Monday, August 31, 2020

The Pandemic’s Lessons for Managing Uncertainty


As we move through the emerging reality of the coronavirus, what have we learned that will help organizations navigate the coming months?

I’ve been following the experiences of four companies — Tata Consultancy Services (TCS), Vodafone, Arup, and Artemis Connection — over the past several months. Each is facing big unknowns. None of the leaders of these companies believes they have all the answers yet; all describe their organizations as being in motion.

While each company’s experience is unique, common themes are emerging that are proving crucial to their journeys: the importance of project management; the need to embrace trial and error; the floating of big, long-term questions; and an excitement to build on the upsides of this moment. Here, I illustrate the four themes through the lens of these companies.

Get Project Management Basics in Place

In each of the companies I’ve been talking with, embedded and non-negotiable project management practices have been key to navigating the initial pivot to virtual workplaces. These practices were subsequently embellished and tweaked for an emerging COVID-19 reality, but the basic architecture of commitments was crucial.

The technology company Tata Consultancy Services (TCS), headquartered in Mumbai, has spent almost a decade building and refining a series of virtual platforms that enable employees to work collaboratively outside of the traditional office. For its staff, transitioning to a more fully virtual work life has meant expanding its established best practices.

Ramkumar Chandrasekaran, TCS’s human resources director for the U.K. and Ireland, told me how they utilize at least 10 different project management action practices. For instance, live dashboards are shared across locations that track the progress of assigned work, share the outcomes of key deliverables, establish whether projects are on schedule, and create a platform for teams to identify and take action on short-term fixes. Teams also often start each day with short (no more than 15 minutes) meetings to discuss what worked and didn’t the day before, and to identify priorities for the coming day.

Dashboards and daily check-in meetings aren’t groundbreaking tools, and indeed they could be found in any textbook on managing virtual projects. The real lesson here is the crucial importance of companywide embedding of and commitment to using these techniques.

Embrace Trial and Error to Manage Challenges

It is becoming increasingly clear that there is no obvious end state for what it means to operate in the age of COVID-19. Instead, there are big, new unknowns to be acknowledged and tackled. As a result, across all four companies, there has been an emphasis on trial and error, listening deeply to the market and to employees, and making constant adjustments.

Back in March, Vodafone, a U.K.-based telecom company, pivoted in less than a week from a primarily office-based employee group to a home-based workforce. Anne Sheenan, director of Vodafone Business U.K., said that one of the biggest early pain points were social connections, which began to fray during the lockdown. Employees missed the sociability and serendipitous interactions of the office environment.

So Sheenan began experimenting with an informal program called “Sandwich with Anne.” Twice a week, she invites for lunch 12 employees from different areas of the company — for instance, marketing and digital. “We send each invite a sandwich lunch at their home address, then around 1 p.m., we sit down for a virtual lunch and talk for about an hour,” she told me. Her goal is to break barriers by being open and removing any intimidation about meeting with her.

The meetings help people to establish new connections beyond their immediate circle. Other leaders within the organization have started to do the same, and the plan is to keep the lunches going at least through the summer.

It could well be that initiatives like this one have relatively short shelf lives. But that’s not the point. The crucial aspect is to be on the lookout for what’s necessary and to continually fine-tune your responses.

Explore the Hard Questions That Affect Your Future

All the leaders I’ve been speaking with are in situations of extraordinary complexity and ambiguity. They cannot yet know what all the right answers will be for the future. But they can begin to identify the right questions. These are questions that probably can’t be answered yet, but for which an answer will emerge.

For Arup, a core and currently unanswerable question is, “What is space for?” Based in London, Arup is a global engineering design company that traditionally has created collaborative offices and some of the most iconic public spaces across the world, including Apple Park in California, the Singapore Sports Hub in Kallang, and the Sydney Opera House. Not surprisingly, the pandemic is making Arup face profound questions about its purpose and practices.

Like most companies, Arup is grappling with the current paradox of remote working — that few people are looking forward to getting back to working continuously in an office, but few want to work continuously at home.

In a webinar I hosted in June with Jenni Emery, Arup’s global people and culture leader, we talked about the need for new strategies for building collaboration and innovation now that face-to-face meetings and serendipitous encounters are no longer a given. Early in March, Arup explored this question by launching a worldwide conversation about how the company could prepare for the future. The #allears initiative was an online, facilitated conversation than brought together more than 4,000 “Arupians” over a three-day period. It gave people the chance to begin to float innovative ideas while keeping in mind the importance of being intentional and considered. At the same time, the company began running virtual consultations with their stakeholders around reimagining cities and public spaces.

For Emery, one of the key issues in exploring hard questions like “what is an office for?” is acknowledging and balancing the significant tension between the near term and the long term. Right now, any ideas about what an office is for has to be seen through the lens of current health and safety restrictions. Yet in the longer term, answers will inevitably focus on building new, creative ways to reimagine office space.

The insight for Arup, and the lesson for other leaders, is acknowledging that while some answers will be interim, it is those who build for the longer term that will offer a significant opportunity for reinvention.

Build On the Upsides

Less than a year into the pandemic, most companies are still in a state that experts in change management sometimes call “unfreeze”: Practices that had previously created solid business processes and structural architecture have thawed. The next phase of change — the “refreeze” step — will be when new crystals metaphorically begin to form around the new systems and routines.

It’s clear that many employees and companies don’t want to go back to the old order. But for a new order and ways of working to emerge, the upside of these new ways of working have to be understood and embraced. Simply put: If people don’t see the upside of the future state, they will hanker after the past.

Artemis Connection, a small strategy consultancy in the Seattle area, is an interesting case study because the business was “born virtual” in 2015, and some of its employees have never met other colleagues face-to-face. Founder and CEO Christy Johnson told me that she learned early on to make the upsides of virtual working crystal clear. Many Artemis employees joined from bigger companies because, while they loved consulting work, they hated the inflexibility of hours. So in building a virtual organization, one of the foundations for Johnson was emphasizing the upside of flexibility: “We tell people, ‘We believe in work-life integration, and you will have a chance to have more control over the pace of work and how you sequence it.’” Her own personal style, for instance, is to do her thinking work in the early morning, so she structures her schedule to keep that part of the day open.

Across the organization, this flexibility is made possible by planning work in cycles of 15- to 20-hour blocks of time. This forms the framework of both client projects and individual time commitments. “For example, if we are scoping a project like writing a weekly intelligence brief, we might calculate it’s roughly 60 hours of work a week,” said Johnson. “That’s four blocks, so we either need two people who can do two blocks, or four who will do one.”

The upside of time flexibility has made a real difference to the lives of employees, many of whom have flourished by developing significant involvement with their community and in social issues. As critical, Johnson says, is that they’ve also been able to transition to the challenges presented by COVID-19 stay-at-home orders (and work-from-home choices) more easily than companies where flexibility was not already baked into the culture.


