BCG’s Weekly Briefs

In BCG’s Weekly Brief, our most senior executives, including Global Chair Rich Lesser and CEO Christoph Schweizer, share their latest perspectives and ideas, as well as some of the firm’s most compelling thought leadership, in an email to colleagues, clients, and friends around the world. These messages cover a wide range of topics that are top of mind for business leaders today, issues that have become more layered and challenging than ever: from global trade and consumer choice to corporate purpose, climate change, and responsible AI. Here is a selection:

AI Works Best for Companies When It Works for Employees

NOVEMBER 14, 2022

To BCG’s network around the world,

A myth that has challenged AI from the beginning is that it brings value to organizations, but only at the expense of workers. Now, a new report from BCG GAMMA, the BCG Henderson Institute, and MIT Sloan Management Review—based on survey responses from more than 1,700 business leaders in over 20 industries and 100 countries—turns that worry on its head.

Organizations whose employees personally derive value from AI are 5.9 times as likely to gain significant financial benefits from it as organizations whose employees do not.

One example is how Land O’Lakes, a US-based, member-owned agribusiness, is using AI. The organization provides its farmers with AI-driven recommendations, which are on track to help them triple their average yields by the end of this decade.

Balance is critical. While farmers may no longer be sticking exactly to family traditions as they cultivate their land, they are also not taking direct orders from AI. The recommendations allow them to make smarter decisions. They can incorporate long-term weather forecasts into complex planting plans, for example, or farm in ways that increase soil health and sequester carbon. At the same time, farmers are learning more from each other, sharing their knowledge at events focused on the new technologies.

AI as a Win-Win

As the authors explain, this AI-driven dynamic—in which people feel more competent, independent, and connected to their work, colleagues, and customers—feeds into a more satisfied workforce. The team’s research uncovered further good news on the value of AI for individual employees, including:

  • Unexpected Attitudes. Most employees (60%) see AI as a coworker, not a job threat.
  • Personal Benefits. Among survey respondents, 64% say they derive at least moderate value from AI, and these employees are 3.4 times more likely to be satisfied in their work than those who feel they don’t benefit from AI. 
  • Valuable Mandates. Workers who are required to use AI are actually 1.4 times more likely to gain value from it than those who are not. 

While many workers may still be wary of AI, companies can overcome obstacles through a range of approaches. Promoting awareness can make a big difference, something managers can do by highlighting when AI is powering everyday employee apps and software. Fostering autonomy is also key. Although companies may need to mandate the use of AI to get more workers to use it, its use must serve to empower them rather than make them feel less essential.
Companies across industries are increasingly AI-ready. While there are still many that have yet to adopt it, consumer goods, retail, and wholesale are catching up to technology companies, 75% of which have adopted or are piloting AI. Value creation comes from higher revenue and lower costs, but AI can also deliver cultural benefits.

Those companies lagging behind in their adoption plans should consider the full range of potential value—including what AI can offer to employees. These new findings—showing that organizations stand a better chance of gaining value from AI when their workers do, too—is energizing.

Please see below for more on this and related content.

Christoph Schweizer
Chief Executive Officer

A Prescription for Change Through Ten Years of Value-Based Health Care

NOVEMBER 07, 2022

To BCG’s network around the world,

Did you know if you have a heart attack in Los Angeles, you could wind up at a hospital with a 6% death rate for treating this emergency or one with a 22% death rate? Vastly disparate outcomes, even after adjusting for epidemiological, demographic, and socioeconomic factors, are common for many medical conditions, a phenomenon that occurs across countries and states and within the same cities, despite the incredible efforts of experienced health providers and substantial levels of investment. 

BCG’s Stefan Larsson, aware of these disparities, was inspired by the story of a group of orthopedic surgeons in Sweden from the late 1970s who collaborated over a couple years until they could align on what determines a successful hip replacement surgery from the point of view of the patient. Once they agreed, they could measure the procedure’s results and publish those results every year. And because of that transparency and collaboration, Swedish hip surgeons’ procedures were the most successful in the world. 

