During a private dinner at last week’s World Economic Forum Annual Meeting in Davos, a long-time regular attendee outlined the occasional chasm between actual risks to the global economy and risks as predicted by the ‘Davos-elite’.
In 2007, the main risk was considered a hard landing of…China’s economy. In 2010, executives talked up the risk of asset price inflation…10 years on we are (perhaps now finally) at the tail-end of the longest ever market bull run.
This year, just as coronavirus is spreading global, the Global Risks Report lists the top five risks as climate and weather related (26 risks are considered to have a greater likelihood of occurring in 2020 than infectious diseases).
With these risks in mind, one of the big shifts over the past decade has been the belief that the private sector should play a greater role in addressing some of the world’s critical issues, serving all stakeholders, not just shareholders.
It is here where the World Economic Forum has played a central role, bringing together all stakeholders to create a roadmap for impactful collaboration. The WEF’s core strategy, where it has enjoyed unrivalled success, can be said to be driven by the following two components: no stakeholder alone can solve the world’s challenges; and how do you even begin to address these complex issues without talking? Better to jaw-jaw than to war-war, as Winston Churchill once remarked. In today’s world of hyper communications and indigestible amounts of data, bringing world leaders and key personalities together for a sensible, civilised and pro-active discussion is invaluable… and therein lies the real value of the WEF and the ‘Magic of Davos’.
Business 4.0: Defining the new role of business
So what should be the role of business be in serving all stakeholders and helping us achieve better societal outcomes (for instance, the SDGs)? Whilst this a question each CEO must decide according to their company’s societal priorities (and there are no shortage of societal issues to address!), what can be uniformly said to be true is that whatever businesses do, they’ll need to do it with tech and they’ll need to do it better with tech. Therefore, to achieve their societal objectives, the CEO’s focus must be on the efficacy with which their company uses technology.
In Davos, a new term for this emerged: Business 4.0. If the Fourth Industrial Revolution is the fusion of the physical, digital and virtual worlds, Industry 4.0 is how companies use technology to navigate those worlds. Business 4.0, by contrast, focuses on how companies must transform in order to leverage the exponential benefits that technology can bring, whether it’s a complex cloud-migration, integrating advanced digital technologies or developing successful tech-partnerships (particularly with verticalised start-ups).
Think of Business 4.0 as ‘smart’ digital transformation for complex organisations navigating a world of complexity. Although American business discourse tends to frown upon complex businesses, in truth, complexity is not a normative value. It can be good or bad, and well-run complex businesses will out-perform in today’s business landscape precisely because the global system is marked by unprecedented systemic complexity.
One interesting observation at this year’s Davos was a more overt push-back at the consensus that all companies are tech companies. Google is not about to become an ‘FnB’ or a consumer goods company. So why should Nestle suddenly become a ‘tech’ company? Nestle should remain a diversified foods conglomerate and Goldman Sachs a bank, for good reason: They are specialised in these fields and know what they’re doing. They understand better than anyone else the value chains, supply chains and critically, their end customers in their businesses. Rather than focus on transitioning to tech, what companies should instead focus on is successfully digitally transforming. Being a tech company and digitally transforming are two very different things.
Therefore, to use technology to profitably serve both societal stakeholders as well as shareholders, companies will need to leverage the power of tech by focusing on business transformation and business outcomes, particularly learning how to leverage the complexity of the global system to their advantage, embracing risk and creating new sources of value to customers and societal stakeholders alike.
Matthew Hoffer - Managing Partner, Spire Strategy
About Spire Strategy
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