The Pandemic’s Lessons for Managing Uncertainty

Saturday, August 29, 2020

Friday, August 28, 2020

Thriving in Latin America’s next normal: Commercial excellence in CPG

Our latest survey shows that the region’s leading consumer-packaged-goods companies are agile, collaborative, data driven, and digital in their commercial approach.
Thriving in Latin America’s next normal: Commercial excellence in CPG

Standing out in China’s private equity market: An interview with Frank Su

Frank Su, head of private equity Asia, CPP Investments, discusses the top four sectors to watch, how global asset managers can empower their GPs to institutionalize, and why secondary exits will become increasingly relevant in China.
Standing out in China’s private equity market: An interview with Frank Su

From defense to offense: Digital B2B services in the next normal

After playing a crucial role in adapting service operations to COVID-19 disruptions, digital and analytics can help B2B service companies emerge stronger in the post-pandemic reset.
From defense to offense: Digital B2B services in the next normal

Warren Buffett: An appreciation

As Warren Buffett turns 90, the story of one of America’s most influential and wealthy business leaders is a study in the logic and discipline of understanding future value.
Warren Buffett: An appreciation

How to generate alpha in Chinese private equity: An interview with Nexus Point founder KC Kung

A leading private equity investor explains why the time is ripe for control investments in China.
How to generate alpha in Chinese private equity: An interview with Nexus Point founder KC Kung

Shifting focus to a comprehensive COVID-19-monitoring infrastructure

The United States can explore several approaches beyond polymerase-chain-reaction testing when considering a complete COVID-19-monitoring system.
Shifting focus to a comprehensive COVID-19-monitoring infrastructure

A playbook for private equity success in China: An interview with Jean Salata

Jean Salata, CEO and Founding Partner of Baring Private Equity Asia, discusses key trends in the evolution of private equity deal flow, how digitalization is affecting private equity firms, and why leadership and talent are key to unlocking outsized returns.
A playbook for private equity success in China: An interview with Jean Salata

Closing the skills gap in retail with people analytics

Retailers that embrace people analytics are poised to streamline their onboarding process, retain strong employees, and ultimately maximize productivity.
Closing the skills gap in retail with people analytics

Eating out(side): Restaurant dining in the next normal

Our survey of US consumers suggests that indoor dining in restaurants may not return to precrisis levels for months—or possibly even years. That means full-service restaurant operators need a new economic model.
Eating out(side): Restaurant dining in the next normal

The big boost: How incumbents successfully scale their new businesses

Corporations can help their new ventures scale up if they avoid these six actions that can undermine success.
The big boost: How incumbents successfully scale their new businesses

‘Less searching, more finding’: The car-buying experience in 2030

In this interview, the former chief strategy officer of Cars.com predicts a seamless digital process for car buyers—and a necessary evolution for dealers.
‘Less searching, more finding’: The car-buying experience in 2030

In search of alpha: Updating the playbook for private equity in China

The era of beta-driven growth is over.
In search of alpha: Updating the playbook for private equity in China

Facility Management KPIs Template

KPIs Templates for Facility Management Most Important KPIs Easily track, monitor and update your facility management KPIs in seconds and stay on top of your business in the most cost effective and convenient way. Key Performance Indicators can be really … Continued
Facility Management KPIs Template

The Best of This Week


A Knowledge-Based Economy May Limit the Damage of COVID-19

Although unemployment is soaring and many businesses are facing bankruptcy, history demonstrates that today’s knowledge-based economy remains flexible, adaptable, and more resilient than the trade- and mobility-focused economies of the past.

How One Nepali Company Aims to Democratize AI

In an interview with Rest of World, founder and CEO Sameer Maskey describes the evolution of his business, the 250-person, Nepal-based Fusemachines. The company first aimed to produce customer service products, like automated dialogue systems. But as the shortage of AI engineering talent in the U.S. emerged as a global issue, the company has instead shifted toward offering AI tools, teaching AI in developing countries, and providing teams of engineers to U.S. businesses.
 

Untangling a Coronavirus Data Disaster

Among many problems with the United States’ erratic coronavirus response, one critical — and underappreciated — factor is bad data. Without accurate data, planners can’t plan, epidemiologists can’t model, policy makers can’t make policy, and citizens don’t trust what they’re told. The U.S. needs a robust program, with professional management of the data supply chain, to develop trustworthy data about pandemics and other public health crises in order to prevent, mitigate, and deal with them properly.

A Divided Economic Recovery for American Workers

Over just a few months, the pandemic has dramatically accelerated the adoption of automation and remote work technologies, which may help explain the starkly divided “K-shaped” recovery observed by economists. At the top: remotely working professionals with growing stock portfolios. Everyone else at the bottom, MIT economics professor Daron Acemoglu explains, is “really getting hammered.”

Getting Smarter About Smart Buildings

If we think big enough, smart buildings can play a key role in helping us figure out what work will look like in the coming months and years. Research suggests four ways to make progress.

What Else We’re Reading This Week:

Quote of the Week:

“In a world beset by a pandemic and all that accompanies it, including an economic recession and political uncertainty, consumers are crying out for brands that can be a beacon of optimism and resilience. ... Now would be a good time for brand stewards to make these emotions central to their brand’s purpose.”

— George Carey, founder and CEO of The Family Room, in “Is Your Brand Purpose at Risk of Being Obsolete?”


The Best of This Week

The big boost: How incumbents successfully scale their new businesses

Corporations can help their new ventures scale up if they avoid these six actions that can undermine success.
The big boost: How incumbents successfully scale their new businesses

‘Less searching, more finding’: The car-buying experience in 2030

In this interview, the former chief strategy officer of Cars.com predicts a seamless digital process for car buyers—and a necessary evolution for dealers.
‘Less searching, more finding’: The car-buying experience in 2030

In search of alpha: Updating the playbook for private equity in China

The era of beta-driven growth is over.
In search of alpha: Updating the playbook for private equity in China

Thursday, August 27, 2020

Using built-in advantages and innovation to scale

A commitment to partners, flexibility, and a good relationship with Bosch, the parent company, enabled scale to happen quickly for S&ST.
Using built-in advantages and innovation to scale

Margin pressure builds in the German machinery industry

Despite rising revenues, profits are plummeting. It’s time to assess the dangers of unprofitable growth.
Margin pressure builds in the German machinery industry

From new business to unicorn: Scaling a new corporate business

Quick pivots and a clear focus helped About You become the first $1 billion start-up business in Hamburg.
From new business to unicorn: Scaling a new corporate business

Five Strategies Every Leader Must Embrace to Harness Disruption


COVID-19’s threat to businesses is not just the immediate loss of revenue from slowed and shuttered operations. The biggest risk will come from accelerated disruption, generated by far-reaching changes in customer behavior and dramatic shifts in business regulation.

The companies that will thrive post-crisis are those that seize the opportunities generated by the accelerated upheavals we’re seeing — where industries are suddenly transformed by new products and services entering the market that are simultaneously better and cheaper than existing offerings.

Consider how consumers and workers have had little choice but to pivot to digital substitutes for in-person activities. Videoconferencing for work, school, and social gatherings; having food and other staples delivered; and streaming newly released movies at home have become normal, even for people who only a few months ago had never heard of the applications they now use daily. Many U.S. online services saw huge spikes in usage in the initial weeks of pandemic-induced lockdowns.

It is far from clear how well new disrupters will fare after the crisis. Still, the relative ease with which consumers have adapted to rapid change both highlights and heightens the urgency for all businesses to better prepare for future disruptions.

We see five imperatives for companies to address today. They are derived from business challenges that two of us (Downes and Nunes) first described in our 2014 book Big Bang Disruption: Strategy in the Age of Devastating Innovation, and we think they’re more critical now than ever. Companies need to address a historic underinvestment in core technologies, an undue reliance on regulations that have kept competition at bay, a misreading of customer adaptability, a need for new kinds of partnerships, and ways to take advantage of the robust technology platforms that have worked so well during these first months of the pandemic.

Tackle Chronic Underinvestment in Core and Emerging Technologies

The crisis has made abundantly clear just how many “emerging” technologies were already market ready. Videoconferencing, high-definition streaming media, and AI-based customer service software, for example, have proved themselves not only usable but rapidly scalable.

The pandemic is providing the ultimate reality check, for better and for worse. It is becoming obvious which businesses lack basic capabilities in online networks, mobile customer and employee support, and other basic elements of digital readiness. Many industries and companies need a quick correction of chronic underinvestment even in mature applications, some of which are central to today’s business.

Upgrades are especially urgent in service industries such as health, education, government, financial services, and energy — parts of the economy where limited competition has systematically blunted the incentives for providers to experiment with better and cheaper methods of product development, delivery, and customer support.

The technology gap is especially acute in government services. In early April, U.S. governors put out urgent calls for retired COBOL programmers to work on antiquated benefit systems that couldn’t handle surges in volume. At the start of the outbreak, Floridians risked their health to stand in line for paper unemployment forms when the state’s online system crashed and couldn’t be repaired.

Any business that doesn’t offer a full-service online channel is now at risk. Many traditional banks, for example, stumbled trying to support small businesses hoping to participate in federal emergency loan programs.

