This Boston Consulting Group podcast series looks around the corner of today’s big business and social issues. The goal—the so what—is to make sense of today and prepare busy leaders and executives for the day after tomorrow.
Award-winning British journalist Georgie Frost interviews the leading thinkers and doers at BCG on the trends, developments, and ideas that will shape and disrupt the future. Topics range from global warming, COVID-19, business resilience, and social inequity to the influence of digital technology on everything. This is not your typical business strategy podcast.
Are companies looking for talent in all the wrong places? Only 10% of jobs are filled by internal lateral candidates. Companies need better ways to find internal candidates especially those who work in a different part of the organization or have latent skills, explain BCG's Nithya Vaduganathan and Gloat's Brian Hershey. Internal talent marketplaces, which are sort of dating apps matching employees to jobs, are one promising option for companies to pursue.
GEORGIE FROST: The competition for talent is nothing new, but in the era of the great resignation, finding, attracting, and retaining the best employees has gotten a whole lot harder. Employers are now not only needing to compete with other businesses, but with the desire for a whole new way of working. But could the best talent be closer than you think, and could technology help you find it? I'm Georgie Frost, and this is The So What from BCG.
NITHYA VADUGANATHAN: Given that over 50% of people today are actively looking to leave, the chances are that if you don't help them actively find a career progression within your organization, they're going to leave anyway.
GEORGIE: Today, I'm talking to Nithya Vaduganathan, Managing Director and Partner at BCG, and a Fellow in the BCG Henderson Institute, researching Creating Talent Advantage. Also alongside Nithya is Brian Hershey, an expert in Talent Mobility and Management, and Director of Strategic Initiatives at Gloat, an external partner of BCG.
NITHYA: On one hand, there's over 11 million job openings in the US today, yet I see nearly 6 million people are unemployed. And because of the great resignation and changing preferences amidst COVID, more than half of Americans plan to look for a new job or are actively looking for a new job. So when you put all of that together, we're really in a meaningful supply-demand mismatch in the labor market, in addition to having high turnover.
GEORGIE: Brian, how do you see the changing working landscape? Is this something that is likely to be permanent, or with inflation running high across many parts of the globe, rates rising, etc., will people be perhaps less keen to leave their roles, or come back to the workplace, and we'll actually see us revert back to the traditional style?
BRIAN HERSHEY: Yeah, I mean I think right now, there's no question that we're entering a new world of work altogether. And I think what we've seen is that there's sort of a quiet revolution happening in the way that enterprises are really managing their workforces, utilizing their talent, and enabling careers for their people, because they have to. We see companies doing really incredible things like looking one level deeper at the skills and aspirations of employees to make smarter decisions about how to allocate the workforce, how to respond to changes in the market at speed, and also how to give employees more agency in their careers, and create a more equitable environment for people to grow and develop.
GEORGIE: So much of this is about, as I said, finding, attracting, but also retaining the best employees. But let's go to firstly, the looking for this talent, where should, Nithya, companies be looking? Where are these hidden pools?
NITHYA: Yeah, I would say to Brian's point of the quiet revolution, one of the solutions I'm most excited about is really looking beyond your floor. More than 60% of people who are leaving their jobs in the past year said one of the top reasons was because they didn't see career advancement prospects, yet only 10% of job opportunities today are actually filled by internal lateral hires. That's a pretty big gap. And you start to say, "Well, what are folks really doing to get at this?"
Unilever is one I'm pretty excited about. They've used a much more strategic approach to unlock internal talent and help people move laterally within the company. They've unlocked over a million hours of capacity, they've moved over 9,000 people. And what's really exciting is that many of the projects that people are getting to do are cross-functional, cross-geography. I'm sure, Brian, you can add a lot of examples on this, right? And 60% of opportunities are going to women. So it's not only a win for a company in their case, right, helping fill roles that were left sort of open, but it's also helping individuals find new prospects and help develop their skills. So to me, that's a really exciting one in terms of a win-win.
GEORGIE: I want to get some examples from Brian, but I just want to find out why you think, Nithya, that figure is so low, just 10%?
NITHYA: Yeah, I think part of it is many sort of organizations and managers, it's sort of a natural behavior to want to hoard your talent or hold on to people, especially those who are really good. But given that over 50% of people today are actively looking to leave, the chances are that if you don't help them actively find a career progression within your organization, they're going to leave anyway. I'm a big believer in that folks do boomerang if you play the long game on people, and if you actually support and develop them in helping them achieve their aspirations and develop new skills. They may actually come back to you or help you attract other talent over time.