The Value-Based Health Care Story 

Stefan, along with Harvard Business School’s Michael Porter, began to focus on how this model could be applied to address health outcome disparities more broadly. About a dozen years ago, working separately at first, and then together, they progressed the concept of making value-based health care the organizing principle for health systems, aiming to reorient care around patient outcomes and success rather than inputs such as standard procedures and investments.

As Christoph wrote back in 2014, when he was the global leader of our Health Care practice, we were changing the game to compete on patient outcomes. Value-based health care could deliver overall population health more consistently, identify and disseminate best-practice diagnostics and treatments, control costs, and rebuild the trust and motivation of health professionals by aligning system performance goals with professional purpose. 

To create change at a system level, however, it was going to be critical to identify the right metrics for each condition, track those metrics, and share back to the community transparently. Last week, I had the privilege of joining the tenth anniversary meeting of the International Consortium for Health Outcomes Measurement (ICHOM), whose mission is to do just that. 

Over the past ten years since its founding by Stefan, Michael, and Martin Ingvar from Sweden’s Karolinska Institute, ICHOM has mobilized more than 1,000 clinical leaders and patient representatives from over 60 nations, who jointly have created standard metrics for about 60% of the world’s global disease burden. These metrics are currently in use at more than 700 hospitals and clinical sites around the world and endorsed by the OECD. That progress is substantial and a testament to persistence, but the road ahead, as we continue to push for broad-scale adoption, is even more important. 

The Patient Priority 

The power of this work is captured in a new book by Stefan and two of his BCG colleagues, Jennifer Clawson and Josh Kellar, called The Patient Priority: Solve Health Care’s Value Crisis by Measuring and Delivering Outcomes That Matter to Patients , which was launched during last week’s ICHOM conference. It’s a compelling read, and it comes at a critical time for the $10 trillion global health sector. Traditional models will not be able to deliver superior care as populations age, demand grows, and budgets are more constrained. It’s time to put the patient at the center. 

The book spells out what leaders will need to do to guide health systems toward a value-based model, and it turns out that these are the same elements of leadership that are required of so many of today’s biggest challenges, including climate action. We need strategic leadership to push for greater transparency and set the right targets. Transformational leadership serves to bring the organization along on the journey. And system leadership is more important today than ever, with organizations offering rich collaboration across boundaries and centered around a common set of outcome-focused goals and metrics. 

Congratulations to Stefan and the ICHOM team for their insight and energy to push for patient-centered value-based health care and to the thousands of health care professionals and organizations that have embraced and advanced this agenda. Please see more on this and related topics below. 

Rich Lesser
Global Chair

Finding Light in a Dark Winter

NOVEMBER 01, 2022

To BCG’s network around the world,

As winter approaches in the Northern Hemisphere, energy challenges—especially in Europe—are top of mind. Here in Germany, we see countless messages about the need to conserve electricity and keep the heat low. Countries such as Portugal are preparing for the possibility of occasional blackouts. In Paris, the Eiffel Tower will go dark an hour earlier than usual every night. 

Over the past six months, prices of energy and related commodities have been extremely volatile—and risen sharply. Business leaders want to know how they should plan for this winter, next winter, and beyond. The good news is that in the medium term there are strategies that business leaders can employ to address looming energy gaps and emerge from this period better prepared for what comes next. 

The Impact of an Energy Supply Gap in Europe 

In 2021, nearly 40% of the natural gas used throughout Europe came from Russia. Recent events have made the significance of that dependence clear, and the results are far-reaching and complex. Monthly imports of Russian gas to Europe have dropped more than 80% in the past year, causing massive price spikes. 

In Germany, for example, wholesale gas prices have increased more than ten-fold. End-supplier prices have more than doubled and are expected to increase further, hitting many households hard. Nearly one-third of the country’s GDP has historically been driven by the industrial sector. Now, due to soaring prices and uncertain supply, the competitiveness of German industry is at risk. In several energy-intensive sectors, Germany is now one of the most expensive production locations in the world. Many ammonia-fertilizer and aluminum factories have significantly reduced production. 

And, just last week, amid historically high energy prices, natural gas hour-ahead pricing at the virtual trading point in the Netherlands actually went negative for the first time. This underscores the complexity of managing today’s supply-demand balances. 

