BCG’s Weekly Briefs

What We Have Learned About Human-AI Collaboration

SEPTEMBER 26, 2023

We are closing in on the first anniversary of the public release of generative AI tools such as ChatGPT and GPT-4. Understanding the ever-changing field of human-machine collaboration is critical for future success, but few companies have a grasp on this interplay.

My colleagues at BCG, together with scholars from Harvard Business School, Wharton School at the University of Pennsylvania, University of Warwick, and MIT Sloan School of Management, have conducted a first-of-its-kind study of human-machine collaboration. It is a complex relationship that will surely evolve over time. As the technology improves, and as we become better at using it, we will likely observe different results and outcomes.

The team explored how humans and AI performed in two scenarios testing popular uses of GenAI. First, in business problem solving, participants were asked to assess the performance of a company and develop a plan to optimize revenue and profitability. Second, in creative product innovation, participants were asked to generate ideas for a new type of shoe in an underserved market. The results revealed that many of our assumptions about GenAI may be wrong. Specifically:

Humans are better at problem solving… and we should trust our abilities. The business problem solving scenario had a clear right answer that participants readily discovered on their own weighing several qualitative and quantitative inputs. The answers given by GPT-4, on the other hand, were often wrong even if convincing. Unfortunately, humans—even those who had received training in the technology—were often misled and did not push back on the results when they could have. While this picture might change as the technology becomes more sophisticated, for now there is a clear limit to the accuracy users can expect in this context.

Machines are great at creative tasks… but there’s a catch. Participants who used GPT-4 to ideate a new shoe design had more compelling answers than those who did not use it at all and those who tried to “improve” on its output. The performance gap between the highest and the lowest performers also shrank when using GPT-4. But beware the creativity trap: People using GPT-4 came up with better individual answers, but collectively their ideas were 41% less diverse compared with those who did not use GPT-4. The logic extends to companies within an industry, too: those who use the technology, applied to the same data, are likely to get similar answers over time.

“People seem to mistrust the technology in areas where it can contribute massive value,” the BCG authors wrote, “and to trust it too much in areas where the technology isn’t competent”—at least not yet.

This study is both promising and sobering in its implications.

• Build a hiring, training, and reskilling plan. These activities are often viewed as answers to many of the challenges of GenAI. But they are not easy answers. Finding the best individual at using GenAI is different from hiring the best at doing the underlying task. Organizations will also need to continually train employees on when and how to work with GenAI in this fast-moving environment.
• Use GenAI technologies selectively and check your results. Organizations should be constantly testing those tasks that will benefit from GenAI—and those still beyond its technological frontier of competence. They also need to monitor the frontier’s ever-shifting border.
• Protect diversity of thought. Human ideation still has, and will likely continue to have, an important role. In the experiment, the overlap between machine-generated and human-generated ideas was less than 10%. The challenge will be to identify promising ideas, whatever their source.
• Build data advantage. Unique data sources will produce unique answers. When multiple firms use GenAI across similar sets of tasks, they could end up with undifferentiated results. Leaders can build an organization’s overall competitive advantage by fine-tuning GenAI models with large volumes of proprietary, high-quality, firm-specific data.

The power of GenAI is yet to be fully realized. It is fair to say we have not quite grasped its full potential. Still, I come back to BCG’s 10-20-70 framework for AI and tech transformations: 70% of the effort should be dedicated to helping a company embrace the change within the organization. We can have the most sophisticated models in the world, but if we do not learn how to use these technologies in the right way, we will not scratch the surface of the value-generation potential.

Christoph Schweizer
Chief Executive Officer

Sparking a Second-Half Comeback for the UN’s Sustainable Development Goals

SEPTEMBER 18, 2023

I've spent a lot of time in recent years thinking and writing about the immense planetary challenges we face. But my experiences over the past couple days attending events at the United Nations have been a strong reminder of the interdependence of people and planet, and the equally important social dimensions of sustainable development.

BCG has supported the acceleration of the UN’s Sustainable Development Goals (SDGs) through a high-impact initiative program and by partnering with many organizations to help them maximize their societal impact. This year marks the midway point of the SDGs, set in 2015 by the international community with the goal of addressing humanity’s most fundamental needs and creating a more livable world by 2030.

