Weekly Business Insights

We will drill, baby, drill!” So thundered Donald Trump in his speech on July 19th at the Republican National Convention, where he accepted his party’s nomination as its presidential candidate.   Mr Trump and his team are keen both to set America’s oil industry free and to unpick Mr Biden’s clean-energy agenda. His supporters invoke vast undeveloped reserves of oil in Alaska and the Gulf of Mexico that would gush forth if only the green boot were removed from the industry’s throat as claimed about Biden administration.  Yet for all the complaints, America’s fossil-fuel industry has done remarkably well under Mr Biden. Oil-and-gas production last year was greater than at any point during Mr Trump’s term. 

Ultimately, investment in the oil business “depends on global supply-demand balances and investor appetites”, says Kevin Book of ClearView Energy Partners, an energy-research firm. The most important factor affecting those balances is not the White House but the Organisation of the Petroleum Exporting Countries, the oil cartel that sets production quotas with the aim of managing crude prices.  It is Wall Street, moreover, not America’s government, that shapes how Big Oil adjusts its investments according to supply and demand. A victory in November for Mr Trump may also do surprisingly little to slow America’s shift towards clean power.  What is more, for all their hostility to Mr Biden, brown industries are just as keen on handouts as green ones. 

No matter what happens come November, America’s low-carbon economy has gained a momentum of its own. Even without subsidies, adding power to the grid with a solar farm is cheaper these days than doing so with a new coal-powered plant. Over 90% of the additional power-generation capacity coming online in America this year will be carbon-free. Big commercial customers, such as the tech giants, which need ever growing amounts of power for their data centres, have made public commitments to cut their net emissions to zero. NextEra Energy, a Florida-based utility that is one of the world’s biggest developers of clean energy, is committed to investing roughly $100bn in solar, wind, batteries and transmission by 2027 regardless of who wins the White House.  A second Trump administration could still slow the greening of America’s economy by fiddling with regulations and abandoning targets for decarbonisation.

Since the beginning of the generative AI boom, content creators have argued that their work has been scraped into AI models without their consent. But until now, it has been difficult to know whether specific text has actually been used in a training data set.   Now they have a new way to prove it: “copyright traps” developed by a team at Imperial College London, pieces of hidden text that allow writers and publishers to subtly mark their work in order to later detect whether it has been used in AI models or not. The idea is similar to traps that have been used by copyright holders throughout history—strategies like including fake locations on a map or fake words in a dictionary. 

These AI copyright traps tap into one of the biggest fights in AI. A number of publishers and writers are in the middle of litigation against tech companies, claiming their intellectual property has been scraped into AI training data sets without their permission. The New York Times’ ongoing case against OpenAI is probably the most high-profile of these.  The code to generate and detect traps is currently available on GitHub, but the team also intends to build a tool that allows people to generate and insert copyright traps themselves. 

The traps are not foolproof. A motivated attacker who knows about a trap can remove them.   Whether they can remove all of them or not is an open question, and that’s likely to be a bit of a cat-and-mouse game. But even then, the more traps are applied, the harder it becomes to remove all of them without significant engineering resources.

It’s important to keep in mind that copyright traps may only be a stopgap solution, or merely an inconvenience to model trainers.   One can not release a piece of content containing a trap and have any assurance that it will be an effective trap forever.

In the race to tap emerging markets, most of the more developed parts of these economies have become saturated with foreign investment.   Confronted with the inexorable demands for growth and concerned with the potential for diminishing marginal returns, business leaders are scouring the map but finding fewer and fewer greenfield opportunities. They have begun to ask, “Where to next?” Welcome to the front lines.

The front lines are not areas that immediately come to mind when thinking about business investment. They hide in disputed corners of countries whose beaches and jungles may already appear on tourism brochures. However, the front lines are far from luxury vacation spots. Their distance from major cities leaves them disconnected from much of their home country’s infrastructure. National governments do not extend basic services like electricity or sanitation to these locales. Even the rule of law and rudimentary security is frequently left to local militias or criminal cartels. These areas often teeter on the razor’s edge between stability and violence, where every decision, event, or investment could mean the difference between encouraging society toward opportunity or sending it back into conflict.