GEORGIE: Do you think, Brian, that in companies, especially larger ones, that they can act almost in silos?
BRIAN: Yeah, absolutely. I think really the way we've built our organizations for the last 100 years, it's sort of what we see as a system of people in boxes. You're hired into a certain role in a company, you're expected to contribute a certain set of skills and capabilities in a certain place in the business, doing a certain set of tasks, usually with a specific team, laddering up to executive leadership.
What's missing in that equation is there's no real mechanism to actually look at the skills and capabilities we have in these boxes. You know, "O.K., this is someone who works for me as a product manager, but what did they do before they came to my company?" Folks who are passionate about graphic design, and maybe are doing audio engineering in their free time, maybe speak languages we don't know about. How can we actually tap into the talent we have and bring it to where it's needed in the business in near real time to solve real business challenges?
We've made it exceptionally difficult I think for an employee to find their next career opportunity inside of their organization. And so we're trying to really break down those walls and silos in the organization. It's more than the technology that comes into play to make that actually happen, there's a real mindset shift that has to happen in the way that leaders think about the workforce and about utilizing human capital to make our businesses successful.
GEORGIE: It's hard though, Nithya, I'm just listening to Brian there, like if I'm a manager, and I've got a great team, and I know that there's a skill shortage out there, I am not going to want to let any of my staff go off, even within the same company.
NITHYA: That's right. I mean, it can't all be just on the manager, right? I think the manager mindset is an important part of this, but I think if we look at what some leading companies are doing, they're starting to really change the rules I would say at the company level as well.
I look at Seagate as an example of an organization that has shifted to say, look, when we have open roles, we really want our leaders, our managers, to look internally first to try to fill those gaps. Look beyond just the folks, the boxes, that report up to you, and if there's a 75 or 80% skills match into a role, look, that's good enough. And by the way, we're innovating on our learning and development solutions and offerings, so we can actually help individuals sort of bridge that gap. So when I look at examples like that, that gets me quite excited about not only breaking down silos, but sort of putting in place more of these enabling mechanisms so it's not just the onus on an individual employee or an individual manager.
GEORGIE: Brian, where does technology fit in here?
BRIAN: Yeah, so using an internal talent marketplace and opening up talent in the organization can give a manager super powers. Unilever is one example Nithya mentioned, there are others, I mean Schneider Electric, and Novartis, MasterCard. There are dozens of organizations operating this way at this point.
Unilever actually was able to staff 17 experts in their company from different geographies to nine different projects, they were able to do the actual staffing of that in about a week, and then they were able to actually not just launch those projects, but complete those projects in 26 weeks. And by the way, this is all the innovative kind of work that's really going to carry the business forward, was able to do that at speed. That's really a game changer.
GEORGIE: How did they manage to do that so successfully?
BRIAN: O.K., so let me paint a little picture for you of what a talent marketplace looks like inside of one of these companies. So imagine a senior leader in a business announcing to the entire workforce that they're reinventing the way that they work, they're reinventing the way that you as an individual can build your career inside of a company. Every employee will be invited to come into this platform and create a profile, right? So, upload your LinkedIn resume, give us a copy of your, PDF of your CV, and then tell us a little bit about what you want to do in the future. What are you aspiring to, what do you want to develop, what roles would you like to learn more about? And using all of this data, our platform is then going to be able to look at all of the open roles, projects that managers are posting on our platform, mentors, learning opportunities, and actually match employees intelligently to these opportunities so that they align with their capabilities and also align with their interests. For leadership, keep in mind this also translates to business results.
GEORGIE: I think I heard Gloat described as "Tinder for talent" or "Tinder for jobs." I've heard of some dodgy Tinder dates, I hope it goes more successful... But is that about fair, is that sort of the idea?
BRIAN: Yes, we've been called a Tinder-like app for enterprise before. There's some parallel there. So when you think about how it actually looks for an employee to find these opportunities, we're making it really simple and we're making it kind of a consumer-grade experience, like the way you would find a movie on Netflix, or a product on Amazon, or in this example your next date. You want to be able to quickly browse through all the opportunities that are relevant and give a quick thumbs up or thumbs down. Am I interested, am I not interested? We know that users love it, they don't want to fill out complicated applications and screening questions. They want to see the opportunities, they want to tell us what they're interested in, and all of that feedback we get from employees also gives us really great data about how to actually surface opportunities for every employee in an organization that are relevant to their skills and their interests.
GEORGIE: Nithya, like I suppose dating in this day and age, it feels like there's a tech solution for everything. But it's not all about the technology, is it?
