Reimagining the future, rethinking strategy

The intersection of COVID-19, calls for racial justice, and economic volatility have many asking whether the level of change and uncertainty in today’s environment is temporary or a signal of permanent change to our way of life and the way we do business.

During the KPMG Board Leadership Center (BLC) September 10 webcast, participants were surveyed about the extent to which their companies were reconsidering strategy. To Edie Weiner, CEO and founder of the futurist consulting firm The Future Hunters, the answer is simple: “Change was already happening in almost every discipline and industry, from sports to education to medicine to physics. Adapting, even more rapidly, is not sustainable in a time of fundamental change. This is a time for reimagining, and the board needs access to thinking and management strategy for a new world. We have to think seriously about starting over.”

Weiner and BLC Senior Advisor Susan Angele discussed the forces reshaping the business landscape and how boards and executives should be reimagining the future and rethinking strategy in light of these forces. 

Takeaways from this webcast conversation include:

Predictions for future trends

To inform directors’ oversight of strategy, Weiner identified 10 trends she sees shaping business and society at large:

1. Intergenerational cauldron: Intergenerational dynamics are becoming increasingly unstable as life expectancy increases, the pace of technological innovation accelerates, and fallout from COVID-19 impacts younger and older generations differently.
2. Visual literacy: The ability to understand digital literacy—including GIFs, memes, and avatars—and avoid misunderstandings—such as recognizing deep fakes—will become a growing imperative.
3. Trust: Advances in artificial intelligence (AI) and cyberattacks have made it difficult to believe what we see and hear—making trust a luxury. Employees will be hired based on whether they can be trusted to interpret and use data.
4. Robots in the workforce: The workforce will consist of humans and AI (in the form of robots or otherwise) working side by side, raising important questions of ethics and ownership of decision-making.
5. Rise of the DICE: Distributed income compensation enterprises (DICEs)—such as crowdsourcing, service provider networks, and the gig economy—are changing the context of work.
6. Feudalism 2.0: Business decisions based on algorithms will require regulation and increased transparency to mitigate issues such as bias.
7. Enviralmentalism: Anxiety and urgency to manage climate change is spreading among all generations.
8. Public capitalism: Related to the triple bottom line and conscious capitalism, public capitalism measures the company’s returns to society (for better or for worse) along with financial returns. The pressure will increase to introduce issues such as equitable compensation, product quality, workforce inclusion and diversity, and environmental sustainability into the metrics by which managers are judged.
9. Technopsychology: An emerging field at the nexus of mental health and technology.
10. Popularism: A movement where ideas, irrespective of political affiliation, are promoted and democratized.

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Implications for strategy

In light of these trends, Weiner offered insight on how directors may want to reconsider the following aspects of their corporation’s strategy:

Setting strategic planning horizons

As management rethinks the company’s strategic direction, the board should ask them to prepare short-term, medium-term, and long-term strategic plans. Weiner suggested using three unique planning horizons with a different team working on each: 1–2 years out,  5–7 years out, and 15–25 years out.

“Oftentimes the people working on strategic planning work on all the planning horizons. That’s a big mistake,” said Weiner. “Those working on the 1–2 year horizon should be financially and administratively focused, analyzing the current market and conducting a competitive analysis. For the 5–7 year horizon, the team should be composed of forward-thinkers who can look at emerging technologies, competitive forces, regulatory shifts, social pressures, and geopolitical and economic trends. The 15–25 year horizon needs visionaries that can foresee mega changes and create a future for the organization that will change significantly while still keeping the vision alive.”

“The hallmark of reimagining is not about what the competition is doing,” said Weiner. “It’s about what you are doing to make your company more effective and efficient going forward.”

Prioritizing risks

A KPMG BLC survey on the impact of COVID-19 indicates that one-third of directors would like to improve their board’s willingness and ability to challenge management on fundamental assumptions around risk and strategy in light of COVID-19.¹ Weiner proposed inverting the board’s view of enterprise risk management and scenario planning: “Significant risk outcomes may have many causes, and the company should prepare to deal with these outcomes regardless of the cause.”

Weiner suggested that the board should consider a list of approximately 20 outcomes each year, ask how the list should be updated from the previous year, how the risks can or will be mitigated, and how the company will respond should the risks occur.

For example, how would the company handle the following outcomes?

• A lack of revenue for an extended period
• The inability of employees to be physically present in their workplace
• Severe reputation damage
• Failure of any or all parts of the supply chain
• A breakdown of all communications 
• A data breach or cyberattack
• The collapse of a core product or service in the marketplace 

“In order to effectively mitigate risk, the company must identify the outcomes that are of highest concern,” said Weiner.

Attracting and retaining diverse talent

Of the directors and C-level executives surveyed during the webcast, 41 percent of the 370 respondents ranked finding and growing diverse talent as the greatest challenge to building a future-ready workforce. Findings by global communications firm Edelman also indicate that most Americans consider an inclusive work culture with a strong diversity program as critically important to attracting and retaining someone like them as an employee^.2

Weiner cautioned that diversity and inclusion initiatives will backfire if implemented for the wrong reasons, for example, if done purely for public relations. “If diverse employees aren’t hired and retained for their points of view, but instead for their appearance, they will burn out,” said Weiner. When diverse employees are valued for their thinking, and are supported by the business case for diversity, more and more diverse and talented people will be attracted to the organization. 

Defining corporate culture

In a recent KPMG poll of more than 300 business executives, culture was identified by more than half of respondents as one of the most important factors impacting their organization’s ability to successfully reemerge or restart post-COVID-19.³ For boards to truly understand and shape the organization’s culture, Weiner recommended looking at the “carrots and sticks,” or what behaviors the organization rewards and punishes.

“Culture is a term that’s thrown around loosely,” she said. “It’s not what is said and written, it’s what is really being rewarded and really being punished.” All executives, managers, and independent workers—in addition to the board—are responsible for “walking the talk” and should be rewarded or penalized through compensation metrics that are transparent to employees and the company’s broader group of stakeholders.

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Webcast survey results*

In light of COVID-19 and related events, to what extent has your company reconsidered its strategy, including its approach to the market, employees, and society?

As a director, what do you view as most critical in how your company builds trust with stakeholders?

As a director, what do you see as the greatest challenge in building a future-ready workforce?

To what extent does the company consider the impact of the business on climate/climate change in its discussion of strategy?