It is thus unsurprising that foreign investment has largely overlooked these far-off places. However, these areas are full of possibilities. Their vast untapped potential takes the form of abundant natural resources and young and growing populations eager to work for a better future. For companies looking to expand their geographic footprints, these underserved areas are what is left on Earth. However, these opportunities are not simply a last resort. There is real money to be made in the front lines. But it requires organizations to be willing to expand beyond urban enclaves and acquire a different set of skills and strategies for success. This is not business as usual.

The authors estimate that 1.4 billion people living in the front lines generate over $20 trillion in annual economic activity — which exceeds the size of India’s economy. This estimate transcends the usual national metrics of economic opportunity because it includes inaccessible rural areas in upper-middle-income countries and excludes large urban centers in lower-income countries that are already saturated with foreign investment. This figure is just under a sixth of the world’s total estimated annual economic activity of $130 trillion (at purchasing power parity).

Importantly, there are significant resources that are underutilized in the front lines, which are home to immense stores of untapped mineral deposits.  Even developed agricultural land can become significantly more productive through small capital investments. It’s equally important that improvements in education and reductions in underemployment could result in far more productive workers. The current high rates of unemployment and underemployment in front-line economies indicate that the labor market can absorb many more workers without drastic changes to existing wages. Similarly, weak front-line infrastructure can be bolstered by modest improvements in technology. Small amounts of targeted capital can translate into disproportionate returns.

Pursuing this type of opportunity requires a vastly different business approach to address the wide range of risks that companies are not used to managing.  Effective operations in front-line environments critically depend on deep embeddedness in the local community. This rests on a broad range of relationships with nontraditional partners; it’s not as easy as negotiating with the minister of finance or the minister for mines in the capital city. Success depends on navigating the often gray moral and operational challenges of working in places where power is often held by those outside of government. Companies must leverage the strengths of some local actors and negotiate a basic understanding of boundaries with others in ways that let them coexist. This cannot be achieved through a single interaction but rather relies on a web of ongoing relationships based on mutual benefit. Although the company will incur additional operating expenses associated with managing the complexity of these nontraditional relationships, the benefits accrue from the increase in stability and security.

An innovation crisis is brewing in the United States: Too many firms, both large and small, are failing to innovate. As a result, problems remain unsolved, technologies are never invented, and meaningful jobs go uncreated. According to one estimate, lost productivity cost the economy more than $10 trillion between 2006 and 2018, roughly equivalent to $95,000 per U.S. worker.

It is believed that a primary cause of this crisis is the polarized approach companies take to innovation. At one end of the spectrum, corporations increasingly focus R&D efforts on product refreshes and incremental line upgrades. Doing so maintains revenue streams and market share while minimizing R&D budgets. These incremental innovations protect profitability and generate modest growth with lower risk.

At the other end, venture capitalists favor high-risk “transformational” innovations that seek to upend industries and generate outsize returns. They anticipate that the returns from innovation efforts that succeed will more than compensate for the failures. In order to build a viable company for an eventual M&A or IPO, the entrepreneurial team behind the innovation is forced to devote considerable time and energy to building up a range of functional and operational capabilities. The exit prices that venture capitalists require to generate the returns they need, and the bidding wars to acquire the start-ups that arise, mean that a large firm must pay a hefty price to purchase a successfully launched innovative start-up. Although observers tend to celebrate when a start-up is acquired by an established company, there’s some inefficiency to this transaction. From an economic standpoint, it would be better if established companies did more innovation in-house—building, not buying.

For that reason, the authors suggest targeting the large gap in the middle of the innovation spectrum. This space is considered too risky for large firms, which worry about analysts’ disapproval when failures drag down short-term profitability. And it’s not risky enough for venture capitalists, who avoid investing in a return profile that’s unsatisfying to their own investors. Yet the middle is precisely where large firms are best positioned to execute their innovation efforts.