Today, however, only 15% of the 169 targets that make up the SDGs are on track. That lack of progress is largely driven by the multiple crises of recent years, including the pandemic, the war in Ukraine, financial shocks, and extreme weather events.

Yesterday, I had the great honor of moderating the closing ceremony of SDG Acceleration Day, alongside UN deputy secretary general (DSG) Amina Mohammed, president of the general assembly Dennis Francis, actor and activist Natalie Portman, and others. It was the culmination of 65 sessions focused on the 17 SDGs and their key enabling capabilities—a day made up of honest dialogue about our shortfalls and the need to do more.

But it was also truly inspirational, with substantial commitments to action, a sense of urgency, and broad societal engagement, including hundreds of young people alongside leaders from government, business, and NGOs. As DSG Mohammed put it, “I think this next seven years will be the game won in the second half.”

The Unique Potential for Business to Effect Change

The SDGs are ambitious for sure, but they’re not impossible to achieve. They do, however, require taking action at scale—as outlined in my colleagues’ call for optimism—and leveraging critical tools, such as digital technologies.

Participants in the multilateral ecosystem will also need to step up, with business playing a central role. The private sector can drive immense impact by bringing scale, speed, and agility to reaching the SDGs. It has a critical part to play in areas such as transforming food systems, speeding up the energy transition, building economic development and jobs, delivering more equitable health care, and generally lifting people out of poverty.

Acting on that unique power is a moral imperative, but it’s also in the near- and long-term best interest of businesses. If we foster social stability, equity, education, and a net zero economy, economic growth will bloom. What’s more, when these efforts reinforce the core business of an organization, they can drive both strategic advantage and positive societal impact in the short term. Our research finds that businesses are more effective, are more profitable, and grow faster when pursuing sustainable advantage.

Business leaders can play a critical role in advancing the 2030 agenda while winning in their own arenas by focusing on the following:

• Play big where you matter most. Identify where you can drive material change while fortifying overall business strategy and corporate purpose. Aligning the potential for positive impact with competitiveness can require reimagining your business model—and radically rethinking opportunities for new growth.

Some companies have enormous supply chains, and intentional adjustments can greatly reduce emissions, for example, or improve the lives of millions of small business owners. When companies have huge organizational footprints, they have the power to create jobs, improve health, and have a direct impact on people’s lives in many other ways.

• Partner for impact. Multistakeholder partnerships and coalitions, including pre-competitive partnerships and joint efforts with NGOs and the public sector, can accelerate policy change and innovation. True change depends on collaboration at all levels.

For example, a global transition to regenerative agriculture requires the collaboration of governments, investors, private sector agronomists, and others to support farmers.

The annual UNGA week in New York is traditionally the largest forum for the international community to discuss the SDGs, with heads of state convening with leaders from across the private, public, and social sectors. I’m so pleased that BCG is playing a major role at UNGA this year, offering our deep expertise to help move the needle on SDG progress, as well as serving as a corporate partner at Climate Week NYC, which is run in coordination with the UN.

Now at the midway point of the goals, this year’s event feels particularly pivotal—a moment to get things right and head toward a more prosperous and sustainable future for everyone.

Rich Lesser
Global Chair

The Hard Edges of a Soft Landing: Planning for the Challenges of 2024

SEPTEMBER 12, 2023

As we approach 2024, business leaders feel a sense of relief not to be contending with spiraling inflation or the threat of a deep recession. But that doesn’t mean planning for the year ahead will be easy.

Macroeconomic uncertainties linger, with China often at the top of the list, compounding geopolitical risks. Consumers’ balance sheets aren’t as strong as they were a year or two ago, which puts more pressure on pricing even as wages are likely to keep growing above the rate of inflation. And top-line growth is trickier to come by, especially in sectors such as housing, which are sensitive to higher interest rates.

Reflecting on this environment, which also includes underlying shifts in technology, AI, and responses to climate change, I think it’s important to revisit a handful of critical principles as we make plans and prepare budgets for the year ahead.

The Power of Innovation. When growth is harder to achieve, building an advantaged innovation model becomes even more essential. This includes shaping the right portfolio, strengthening the organization and processes, and building a culture of innovation.

