Mr Martin Reeves, Global Director of the BCG Henderson Institute, addressed the BSF to share the business perspective, to speak about the contribution of business to the next decade, which he feels will involve equally momentous changes as other areas.
Mr Reeves argued that this was one of the worst times in history for complacency, pointing out that the names and nature of top companies had changed almost completely between 2009 and 2019. The largest companies today are ecosystem-based businesses, “communities of companies pursuing a common purpose”. The transition will involve changes not only in competitive strategy but in the conception of what strategy is.
Reeves, who feels lower growth rates and returns will eventually become an unavoidable reality due to the aging population, shared with the visitors some of his “personal speculation on what it will take to win in 2029” in terms of corporate lessons, which he feels may also be applicable to governments and nations.
He outlined five pillars of change that will be necessary to have an advantage, starting with mastering a new logic of competition, which involves competing not on scale but on the rate of learning, meaning learning about how the world is changing, which is done easier by ecosystem-based companies that are structured vertically.
This involves the second point, which is designing the company of the future. These are “synergistic combinations of humans and algorithms that make decisions a broader range of time scales and on a broader range of geographic scales.”
This will require the third point, which is the application of the science of organisational change. Reeves stressed there I no single type of organisational change – traditionally a top-down driven affair, which is ok only if the change is relatively simple, involving clear ends, a clear beginning and clear means.
There is however an adaptive approach to change that involves trying out things to see if they work, or an approach that involves scouting and establishing a map, meaning exploration, or for instance an approach that is “like trying to escape from a swamp” with rapid action rather than the best action. Reeves moreover stressed the key predictor of a successful change is the time when it is mounted, meaning it is good to start while the company is still doing good and to challenge the leadership that designed the company’s previous model.
The fourth point is the need to harness the power of diversity. Studies have shown gender-balanced companies are doing much better, “but the sad fact is that we’ve made very little progress” here, with the share of women CEO’s in the US in the last decade increasing by a single percentage point from 26% to 27%.
The final point is the need to optimise both for social and business value. Reeves drew here on Aristotle’s distinction between two concepts of economy: chrematistike as wealth maximisation as an end in itself and oikonomia as the art of managing a household. Along with the social case to be made for this, there is also a business case, with companies espousing the latter approach in fact doing better.