In this tumultuous context, governments in Europe especially are pulling all levers to ensure energy supply and keep prices manageable—rapidly shifting to liquified natural gas (LNG) and other sources, conserving energy, subsidizing the costs to consumers, and investing for the long term in renewable energy and hydrogen. 

Resilience for the Long Haul 

As CEOs around the world figure out how to respond to the broader implications of this energy crisis, the most critical goal should be to invest in business resilience. Leaders should understand the range of scenarios relevant to their industry and sector and pursue strategies that are proactive and adaptive. 

When it comes to managing current energy instability, leaders should consider taking four specific actions to manage risks and prepare for the future: 

  1. Develop a “control tower”-style perspective on the organization’s exposure to energy prices and volatility across the value chain, moving quickly to optimize production, sales, marketing, and pricing plans in order to protect margins.  
  2. Assess and act on a whole-company, near-term resilience program, depending on sector, footprint, and relative competitiveness based on energy exposures.  
  3. Strategically review the portfolios of supply sources, production locations, and products for mid-term resilience against the new normal of energy costs and the climate transition. 
  4. Accelerate investments into sustainable energy solutions with quick payback times, including energy efficiency in industrial operations, renewable electricity, building efficiency, and bio-energy. 

Climate Action Turnaround 

These last two actions are important. As Europe faces a fossil fuel energy crisis, with cheap Russian supply a thing of the past, the need for a climate transition becomes more urgent than ever. The current energy crisis will force governments and businesses in Europe to invest in new technologies faster than planned, supporting the global push to combat climate change. Every renewable energy park commissioned, every industrial biogas application launched, and every energy efficiency measure adopted can offer affordable and secure energy solutions for the foreseeable future and are good for the planet at the same time. 

Disruptive forces can be the lifeblood of tomorrow’s opportunities—no matter how dark the winter ahead may look. As leaders, we can use this time to stake a claim for a more positive and stable future. 

Christoph Schweizer
Chief Executive Officer

Mobilizing for Progress in Decarbonization Technologies

OCTOBER 24, 2022

To BCG’s network around the world,

We’re excited to be writing the Weekly Brief together this week after attending the inaugural Breakthrough Energy Summit in Seattle. Just over a year ago, BCG became a founding partner of Breakthrough Energy Catalyst, a groundbreaking program (part of the larger Breakthrough Energy organization founded by Bill Gates) aimed at the development and scaling of critical climate technologies. 

Many of the technologies we need to reach net-zero goals are in the early stages or haven’t even been invented yet. The summit brought together about 700 representatives of private and public sector organizations, as well as scientists and leaders of NGOs, to focus on how we can speed up this critical work. The group was energized and optimistic about the potential for progress—but well-aware of global headwinds and the daunting challenges to come. 

Overall, we continue to feel encouraged about the road ahead. Here’s why: 

The Power of Business. Many CEOs are reinforcing the urgency of climate action. Economic uncertainty and geopolitical conflicts have had an impact on priorities, driving more focus on short-term resilience, cost reduction, high inflation, and ways to secure immediate access to affordable energy (especially in Europe). But the long-term views of business leaders are unchanged; in Europe in particular, geopolitical conflicts have increased the urgency of achieving energy security. CEOs know that addressing their own emissions is critical to many parts of their business, including their fundamental license to operate. 

The Power of Innovation. At the summit, there were more than 90 CEOs of startups and mid-stage technology companies with solutions that are poised to scale and that have the potential to significantly reduce the costs of decarbonization. Clean technology represents an unprecedented business opportunity. BCG’s recent study, done in collaboration with Breakthrough Energy and Third Way, estimates a cumulative global market of about $60 trillion between now and 2050 based on just six key emerging technologies: electric vehicles, electrochemical LDES (long-duration energy storage) batteries, direct air capture, clean steel, nuclear SMRs (small modular reactors), and green hydrogen. The broader ecosystem of climate tech will be worth much more. 