NITHYA: No, it's not. I think there's a lot of aspects of what this kind of marketplace can do that's very exciting, that's different from the old way of... You know, you ask me, "Why is that 10% so low?" It's because in the prior world, if people want to move laterally, it's because an individual might know someone and if they have a supportive manager, right? But imagine this new world where opportunities are more transparent to everybody. Bias-forming parameters are actually removed, so that increases the odds for folks who may be a little bit shyer to try to approach something that might be out of their quote-unquote "wheelhouse."
This is where the engines can actually proactively suggest things based on their skills and say, "Hey look, have you considered X, Y, and Z?" And then, if you couple that with leaders that are saying, "Look, we're taking a more expansive sort of approach. Given talent is such an issue, we really need to not only be able to have innovative ways to bring in talent, but we have to be much more deliberate and thoughtful in how we retain talent. Here's a new aspect of our employee value proposition, and we're actually going to reward managers who help their talent sort of find new opportunities."
And you start to then see the move to this not just being one or two people doing it, but sort of as an organization, it's a totally different mindset. I think the other aspects are can you actually integrate some of this mobility into some of your other talent practices, right, so it's not just the standalone aspect? You know, a manager saying, "Okay, let me give you feedback on your performance and your role." There's also a conversation about, "Hey, are there other potential roles within the organization?" "Are there new skills you want to develop, how can I help you?" And managers are being held accountable to doing that with their employees. Yes, the technology is an enabler, but that broader sort of operating model is changing to create more of, I would say, the groundswell to scale this kind of innovation.
GEORGIE: You spoke about a mindset, a culture, lots of different things that you can do alongside the technology, and a lot of it does seem to be changing a bit of the mindset around it. Where do you begin as a company? What sort of tools do you start to implement, what sort of attitudes do you begin to have, I suppose?
NITHYA: Yeah. I mean, you can start small to try to test this. I would say more permanent job transfers might be sort of further off for someone to start with, but why not start with projects or almost creating an internal gig economy where employees have the chance to dabble, try something new? It can help with retention. But managers don't let need to let go of their people sort of overnight, so it's a way to kind of dribble and try that. And then I would say it's starting to kind of move in this direction of, "Can we actually rewire the way we do things like performance reviews, or how we fill open roles?" Right, like what Seagate's doing.
BRIAN: It's never a good time to do any kind of change in a large enterprise environment. There's always a lot of complexity. We kind of say, "You need to spark the change," and, "You need to be the spark of change." And we've seen HR teams who have been incredibly empowered in the last few years, especially as organizations have really relied on HR leaders to make it through all of this change, actually coming forward and saying, "We need to change the way we work, and we need to implement mechanisms in our business and build muscle around being more agile and adaptive."
It goes far beyond HR to C-level leadership who understand that in this environment, not just how fast your business needs to move, but also that you really need to make changes to hold onto your people, and to take care of your people, and develop your next generation of leadership, and have a sustainable approach to your human capital strategy.
And increasingly, I think what we're seeing is that if your business doesn't have this capability to draw on talent inside your inventory of skills and capabilities, bring it to real business problems, get projects launched faster, bring products to market, get there before your competitors, enable fulfilling careers for your people, your business is at a serious disadvantage in this world of work. So what started as an HR initiative, "This is good for our people, this can help us develop skills," has translated into a real business strategy to staying agile and adaptive in today's world of work.
GEORGIE: Nithya, I do want to ask about the dangers of too much. I mean 10% seems very low, but I'm wondering if there's an ideal number of internal hires you would like to have. And I sort think there about institutionalization, you know, there's often benefit to having someone come from the outside with different experience that can bring a different fresher approach to things.
NITHYA: Yeah, I mean I don't think with the level of job openings that exist in most organizations, with the level of new skills, with the changing half-life of skills that organizations need, I don't think we're at risk of filling every single spot internally. This is sort how do we... When 60% of people are leaving because they can't find career opportunities and only 10% are filled internally, we could narrow that gap a little bit, but there's still going to be a lot of room and need for external hires.
I think the other aspect of this though is in driving more of this internal mobility. We're seeing opportunities for more cross-functional teaming. So while it may seem slightly counterintuitive at first, it actually is driving more innovation because it's a way of bringing folks with different experiences and backgrounds that otherwise wouldn't have found each other to kind now come together to solve problems, right? So, even that in itself is an unlock on innovation, which is quite exciting.
GEORGIE: We've spoken about hidden talents, and the main focus of this podcast was of course about internal hires, but just briefly, Nithya, with all your research, where else can we look?