In addition, business model innovation will be the key to deeply embedding AI to drive productivity and strengthen customer relationships. And for many, capturing future growth means participating in the reshaping of global infrastructure, leveraging new technologies to decarbonize operations and supply chains.

This is a long and important list, which raises the essential question of how to fund this journey…

The Power of Price and Revenue Management. As consumers find themselves with lighter pocketbooks and as uncertainty and interest rates weigh on big purchasing decisions, companies need to manage revenue growth by adopting more sophisticated approaches to pricing.

Integrating data and AI is essential, using them to spot opportunities and personalize relationships to drive more value creation for customers and companies. (I’ll come back to this topic in October, when BCG’s new book on strategic pricing is on the shelves.)

The Power of Rediscovered Productivity. Executives should see sustained tight labor markets and resulting wage pressures as a clear signal to up their investments in productivity growth. The playbook of the 2010s, when labor market slack fueled the next chapter of growth, will no longer work.

The Power of Supply Chains and Procurement. If there is one essential learning of the past five years, it’s the critical role that our supply chains play in navigating uncertainty, maintaining an efficient cost structure, and achieving true decarbonization.

This means pushing hard on procurement and related capabilities to navigate commodity swings, deepen supplier relationships, and shape a bold agenda on cost. Making progress on Scope 3 emissions is high on the agenda, as are topics such as biodiversity and supplier diversity—all of which are increasing the need for transparency in supply chain strategies.

Advanced procurement functions underpinned with stronger cross-functional teamwork can anticipate risks, understand the impact on supply, and use this information to support key decision making.

The Power of Adaptive Advantage. There’s less pessimism than there was at the beginning of this year, but the potential for disruptive shocks in 2024 remains, including China, the US election cycle, and the war in Ukraine, alongside continued food and energy volatility.

As we set plans for 2024, leaders need to nourish an adaptive mindset and embed processes that monitor and respond to major changes in the environment. Building those muscles before you need them can be a differentiating factor.

* * * * * *

A soft landing was welcomed in the business community. But the slower growth we’re facing brings hard edges—vulnerabilities and challenges that will require sharp choices for the year ahead. The best-laid plans can only be carried out by those with deep resilience and a readiness to reset when the unexpected occurs.

Rich Lesser
Global Chair

A Blueprint for the Energy Transition

SEPTEMBER 06, 2023

The energy transition has been a prominent topic of conversation among CEOs, governments, and other stakeholders for years. But last month, amid unprecedented heat waves, wildfires, and droughts, I joined a CEO meeting where the sense of urgency was at an all-time high. At the same time, many admitted to being simply overwhelmed by the complexity and scale of the energy transition and how to navigate its inherent risks and tradeoffs.

As a global community, we are not moving fast enough to reduce emissions and adapt to a changing climate. Though technological innovations emerge constantly, progress remains too slow to solve fundamental challenges. This is because:

• The transition to green energy sources must occur three times faster than any prior transition—such as that from coal to oil and other hydrocarbons.
• Unlike past transitions, renewables must replace traditional energy sources, not only meet additional demand.
• Only one half of the $37 trillion investments needed by 2030 has been committed—and much of that is contingent on healthy returns.
• As we shift from extracted to manufactured energy, few companies are prepared for higher upfront investments, higher transportation and storage costs, and greater energy price volatility.

The energy transition is as much a demand as it is a supply problem. As the authors of BCG’s new report, A Blueprint for the Energy Transition, point out, the technologies to increase energy efficiency, decarbonize the power supply, and electrify carbon-powered activities are largely available. Other technologies, such as low-carbon hydrogen and carbon capture, are close to being commercialized.

We have the tools to reach net zero but not the policies, proven business cases, and capabilities necessary to massively accelerate the pace of progress. The energy industry cannot conquer this challenge alone.

• Governments can do more to close the funding gap, incentivize private investment, and ensure a just transition for those at risk of being left behind, especially those in lower- and middle-income countries who did not cause the carbon crisis but are suffering its consequences.
• Large energy consumers, such as industrial goods companies, can ensure that conversion, transmission, and distribution infrastructure is in place to access low-carbon energy.
• Financial institutions need to integrate carbon into their decision-making and risk calculations. They should also identify sound investments in networks and other shared infrastructure, such as the electrical grid, to encourage the development of low-carbon production.

