stuck in one space for the majority of the day. But remember to shake things up every once in a while, if only to feed that creativity within you.  Take in your surroundings with the eye of an artist. Go outside, breathe in nature, or experience something different whenever you can. That break in the monotony, that little piece of spontaneity? It can work wonders for your business. It can even inspire your work, just as it would an artist.

2 key takeaways from the article

1. Creativity is not just for the arts. You don’t have to be a “creative” person to harness that sense of energy, wonder, and imagination — and apply it to your business.  No matter what you do and who you serve as an entrepreneur, you can channel your inner artist to build a successful business.
2. Be authentic. Trust yourself. Create something of your own for yourself. And bring that creative energy and imagination to your work. You can apply these artistic principles to your business, even if you’re not an artsy type or work in a creative field. They’ll help you check in on the health of your business, as well as your passion for the work that you do.

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Topics:  Entrepreneurship, Creativity, Innovation, Authenticity