NITHYA: Yeah. Thank you, Georgie. A couple other sort of, I would say innovative solutions on talent advantage that get me quite excited. So, one would be just how do we redesign the actual work that needs to get done, and how does that help us break apart what I call skill unicorns?
I think another one that gets me really excited is also this idea of screening in, not out. Many organizations quickly go to more easily identifiable criteria that might be things like degrees, or time you might have in a role, as key requirements to get a job. The reality is that actually filters out a lot of really good candidates. And what we're seeing is that companies like IBM have actually said, "Look, in half of our US job listings, we've removed that degree requirement," and that's helped them widen the talent pool in terms of qualified talent pool.
And the reality is, I would say, is there an opportunity to get beyond these easily identifiable criteria and actually look deeper to try to understand what actually makes people successful in a job? And maybe it's not that degree, but it's actually have they had experience working on a team? Let's look at the success of projects they've worked on, which might actually be much closer to helping you identify good talent.
GEORGIE: Anything you would add to that, Brian?
BRIAN: Yeah, I mean we see companies looking to alumni of their organizations, people who know how the organization works, and even some of the people they've been working with already. We see folks looking into the broader workforce ecosystems out there. So, not just necessarily the broader labor market for full-time roles, but also the contingent workforce.
You know, is there a full role requirement here, or can we actually, as Nithya pointed out, look at the work that needs to be done, kind of break that apart into sort tasks, and staff things up that way?
We've actually had at one of our financial services organizations and also one of our manufacturing customers, we saw the same thing happen, which was in this case a woman leaving on parental leave. Typically the MO for the business was to find a temporary worker to come in and fill that gap. Instead, what both of these organizations were able to do was look at this individual's role, break it down into constituent projects, they posted those to their internal marketplace, and sure enough there were employees internally that had those capabilities, had the capacity, and more importantly had the interest in doing that type of work two hours a week. That kind of thing gets us really excited.
GEORGIE: It sounds cool, it sounds exciting, it sounds a little bit messy, and a little bit scary. But Nithya, I mean Brian outlined earlier what would happen if companies don't start being more flexible and thinking differently about the world of work. What do you think will happen if companies don't try to be a bit more creative, a bit messy even?
NITHYA: I don't think folks have a choice not to do something here, right? So if they don't change and look to innovative solutions, embrace new, whether it's the technology or broader operating model changes, I fear they're going to get behind in terms of their ability to get their services, or products, and offerings, to market at speed because they lack the talent to do so, and they're unable to... Sort of combination of bringing in enough talent, but then I think even more importantly sort of in this context of the great resignation that we're in, being able to retain that talent.
GEORGIE: Thank you so much, Nithya and Brian, and to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at TheSoWhat@bcg.com. And if you like this podcast, why not hit Subscribe and leave a rating wherever you found us? It helps other people find us too.
Georgie Frost is an award-winning freelance finance broadcaster and journalist. She began her career as a sports journalist at the Guardian Media Group before hosting sports shows on BBC Radio. In 2014, she created a daily finance-based talk radio show on Share Radio, winning honors as the financial broadcaster of the year and as one of the top five best new presenters in the UK at the APA Awards. She has written for the Financial Times, the Sunday Times, and the Daily Mail and appeared as a sports and financial commentator in national newspapers as well as on ITV, Sky Sports Mix, and BBC One. She has written and hosted the Daily Mail’s “This is Money” podcast for the past five years.
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GEORGIE FROST: Digitally transforming your company is a no-brainer. The rewards are immense. Fail to do it and you risk becoming uncompetitive and disappearing altogether, but many businesses are simply failing in their efforts. So what is the secret to a successful digital transformation? I'm Georgie Frost and this is the So What from BCG.
PATRICK FORTH: There are six things that a company needs to do that will flip those odds from 30% success rate, to over 80% success rate. And only one of those is a technology-related issue.
GEORGIE: Today, I'm talking to Patrick Forth, senior partner at BCG and expert in digital transformation.
PATRICK: I think firstly, we've got to understand how important it is to digitally transform. It's a real imperative. It really is impossible to manage for productivity, a good customer experience, to leverage data and analyze user advanced analytics, and then to think about growth from innovation. So, those are the reasons why it's an imperative for every company, from a bank to an airline to a mining company. The problem, and why the 70% are failing, is because these are new muscles for organizations.
Organizations tend to be good at delivering the past business model of their core business. And they're not necessarily very good at building new digital capabilities. Most companies, I think, figured out during COVID how to support remote working, but that's a very, very narrow scope for digital. What I'm talking about is the ability to really impact a company's strategy. So, to fundamentally change the customer experience, the way customers interact with the company in digital channels, but also in physical channels as well.