The authors present a new model of innovation, the growth driver model.  The model has three stages. First, a corporation partners with an outside investor and identifies where riskier innovations are needed, how these innovations would fit into the firm’s strategy, and how they might be integrated into its operational and functional units. Second, again in partnership with the outside investor, the corporation sets up an off-balance-sheet “accelerator” company that identifies and builds out the innovation projects for which the corporation will be the customer. Finally, innovations are developed. As the accelerator takes form, corporate leaders, investor partners, and the accelerator’s management team identify a pipeline of “growth drivers”—products and services that will generate long-term revenue growth in markets where the firm is already established or in closely adjacent markets. The corporation then establishes an operating model for these new products that leverages its existing sales, manufacturing, regulatory, and management capabilities.

Troubled airplane manufacturer Boeing made a big announcement on Wednesday: after a monthslong search, the company has chosen a new CEO, Robert “Kelly” Ortberg, to take the helm on Aug. 8. 

Ortberg, the former chief executive of aviation component manufacturing company and Boeing supplier Rockwell Collins, now known as Collins Aerospace, is inheriting a company struggling to recover from an unrelenting series of disasters over the last few years. 

Two plane crashes involving the 737 Max 8 jet—one in Indonesia in 2018, and the other in Ethiopia in 2019—killed a total of 346 people and prompted regulators to ground that plane model. Then-CEO Dennis Muilenburg was ousted, and current CEO David Calhoun took over in January of 2020 to try to turn the company around. But in January of this year, the panel of a 737-9 Max flew off an Air Alaska plane midflight, putting the company in the spotlight once more. The Federal Aviation Administration (FAA) responded to the incident by capping the manufacturing rate of Max planes at 38 per month, in order to improve safety. It also withheld approval on a new production line at its facility in Everett, Washington. Consequently, in May, the company said it expected to lose money this year.   The company has already paid hefty fines, and shares in the company are down more than 20% this year. 

Fortune reached out to Boeing analysts to hear what they think it will take to turn the company around. The analysts say three changes:

1. Change the company culture.  Boeing’s repeated missteps have highlighted a critical weakness within the company—its culture. The company’s troubles don’t come down to one or two instances of failure, but rather managerial decisions spanning decades that allowed for catastrophic results. They eed to return to a single purpose, single focus: ‘Build the best airplanes and sell them.’”
2. Innovate.  Boeing was once on the cutting edge of aerospace engineering with plane models like the 727, 747, and 767, according to Safran. But no longer. “Boeing has been talking about new products now for, like, 15 years. They haven’t had anything since [2008], when they announced the 787,” he says.  This is not a quick-fix situation—it will take decades of hard work.
3. Build better communication and transparency .  Another one of Ortberg’s most important executive missions—and perhaps one of the most difficult—is to improve the company’s communication and transparency. Boeing has a lot to make up for after pleading guilty to misleading regulators.  “He needs to rebuild trust. They have lost the confidence of the government and the regulators, of the general public, and most importantly of customers,” says Safran.

Alistair Brownlee, two-time Olympic gold medalist, four-time triathlon world champion, three-time Ironman winner, and bestselling author, isn’t one to shy away from making a mantra his own: “If you want to achieve something no one has achieved before, you have to approach the challenge in a way no one has before.”

In a keynote fireside chat at the Unleashing Disruptive Growth event in Barcelona, Alistair sat down with McKinsey’s Philipp Hillenbrand to discuss invaluable lessons   business leaders and entrepreneurs can learn from elite athletes.

Key insight #1: Determination drives long-term success and fuels persistence through pushback.

Philipp Hillenbrand: Alistair, you were studying medicine when you made the decision to become a professional athlete. You told me that people tried to discourage you by saying you would regret your decision. How do you deal with these voices?