Regardless of the size of your business, your new imperative is to get on top of the technology adoption curve and stay there. In particular, embrace online technologies that have proved themselves fully capable of replacing some of the in-person elements of your business. Dedicate at least some part of your budget to technologies that seem to be viable in the long-term future. You may be surprised how fast those technologies come up in your rearview mirror.

Stop Relying on Regulatory Advantages

For many business activities, readily available technology-based disrupters were waiting just off stage, held back by regulation. In some cases, the alternatives were stymied by a long and troubled history of professional licensing (as with the development of medical devices and services), overly protective franchise laws (safeguarding car dealerships), or even union contracts (dictating media production). Many government services, including drug approvals and benefit management, are legal monopolies.

In industries with that kind of regulation, incumbents often have little reason to experiment, let alone disrupt themselves. It’s no surprise that prepaid HMOs like Kaiser Permanente were already experimenting with telehealth, whereas insurance-supported medical services, which may not have been able to recover any fees for virtual services, didn’t. Similarly, cutting-edge disease contact-tracing applications are being developed by non-health technology companies, including Apple and Google.

The ease with which governments are demonstrating flexibility during the crisis may inform a large-scale rethinking of policy after the crisis. In health-related fields, notably drug and treatment testing, we may see a new reliance on faster digitally driven protocols and an expanded role for nurse practitioners, pharmacists, and other professionals. More broadly, the pandemic has exposed laws that claim to protect consumers but that, over time, have simply served to shelter industry incumbents from competition.

You’ll want to review all the laws and regulations that govern your business. Ask yourself which ones you rely on most for competitive advantage. And then think like a startup: Actively get out in front of regulation when inefficiencies are obvious, even if those regulations are (currently) working to your advantage. They may suddenly disappear, temporarily or permanently.

Don’t Kid Yourself About Consumer Resistance

The accelerated turn to working from home, online education, digital sales and service, and streaming content (which has attracted viewers who never rented movies from digital services before) has burst many long-standing myths about online channels. In every case, incumbent providers had long resisted going even partially virtual, convinced that their users were different. Customers, they were sure, preferred in-person experiences, either because of their age, the nature of the product, or the unique expertise of the business’s front-line staff members.

There is a grain of truth to many of these claims but often not much more than that. True experience goods, such as live sports events and travel to theme parks and unique tourist destinations, will recover in some form, even though they’re suffering tremendous downturns right now. But in many cases, digital alternatives have been superior for a while. With increased price transparency and fewer models and options to choose from, buying a car online versus solely at the dealership was already becoming popular. Seeing an opening, new entrants like Carvana are now heavily promoting their touchless approach to used-vehicle buying and delivery, elegantly pivoting their advertising tagline from “simpler” to “safer.”

Consumers who previously thought of themselves as tech averse for certain experiences are finding that online options can be adequate or even better. Many doctor visits for minor or routine checks, which have shifted online to keep in-person slots available for sicker patients, are proving just as effective when done over the phone or videoconference. Accenture’s recent survey of 2,700 patients around the globe showed that 44% have become new users of medical devices and apps to support treatments in oncology, immunology, and respiratory medicine since COVID-19 hit.

The COVID-19 crisis has shown that there are significant opportunities in meeting consumers where they are now (by being adaptable) rather than where companies thought they were before the pandemic (a few steps behind).

Rethink Your Partnerships — Including Those With Consumers

Having seen just how much even current technology can do for so little cost, no stakeholder will continue to accept excuses for inefficient and information-starved business as usual. Now is the time to reconsider traditional ecosystem partners like supply chain and distribution partners that may have failed to meet business needs and to seek to build new partnerships.

You don’t want to wait for the next crisis to start looking for opportunities to collaborate with or acquire the most visionary startups, entrepreneurs, investors, and tech giants already circling your industry. Already, for example, AI is being deployed at scale to help develop a COVID-19 vaccine, and robots are helping manufacturers and distributors continue to operate. In the workforce, companies are forming partnerships to shorten the complex, often lengthy cycle of unemployment. For example, with People + Work Connect, human resources officers from many industries created an employer-to-employer platform that brings together companies laying off or furloughing people with companies that are in urgent need of workers.

It’s long past time to combine available technologies with new business thinking, especially about users. The good news is that the risks for encouraging virtual alternatives, including touchless payment and delivery and self-service kiosks at high-risk locations, has been dramatically reduced by the crisis. It will likely stay low even after the emergency passes.

One note of caution: Customers suddenly forced to solve their own sales, delivery, and service problems are learning fast just how much benefit they bring to the companies they do business with. Don’t expect them to forget that when the crisis is over. Instead, give them the tools to do even more and watch the value you share with them multiply.

Embrace Robust Technology Platforms

The internet has held up brilliantly during the pandemic, thanks to long-term investing by leading providers: Key infrastructure providers had all built capacity well ahead of demand. Fortunately, many businesses had already transitioned from custom IT services to cloud providers, mobile network operators, and app developers, which increasingly offer better prices, scalability, and superior customization. The crisis has only underscored the wisdom of that trend and the crucial need for future flexibility.

New services built on those platforms, such as videoconferencing services, are experiencing what we call catastrophic success, where years of projected user demand arrives all at once. So far, app developers and their platform partners are managing to serve an exponential increase in both customers and unanticipated use cases.

In some cases, however, a robust digital infrastructure is being let down by its physical counterpart. Users of restaurant and grocery delivery services, for example, are finding that they can easily search for products, get recommendations for alternatives, and place orders only to be told that there are no available delivery windows for days or even weeks.

All this suggests two immediate actions. One is to reassess your current technology infrastructure, looking for ways that you can offload even more of your IT needs — hardware, software, and capacity — to reliable third-party services. Those providers may not be able to satisfy exponential growth indefinitely, but they are likely to do so longer than you can on your own.

At the same time, look for weak links in your supply chain, both physical and virtual. If demand were to explode suddenly, what processes would be the first to break down, and why? What alternatives can you line up now in the event of your own catastrophic success? What features on your IT wish list, such as better security and usability, might be more critical than you thought?

Some of the changes we’ve seen in consumer attitudes and behaviors since COVID-19 erupted may or may not be permanent. What is permanent is the market’s newfound readiness for alternate options. As consumers show an increasing willingness to try new things, as workers seek out technologies that will help them survive and thrive, and as regulations in industries such as health and education rapidly evolve, companies must look more closely than ever at the growing possibility of disruption.

To do this, companies must examine the evidence and the trends and get a reasonable sense of what the future will look like. It’s something we call seeing the inevitable future. That future is arriving a lot sooner than even we ever imagined.


Five Strategies Every Leader Must Embrace to Harness Disruption

Is Your Brand Purpose at Risk of Being Obsolete?


Great brand purpose and positioning strategy begins with a human insight, not a category insight. It begins with a question of what’s driving consumers to make their decisions — putting an emotional why in front of a behavioral what. As one Journal of Brand Strategy study put it, “In practicing purpose-driven marketing, brands need to connect their purpose to consumer values and human needs.”

In times of great cultural upheaval, those values and needs change. As business leaders, especially brand stewards, look to find their voice in a post-pandemic world, they face a critical question: How has COVID-19 altered the emotional imperatives that affect consumers’ brand choices?

For the past 15 years, my company has conducted a longitudinal survey that tracks the emotional drivers of consumer decision-making and how events in our cultural surroundings are affecting them at any given time. Surveying tens of thousands of people, we quantify which of the 150 different emotional priorities that we call Passion Points are foremost on their minds at the moment, which ones are trending up or down, and which ones are impervious to cultural change.

Using a System 1 approach, we get quick answers. Time pressure is crucial because it prompts people to provide intuitive, instinctive responses, giving us a window into the emotional drivers behind people’s buying decisions. (Harvard Business School professor Gerald Zaltman said that 95% of purchasing decisions take place in the subconscious.) By comparing the results each year with past waves of this survey, we can see the shifts in consumers’ emotional priorities.