Really, what I'm talking about is a fundamental re-skilling of organizations in a way that creates value for the company, by creating value for their customers. And it is fundamentally what is going to underpin competitive advantage in the future.
GEORGIE: Is the problem that the will is there, it's just the execution? Or is there a perhaps an ignorance of what benefits digital transformation can bring or perhaps even fear that we don't do that as a company? That it will change our business model if we have to do that.
GEORGIE: Is it a question of companies don't want to change, or that they do, they just don't know how?
PATRICK: Yeah, look it's really interesting. I think when you think us as human beings, leaders of many companies, haven't lived through a digital world and don't have digital experience, perhaps on the board or in the executive team, and therefore all of their received learning and experience comes from a largely pre-digital world. And therefore it is often the inability of leaders to really, really understand what technology can provide and how to make it happen.
But that's a soft answer. The hard answer is, we've done a lot of analysis on exactly how to make these digital transformations successful. And it turns out that there are six things that a company needs to do, that will flip those odds from 30% success rate to over 80% success rate. And they are things like making sure that your strategy is really aligned to your digital initiatives. They are things like making sure your leadership is genuinely committed down through to the middle management, which is where a lot of important things happen in organizations. It's about making sure you have enough digital talent in your organization. It's about making sure that you have agile governance so that you can make quick decisions, escalate, and address roadblocks very early. It's about making sure that you're measuring the right things and that you have one source of truth.
And then lastly, there's only one that's about technology, which is making sure that you have a good technology architecture and data architecture, which suits the business needs. So, interestingly, there are only six things to worry about and only one of those is a technology-related issue. And so what we spent a lot of time doing is figuring out a sort of pass/fail scorecard on each of those six so that we can get to a very granular agenda of how you configure your organization for success.
GEORGIE: Forgive me. I sound negative when I say this, you said taking the success rate from 30 to 80%, why can't you get it to 100%? I'm just wondering if there are some organizations, companies that will never get this right?
PATRICK: Well, that's the challenge. Those that don't get it right, are going to find it much, much harder to manage their customer expectations, to manage their productivity, to manage growth. And those are all the things that drive shareholder value creation. And so increasingly they will become less and less competitive. And I think executives really understand that, which is why I think the executive world understands there's a race on here. And if you can get to be one of the successful ones, at 80% and above, you can then unlock a really exciting agenda, which is frankly, not available to those who have not built those basic digital capabilities.
GEORGIE: In terms of the more positive, the 30% that are currently getting it right, what are they doing? Give me examples.
PATRICK: Yeah, no, it's interesting. I mean, I talk about a 101 agenda and a 102 agenda. So, the 101 agenda to get right is about fixing the basics. I call it digital reengineering. So, it is making sure that your customer experience across all channels is good. Your operations are efficient, have high degrees of straight-through processing, that your data is managed in an effective way. This is sort of fixing the basics of the core business. They're complex, because they often involve a lot of process changes—people changes as well as technology changes.
The examples of the 102 agenda, though, are much more exciting. And these are the companies we refer to, as digital incumbents. So these are companies that have delivered a successful digital transformation and are starting to pivot beyond just fixing the basics, toward things like innovation. Innovation in the core business and innovation beyond the core into adjacencies.
So for example, you might see a telco that is using personalization in such a way that they know who you are and they know enough about you to suggest that you might be interested in an offer for a media value-added service. These are things that are really happening now, but what we're learning is that the companies that haven't mastered the 101 fix-the-basics agenda really can't address the 102 agenda.
And the 102 agenda is really where the value lies because if you look at medium-term, shareholder value creation, something like 60 to 80% of that is driven by revenue growth as opposed to margins and multiples. And so if you want to really get at the sorts of the shareholder value creation, that you're seeing digital natives achieve, you have to get to that 102 agenda. And that's what's exciting because we are seeing a handful of companies that are starting to realize this and are starting to focus on it.
GEORGIE: Can you ever, if you're a big legacy company, or you're a digital incumbent, keep apace with the digital natives and if you can't beat them, can you just buy them?
PATRICK: So good questions. First of all, we're...the old original internet paradigm, if you will, was that the digital natives were quick and agile and the incumbents were full of both legacy architecture and legacy behaviors. And therefore the dinosaurs were going to be killed by the nimble. That is true, and if the incumbents don't react, that will certainly be true, but what we are seeing and we have real hard evidence of this now, is that something like a third of the incumbents are really moving and are really starting to build digital capabilities that overlap with and rival those of digital natives.
