Half-time into 2021, here is an attempt to draw a list of challenges for leadership teams:
1. Managing the fast macroeconomic recovery – more pleasant than managing a crisis but not easier!
Distinguishing between structural and cyclical drivers, scaling up, managing cost inflation, pricing management
2. Preparing for an eventual return to low growth
Pre-crisis low GDP growth regime expected to return – what is the strategic and operational response today?
3. Accounting for the sources of risk
Inflation, commodities, China, trade wars, government debt, rising taxes, a new Zombie-sounding COVID variant, climate change (physical assets risk); What are the useful and relevant scenarios?
4. Integrating new trends into own strategy and operations, and into client solutions
Supply management/reshoring, advanced automation (control & optimization), AI/digital solutions, energy transition/ESG; creativity as a business system… Think Big!
5. Defining 2050 – suddenly on the horizon – with 2025 or 2030 being mere milestones
Articulating a long term vision – what will the firm look like in 2050? What is the transition plan, if required? What is the story (consider Intention & Obstacles)?
6. Acknowledging the extreme bifurcation between growth/quality and value assets, and pondering on its impact for asset portfolios
Schism in the financial markets mirroring a schism within many industrial companies – strategically, operationally, financially – consequences for the firm’s asset portfolio?
7. Re-thinking the organization
Trend towards decentralization for greater ownership and accountability with full alignment with strategy and culture to achieve group 'coherence'
8. Boosting defensiveness in addition to growth and profitability to achieve a premium valuation
Defensiveness driven by industry structure, tech/domain expertise, positioning in the value chain, business model, end-markets… and ESG
9. Effecting a gracious exit from (deep) value assets
No buyers for (deep) value assets yet impairing industrial groups' ability to implement a strategic re-positioning; careful exit planning; spin-offs and M&A structuring required;
10. Integrating ESG-risks and opportunities and looking beyond climate change
'What you do vs. how you do it', EU taxonomy and disclosure, ESG rating agencies, D&I, managing the office, corporate culture, green activism, corporate diplomacy
11. Performing acquisitions to supplement organic growth in a low-growth environment
Develop M&A capabilities (target identification, M&A criteria, target/process selection, trusted advisors); string of pearls strategy or pearl necklace?
12. Building ties with governments and their agencies as the pendulum swings towards more regulation
Establish close contacts with relevant government agencies; influence industrial policies
The bigger the challenges, the bigger opportunity to build competitive advantages.
But there is really no time for procrastination.