The impact of episodes of cultural upheaval on consumer emotions is nothing new: We saw substantial Passion Point shifts following SARS, the Great Recession, the Sandy Hook school shooting, and the 2016 election. But nothing could have prepared us for the breadth of change we’re seeing now, during the coronavirus crisis.

Consider the following three examples of trending emotional priorities that show signs of becoming long-term fixtures in consumers’ collective consciousness.

From ‘We’ Love to ‘Me’ Love

COVID-19 is not like previous crises that brought Americans together. In the latest wave of our survey, none of the top 20 Passion Points showed a rising sense of community. Instead, we saw an upswing in people’s need to focus on themselves, including their own physical and mental health. As one respondent said, “I can’t take care of others unless I take care of myself.”

Among parents, there was a 25% increase in the “Having Fun With My Friends” Passion Point and a 16% decrease in “Teaching My Child to Love Themselves.” Of course, this is not a sign that parents care about their kids any less. Rather, it’s a natural result of being around their children all day. They know the kids are safe and cared for. Meanwhile, parents are missing their adult friends and having time away from the constant demands at home. They need to put on their own oxygen masks first, before helping those around them.

This has enormous implications for family brands seeking their voices in a post-COVID-19 world. For example, a fast-food chain may want to consider moving its purpose away from delighting children and instead focus on delighting parents with a simple, affordable indulgence for themselves.

Optimism and Resilience

In a world beset by a pandemic and all that accompanies it, including an economic recession and political uncertainty, consumers are crying out for brands that can be a beacon of optimism and resilience. This is true across every demographic we study — parents, millennials, Generation Z, and especially kids. In fact, there was a 23% increase in the “Staying Positive” Passion Point among 9-year-olds compared with 2019, and a 12% increase among Gen Z.

Now would be a good time for brand stewards to make these emotions central to their brand’s purpose. Take a page from successful brands that have done this. One of the best examples is the “Fishful Thinking” campaign for Pepperidge Farm’s Goldfish crackers. While most of its competition was promising zesty new flavors and turning to celebrity influencers, the Goldfish brand built its purpose around fostering a sense of optimism and resilience. Its marketing focused on the happy face on its crackers, declaring them “the snack that smiles back.” The brand grew its market share despite higher prices than some competitors’.

Personal Agency

One of the most rapidly ascending emotional priorities among the 150 we track was “Rebelling Against the Rules.” Largely confined to their homes, many people have grown angry and frustrated. They’re seeking safe ways of reasserting their power and personal agency.

In consumer interviews, where we collect qualitative information in addition to quantitative data, we found that this impulse to rebel helped explain why more adults are eating sweetened cereals. It also helps explain the massive appeal of the Netflix series Tiger King, which features a man who rebels against every social norm. In reconsidering their purpose and positioning, brand managers should consider how their products can be used to give people a sense of rejecting expectations and asserting their autonomy.

Our past experience indicates that many of these emotional changes will remain with consumers for years to come. Make no assumptions about your consumer based on the one you knew in the past. That consumer is gone — and will not be coming back anytime soon.


Is Your Brand Purpose at Risk of Being Obsolete?

Wednesday, August 26, 2020

Reimagining procurement for the next normal

Procurement has led the way out of a crisis before, and can again. But success will mean rethinking every aspect of the function.
Reimagining procurement for the next normal

Managing China’s growing oncology burden

Significant increases in incidence rates have made cancer a high priority in China. Progress has resulted from innovative treatments and greater access to care, yet much more needs to be done.
Managing China’s growing oncology burden

Fashion on climate

How the fashion industry can urgently act to reduce its greenhouse-gas emissions
Fashion on climate

Reimagining actuaries: A Q&A with Society of Actuaries’ Greg Heidrich

The executive director of the Society of Actuaries discusses the changing role of the actuary in a world of quickly evolving data, analytics, digital work, and the COVID-19 pandemic.
Reimagining actuaries: A Q&A with Society of Actuaries’ Greg Heidrich

Getting Smarter About Smart Buildings

Image courtesy of Daniel Hertzberg/theispot.com

We’re seeing renewed energy around smart buildings as organizations, their landlords, and developers consider what it will take to facilitate a mass return to physical workspaces mid- and post-pandemic. In particular, they’re thinking about how emerging technologies, beyond garden-variety sensors and apps, can be used to track employees and keep them safe. It’s increasingly possible, for instance, to analyze radio waves, like Wi-Fi, to monitor where people are and how they move — without any connection to a smartphone or other hardware.1 Employers and builders are also reconceiving optimal office design.2 A new global Smart Building Certification process is even underway.

However, in response to all this energy, one must ask: What will come of it? Is “smart” really getting smarter — and taking us where we want to go?

Smart environments have a long, deeply imperfect track record, dating back at least to the 17th century, when Dutch inventor Cornelis Drebbel created one of the first feedback-controlled devices: a thermostat that regulated airflow in a chicken incubator, based on temperature. Progress since then has been impressive, particularly in terms of efficiency (think energy and time savings), comfort or wellness (temperature, air quality, sound, lighting, and so on), and safety (detecting fire, revealing gas and water leaks, and other self-diagnostics).3 In that sense, we have achieved much of the promise of what were originally called intelligent (or automated) buildings at the end of the last century.4 But “smart” has also fallen short of our expectations in this century. We wanted smart homes that would work with us to anticipate and automatically address our day-to-day needs, but we’ve settled for connected homes that we manually control from our smartphones; we wanted smart cities that would run more efficiently by learning, predicting, and responding to our living patterns, but we’ve settled for large, underleveraged data sets.

There’s a pattern here, one that’s perhaps rooted in our dictionary definitions of smart. We use that word in two distinct ways, referring to human intelligence (our mental acuity) and device intelligence (tech’s capacity for predictive and independent, or automated, action). Until we integrate those definitions and make sufficient investments to integrate them in practice, not just in theory, our smart ambitions — for our workplaces as well as our homes and our cities — will remain elusive.

Such integration is not easy.5 On the one hand, human intelligence is currently ahead of device intelligence — our brains are still the best CPUs around. On the other hand, nonhuman processing power and device connectivity are expanding exponentially, whereas our brainpower is not. And while device intelligence benefits from predictable behavioral patterns, dramatically shifting behaviors prompted by unanticipated events like COVID-19 demonstrate our human tendency to defy prediction. But if we learn from the past and think big enough, smart buildings can play a key role in helping us figure out what work looks like in the coming months and years.

A Blueprint for Progress

Research and experience suggest four ways to move forward:

1. Rather than simply focusing on what sensors and automation can reveal and do by themselves, we should investigate how technology can safely promote collaborative, effective human interactions. Research has demonstrated that physical environments we think will stimulate collaboration don’t always do so.6 Smarter buildings, first and foremost, must be smarter about producing the types of meaningful human exchanges organizations and their employees want.7

Architects can help by designing hallways, stairwells, kitchens, and workspaces to flow so that people run into one another and interact. For example, the infamous Building 20 at MIT, believed to have produced more innovations than any other building on the planet, was designed “inconveniently” to require its occupants to walk along the spine of its five wings to go from one office to another, causing many productive hallway “collisions” along the way. Imagine how many more useful conversations might have happened sooner if some of that movement could have been directed by smart technologies.

A small number of buildings around the world are already experimenting with exactly that approach. And amid pandemic-related de-densification efforts, the potential for smart buildings to reduce the number of total interactions but retain the most valuable ones has taken on increased importance. The same electronic communication data (from emails, calendars, and instant messages) that allows an AI-based system to deliver news that is relevant to our immediate priorities, given who we are meeting with at the moment and what we are planning to discuss, could also guide us to collide with other people in our buildings or organizations who have knowledge that might be useful to us.

2. Rather than enhancing brick and mortar alone, smart buildings should be designed to improve both physical and virtual work. This year, the world began what has been described as the largest work-from-home experiment in history — and it has been more successful than predicted.8 As many organizations shift to hybrid work environments (with some employees working from home and others in office buildings, or with everyone alternating between the two), smart buildings could ease the transition. Yes, sensors can provide managers with data on employee whereabouts to keep people safe and socially distanced. But they can also help individuals make decisions about whether to come to the office or work from home — based not only on capacity constraints but also on whether the people we need to work with will be available in person or virtually.