We know far more than we did five years ago about what we need to do to solve the energy transition. We have proven technologies and a willingness to commit many trillions of dollars to the cause. We need more money, but also something money can’t buy: the willingness to try and the confidence that we can do this.

Christoph Schweizer
Chief Executive Officer

The Importance of a Thriving Innovation Culture

AUGUST 28, 2023

If I’ve had one consistent passion throughout my professional life, it’s been innovation. I started my career in R&D at Procter & Gamble, studied optical computing and data transmission for Bell Labs as a BCG project leader, spent a decade as a partner working on improving life sciences innovation, invested massively in digital and analytics innovation as a CEO, and now focus on advancing climate technologies as our global chair.

These experiences have made me very aware of the levers that managers pull to increase innovation effectiveness, generally aimed at addressing their organization’s structure and cross-functional processes, as well as portfolio management and resource allocation. And what I’ve consistently observed is that those efforts, while necessary and important, are often insufficient.

That’s why it was so energizing for me to read An Innovation Culture That Gets Results, a new BCG article that stresses how important it is to nurture the right structure and mechanisms in combination with a strong innovation culture.

What do we mean by “innovation culture”? The authors of the article—Justin Manly, Johann D. Harnoss, Hannah Lu Schmitt, Robert Werner, David Blanchard, and Deborah Lovich—neatly define the term as “the collective behavior that shapes how new products and services get built and marketed to customers.”

They liken the two components of innovation (structure and culture) to that of hardware and software. The culture of innovation is like software, and it depends on the hardware of strategies, governance, and other ingredients of the operating model. When the emphasis is on the hardware alone, the impact of innovation will be limited.

In fact, companies with strong innovation cultures are 60% more likely to be innovators, while those with strong innovative structures are 35% more likely. Those with both—innovation culture leaders—are nearly twice as likely to be world class innovators.

The authors offer a number of helpful, practical strategies for nourishing a culture of innovation:

• Give employees the time and space to think beyond their current tasks.
• Build an innovation ecosystem, which will lead to better—and faster—results than relying solely on in-house R&D.
• Empower teams to pursue projects that have significant commercial potential, de-risking the early stages of innovation.
• Encourage collaboration, in part by removing the barriers to communication within the organization.

Culture leaders excel by focusing on the following three areas:

1. They articulate what works. Successful behaviors include balancing freedom with accountability and encouraging risk taking and playfulness. It’s important to define those behaviors with precision and to cultivate and reward them along the way.
2. They activate innovative culture from the top. Leaders walk the talk, personally engaging in key outreach activities while providing the needed hardware to support the software: the incentives and platforms for cultivating and rewarding new ideas, the ownership that teams need to operate unencumbered, and the freedom to collaborate with external partners.
3. They embed core behaviors in the operating model. Culture is profound. It runs deeply through a company’s incentive systems, policies, processes, and practices. Innovation leaders even embed their culture in their hiring practices, looking for people who will bring an innovation mindset.

Some companies have a long history of success with innovation but find the well starting to run dry. Others want to get off the ground with a strong sense of innovative purpose.

Whether your company needs a reset or a whole new approach, focusing intently on these three areas—articulating, activating, and embedding the right behaviors—will establish the best possible conditions. You can build not just the structure that enables innovation but also the much-needed culture that allows it to thrive.

Rich Lesser
Global Chair

Methane Matters—Much More Than You Think

AUGUST 21, 2023

You may have read in the climate literature that one ton of methane emissions has roughly 28 times the warming impact of one ton of carbon dioxide emissions. But if you’re like me, you may not realize how much that difference is understating the near-term impact.

Methane emissions are shorter-lived in the atmosphere than CO2 emissions, which means their warming effect is more concentrated. So, over the first 20 years, that one ton of methane emissions will have a warming effect that’s about 80 times greater than that of carbon dioxide. In the first year, those emissions are 120 times more powerful.

I’ve been engaging deeply in the climate crisis for years, but I only became aware of the implications of this a few months ago, when a team at BCG shared this analysis with me. And I’ll be honest: it didn’t seem believable at first. How could an issue this big—with solutions already at our disposal—not get more attention in the fight against global warming, particularly over the next couple decades as other solutions are still ramping up?