Alistair Brownlee: The truth is that deciding to become a professional athlete was a very difficult decision. Fortunately, I had a great support system of family and friends, but I also dealt with the negativity by having a strategy. I always remember that success happens over many years. It’s one of the greatest sporting clichés—but for good reason. Throughout my childhood and teenage years, I gradually got better at sport. I went from being the worst in my school to being the best in the city, and then I became World Junior Champion at 18, weeks before I started university at Cambridge for medicine. 

Key insight #2: Remove as many barriers as possible to build productive habits.

Philipp Hillenbrand: How did you train your personal mental resilience muscle? What keeps you going when you get up at 5:00 in the morning?

Alistair Brownlee: In its simplest form, all sport—especially endurance sport—is a dose-response relationship, meaning the more of it you do in small doses over a long period of time, the more your body responds by getting better, faster, stronger, and more consistent.  I had three strategies for achieving this. The first was making sure that what I was doing became a habit.  Second, I was obsessive about removing the barriers to do what I needed to do.  I didn’t give myself a choice of whether I should train or not. It was like going to work. It was who I was. Establishing those habits and removing those barriers made me more resilient.  Third, as cliché as it sounds, you have to find motivation and enjoyment in the process. I truly believe that you can’t motivate yourself to do hard things every day to achieve a goal that might happen in two, four, or eight years unless you celebrate small achievements along the way. And you have to find what motivates you. 

Key insight #3: Increase the bar without breaking it.

Philipp Hillenbrand: You once told me that every race is a little bit tougher than the prior one. In such a competitive environment, how do you manage to outpace your contenders?

Alistair Brownlee: I believe a sporting career is innovation that happens in many ways. I tried to be innovative first in my training. My body was changing, and the training that worked last year didn’t work the following year. Training is a process of consistent iteration. Each week was a chance to experiment. Could I do a few more minutes? Could I run a bit faster? I challenged myself to find different modalities of training that would give me a better result without risking injury. I think constant but simple innovation by iteration is an undervalued approach.  Maximizing the yield from everyday training by optimizing the routine impacts your body’s adaptation and compounds improvement; this is what leads to outliers in performance, in my experience.  As a person new to the sport, the second way was figuring out how I could innovate differently than the competition in terms of the dynamics and tactics of the race. The third way was being analytical and scientific about my approach. I enjoyed reading about the latest scientific approaches to things like altitude training or certain nutritional supplements, just to stay on top of the game.

Being an athlete is like being a start-up. You’re doing a lot on your own and have to innovate. You’re only as good as your last race.  But the analogy stops when you say, “Go fast and break things.” Because if you go too fast, you just break yourself. I think one of the keys to sport is finding how to increase the bar as much as possible without increasing it too much.

Key insight #4: The bigger the rock, the bigger the gain.

Philipp Hillenbrand: Let’s stay with start-up clichés. Silicon Valley promotes getting 1 percent better every day, but you say to focus on a few areas that result in 70 to 90 percent progress leaps while still improving daily habits. How do you identify and prioritize these high-impact areas? How do you balance these transformative opportunities with small improvements?

Alistair Brownlee: I think it’s a question about where you focus your resources. Ten years ago, there was a popular sports mantra: “Leave no stone unturned.” While I thought that was fine, you can’t look under every tiny pebble and forget about the big rocks, because that’s ultimately where your biggest gains are.

Key insight #5: Effective leadership stems from conviction and assembling a supportive team.

Philipp Hillenbrand: Is there anything that business leaders, investors, and start-up founders can learn from you as a top athlete in terms of leadership?