The Power of Policy. Recent government policy, especially in the US, will materially drive advanced decarbonization solutions. The recent US policy trifecta of the CHIPS Act, Infrastructure Investment and Jobs Act, and Inflation Reduction Act will fundamentally change the economics for several important decarbonization technologies, including renewables, clean hydrogen, and carbon capture. We expect this may prompt other countries to respond with their own incentives, which will help with the global deployment of these technologies. 

The activity already taking place is impressive. For example, Breakthrough Energy Catalyst announced its first investment, LanzaJet’s Freedom Pines Fuels project, supporting that company’s first commercial-scale sustainable aviation fuel (SAF) plant. The project will be the first in the world to produce alcohol-to-jet SAF at commercial scale, which is projected to lower emissions by around 70% compared with fossil jet fuel. 

Overcoming the Headwinds  

Despite the possibilities, it’s important to recognize the larger headwinds. Cost gaps still exist. Government subsidies can help close the green premium gap for a while, but many of the emerging clean energy technologies still need innovation and adoption at scale to achieve cost-parity with the fossil fuel alternatives. 

We also need to see a significant expansion of enabling infrastructure: expanding electricity transmission capacity, securing access to raw materials, and reducing red tape, starting with permitting. 

Talent is another looming issue. Decarbonization is a great field for an impact-focused employee to make a career. But at the scale required to make the progress we need, it will take hundreds of thousands of new employees across a wide variety of roles, including engineering, construction, procurement, finance, and more. 

The challenges are significant, but the tech solutions we need are within reach. With public and private organizations working together, and with the recognition of the enormous advantages available to businesses, we can accelerate innovation and hopefully avoid the worst impacts of climate change. 

See below for more on our research on the clean energy market, along with other related content. 

Christoph Schweizer
Chief Executive Officer

Rich Lesser
Global Chair

Get Ready for the Metaverse

OCTOBER 18, 2022

To BCG’s network around the world,

The metaverse is still so young that there isn't even a very simple definition of it yet, but that has not stopped it from infiltrating more and more conversations. CEOs are taking notice and want to understand what it might mean for their companies.

From a practical perspective, we think about the metaverse as the convergence of multiple technologies and the proliferation of data and content to create new experiences and unprecedented value for users and organizations. At the core of the metaverse is the digital-twin concept, which in consumer applications are the virtual worlds and in enterprise applications are the layers of customer and operational data that can be used to drive tangible value. 

So far, most metaverse activity has been in gaming and, increasingly, concerts and other immersive virtual experiences. Retail, fashion, and apparel companies are also early movers, but a growing list of major companies across industries, including in technology, telecommunications, health care, automotive, and industrial goods, have become active. The metaverse is also increasingly used in operations—from manufacturing optimization to disaster management and recovery. 

Examples of the metaverse are multiplying fast. It’s the advanced merchandising used by a retail giant that links back to and improves the supply chain. It’s a smartphone app that integrates with an augmented-reality-enabled windshield to offer driving directions, which then feeds into a car’s self-driving algorithms. It’s the technology that enables emergency services to respond when a phone or watch belonging to a person in need of medical assistance sends an SOS. It’s two friends on different continents shopping together in a virtual mall.

As the metaverse “amplifies” the economy in many ways, its potential value is huge. We’ve estimated that a Fortune 500 retailer, for example, could harness the metaverse to realize: 

  • 1.5–2 percentage points in margin improvement from improved onboarding and training of staff  
  • $200–$400 million from increased store traffic and customer loyalty owing to an improved in-store experience through benefits such as enhanced marketing and digitally guided shopping experiences  
  • $500–$750 million from streamlined operations and improved control of inventory 

It’s helpful to think of the metaverse as a digital representation of the physical world organized into layers, like a technology stack. Companies will naturally participate at different layers. 
Some will be active at the bottom, core layer, building the digital infrastructure, providing financing, and delivering connectivity or key services. Others will be more involved at the utilities layer, involved in activities such as connectivity and power. Still others will fit in at the services layer of the metaverse, in areas such as health care, government services, and law enforcement. But most will focus on the top applications layer, where they will interact with B2B and B2C users in metaverse environments. 