The fact is that most of the collective focus and conversation to date has been on reducing carbon dioxide emissions, and this remains essential. But accelerating the fight against methane emissions, which come primarily from unintended leakages in energy production, agriculture, and waste, is a critical puzzle piece that often gets overlooked and undervalued.

There are three reasons why cutting methane emissions is the most powerful weapon we have in the struggle against near-term climate change:

Methane is much more potent than carbon dioxide.

Its impact over the short term is staggering, as I described above. Carbon dioxide may be responsible for the scale and longevity of climate change, but methane is setting today’s pace.

Methane concentrations are way up.

Since 1900, atmospheric concentration of methane is up about 120%. Carbon dioxide is up about 40%. Multiply these numbers by methane’s front-loaded effect, and it’s clearly responsible for a large component—more than one-third, according to our estimates—of the global warming we are experiencing today.

We can turn the tide.
Every day, emissions released in the atmosphere increase GHG concentrations. Fortunately, GHGs are absorbed in the sea and land and destroyed through natural processes. These sources of reduction are known as sinks.

In the case of methane, current emissions are only modestly greater than sinks. Recent research shows that from 2010 to 2017 methane emissions were about 4% greater. This is important. If we can reduce methane emissions by 10%, atmospheric concentrations should start to decline. If we can reduce them by 30%, we have a chance to slow the runaway train of climate change.

Many solutions already exist in the sectors responsible for methane emissions, and the needed technology is advancing.  To make a significant difference, we can detect and fix leaks in oil and gas operations and infrastructure, collect and destroy methane at landfills, and start to address agriculture by converting manure into biogas and applying new feed additive technology to reduce methane released by cattle.

As I’ve come to understand the huge and understated near-term impact of methane emissions, I’ve realized that their reduction must be at the core of our efforts to tackle rising temperatures and not a side point to carbon dioxide.

This November, leaders from more than 150 nations will gather at COP28 to discuss, in part, how they can meet the Global Methane Pledge to reduce emissions by 30% by 2030. Getting there will require new regulation, as well as stronger commitments from companies and consumers—and a deeper understanding that the actions on methane we take now could have the greatest impact on changing the temperature trajectory between now and 2050.

Next time you are discussing sustainability with your leadership team, take a moment to do a deep dive on methane emissions from your organization, customers, and supply chain. See where you can accelerate action, and embed these new opportunities in your plans.

Rich Lesser
Global Chair

Taking Time to Recharge

AUGUST 01, 2023

To BCG’s network around the world,

In my last email to you before I take a summer break, I wanted to share a few book recommendations from some BCG leaders I greatly respect. Rest and reflection are critical to good leadership. This takes different forms for different people, but one way I rest is by reading about a topic in more depth than I can get from an email.

The recommendations below all cover big, challenging themes worth reflecting on—globalization, AI, humanity, and more. That said, if reading is not where you find rest, my greater encouragement is to engage in those activities where you do. I for one am looking forward to digging into one of these reads, enjoying some down time with my family, and putting a few more miles on my road bike!

The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future
The Equality Machine is basically an optimistic point of view on how we can use digital and AI to make the world more inclusive. It provides a good counterpoint to a lot of doom and gloom.

– Amanda Luther, Managing Director and Partner

Humankind: A Hopeful History
Rutger Bregman‘s Humankind: A Hopeful History...no book has given me a more hopeful position regarding the true nature of humankind and our eventual ability to come to our senses.

– Felix Schuler, Senior Advisor

The End of the World Is Just the Beginning: Mapping the Collapse of Globalization
Amid so much chatter about decoupling and potential shifts in deglobalization, the author of this book walks you through a longer time span of change (where we’ve been and how things could likely play out in the decades to come).

– Russell Dubner, Managing Director and Senior Partner

The Alignment Problem: Machine Learning and Human Values
The Alignment Problem was written several years ago, but is still extremely relevant. I commonly recommend it to help folks understand responsible AI issues, their linkage to underlying data, and how longstanding societal issues contribute.

– Steve Mills, Managing Director and Partner

Far From the Tree: Parents, Children and the Search for Identity
In this seminal book, author Andrew Solomon explores the lives and communities of people with a variety of horizontal identities (traits not typically passed down vertically from parents such as deafness, dwarfism, autism). The stories of how being different is a quality, not a deficiency, are incredibly moving.