A decade ago, researchers found that team members coordinated well and closely identified with the group when no one was colocated or when the same number of members worked in each location (say, two in one office and two in another). But when proportions weren’t balanced, teams suffered.9 Smart buildings could help us achieve balanced proportions across hybrid workspaces and solve some of the coordination problems that will be created as a subset of people head back to office-based work. Indeed, the most sustainable office building on earth — The Edge in Amsterdam — already does this, and while its occupants always found this useful given the dense population of the Netherlands, it is becoming even more so midpandemic.

3. Rather than generating data seen by “them” (that is, by managers, for the purpose of top-down supervision), smart buildings should yield data that’s visible to and used by “us” (by employees as well as their bosses, for coaching and development). What one might call a data bottleneck is a big barrier to smart getting smarter. Whether it sits untapped on servers or unanalyzed by managers, smart building data is woefully underused. In part, that’s because we’ve assumed that the best users of smart device data are the people who manage the devices, like those in our IT and facilities departments.

What if, instead, we viewed this data as akin to Fitbit data — information to help us better manage our own behaviors, individually and collectively? When the data “belongs” to someone else, the feeling of being observed reduces employees’ perceptions of autonomy and undermines creativity, productivity, and engagement. But studies show that people more often put it to effective use when everyone has open access to it.10

4. Rather than focusing on certifying buildings at birth — a process that’s managed by real estate developers, not employers — we should pay more attention to what we’re learning about effective work and how we can use technology to incorporate those lessons over time. This is ideally an ongoing cross-functional conversation that, at a minimum, includes both facilities folks and HR.

It is probably for this reason that organizations that have a single leader responsible for both of those functions, like Nationwide chief administrative officer Gale King, seem to be making more progress than others toward smarter buildings. When people with different backgrounds are separately responsible for human capital and physical capital, their key performance indicators, and sometimes their belief systems, are often in tension, generating arguments rather than progress. But when one person is accountable for both, fast experimentation and decision-making become more realistic.

These four changes remove barriers to collaboration and development and, in the process, shift the balance of power to the people doing the work. They put colleagues on more equal footing, regardless of location. They give everyone access to the data, so everyone gets a say in how it’s interpreted and used to make work better. They help us make progress toward being more productive.

In the spirit of making such progress, let’s not view smart as something a business school professor is best equipped to define today. Instead, let’s deepen our shared understanding of what that term stands for by combining human and device intelligence — and continually experimenting — to improve our collective intelligence. That’s ultimately what will make our buildings smarter, because it will also make us smarter.


Getting Smarter About Smart Buildings

India’s turning point: An economic agenda to spur growth and jobs

A clarion call is sounding for India to put growth on a sustainably faster track and avoid a decade of potential stagnation.
India’s turning point: An economic agenda to spur growth and jobs

The imperatives for automation success

New survey findings show that organizations that successfully automate business processes follow a few common practices.
The imperatives for automation success

Women in healthcare: Moving from the front lines to the top rung

Our analysis shows women in healthcare have made progress and continue to report high job satisfaction. However, women also encounter persistent obstacles to advancement, particularly for senior positions, where they remain underrepresented.
Women in healthcare: Moving from the front lines to the top rung

End-to-end digital transformations for chemical companies

Digital technologies disrupt old ways of working but also reveal opportunities to improve. Chemical companies can capture value by digitizing the entirety of their value chains.
End-to-end digital transformations for chemical companies

COVID-19 exposes a critical shortage of oxygen in developing countries

The COVID-19 crisis is exacerbating what is considered a critical vulnerability in the health infrastructure of many developing countries—a severe shortage of medical oxygen.
COVID-19 exposes a critical shortage of oxygen in developing countries

Tuesday, August 25, 2020

To Fight Pandemics, We Need Better Data


The United States has had many problems coping with the coronavirus. A critical — and underappreciated — problem is bad data, which makes coping more difficult.

We still don’t know how many people have the virus, how many are hospitalized, how many are in intensive care units, and how many are on ventilators. There is poor data on testing availability, and testing results are too often incorrect, delayed, or not counted. Contact tracing, necessary for avoiding community spread of coronavirus, lacks both the needed data and the human or technological resources to use it. And for much of the pandemic, we have not known whether medical supplies were adequate, whether equipment was even working, or how quickly we could obtain crucial items such as personal protective equipment and ventilators or ramp up to produce them domestically.

Without good data, planners can’t plan, epidemiologists can’t model, policy makers can’t make policy, and citizens don’t trust what they’re told. Bad data has led to poor decisions — behavioral and policy-oriented — which in turn have prolonged the disease and contributed to unneeded suffering and death.

Pandemics and other public health crises (such as opioid overdoses, AIDS, and SARS) occur frequently. The U.S. needs a robust program to develop and make available the trusted data needed to prevent, mitigate, and deal with them, through professional management of the data supply chain. We are losing the battle on COVID-19 data, so we must act quickly. We must put in place a system and a set of policies that can help fight future pandemics and public health crises.

Anatomy of a Data Disaster

The U.S. public health care system, like all industries, had many data quality problems before this pandemic. COVID-19 has brought these weaknesses into sharp relief. The Centers for Disease Control and Prevention (CDC) has played an effective role in fighting pandemics in the past, but it has focused less on a strong set of data policies and data quality standards. And the federated approach we’ve adopted to manage this pandemic, with each state choosing its own path to disease reporting and treatment, has been particularly unsuccessful.

Basic data on numbers of cases and “death due to coronavirus” are reported differently by different states. Some report presumed cases and deaths, and others do not. Some report on cases and deaths of nonresidents that occur in the state or in long-term care facilities, prisons, and business sites — and others do not. Some report on cases and deaths in all hospitals, whereas others rely on samples.

The net results are both a significant undercount and a hodgepodge of figures, making predictions and comparisons difficult. One is forced to conclude that the data needed to manage the COVID-19 pandemic is effectively unmanaged. This is an acute problem, demanding urgent, professional attention.

There are, of course, precursors to this story. The landmark report in 2000 by the Institute of Medicine (now the National Academy of Medicine), To Err is Human, gave its best estimate of the number of people who die yearly from preventable medical errors, primarily hospital-acquired infections, as between 44,000 and 98,000 — an incredibly wide range for something deemed a national priority for over 30 years. Likewise, there is widespread disagreement about the best way to define and measure hospital readmissions, and different states report maternal and infant mortality differently. Many of the same issues that have bedeviled COVID-19 data involving a lack of consensus around data definitions and uneven reporting processes are also found in public health data.

Many of the problems in pandemic and public health data arise from the front lines of health care provision — hospitals. Many hospitals still have data-related quality issues with wrong-site surgeries, medication errors, blood type errors, unrecorded allergies, misread radiology reports, and missing contact information. The relatively recent rise of electronic health record (EHR) systems, and federal standards for “meaningful use,” have addressed the problem somewhat. But data standards for the pandemic are not codified in EHRs, and data on the equipment needed to fight it isn’t in them at all.

Observers of this pandemic in the U.S. are not blind to data issues and take steps, often extraordinary, to deal with them. Finding official sources wanting, media companies such as The New York Times, The Atlantic, and National Geographic, and university groups at Johns Hopkins and the University of Washington, provide summaries of U.S. and global cases. Nonprofits have also jumped in to try to determine the needs of hospitals in hot spots and attempt to match critical suppliers to hospitals with the greatest needs.

While we applaud their efforts to fill the gaps, this shouldn’t be necessary, and it leads to multiple versions of pandemic truth, adding cost and uncertainty. It also builds a false sense of confidence — after all, The New York Times reports very specific death counts, camouflaging the uncertainty and severity of the issues, and distracting people from addressing the root issues.

