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12 Layers Of Complexity v3.0

Here is an updated version of the proposed ’12 Layers of Complexity’, which executive teams must contend with. Since the last version in 2022, many trends have hardened while themes have crystallized.

 

  1. Living without a macroeconomic cycle

  1. Incorporating geopolitics and related industrial policies as a material risk factor

  • Assess the impact of trade restrictions, including growing export restrictions, on revenues and sourcing; closely monitor China risks vs. opportunities; tighten supply chains without creating supplier over-dependencies

  1. Rethinking an organization’s organization

  • Challenge existing organizational structures, an underappreciated factor driving or impeding value creation; dry the power-sucking ‘corporate swamp’ to implement effective responses to fast-changing operating conditions; bring people back to the office

  1. Implementing fair pricing strategies

  1. Calibrating investments in artificial intelligence

  • Use generative AI to fight the hurdles to innovation; assess generative AI opportunities for both own operations and customers to build a competitive edge; be mindful of the risk of overinvestment (and management distraction) given the hype

  1. Turning non-financial disclosure into a competitive weapon

  1. Quantifying sustainability initiatives

  • Anticipate the corporate finance evolution to 2030 by developing the tools to establish a link between ESG initiatives and cash flows (value creation) - apolitically; apply to ESG initiatives the same decision-making model as to R&D projects

  1. Responding to the political shift to neopopulism

  1. Making the best of intellectual capital

  1. Paying attention to nature

  1. Building a portfolio of new technologies

  • Be patient before investing in new tech assets since they are typically immature, subject to global competition, unprofitable, and capex-hungry; be prepared to pay a premium for fast-growing, profitable companies with a demonstrated track record

  1. Making ESG an integral part of a winning business system

  • Act as corporate stewards and make sustainability part of the company’s business/operating system; beware of bad ESG and listen to ESG critics; watch the ESG cycle but keep an eye on long-term trends

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