And by the way, it's not plain sailing for digital natives because as they age, the risks of them building legacy technology and legacy behaviors increases as well. And so, there's a real overlap between the leading edge of incumbents who are focused on this and the digital natives. And if you have an overlap of those capabilities, and then you recognize the other structural advantages of incumbents, often being scale, customer knowledge, regulatory knowledge, distribution channels, all of these things, really give them an edge over the digital natives. I'm pretty bullish about a relatively small number of incumbents who get this right. I think there's a very exciting future for them.
GEORGIE: I do think that legacy companies as well, ones with the big names, the loyal customer bases, are already at a great advantage, in terms of branding, but also capital, that actually, they naturally should be able to surpass digital natives. What is the thing that would be stopping them?
PATRICK: Well, it's a long and complex journey. Many companies who are at the high-performing end of the incumbents have been on this journey for five or ten years and it does require real tenacity and persistence, from the executive and the board, to build these capabilities. You don't put workload in the cloud overnight. You don't create a culture of innovation, in which you test and learn and fail fast and move on, overnight.
Incumbents tend to be places where you like to minimize risk. Whereas what we're talking about here is companies that are prepared to experiment and fail pretty often in the pursuit of the innovation that takes hold. And so, these are big, big changes in organizations and they take many years, but the thing we're finding is you can create value in year one and in year two. And so you build the confidence of the organization and you're actually creating value. So, it's not like you have to invest now, for a return in ten years time.
And I think that's one of the challenges of companies, is to make sure that you're actually generating value as you go, and building the capabilities and extracting the value from those capabilities as you then focus on the next wave or the next dimension of this.
GEORGIE: I hear what you're saying about the benefits of changing into a company that can try something, innovate, risk failure. But I guess while the rewards are great in becoming a digital incumbent, the risks if you are a traditional company, with that great brand, that customer loyalty, the trust, the risks of getting things wrong can be enormous now.
PATRICK: Yes, and this is the dilemma for executives, because sticking to the knitting is not an answer either. Because what you'll see is you will be disrupted. People will be attacking your value pools. You can cut costs in the classical way for a certain amount of time, but that then becomes not a long-term strategy. So for me, it's inconceivable to have a long-term strategy that doesn't include some element of the digital agenda that I've been describing. Companies who are perhaps perceived of as being the least digital-- energy companies, utility companies, the public sector, all of these entities are saying, we have to do this. And so, I think executives are actually past your issue, but they're really focused on what you talked about earlier, which is, "How do I minimize the risk of failure and how do I get some runs on the board sooner rather than later?"
GEORGIE: The steps you need to take if you are a legacy company and you want to become a digital incumbent. So you're at the start of your journey. Where do you begin?
PATRICK: Everything starts with having a strategy and having a direction and having a vision and having a purpose. And so you then extract out of that: what is the digital agenda that will enable that strategy? So, it may be that your customer experience is poor and you need to focus on that, which for many companies is the starting point. It may also be that you have poor productivity and you've taken out functional costs, but you've not taken out end-to-end costs and really thought about how technology can enable that and advanced analytics can enable that. And so, you need to create a portfolio of initiatives that are digital, that reinforce the strategy. You can't have those two disconnected. That's the first thing.
The second thing is, you then need your leadership to be totally aligned. Because very often what you have is a technology agenda that is somewhat disconnected from the business agenda. And you hear very often business people saying, "If only we had the technology to be able to do something," and then you go to the technology group and you hear them saying, "Gee, I'm under a lot of cost pressure. I've got to deliver against cyber security. I've got to deliver productivity. I've got to keep the lights on for a bunch of aging systems. I don't have the bandwidth to start investing in digital."
So these are real issues that the leadership needs to deal with. And when I say leadership, it's really important that it gets down to middle management, because it's middle management who drives these initiatives and need to believe in them. Quite often, middle management again has the experience of the past and they project that into the future. And that's no way for success. The next part of the playbook is around a really, I call it agile governance. So, the way of managing a transformation, that is persistent and that is tenacious, and that is responsive.
Often companies get the initiative leadership wrong, or they get the cadence wrong, or they get the reporting wrong, but that's O.K., everyone fails. But, the governance is about saying, right what will we change? What will we do better? What will we do differently? How do we surface the big issues faster? How do we get the decisions made at the right level in my organization? And so, that's a muscle that needs to be built over time.