– Nadjia Yousif, Managing Director and Partner;
Chief Diversity Officer

And for those who prefer a good listen:

Bloomberg’s “Zero” Podcast
Akshat Rathi, a Bloomberg News senior reporter for climate, speaks to guests leading the fight against climate change. This solutions-focused approach provides compelling insights into the policies, strategies, and clean technologies that are needed to reach net zero. Check out the episode “How a Fossil Fuel Company Became a Wind Giant” with Mads Nipper, Ørsted CEO, to hear about the challenges of the wind industry and the role of corporate strategy and government intervention in accelerating the energy transition.

– Hubi Meinecke, Managing Director and Senior Partner; Global Leader, Climate & Sustainability Practice

You can find a longer list of books recommended by BCGers below. I’m taking time to recharge, as I hope many of you are doing or have recently done. We’ll be back in your inboxes again in late August.

Christoph Schweizer
Chief Executive Officer

Navigating Through Negativity

JULY 24, 2023

To BCG’s network around the world,

As I’ve expressed to you in past Weekly Briefs, I’ve often been frustrated by what feels like overly negative headlines about the economy.

Philipp Carlsson-Szlezak, our chief economist, and I have maintained a mostly positive outlook, particularly for the US economy, over the past couple years—certainly more optimistic than the media’s (and many pundits’) predictions of either severe recession with high unemployment or spiraling inflation.

The jury may still be out, but the soft landing we saw on the horizon (see here and here) appears increasingly likely. Why were the headlines and many predictions about the US and beyond so off?

Underestimating Resilience in the US

In an excellent new article in Harvard Business Review, Philipp, along with his BCG Henderson Institute colleagues Paul Swartz and Martin Reeves, explain that the dark forecasts missed the full picture of the US economy’s resilience. The article also provides a balanced guide to leaders wanting to navigate the inherent economic uncertainties.

Looking at the past couple years, the concerns about the labor market, housing activity, consumer spending, and financial systems were all valid, but the analytical lens was too narrow. Each has elements of strength related to the post-pandemic context and thus not captured in the historical data often used to make forecasts.

For example, fast-rising rates did exert a strong headwind on the housing market. But housing inventory was so exceptionally low after the pandemic that activity remained solid even when demand dipped.

Underestimating Resilience in Emerging Markets

It’s not just the US that has been the focus of dire economic predictions. The outlook for emerging markets has also been consistently negative, based on the reasonable fear that rising interest rates in the US would trigger financial crises in those economies, as has happened in the past.

But another interesting recent article—this one in Fortune by Philipp and Paul—explains why today’s picture is different and a systemic emerging-markets meltdown is less likely. Today, emerging markets are overall much more economically robust than they were in the 1980s and 1990s. Many have increased their reserve balances, shifted out of dollar-denominated debt, and weaned themselves off fixed exchange rates.

Their economic management is also better today. For example, Mexico and Brazil raised interest rates before the US Federal Reserve did, which has allowed them to avoid the pressure that comes from falling behind—a situation they have dealt with in the past. These changes have shored up resilience and put these economies in a much stronger position.

Taking in the Headlines with a Grain of Salt

Does all this mean that the US and emerging markets are out of the woods? Of course not. As we know very well, shocks can arise and change a positive trajectory—or at least put it on pause. It is as foolish only to double down based on the upside as it is only to hunker down because we’ve been told the sky is falling.

But as business leaders, it’s important to look out for bias and remember that stories may fail to integrate critical context or may depend on flawed historical analogies. And we all understand that sharp, negative headlines will attract more clicks.

Yes, risks are out there. Our job is to keep tabs on the wide bands of today’s uncertainty while not getting stuck in a universe of doom-and-gloom scenarios.

Rich Lesser
Global Chair

Change is Hard

JULY 18, 2023

To BCG’s network around the world,
It’s often said that there are only two things people dislike: the way things are—and change.

Many of the people I talk to each day—CEOs, senior executives, public and social sector leaders—are great at changing. They have navigated new challenges, stretched their capabilities, and faced new responsibilities as they progressed in their careers. They are successful because they are good at change. The more they succeeded, the more adept they became at change.