Alistair Brownlee: You wouldn’t think there is much leadership in an endurance sport—you stand on the starting line by yourself, you race by yourself, you cross the finish line by yourself. In reality, you have a team of coaches, physiotherapists, doctors, masseurs, mechanics, and more. You have to take these people with you on what is ultimately a very selfish, self-indulgent goal of winning races. I was forced into a leadership position as a 21-year-old world champion, and my strategy was to find people who were just as committed as I was. But I realized that I was never going to find people like that. Like I said earlier, this had been a passion of mine since I was eight years old. Readjusting my expectations was important, as was finding people who were passionate, just at a different level than my own.  Because I was doing the training and racing, I made sure that I was making the final decisions. I could seek out the opinions of world experts for something specific, like an injury, but I was the one who closed the feedback loop when it was time to move on. Finding people who supported that approach and having my own convictions in making those types of decisions made me a more effective leader.

Healthcare leaders need to know how to lead with personalization, meaning they have to see patients and employees in their full humanity.  Personalization requires diversity of thought, and diversity of thought requires personalization. So, what skills do you need as a leader, to foster an organizational culture that promotes personalization?

This article is the part of weekly series, during which the author shared insights from the recent 2024 Healthcare in the Age of Personalization Summit. The big themes that emerged from this conversation included:  

1. Agility.  As board member for MGH Institute of Health Professions and president of Western New England University, Dr. Robert Johnson is charged with preparing the leaders of the future. He said all leaders need to be able to adapt to change. Patients and employees are looking for agile organizations and agile leaders who have the ability to get things done in real time and meet the needs of individuals.  “People want leaders who have the ability to learn, unlearn, and relearn as a steady state,” said Dr. Johnson. “They want people who have essential human skills that cannot be replicated by AI or an algorithm. They want individuals in their workforce who have the ability to create value as a continuous mindset as they go forward throughout their organizations.”
2. Active Listening.  To build a culture of personalization through diversity of thought, we have to be able to listen to one another.  Jeannie Virden, enterprise chief HR officer at Central Health, agrees that the only thing that is constant is change.  She said it’s common in healthcare to have hierarchal decision making, where the leaders in the C-suite are the ones making decisions and pushing them down. But we have to rethink those rigid workforce models.  “We need to ensure that our leadership teams at every single level are diverse in terms of background, experiences, perspectives, and even industries,” said Virden.  But that’s just the first step.  “Once we have that in place, we need to make sure that we have active listening and feedback loops,” said Virden, “and once those are established, we need to make sure that we’re actually utilizing them to make decisions, to foster open communication and dialogue before decisions are made.” 
3. Relational Mindset.  The third skill is being able to shift from a transactional mindset to one centered on relationships.  Mark Dooley is CEO of Gadsden Regional Medical Center in Alabama. He acknowledged that the transactional nature of healthcare is another obstacle to personalization in the industry. You can have some success short term being transactional. But if you want true strategic long-term success, you need to have a relational mindset.”
4. Tolerating Healthy Tension.  Practicing the first three skills requires another bonus skill: the ability to embrace healthy tension. Why? Because agility means we have to change, active listening means we can’t turn away when we hear something we don’t like, and relational mindset means we have to make an effort to see and understand someone in their individuality. All of these things will generate tension.  But it works both ways: embracing tension requires the first three skills. They all depend on each other.

The lean startup methodology was originally introduced to help startups with new product development.   But since Eric Reis authored the book, The Lean Startup (Crown Currency, 2011), the methodology has driven large corporations to adopt a lean thinking mindset in regard to their service development as well. 

This allows businesses to iterate quickly, minimize waste, and create products and services that resonate with their customers.  So, how are businesses actually using the lean startup methodology? Here’s how eight business leaders think lean to produce big results for their businesses. 