The fifth one is about measuring. You need to be real clear about what you're measuring. So, if it is a customer experience improvement, let's measure that at a very granular level and show that you're having an impact. If it's a return on a digital marketing investment, let's make sure we know how to measure that. If it's a return on straight-through processing, let's make sure we really understand how to measure that and there's one source of truth.
And then the last one is technology, and the really important thing about technology is that it be business-led. You can then design behind that, the things that technologists are excited about, things like cloud-based, things like modularity, interoperability, and opening up each of the platforms through open interfaces, so that you are not locked into, proprietary single-product technology stacks, which don't talk to each other, which is usually the starting point of most large complex organizations.
GEORGIE: I just wanted to ask you about the idea that, this isn't just a final destination. You've laid out what you need to do, to become a digital incumbent but technology's changing all the time. You need to keep apace. So, this is an ongoing journey, isn't it?
PATRICK: Yeah, I'm really glad you asked me that because there is sometimes a feeling that if a company does a digital transformation you go from an analog state, to a digital state and that's a steady state and then we can all relax, right? That is so not the case. And it's very exciting. So, I mentioned the 101 and the 102 agenda. 101 being fix the basics. 102 is about then starting to focus on innovation and growth and the sorts of things that digital natives are doing, which explain their high shareholder value creation.
But if you think for a minute, what's coming down the pipe in terms of new technology. We have the metaverse. We have web 3.0. We have things like decentralized finance. We have blockchain, we have things like synthetic biology. We have genomics. We have quantum computing and quantum technology. There are waves and waves of new technology, that are going to be available, but they're only going to be available for the companies, who have built the capabilities we've been talking about. And so, in a way if you don't get on this train very quickly and succeed, you are mortgaging the future of your company.
GEORGIE: Patrick, thank you so much. And thank you for listening. We'd love to know your thoughts. To get in contact, leave us a message at TheSoWhat@bcg.com and if you like this podcast, why not hit subscribe and leave a rating, wherever you found us? It helps other people find us too.
GEORGIE FROST: You want the best talent for your company, but where are you looking? Possibly not far enough. Reducing the obstacles to global migration and building bridges to opportunity for talented people regardless of where they were born and live might be a moral cause, but it also has a strong business case too. I'm Georgie Frost, and this is The So What from BCG.
JOHANN HARNOSS: The biggest cost, which maybe doesn't necessarily always directly show up in the accounting books, is the opportunity cost of not having these talents.
GEORGIE FROST: Today, I'm talking to Johann Harnoss, Expert Partner of Innovation at BCG and a fellow at the BCG Henderson Institute. Johann is also the founder and CEO of a social startup, the Imagine Foundation, dedicated to advancing global equality of opportunity.
JOHANN HARNOSS: What I truly believe in is that talent is universal yet opportunity is not. And I see that every day in the work that we do at Imagine Foundation, where we help folks out of Afghanistan, Syria, Pakistan, and many other countries in the Middle East find opportunity that they sometimes struggle to get within their own countries in Europe.
This is actually backed by a frankly shocking stat, and that is, if you take two human beings on this planet Earth randomly and ask yourself, among all of the observable economic differences that you see between those two people, where do they come from these differences? Is it family, education? Is it social economic status? Yes, all of them play a part, but, ultimately, two thirds of all of these differences simply come from one fact or one question, where have you been born?
And that truly shows me and others that the world is still a very, very unfair place. And if we can give people the means, the tools, and the inspiration to find their own destiny, and that can mean also moving across physical borders, we can make the world a better place.
GEORGIE FROST: So we know that there's a moral case, but what about the business argument? How does movement of people in this way benefit companies and therefore society?
JOHANN HARNOSS: Yeah, migrants tend to not have just on average a net positive effects for the societies that they join but also, ultimately, for their origin countries. Migration isn't just something that benefits some and actually harms others, but it can be something that we can structure as a win-win or even triple win. In this situation today, lots of companies need workers, not just so-called highly skilled workers that can do IT jobs, but also many other workers that can help them execute their operational and growth plans. And so I think the talent angle is, frankly, the very obvious one.
What is really interesting and, I think, totally overlooked by now by most is these global talents, if we put them into teams together with us, they bring in cognitive diversity that together our teams will be more creative, and, ultimately, there's a clear innovation boost coming from that.
So I talked to actually a former director at WhatsApp, and she told me WhatsApp was designed since day one as a global product. In fact, actually WhatsApp had been much more popular in Europe and wide parts of Asia before it had become popular in the United States. She was part of a super globally diverse team, and that diversity truly helped them have more empathy for a very global target audience and ultimately build better products.