How to Play

Here are six early steps that BCG’s metaverse team suggests leaders can take to get started on building a robust metaverse strategy: 

  • Set a broad vision for what you want to achieve. 
  • Build the digital assets and tech enablers that allow you to put the strategy into practice and expand it over time.  
  • Create a digital-twin strategy, embedding metaverse use cases into regular operations early.  
  • Provide personalized attention with AI and build and retain customer trust, creating segment-of-one offerings, while protecting digital privacy.  
  • Equip and engage the organization by using the metaverse in hiring, onboarding, coaching, and training. 
  • Establish a mission control office to define goals, highlight dependencies across teams, and de-risk the overall plan.  

While avatars and gaming are important aspects of the metaverse, it is about so much more. It represents a broad opportunity that will require a robust understanding of the confluence of business strategy, traditional and virtual digital assets, and new tools. Companies won’t want to be left behind. 
Please see below for more on this and related topics. 

Christoph Schweizer  
Chief Executive Officer

Pricing Tools, Sophistication, and Judgment Are More Important Than Ever

OCTOBER 10, 2022

To BCG’s network around the world, 

Inflation continues to be an enormous challenge and will likely stay at above target levels for an extended period. The threat of recession looms. Central banks have made significant rate hikes, while OPEC decided on production cuts in anticipation of softening demand. 

All of this paints a volatile picture for firms trying to translate these signals into a pricing strategy. While margin pressures on companies rise, their customers are increasingly vulnerable and becoming price sensitive in many categories, so the simple lever of raising prices is not always possible. And even when it is—and it makes the most sense from a near-term profit perspective—it’s critical to stop first and ask: is it the right thing to do and if so, how? 

Consider Consumer Complexity

It’s important to acknowledge that consumers today are far from monolithic. BCG’s consumer behavior research, conducted in Germany, France, the US, and the UK in August 2022, indicates consumer complexity that should be understood and integrated into sophisticated pricing strategies. 

There are categories within which consumers, driven by three distinct reasons, expect to spend more than they do today. There’s inflation-driven spending on essential items such as gas, utilities, groceries, and housing. There’s increased spending due to pent-up post-pandemic demand on things like travel, movies, and live entertainment. And finally there are “no sacrifice” categories, which include items such as organic food and pet supplies that some consumers are unwilling to do without. 

Then there are categories where consumers intend to spend less. They’re buying fewer non-essential items, such as clothing, to compensate for higher spending on essentials. They’re hunting for deals and promotions in categories like body and skin care, still intending to make purchases but for less. And in categories such as gym memberships and cosmetics, consumers are looking for substitutions, wanting to switch to cheaper alternatives. 

Pricing for the Future

In a survey of more than 1,400 pricing decision makers carried out last month, we learned that most companies have protected their margins by increasing prices without differentiating much by SKU, segment, or channel and have not invested in upgrading pricing capabilities. That approach won’t hold up in today’s environment of consumer behavior divergence and economic volatility. Instead, pricing should be part of a highly sophisticated process.

First, companies need to increase their investment in competitive intelligence, analytics, and automation. But that’s not enough. They also need to maintain a human control mechanism to ensure careful judgment as consumers feel more strain, making sure that price moves are strategically aligned and effectively communicated, and that stakeholder implications are recognized.

Consider convenience and small-format stores, where pricing elasticity is considerably lower than in large-format supermarkets. Prices go up in convenience stores, and they stick. But lower-income neighborhoods often lack access to supermarkets, and consumers disproportionately depend on convenience stores for their everyday, staple goods. Companies need to find better ways to meet the expectations of shareholders and investors while serving customers as responsibly as possible. For a large segment of consumers in many parts of the world, the pandemic’s lockdowns left their pocketbooks reasonably full. As a result, many companies were able to respond to severe cost shocks and supply chain disruptions by taking the short-term, high-impact route of raising prices.

But we can’t just look at the past—not even the recent past—as a guide to the future. As pressures on consumers grow and as businesses are increasingly scrutinized for their pricing actions, leaders need to be more methodical in order to make the right moves in the right way. The tools to do this exist. Now, it’s about building and applying them, alongside careful leadership judgment, to navigate the stormy seas ahead.