And yet many now lead organizations that struggle to change. BCG’s research finds that as many as 75% of transformations and major change efforts fail to realize their intended value. The explanations I hear for these misses and disappointments are troublingly vague: inability to generate buy-in, a lack of accountability, insufficient energy or momentum.

My colleague Julia Dhar, who leads BCG’s Behavioral Science Lab, describes two phenomena that help explain why change is hard.

• Change Aversion. Psychologists have shown that people hate loss more than they love a gain of equal magnitude. It is much more painful to lose $5 than pleasurable to find $5 on the street. People view change in a similar way. We value what we have, in all its imperfections, more than what we could have. In other words: people are change-averse. You can measure your own energy for change using our new assessment.
• Change Distance. People closer to change decisions and with more seniority feel more favorably toward change than those further away or with less influence. The greater the distance between them and an initiative's center of gravity, the stronger this effect becomes.

While these two phenomena are different, the prescription for overcoming them is similar. Humans are complex beings with emotional reactions to change. Their reactions do not fit easily inside the rigid confines of a spreadsheet or Gantt chart, but they are valid. So what can we do?

Be empathetic. Imagine yourself as an employee in a cubicle farm, home office, shop floor, hospital ward, or retail store of your organization. How strong is the case for change from this new perspective? What can you do as a leader to address concerns? What channels can you create for stronger listening?

Encourage agency. Lay out the facts for employees and bring them along on the change journey. Employees are more likely to change if they are invested in the process. Jeanie Duck, BCG’s first change management consultant, used to say, “Insight discovered beats insight delivered.”

Train frontline leaders. One way to close the change-distance gap is to bring your frontline leaders into the circle of change. Frontline leaders are often first-time managers who oversee operations such as call centers, bank branches, or manufacturing shifts. They are your ambassadors, who can explain the need for change to employees and convey employee concerns back to you.

Frontline leaders manage up to 80% of employees at many organizations but often receive only basic management training and limited access to senior leaders. It’s no wonder they struggle to be effective at translating lofty change ambitions for their people.

Offer authentic praise. Employees may be more willing to embrace change if they feel they are noticed. Our research has shown that the number-one request that employees have of their leaders is more appreciation and recognition.

To some extent, these are not new lessons, but they’re relevant today, when the ability of large organizations to change is a great differentiator and a source of enduring advantage.

Christoph Schweizer
Chief Executive Officer

JULY 10, 2023

Two things about AI caught my attention last week.

The first was the news that BCG was ranked as a global leader in AI services by IDC MarketScape—actually the upper-right spot of the 25 firms included. It’s a feat we’re quite proud of, especially considering that ten years ago we had just over a dozen data scientists in our ranks and little sense of where this journey would take us.

The second was hearing Christoph mention on a few occasions that, in the first half of 2023, BCG has been engaging in depth on generative AI with board- and executive-level leaders at more than 600 different organizations—and is already supporting many projects focused on the technology and its productive deployment.

All of this, along with a new survey about GenAI that we recently conducted with more than 2,000 C-suite leaders, means we’re gaining a clearer understanding of the impact the technology is having and the next steps leaders should take. I reached out to two of our own leaders on the topic, Nicolas De Bellefonds and Vlad Lukic, to learn more about the insights they’ve gathered, which I hope you’ll find valuable.

GenAI Success Starts with AI

Making good use of GenAI starts with a foundational strength in AI itself. In fact, the gap between those making fast progress and those falling behind in AI has widened significantly with the advent of GenAI.

About 20% of organizations—and not just tech companies—fall into that front-runner group. Another portion—about 30% of the total— are at the bottom of the pack and are doing what they can to dive in. But the 50% or so in the middle are the most challenged. They’re learning about GenAI and talking about its potential impact at the highest level of the organization, but they’re having a hard time translating their interest into coherent action.

Separating from the Pack

Those in the top 20% are increasing their GenAI maturity at a remarkable speed, creating advantage in six months that could
easily have taken years in the past. That’s partly a result of the data and tech infrastructure they’ve already built—but also the effort they’ve made to lock up expert resources as quickly as possible.

These leading companies are finding ways to integrate GenAI into the broader data and AI momentum that has already driven value for them. They’re fitting it into solutions that are improving products and services, operations, and the HR and IT experiences of their own employees. Adopting GenAI has been almost a seamless part of their AI journey.

