At the start of 2021 we wrote about how COVID-19 has accelerated a range of global disruptions that we call ADAPT, and how these forces were affecting the five key issues that private businesses needed to address: digitalisation, workforce, cyber security, ESG (environmental, social and governance), and the intergenerational transfer of wealth.
A year on, where are we now?
In our view those same ADAPT forces still hold true today, and will continue to set the agenda for private businesses for the medium to long term. However, as they play out, they’ve also generated a set of urgent, short-term impacts that private business leaders must tackle now. Issues like short-term volatility in markets and economies. The immediate impacts of inflation. The “great resignation” under way worldwide. Privacy and cybersecurity risks. And dislocation of supply chains.
Now the challenge for private business leaders is working out how to navigate these immediate issues while also staying focused on the ongoing global trends. This is all complicated by the fact that most business leaders have not experienced many of these issues before. Some – like climate change – are here for the first time. Others – such as inflation – haven’t arisen for decades. These issues are also more interdependent and more uncertain; they come fast and they involve more stakeholders.
To help private business leaders think about how to address these challenges and how to both preserve and create value in this fragile world, we’ve created a list of five key questions.
Five questions to help private business leaders address challenges and create value
1. How good is our radar for detecting immediate issues while keeping longer-term imperatives in view?
A good way of illustrating this question is when considering the short term impact of the ‘great resignation’ alongside the long term issue of rightsizing the workforce.
In 2021 we identified workforce planning as a key long term priority. With the rise of AI and technology, we recommended that private business leaders ask themselves some tough questions about whether their current workforce was right sized for their long term business strategy and planned accordingly.
Since then businesses worldwide are having to deal with the short term impact of ‘the great resignation’ and the resulting need to recruit staff. Instead of reacting with a short term mindset and replacing like with like, now is the time to implement this longer term workforce planning. Think ahead to the skills that you will need in the future and start replacing leavers with new hires who have these different skills. Or use it as an opportunity for existing staff to train up and learn these new skills on the job.
2. Who in our business will own the issues – including ESG?
Many private businesses struggle to identify the natural ‘owner’ for dealing with these big issues. Listed companies may have a Chief Sustainability Officer to manage the company’s ESG strategy; or a Chief Technology Officer to oversee technology investment and implementation. However, private businesses may not see the need or have the budget to employ such roles.
With some issues such as workforce planning there is a natural home (in this case with the HR Director). In other cases such as ESG it’s not clear who should take ownership of such a key issue. We believe that each of these issues presents an opportunity for different people to take on new leadership responsibilities.
For example, ESG can be an opportunity for the CFO to take the lead. They have experience in setting up systems and processes for monitoring/reporting. They have expertise in managing costs and leading change programmes. They also have the authority needed to drive the change required.
3. Where will we get the expertise to make smart decisions and address complex issues today?
One of the disadvantages that private businesses may have over listed companies is around access to expertise. Why? By way of example, take managing the effects of inflation. Listed companies will often have macroeconomists who’ve studied inflation and can develop strategies to address it. Many private business leaders haven’t experienced inflation before, and may struggle to work out how to respond.
This raises the question of where to get the expert insight needed to enable smart real-time decisions. We believe that this is a good opportunity to look at the workforce and consider the different ways that skills can be contracted. For example the pandemic has led to an increase in self-employed workers available on contract or for freelance work. Private businesses can buy in this expertise on a short term basis much more easily than they could in the past.
Another avenue for sourcing these skills is through the local community. One of the advantages for private businesses is often how embedded they are in the communities in which they operate. Using this network such as local business associations or academic institutions may uncover talent that previously had been unavailable.
Finally, when considering untapped skills within the organisation, consider the next gens for their digital expertise. Often millennials or Gen Z, they are digital natives or have learnt digital skills that are invaluable and could be under-utilised.
4. Digital will be key to tackling every challenge – but how will we ensure tech investments support the outcomes we want, including for people?
Blockchain and cryptocurrencies have come of age, with issues around speed, scalability and energy consumption now being addressed. Electric vehicles have gone mainstream, with all major manufacturers preparing to migrate their platforms. Doing business in the cloud has had the dual advantage of enabling a new generation of startups (and unicorns) and simplifying back office processes for well established businesses.
These are just some of the myriad of technologies that are rapidly changing the way we work and live. One of the advantages that private businesses have around technology is their licence to operate with a long-term perspective. Unlike listed companies, private businesses aren’t being pushed towards short-term, knee-jerk reactions by stakeholders associated with the public markets. Private businesses’ ability to take a longer-term view can make it easier for them to invest in technology that supports their longer term innovation; without having to immediately justify the return.
5. Where and how will we find the diverse leadership we’ll need to address these challenges?
And finally what is clear is that the leadership styles of the past need to adapt to today’s different demands. We’ve identified what we call the Six paradoxes of leadership. They are not only the paradoxes that leaders face now but also those that will remain important in the future. When considering the composition of the board or the senior leadership team, private business leaders need to identify their strengths amongst these paradoxes; and then appoint others who can complement them.
For example, one particularly relevant paradox for private businesses is that of the traditioned innovator. This is someone who can respect the past whilst deciding what needs to be brought forward into the future. A traditioned innovator recognises that innovation doesn’t have to always mean ‘brand new’ but should be consistent with and build upon a company’s history and traditions.
The message? Private business leaders who take the right steps today can navigate successfully through 2022 while simultaneously building a business fit for the future. Answer these questions and you’ll be well-placed.
Contact us
Dr. Peter Bartels
Partner, Global Entrepreneurial & Private Business Leader, PwC Germany
Tel: +49 40 6378-2170