Rich Lesser
Global Chair

The Pulse of Corporate Innovation: BCG’s 2022 Most Innovative Companies

OCTOBER 03, 2022

To BCG’s network around the world,

Innovation is fundamental to a company’s differentiation, growth, and value creation. In other words, it is central to the role of senior leadership. 

Almost every year since 2003, BCG has monitored corporate innovation, identifying the top 50 companies based on survey responses from 1,500 C-suite and senior executives across 41 markets and 19 industries, as well as total shareholder return data. We assess the overall state of innovation and examine how the top performers secured their spot. 

The innovation that has taken place over the past 20 years is remarkable. We’ve seen the emergence of new kinds of products, such as the first smartphones, electric vehicles, and a number of lifesaving and life-enhancing advances in health care. New business and operating models have emerged, leveraging e-commerce, highly sophisticated analytics, and, increasingly, AI. 

Looking back at the lists over time, here are some important patterns: 

The Staying Power of Technology. Apple has been at the top of the list almost every year beginning in 2005 (with a slight drop to number three in 2019). Technology has been the most prominent industry on this list since we started putting it together. This year, it represents 42% of the top 50 list, and 9 of the top 10 companies, reflecting both the pervasiveness of technology in our lives as well as the advantages of pioneering and deploying digital and business model innovation to create sustained differentiation.

Disruption Is Evergreen—and Influential. Breaking through isn’t easy, but we’ve seen a trend for years of disruptive companies working their way onto the list and raising the bar. Six players on the 2022 list, including two in the top ten (Tesla and Moderna), are younger than the list itself. And these disruptors can wield a great deal of influence. Tesla, for example, has not only established itself as a perennial presence since joining the list in 2013 but has disrupted the broader automotive industry. Several auto companies have made substantial recommitments to innovation and are back on the list after an absence.

The Challenge of Repeated Success. Only six companies have made the list every year since it began: Apple, Microsoft, Amazon, Toyota, IBM, and Samsung. While each of these players has adopted different innovation models, the commonalities provide a guide that all companies can emulate. They have each set a clear innovation strategy, built and maintained a well-defined innovation system, invested in digital tools and platforms, and fostered an innovation-friendly culture.

The Innovation of Retail. Seven retailers appear on our 2022 list. Five of these are digital natives: Amazon, Alibaba, Zalando, Jingdong, and eBay. They are joined by Walmart and Target, which have innovated to compete with digital disruptors and to respond effectively to changing consumer behaviors and supply chain challenges driven by the pandemic.

The Green Growth Imperative. This year’s report revealed that product, process, and business model innovations related to climate and sustainability have become a top corporate priority. Many of the companies on the 2022 list were among the first to embrace ESG principles and set decarbonization goals. And 80% of them are among the top innovators in climate and sustainability, according to their global peers. 

How to Advance Innovation Excellence 

The BCG team behind the Most Innovative Companies report has found through its research that there are tactical steps that companies—no matter their starting point—can take to improve their innovation ROI and outperform their peers: 

  • Set a clear innovation ambition: Why do we innovate, and what’s our goal? 
  • Define the innovation domain: Where do we play, and what’s our “unfair” advantage? 
  • Integrate innovation into performance management: What outcomes do we reward and celebrate? 
  • Monitor and redeploy resource allocation: Which innovation projects will we accelerate? Which projects or programs should we stop to make that happen? 
  • Work in agile ways and embrace digital tools: Do we have agile teams working with end-to-end responsibility? 
  • Mind your culture: Have we built an innovative culture, one that can attract the best talent? 

Please see below to read this year’s report, along with other related content.  
Christoph Schweizer  
Chief Executive Officer 

The Power of AI in Manufacturing

SEPTEMBER 27, 2022

To BCG’s network around the world,

Manufacturers are under considerable pressure: rising economic uncertainty, labor challenges, fluctuating energy and raw material prices, and supply chain disruptions. The traditional means of driving productivity are drying up, and it’s getting harder to uncover the next wave of value. This is where digital and AI come in, powering a new era of continuous improvement for bold companies ready to drive a step change in performance. 