COVID-19 Data Steps That Must Be Taken Now

So, what should the health care system do to address its data management issues? We’ve identified four steps that are crucial for our current moment:

Embrace having one agency consistently in charge of data collection. This pandemic underscores the need for a single, trusted national agency charged with setting federal standards for cases, deaths, testing rates, and other key data. This agency would provide complete, accurate data on the incidence of this disease, future pandemics, and other threats to public health.

Viruses and other diseases don’t respect state boundaries, and leaving states or even smaller administrative units to gather and report data however they wish will not work. Establishing a fully centralized approach and data management agency is, in fact, what other countries with much better records at controlling the pandemic have done: Singapore, South Korea, Ireland, and Japan, for example, use centralized data reporting agencies and have done better in managing the disease.

Recently, the federal government changed primary responsibility for the national collection of COVID-19 data from the CDC to its parent agency, the Department of Health and Human Services. A month after the announcement, the government said it would switch the responsibility back to the CDC, where it is creating a “revolutionary new data system” to manage such data. We tend to be skeptical of revolutionary breakthroughs in data systems, particularly when new systems were also touted as the reason for transferring the responsibility to HHS in the first place. We also question the wisdom of making the shift from one agency to another — and back again — in the middle (or so we hope) of a pandemic. It has led to delays and inaccuracies in data reporting for several weeks. A number of public health experts argued recently in a letter that changing to the new system left hospitals “scrambling to determine how to meet daily reporting requirements.”

We’re not sure which subagency within HHS is the best home for COVID-19 data management and reporting, but HHS is where this responsibility belongs overall. It is the federal agency charged with monitoring and improving health and health care. It also has primary responsibility for government-funded care reimbursement, which gives it a motivational “stick” to punish hospitals and public health departments that don’t supply data in the right formats.

Task whatever agency is managing the data with advocating for policy based on data. Creating an organizational home for COVID-19 data, and adopting some new technologies and service providers, are just the beginning of the solution.

The thrust of our recommendations is more about professional management and leadership of the data supply chain than about a new owner or a new database. Given current weaknesses in the supply chain, for instance, improving its function will require clear policies and perhaps hundreds of skilled professionals working with individual hospitals to make sure the hospitals understand them and develop the capabilities to meet them.

The agency managing COVID-19 data must create clear data definitions and centralize the maintenance of all data needed to guide public health policy and implementation. It must develop and manage the data supply chains such that all those contributing understand what is expected, and it must implement measurements and controls to make sure the data meets all requirements. It must build new capabilities to spot threats more quickly and engage with others to develop the data needed to fight them off. Data must be viewed as a national resource, protected by and subject to federal law restricting the release of medical information, but also anonymized and made available so others can analyze it. Doing this work will be incredibly demanding. But having the correct data is the only way that HHS can provide the needed leadership for this pandemic and for all elements of its overall mission.

Demand that agency leadership foster a data-driven culture. HHS or the CDC must build the needed culture starting at the very top. It must have a senior data leader, most likely a chief data officer. (HHS had one, but she resigned in January 2020 and has not yet been replaced; its CIO recently resigned as well. The CDC has not yet hired a chief data officer but is attempting to recruit one during the pandemic.) It must hire and train a large cadre of seasoned professionals, well versed in both data and health care, and mold them into a world-class team focused on making HHS a trusted, data-driven agency.

Politics is the elephant in the room, and it is clear that pandemic and other public health data must be made as immune as possible to political influence. The absence of strong federal standards means that state governments can report data that misrepresents their performance in addressing the disease. Florida, for example, fired a data dashboard designer who insisted upon reporting the correct positivity rate.

We have well-designed structures in place for resisting political influence on the reporting of unemployment data, and we can apply them to pandemic data as well. Politics also underscores the importance of extremely high-quality data: Throughout our careers, we’ve observed that people fight less about the data when those responsible are completely transparent about their methods, publish quality statistics, readily acknowledge weaknesses, and address those weaknesses aggressively.

Professionalize data management at providers of key pandemic and public health data as well. It’s clear that hospitals and public health systems will need to be fully engaged in the effort to improve the quality of data for COVID-19 and subsequent pandemics. This is a chronic problem that demands long-term, professional attention.

Hospitals, drug companies, labs, insurers, county health departments, and other data providers must professionalize their data management. They should put someone in charge of data, preferably reporting to the CEO. They must see themselves as essential to the data supply chain and learn to be better data customers and suppliers.

Everyone in the health care industry touches data and thus has a role to play in data quality, and hospitals and others must teach people these roles. In particular, those who spot bad data must be encouraged to do more than simply work around the issue — they must call it out, help sort out the root causes, and eliminate them. Finally, providers must get patients involved in building and maintaining complete and accurate records as well.

It’s impossible to know just how many lives and dollars that poor management of COVID-19 data has cost the U.S. — in part because we don’t have good data. But simply accepting the human and economic toll of future pandemics and other public health crises is untenable. Data can be our best weapon for fighting pandemics. We need better approaches to acquiring, managing, and using that data.


To Fight Pandemics, We Need Better Data

Lessons for US governors and mayors planning a second term

Governors and mayors can set the stage for a productive second term by devoting time well before the election to planning.
Lessons for US governors and mayors planning a second term

Summer Reading List From MIT SMR


It’s been an unsettling and difficult summer for many. Yet despite the uncertainty and apprehension, we still look to August as a time of rest and reflection. The pace slows, and it’s a good time to step back and think about what first-rate leadership really means to you and your organization.

To that end, please enjoy these recent and classic articles from MIT SMR. They offer a variety of perspectives to help you focus on the skills most relevant to your effectiveness.

The Most Underrated Skill in Management

There are few management skills more powerful than the discipline of clearly articulating the problem you seek to solve before jumping into action.

What Makes Work Meaningful — Or Meaningless

Research offers insights into what gives work meaning — as well as into common management mistakes that can leave employees feeling that their work is meaningless.

The Lost Art of Thinking in Large Organizations

Many executives in big companies attained their positions by excelling at getting things done. Unfortunately, a bias for doing rather than thinking can leave these executives ill-equipped for their new roles.

The New Leadership Playbook for the Digital Age

Leaders may be holding onto behaviors that might have worked once but now stymie the talents of their employees. Organizations must empower leaders to change their ways of working to succeed in a new digital economy.

Confronting the Uncomfortable Reality of Workplace Discrimination

Organizational leaders can begin to address racial discrimination in the workplace by taking strategic actions.

Building Ambidexterity Into an Organization

A company’s ability to execute today’s strategy while developing tomorrow’s arises from the context within which its employees operate.


Summer Reading List From MIT SMR

Monday, August 24, 2020

Why You — Yes, You — Need Enterprise Architecture


Digital technologies have raised customer expectations for responsive, seamless online services and information-enriched products. Many companies are struggling to meet those expectations and will continue to struggle unless they embrace enterprise architecture.

We define enterprise architecture as the holistic design of people, processes, and technology to execute digitally inspired strategic goals. Every negative customer interaction via a company app, website, telephone call, or service provider exposes your architectural inadequacies. Left unresolved, these issues will destroy formerly great organizations.

One common architectural problem: Many businesses are designed around product verticals. Those verticals optimize profits and define a customer experience for that specific product independently of the rest of the organization. The digital economy, however, rewards integrated solutions, which require that people work across product lines. To meet these demands, companies must rethink how work gets done and how that work relies on people, processes, and technology.

Although the need for radical redesign is urgent, we don’t recommend that you run out and hire an enterprise architect to identify the gaps in your operations. Unless you have fewer than, say, 50 people in your business, you cannot simply redraw the organizational chart. You will need to evolve into a digital company, addressing the experience challenge without compromising product excellence and innovation. To take advantage of new technologies, you’ll need to become flatter, more evidence-based, more automated, and more digitally aligned both vertically and horizontally. These design changes will allow you to respond faster to both operational problems and new business opportunities.

Three Principles for Organizational Redesign

Enterprise architecture provides a road map for organizational redesign. This will be a long, never-ending ride, so you should get started now. Adopting three enterprise architecture principles — breaking key outcomes into components with designated accountability, empowering cross-functional teams, and allowing business design to influence strategy — will help you embark on your journey.