1. Avoid things that don’t scale.  For this, according to Larue, who formerly directed product at companies like Zillow and SoFi and now is a co-founder of Deferred.com, a real estate tax platform based in Los Angeles, one needs to find ways to validate without building, using customer surveys, user interviews with design prototypes, or competitor research.
2. Creating minimum viable products.  For Garrett Nutgrass, a marketing content strategist at Destify, a destination wedding planning company in Chicago, creating Minimum Viable Products (MVPs) helped the company identify and address key pain points in the wedding planning process.
3. Pivot or persevere.  The principle “pivot or persevere” is when a business reaches a decision point on whether to continue, adjust, or stop with the direction of its product development. For Rene Ymzon, an engineer and marketing manager at Advanced Motion Controls, a motion manufacturing company in Camarillo, California, this principle allows the company to continuously test its servo drives and motor controllers in various real-world applications.
4. Conducting small-scale pilots.  At PRESS Modern Massage, a group of clinical massage studios in New York City, conducting small-scale pilots has enabled the company to effectively refine and expand its services while minimizing risk.
5. Testing before implementation.  Thomas Minieri, founder of Lemonade Maker, an entrepreneur coaching franchise based in Charleston, South Carolina, says that utilizing the lean startup methodology allows his company to test new ideas before introducing them to franchisees.
6. Refining products with customer feedback.  Refining products and enhancing customer satisfaction are the core principles of the lean startup methodology. That’s why Michelle Aran, CEO of Velvet Caviar, a phone case company based in Brooklyn, says that gathering customer feedback through surveys and social media enables the company to iterate quickly on designs to maximize sales.
7. Quickly test audiences and market fit.  While product design and iteration are a common use case, marketers have adopted the lean startup methodology to build markets and quickly test audiences without spending substantially. 
8. It depends on the type of startup.  Zain Jaffer, CEO of the investment management firm Zain Ventures in San Francisco, previously sold his technology startup to Blackstone for $780M and now focuses on real estate investments. For Jaffer, the lean startup methodology depends on the type of company.  “In the software world, it is quicker to simply create the website or app and see if people respond than conduct a due diligence study,” Jaffer shares. “On the other hand, in real estate, millions can be spent on a single project. If I do not conduct enough due diligence in a field like real estate, I could end up with a white elephant.”

According to the author, two years ago, he was depressed. Business was struggling, the country faced war, and he had no idea how to support his-self and the team. Instead of complaining, he decided to work on himself: he went to therapy, consulted a coach and read self-help books.  He realized that the survival of his startup was 100% up to me, so he started working on mindful leadership.  His startup didn’t just survive — it thrived.   He launched new products, received great metrics, and raised investment.  Here are three qualities of a mindful leader that will help you navigate through turbulence.

1. Recognize destructive patterns and change the scenario.  If you were an outstanding student in high school and your family praised you for good grades, you probably formed a pattern: “I need to be the best to be loved.”  During brainstorming sessions, he found himself growing anxious and defensive when his ideas weren’t immediately hailed as the best. Criticism, no matter how constructive, felt like a personal attack. This certainly affected business results — discussions dragged on for hours, he wasted a lot of energy on conflicts, and the team thought he was toxic.  After reading Young and Klosko’s book “Reinventing Your Life,” he discovered this pattern and understood how to change it. Now, he doesn’t feel discomfort when someone criticizes him.   He adopted a new approach: to speak last in discussions. By allowing his team to express their thoughts first, he can listen attentively and objectively evaluate each idea’s merits. 
2. Separate yourself from your ego.  Your ego is like a voice that thinks it knows best. It can trick you into believing things that aren’t true, like thinking you’re a terrible person if you’re not constantly praised.  How this shows up at work: Imagine you’re interviewing someone more intelligent than you in some areas. If your ego is in charge, you might see this person as a threat instead of admitting their valuable expertise. This can lead to poor decision-making.  Your ego also affects how you feel about yourself. If your business results drop, your ego might make you think you’re a failure, but others might see this as a chance to improve.
3. Find your inner driver.  No matter what you do or what business decisions you make, psychology explains it with two types of drivers. The first is the pleasure drive, where you do something for reward or recognition. The second is the aggressive drive, where you want to challenge others, be first, or succeed at others’ expense.  However, there is a third driver that defines an influential leader. It is the generative drive. People with it are curious and always want to grow and improve things around them.  When you understand what truly drives you, especially if it’s a generative drive, you can lead your business in a way that’s not just about profit but about positively impacting the world.