The value that AI can unlock for manufacturers is significant. A 2% to 5% increase in revenue through higher throughput and yield. A conversion cost saving of 10% to 15%. Better customer service and quality, more sustainable operations, and improvements in safety and employee engagement. Despite so much potential, however, only 8% of manufacturers have scaled even one digital or AI solution across their entire plant network. 

The 10-20-70 Path to AI at Scale 

What’s holding manufacturers back? 

Many put too much weight on the algorithm and not enough on the processes, organization, and skills and capabilities of the people involved. At BCG, we refer to the 10-20-70 formula for success in scaling digital and AI. Ten percent of the effort should concentrate on algorithms, 20% on the data foundation and technologies, and 70% on embedding AI into key business processes, new ways of working, and enabling the workforce. 

In other words, organizations need to invest more than twice as much in process and people as they do in tech, data, and algorithms. This includes fundamental reskilling and upskilling along with the development of suitable organizational models and new KPIs and incentives. It’s also critical to bridge the historically distinct IT and OT (operations technology) groups, since data from both systems are essential to the development of a scalable platform. 

Companies should start by zeroing in on key value drivers and pain points that are specific to their business. AI and digital offer extraordinary opportunities to solve today’s complex manufacturing challenges, benefits that most organizations have yet to take full advantage of: 

  • In manufacturing planning, for example, AI and digitization can help companies improve site production scheduling, greatly enhance visibility into network operations in real time, and help remove bottlenecks in production. 
  • For the production process itself, companies can use AI and machine vision (the technology and methods that provide automated inspection and analysis) to enable a new wave of automation. Digital and AI can also drive early warning systems, alerting management before issues arise and avoiding unexpected shutdowns. 
  • Supply chain challenges can also benefit from AI solutions, including emissions tracking and abatement, advanced demand forecasting, digitization of traditional sales and operations-planning processes, and network optimization. 
  • These technologies can provide benefits to those who support the production process, too, including predictive maintenance to reduce costs and improve uptime and the digitization of routine tasks.  

AI in Manufacturing Delivers Measurable Value—One Example  

Some companies are getting the formula right—and reaping rewards. A North American fast-moving consumer goods company, for example, was facing labor challenges, exacerbated by the pandemic, and was managing numerous plants with low digital maturity. With a bold vision to transform operations through AI, the company launched an 18-month end-to-end journey that incorporated strategy, digital solution development, and capability building, along with investments in a data platform as a foundation.   

The manufacturer created a new team with more than 15 fully trained FTEs at the helm, resulting in improvements in worker safety, product safety and quality, employee engagement, customer satisfaction, and sustainability. The effort included a dedicated change program to build momentum and a new role in the plants to drive adoption of these tools. The effort has delivered $100 million in value already and is on track to generate an additional $100 million in the upcoming fiscal year, equivalent to a full point increase in profit margin.  

The potential is exciting. With a holistic approach, AI can solve some of today’s most persistent problems in manufacturing, tapping into new opportunities that allow companies to reshape and deliver on future goals and ambitions.  

Please see below for related content.

Christoph Schweizer
Chief Executive Officer

Solving the Green Consumer Puzzle

SEPTEMBER 20, 2022

To BCG’s network around the world,

As governments, NGOs, and businesses from around the globe gather for Climate Week in New York, it’s exciting to feel the increased momentum to reach bold climate and sustainability ambitions. And it’s no secret that consumer products—and choices—play a big role in getting us there. 

On the demand side, consumers increasingly want to make a difference, but their actions don’t always match this aspiration. A new BCG report, Consumers Are the Key to Taking Green Mainstream, includes the results of a survey of 19,000 consumers across Japan, Germany, France, Italy, China, India, Brazil, and the US. While 80% of respondents say they are concerned about sustainability, only 20% feel that they themselves can have an impact, and at most 7% report paying a premium for sustainable products and services.

As the report explains, there are large segments of consumers who are “fence sitters”—not yet purchasing sustainable products but increasingly adopting sustainable behaviors, such as using reusable cloths for cleaning, recycling packaging, and driving their cars only when necessary. 