Changing the Conversation

It’s not too late for others to catch up. If you’re one of those in that middle 50%, here are some critical ways to adjust the conversation and priorities at your organization and follow the lead of those having early success with GenAI:

Focus on the big wins. Look beyond the obvious opportunities of content creation to the full scope of potential impact, from smart design to problem solving and autonomous agents. Instead of individual use cases, think about how to redesign functions and processes end to end in marketing, customer service, operations, and technology. Tap into proprietary data to drive deeper customer relationships and spark innovation and creativity.

As with machine-learning AI, the real challenge lies not just in proliferating pilot tests but from thinking on day one about how the new capabilities will be embedded in the broader organization—so pick your shots carefully.

Drive impact with AI and GenAI. It’s not about replacing AI and only playing with the newest toy. The combined power of AI and GenAI packs the most punch. Leading companies are using GenAI to build on what they’ve already achieved with the machine learning and optimization of “traditional” AI, analogous to benefitting from integration of the left brain (predictive AI) and right brain (GenAI).

Invest in the foundation. Now is the time to dedicate new resources to your tech and data infrastructure, maintaining an outcomes-focused perspective. This foundation will be a fundamental source of competitive advantage for the next five to ten years; build it in parallel with the pursuit of your biggest near-term opportunities. It’s also critical to invest time and resources into responsible AI, which should be part of the foundational platform.

Undertake comprehensive workforce planning. Envision the impact of GenAI and AI on your workforce over the next three to five years—not only where you’ll need new talent but also where you might be able to upskill and reskill your current workforce. GenAI is a source of anxiety for many workers. The challenge is to convert that anxiety into a sense of empowerment and opportunity.

Those in the lead will keep pulling ahead. For everyone else, it’s time to change the nature of the conversation and take action or risk losing ground.

Rich Lesser
Global Chair

Celebrating 60 Years of Impact

JUNE 26, 2023

To BCG’s network around the world,

This week marks BCG’s official 60th anniversary. Though we don’t typically use the Weekly Brief to talk about BCG, we wanted to celebrate this moment with you. We would not be here without you—thank you! Our 60 years of history have been shaped by you and for you: clients, partners, alumni, BCGers.    

Fueled by your trust, we have grown from one individual in one room to more than 30,000 people in over 50 countries—from a bold ambition to the largest global partnership. We’ve done all of this while relentlessly pursuing our purpose: unlocking the potential of those who advance the world.        

We have the privilege of living this purpose every day, working side by side with you. Over the past 60 years, we have seen this community solve complex problems, create economic growth, drive innovation and sustainable value, and have a positive impact on lives and livelihoods. Here are a few examples of our collective impact:

• Our top 100 clients have generated an additional $2.5 trillion of value above local market indices in the past ten years.  
• In the past two years, our work has directly protected the health of 500 million people in lower- and middle-income countries.
• Our work with our top 20 clients alone has delivered action plans to reduce global CO₂e emissions by 1 gigaton—equivalent to the total emissions of Germany and the UK combined.   

We are not only grateful for what we have achieved together but also for how we work together to unlock this potential each day:

Uncovering Bold Insights We Can Act On. We’ve shaped the field of business strategy with insights such as the growth share matrix and experience curve. Today, we tackle some of the world’s toughest challenges, including climate and sustainability—partnering closely with clients, driving complex change, enabling organizations, and embracing the power of technology to create lasting impact for businesses and society.  

Growing by Growing Others.  We serve as a school for talent to shape the leaders, thinkers, and entrepreneurs of tomorrow. We collaborate with all of you to challenge the status quo, change lives, promote diversity, and create socially transformative businesses that align profit with purpose.       

Leading with Integrity. This comes through in the way we solve complex problems and provide honest answers, in the work we choose to engage and not engage. We are far from perfect—humans and organizations never are—but we work every day to live up to our high standards and remain worthy of your trust.

Our dedication to unlocking the potential of those who advance the world is unwavering. It’s grounded in our contributions to our clients, our people, and the world at-large.   We are committed to continuing to act as an engine for big ideas, a home for curious talent and the leaders of tomorrow, and a driver of lasting, positive impact for decades to come.

Thank you for shaping this journey with us.

Christoph Schweizer
Chief Executive Officer