Principle 1: Enterprise architecture breaks processes and products into components. At the beginning of the current millennium, developing an enterprise architecture meant designing enterprisewide systems and processes. Enterprise architects — often based in IT units — helped executives articulate a target state for the execution of transactions and core business processes. This is a value-adding exercise, but it is no longer enough.

Today, enterprise architecture involves componentizing a company’s key outcomes — products, customer experiences, and core enterprise processes — and assigning clear accountability for each component. In other words, the enterprise architecture designs an organization’s critical people-process-technology bundles in a way that facilitates both operational excellence and adaptability to change.

For example, in many companies, payment processing is built into many different products. Instead of designing payments into each product separately, a single team could design the technology and processes required for payment processing for all products. That turns payment processing into one of these people-process-technology bundles, which is a reusable component. Staff members can continually improve processes and technologies in response to the changing needs of the customers and product owners who are the components’ stakeholders. The component becomes a living asset in the company.

Early research findings indicate that componentization helps organizations use data more effectively and respond to business opportunities faster. Decomposing a business into components, however, is not easy. It’s a very different way of thinking about how work gets done. In addition, extracting reusable components from existing processes is a delicate operation.

The long time horizon should not be discouraging, however. Each new component adds value when implemented. Companies can stage the development of new components when it’s clear that they will create value.

Principle 2: Empowered cross-functional teams implement enterprise architecture. Creating people-process-technology bundles represents a dramatic shift from traditional management approaches in which IT people design and manage systems, functional leaders design and manage processes, and business unit managers design roles and manage people. For this new model to work, employees must be empowered with responsibility for the processes and technology within each component.

The leadership task becomes one of formulating teams and then coaching team members to help clarify their missions, establish meaningful metrics, and design experiments to test innovations. Team members define their goals. Leaders hold teams accountable for meeting those goals and, just as important, grant them the autonomy to do so.

To fulfill their missions, component teams usually need diverse talent. The enterprise architecture effort thus requires not only componentizing the business but also assigning cross-functional teams of experts to each unit. Staff members need to understand the component’s process and technology requirements, so most teams will need product experts, software developers, and user design specialists. They might also need data scientists, lawyers, finance people, or other specialists. Over time, teams will articulate their own resource requirements.

Principle 3: Enterprise architecture influences strategy. In responding to customer demands, empowered teams naturally identify new opportunities inspired by the capabilities of digital technologies. This creates the third essential principle of enterprise architecture: As component teams address strategic objectives, they simultaneously reformulate strategy based on continuous learning about what customers want and what digital technologies make possible.

In this context, strategy becomes both a top-down and bottom-up exercise. Leaders create new teams (or pivot existing teams) to seize emerging opportunities. When companies fund teams rather than strategic initiatives or systems development projects, those groups can respond almost instantaneously to what digital music service Spotify, for one, refers to as the company’s “bets.” Meanwhile, component teams can restate goals aimed at implementing high-level strategy.

How Enterprise Architecture Guides CarMax

Enterprise architecture charts a path for gradually increasing componentization. Although the process is evolutionary, it can be immediately effective. CarMax offers an example of a company on this journey.

Founded in 1993, CarMax is a $20 billion business created to deliver an exceptional customer experience in an industry known for terrible ones. It is the largest used-car dealer in the U.S., with over 200 stores in 41 states. CarMax’s vision calls for combining online, in-store, and at-home service offerings to ensure a convenient, personalized car-buying experience.

Customer data is CarMax’s business engine, and the implementation of an enterprisewide customer relationship management system to componentize, capture, and manage that data was a major architectural effort. Another key architectural effort was the introduction of empowered product teams. The company introduced its first three teams around 2015 to address what management viewed as an urgent need to improve its online customer experience.

Each of those first teams owned responsibility for one of three missions: descriptions and pictures representing each individual car, online display of those pictures and descriptions, and underlying infrastructure supporting the website. When leaders were able to document the positive results of the efforts of the first three teams, they started identifying additional components and forming other accountable teams.

Today, CarMax has more than 30 empowered teams with accountability for specified components of an omnichannel business model. These teams stick together and pivot (rather than disband) if strategic objectives change. Each team of around seven members includes a product owner, lead developer, and user designer. These cross-functional teams report into CarMax’s two-in-a-box management design, which refers to joint ownership by a product manager and a technology manager for forming, developing, and overseeing the teams. This model extends all the way up to a box shared by the chief marketing officer and CIO.

Senior leaders own responsibility for CarMax’s enterprise architecture, but enterprise architecture thinking permeates the company. During annual and quarterly strategic planning processes, leaders articulate business priorities. Team missions are adapted — and new teams formed — in response to changes in strategy.

Based on the company’s strategic priorities, teams develop quarterly objectives and biweekly goals. CarMax tracks teams’ alignment and progress in biweekly open houses. At these meetings, teams share their objectives and key results in 15-minute time slots and receive feedback from one another and interested leaders. In fulfilling their missions, teams develop insights that influence the strategic planning process. In fact, the company’s embrace of an omnichannel vision was triggered by insights generated by one of the teams. That strategic shift led it to redefine the missions of four teams.

This top-down and bottom-up approach to strategy and strategy execution has not only helped the company formulate an omnichannel vision. It also enabled the business to respond rapidly to the demands of the COVID-19 pandemic: Leveraging its componentized architecture, the company needed just two weeks to roll out CarMax Curbside, a contactless buying experience.

Start Small but Get Started

CarMax’s product teams represent a small percentage of its more than 27,000 employees, and it has no plans to transition the entire company to a component-based business architecture. After all, some end-to-end processes are well suited to top-down process optimization, and some people prefer to execute delegated tasks rather than own a problem. Component teams, however, are at the heart of the company’s enterprise architecture and increasing componentization.

Other businesses need to begin following a similar model. Leaders who don’t start exploring radical redesign for their increasingly digital companies are at risk of committing managerial malpractice. You — whoever you are, and whatever role you fill — need enterprise architecture to guide you through that radical redesign.


Why You — Yes, You — Need Enterprise Architecture

Why Our Knowledge Economy Can Survive the New Age of Pestilence


History, it has been observed by an unknown wag, is a sequence of disasters, and the stuff in between is boring. While each catastrophic event is unique in the chaos that it sows and how it shapes subsequent human events, in the throes of crisis, we often look back, seeking patterns to assuage our uncertainty. So it’s not surprising that interest in the 1918 Spanish flu pandemic surged along with the coronavirus earlier this year — but perhaps the important lesson to take from history is not what is similar but what is different.

It would have been convenient if all major disasters could be classified as either purely natural, such as earthquakes, and purely human-made, such as civil war, but the historical record does not always allow such facile categories. Sometimes nature and people work hand in hand to kill, disrupt, and at times change the course of human history when ignorance, cruelty, and the rigid adherence to some cause or ideology aggravate what nature wreaks.

In the past, catastrophes, especially unprecedented and unanticipated ones (that is, black swans) have changed the course of history. The Justinianic Plague that broke out in 541 A.D. may have prevented the reconquest of Italy by Byzantium and the possible resuscitation of the Roman Empire. The Black Death, one leading scholar has argued, produced far-reaching demographic, economic, and cultural changes, but it also “prepared a road for renewal.”1 Human-made disasters similarly changed the direction of history, none more than the repeated invasions of the Middle East by Mongol invaders and the diseases inflicted on the original populations of the New World by European explorers. Regions that had been prosperous and sophisticated were reduced to poverty-stricken backwaters.

How has modernization changed the way economies are exposed to, respond to, and are affected by disasters? At some point around the year 1800, a major transition took place that drastically changed the dynamic properties of the entire economic system, similar to a phase transition in physics. Before the Industrial Revolution, economic growth was largely the result of improved markets and gains from trade — what economists call Smithian growth. The riches of the great cities of the Italian Renaissance and the Dutch Golden Age were to a large extent based on commerce, finance, and the institutions that supported it. Trade made regions rich, but it was fragile. Greedy rulers and predatory invaders, to name but two threats to prosperity, often killed the geese that laid the golden eggs of commerce.