So why aren’t consumers making more purchases that align with their beliefs? For some, naturally, it boils down to cost. For others, it is more nuanced; they may not believe that their actions make a difference, or they may be apprehensive about changing from a favorite brand. Companies can help bridge that gap and influence consumer behavior: 

  • They can make claims locally relevant, being sure to speak the language of consumers and not that of internal business teams, regulators, or investors.  
  • They can broaden the dialogue with consumers, leading them to choose sustainable products and services that have additional attributes that are important to them, such as providing health benefits. 
  • They can respond to consumers’ hesitation to make sustainable choices by removing real or perceived barriers through innovation and communication. 

On the supply side, companies need to create truly sustainable consumer products—products that are not just net zero in carbon use but also promote biodiversity and reduce reliance on water and land. One company leading the way in this work is Quantis. I’m thrilled to share that BCG recently announced a deal to acquire Quantis. 

Quantis is an environmental sustainability consultancy that guides organizations to align their sustainability strategies with “planetary boundaries”—the environmental limits within which humanity can safely operate. This includes supporting companies with ecodesign, a process that integrates environmental impact criteria into the development of products and services while ensuring offerings are appealing to customers and profitable for organizations. 

In its work with L’Oréal, for example, Quantis developed a tool that analyzes the impact of the full life cycle of products—from raw material extraction to packaging to disposal—to ensure that all new products are more sustainable than what’s on the market. 

The next step in ecodesign is the development of frameworks and tools, such as packaging-assessment software that combines sustainability science and product design KPIs so that companies can reduce the environmental footprint of their entire product portfolio. 

Whether it’s bringing consumers on board to embrace the sustainable products and services that organizations must increasingly offer, or helping companies make their offerings more sustainable, we need to keep up the work of building a true planetary economy. 

Please see more about BCG’s acquisition of Quantis in the press release below.  

Christoph Schweizer  
Chief Executive Officer 

The Best Organizations Turn Uncertainty into Opportunity

SEPTEMBER 13, 2022

To BCG’s network around the world,

In the face of uncertainty, it’s natural to freeze, like a deer in the headlights. But waiting for clarity is a losing move. A new BCG Executive Perspective explains why now is the best time for action, breaking down today’s unprecedented complexity, the potential impact to regions and sectors, and how to turn ambiguity into opportunity. 

During downturns, the market splits. Organizations that innovate, digitize, and successfully acquire and integrate other companies emerge as leaders. For example, those that take advantage of lower valuations and double down on M&A experience a 4.6% increase in one-year relative total shareholder returns on core industry acquisitions and 8.5% on non-core. And innovation leaders, companies that invest 1.4 times more in innovation than laggards, are rewarded with 4 times the return. 

Companies do need to make the necessary defensive moves to protect themselves, but they should also reserve focus and capacity for bold plans to win—and that means having a clear understanding of both their starting point and the risk of inaction. The Executive Perspective describes a range of starting-point archetypes: 

Fortress Companies. Organizations with high market share and financial stability can boldly leverage their advantageous starting point. They can pursue M&A, often benefiting from the lower valuation of target companies; scale new business models; and accelerate digital transformation and ESG initiatives. Not doing so means likely losses in competitive advantage and missed opportunities for growth. 

Prepared Companies. Even when facing lower market stability, those with a strong balance sheet can still leapfrog the competition by diversifying their business and organizational models, strengthening their supply chains, and rapidly innovating go-to-market channels. Inaction could mean not only missing out on current opportunities but also giving away additional financial buffer for the next disruption. 

Unprepared and At-Risk Companies. Struggling organizations and those in particularly volatile markets should first adjust costs and stabilize the balance sheet. They can focus on data-driven strategic planning, consolidating supply chains and vendor relationships. The important thing is to take action. If they don't, they could become easy prey for “Fortress” or “Prepared” companies making bold moves or miss growth or margin opportunities within their segments. 

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Today’s world is characterized by persistent, multidimensional uncertainty. The strategies and tactics of resilience have become essential tools for leaders, independent of starting point. We can no longer rely on instinct and precedent. Instead, we need to establish a new mindset geared toward dynamic strategy. 

Rich and I expect to return to this important topic soon. Please see below for the full Executive Perspective, along with other content focused on what it takes to win in the face of uncertainty. 

Christoph Schweizer  
Chief Executive Officer 

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