Then came revolution. Following the scientific revolution of the 17th century and the Enlightenment of the 18th, people slowly started to apply formal knowledge of natural laws and phenomena to what we would call production. Applying this knowledge was difficult and slow, and its success was very uneven. But around 1914, it became clear that technological change had replaced markets as the chief engine of economic progress. Economic growth is still a vehicle that runs on dual engines, and modern prosperity owes a lot to Smithian effects, such as the rise of global trade, specialization, better capital markets, migration, and supply chains. Yet, current prosperity would have been unimaginable without advances in science and technology.

What needs to be stressed is that these engines are inherently different. Markets, mobility, and trade are vulnerable to what economists call exogenous shocks — unexpected or unpredictable events. They depend on peaceful politics, trust, and cooperative institutions that make markets work. These institutions are inherently frail. A shock, whether war or virus, can wipe those out in just days. We have experienced this in our lifetimes: A major terrorist attack or a pandemic can disrupt markets in a matter of weeks and bring the infinitely complicated machinery of international markets to a grinding halt. In August 1914, with the outbreak of hostilities in Europe, the entire system based on the gold standard and the institutions that supported international specialization and exchange collapsed. It took many years for the system to recover, and it could be argued that not until the 1950s did the world return to the kind of proto-globalization that had taken place in the decades before 1914. Today’s pandemic is an extreme example. The Economist magazine worries about the end of globalization as we know it.2 Airlines, ports, and ride-hailing companies have seen their demand collapse to a sliver. The mobility economy is in an induced coma.

In the past, shocks to the Smithian system that made markets work could lead to devastating and permanent damage to economic performance and living standards. The best-known case was the decline of the Roman Empire. It died of many shocks — pandemics, invasions, possibly climate change — but it was a society that had relied on trade and mobility to sustain its wealth. Once the institutions that sustained the trade around the Mare Nostrum (Mediterranean Sea) had collapsed, Europe sank into centuries of poverty and barbarism. Eventually, trade revived in the so-called commercial revolution of the 12th century, and some measure of prosperity slowly started to return to Europe. But it remained vulnerable to the cruelty of nature and the misdeeds of men.

What modern economic growth has achieved, based on more productive technology and the science that underlies it, is a level of prosperity that is much more resilient. To see this, we can look just at major shocks to the world economy in the 20th century: two major wars, the Spanish flu pandemic of 1918, the Great Depression, the 9/11 terrorist attacks — the list of calamities goes on and on. Yet, none has permanently reduced the growth rate of the world economy, and the worldwide decline in hunger, poverty, and disease has continued apace. The reason for this resilience is very simple: Major shocks cannot really undo growth when it is based on knowledge.

Knowledge, once acquired, cannot easily be reversed. In theory, of course, knowledge can be lost when everyone who possesses it dies and there are no stored-up copies in books or models. This can happen, and it has in fact occurred in history. Some of the sophisticated mechanisms from antiquity, such as the famous Antikythera mechanism, an astronomical device built in the 1st century B.C. and found at the bottom of the sea in a wrecked Greek ship, would have stumped a medieval clock or instrument maker. If important knowledge is sufficiently diffused and accessible, however, it becomes increasingly unlikely that any invention will ever be “lost.” Hence, although wars and natural catastrophes can disrupt markets, commercial life, and the international economy, they rarely cause much erosion of the knowledge base that made an economy prosperous and productive in the first place. Market economies and the international division of labor, once disrupted, can be repaired fairly quickly and economies can bounce back — if the suitable institutions such as law and order, peace, and effective contract enforcement are in place.

As a result, the 20th century has shown a resilience that has no equal in history. Despite the best efforts of homicidal dictators and foolish generals, most human-made catastrophes have, on the whole, not materially slowed the rate of economic growth in the past century. The example that drives this home is the astonishing recovery of Germany after 1945. World War II did not just destroy markets, commercial networks, and the institutions that supported them; in Germany, much of the physical capital was wiped out by Allied bombing. Yet, the ingenuity of German engineering and chemistry survived the war, and within a decade Europeans were driving their Volkswagens and washing their clothes in AEG washing machines. The Germans who managed the comeback called it the “economic miracle,” but in retrospect, it was not a miracle at all — just an affirmation that their prosperity rested on a solid base of knowledge.

Most relevant to what is occurring in 2020 is the experience of the world economy in the late 1910s. That catastrophe was a double whammy, as the Spanish flu came on top of the indescribable horrors of World War I. The economic cost of the dismantlement of the institutions that undergirded international markets and the massive disruptions due to the pandemic were vast.3 The impact of the Spanish flu in terms of human life was massive: If the estimate of 50 million dead worldwide is even remotely close to the mark, this constituted approximately 2.5% of the world’s population. In the United States, the death toll was 675,000, or about 0.67% of the population. This death rate would be equivalent to approximately 2 million deaths in the U.S. today, about 20 times higher than the estimated death toll of the coronavirus pandemic up to May 2020. Moreover, unlike COVID-19, the Spanish flu was especially fatal for young adults and prime-age workers. The disruption was deep and painful, and it has been argued that it caused a decline in consumption and GDP. Real per-capita GDP in the U.S. during the three years following the 1918 pandemic was somewhat lower than during the peak years of World War I — and areas particularly affected by the flu experienced a more substantial decline of output — but by 1923, it had fully recovered from its slump.4 The U.S. economy, much like the European economies, was ready for the rapid expansion of the Roaring ’20s. The stock market, interestingly enough, did exceedingly well in 1919. In short, as Efraim Benmelech and Carola Frydman concluded, “the 1918 influenza did not kill the U.S. economy.”5

The pandemic is a classic unanticipated supply shock. But it will not be the next Black Death or Irish Potato Famine. In a modern economy, the advanced nations are much more resilient than ever before, even if the sharp temporary fall in output and employment seem frightening. For one, a considerable proportion of the labor force can work from home, an option that few had in 1918. Supply chains and international trade may be disrupted to the detriment of globalization, but ingenuity and imagination find substitutes.6 Moreover, research efforts on COVID-19-related topics have increased enormously (despite the difficulty of lab work within social-distancing guidelines). Compared with 1918, we are far more resilient now. We know far more about what is hitting us than people knew about the Spanish flu, and our knowledge is expanding rapidly — if not rapidly enough for an impatient public.

Knowledge not only makes for a more productive and resilient economy but can also lead to the kind of agility and problem-solving ability that is especially needed in the face of sudden unanticipated shocks. When faced with a massive and unanticipated challenge, modern society turns not to priests but to scientific experts. The difference is that science works. The way technology advances in many cases is through focusing devices — society recognizes that it urgently needs a solution to a major problem, and intellectual resources and efforts are redirected to provide a solution.7 The wars against smallpox in the 18th century and polio in the 20th, the wartime Manhattan Project, and the development of affordable solar panels and other green energy technologies are examples of such focused efforts. Since early 2020, we have seen the research community turn upon this virus from every direction — diagnosis, cure, and vaccine, producing a complete analysis of its RNA to look for vulnerabilities. Compare those efforts with the horrible responses of ignorant populations to the Black Death or even the Spanish flu. Knowing more does not guarantee success, but it improves the odds and persuades the public that the shock is transitory because of the widespread belief that science will find an answer.

Leaders of our business and technology community would be wise to keep sight of the flexibility and adaptability of our economy, as unemployment soars and businesses small and large in the service sector face bankruptcy. The transition to a post-coronavirus economy will be longer and more painful than the optimists believe, but the fundamentals of modern prosperity — technology that supports a living standard unprecedented in human history and the capability of science to solve problems — have remained unshaken. At the end of the day, the post-pandemic economy may not be all that different from what we had in 2019, and insofar that it is different, not all changes will necessarily be bad.8


Why Our Knowledge Economy Can Survive the New Age of Pestilence