And nowadays we take for granted that WhatsApp is one of the very few global messenger services, but back then, when they started, there was actually lots of competition. For her and for WhatsApp apparently, that global diversity was truly one of the engines that they used in order to succeed.
GEORGIE FROST: When you're talking about migration, you're not just talking about, for example, and there's lots of examples here, say, within Europe or even from Australia to America. You're actually talking from completely new areas.
JOHANN HARNOSS: Indeed, and if you take that argument seriously that ultimately this is about cognitive diversity, then, in fact, it doesn't help much if most of your immigrants actually come from neighboring countries. Ideally, you would actually say that you would like to diversify the inflows of talents and migrants that you have so that you really truly maximize the cognitive variety embodied in those people.
GEORGIE FROST: I can imagine that it's fairly easy, not necessarily neighboring countries. I mentioned there from Australia to America. I don't think they're next door to each other. But how difficult is it? And I've looked at the Imagine Foundation. I mean, you're talking about areas like Syria or Afghanistan. I mean, there's all sorts of structural, cultural boundaries to cross here.
JOHANN HARNOSS: Yeah, indeed. So, yeah, what is the Imagine Foundation? So we started that project nearly four years ago now. Initially, it was just a very small team here in Berlin, and, today, we're more than 150 volunteers dedicated to this one task, and that is to make it easier for folks predominantly from the Middle East to find new jobs and ultimately a new life in Europe.
What we found out is that, particularly for immigrants or aspiring immigrants to Europe and for folks who have acquired some university level education, it's actually not the visa bureaucracy, so to speak, that is actually the true hurdle, but it's access to jobs and cultural capital. And, as a result, we set up a fully digital remote coaching program, which basically helps aspiring migrants and talents assess their own strengths and weaknesses.
We get feedback on CV and on online presence, on LinkedIn and on other forums, and, ultimately, we make it much more likely that, through our support and through a jobs app that we have and through many other digital technology enabled means, that they find a job here in Europe. And, with this job offer in hand, they can then much more easily actually get a EU Blue Card and move over.
GEORGIE FROST: Forgive me, but it sounds as though you're still judging talent on some of the more traditional metrics. So education, where has that education been? It's very difficult, even when you're employing people within your own country, to actually get a right fit for a job. But when you are trying to get talent from a completely different country, completely different context, that's quite hard to do, so you're perhaps more likely to fall back on those traditional metrics. So, how can we really expand the talent pool genuinely to get those talents, the hidden talents?
JOHANN HARNOSS: You are hitting the nail on the head. Even today, it's so hard for employers, even well-intending ones that would like to broaden their talent pools, to assess those, let's say, they're often called non-traditional candidates. These candidates often, in fact, actually start with a disadvantage. So I talked to a recruiter, and she said, "Johann, I do not want to actively discriminate "against folks from those origins, "but, nevertheless, I have to admit, "simply because it's much more difficult "for me to assess their backgrounds and their skills, "these people," and it was quite brutal, I have to admit, "they start with minus 60 points with me "compared to other ones."
And that really shocked me, but, on the other hand, it really showed me the value of our program here at Imagine, simply because what we do through the coaching and the training is we vet people. They graduate as fellows. They receive a letter of recommendation from us that sort of certifies people's technical ability when it comes to certain digital challenges, how good is their English, and many other things. This is just the start.
And what I'm personally getting very excited about nowadays is that, because we have all of this data on these people, we can then much more accurately also support companies and tell them, based on these, let's say, successful talents who have come over, we can use those fingerprints of data, so to speak, to actually help you find more of these originally underrepresented folks.
GEORGIE FROST: Again, the moral case is there, but the business argument. If you're a company, how do you go global unless through your social startup it seems? 'Cause it's a lot of work involved in that, and I haven't even touched on language barriers.
JOHANN HARNOSS: Sure, so the good news is truly, while I'm very proud of what we've achieved at Imagine, it's clearly not the only way to access these talent pools. I mean, frankly, if you're looking for developers from Syrian background or want to give a hand and a chance to folks out of Afghanistan, there are not that many organizations that do that, but, increasingly, and this is well known, the world has become flat. There are lots of companies already doing active sourcing, as they call it, in specific countries.
And so you can meet interested candidates very easily through LinkedIn. So let me tell you how Douglas, increasingly not just a beauty retailer but also an e-commerce organization here out of Germany, how they did this for them. Initially, through us, but now also independently, what they're doing is they have fully digitalized their recruiting processes. So they do not require talent to show up physically for a final interview. And then, they also discovered that, in order to attract the best and maybe also retain them, you want to have better relocation packages.
So they introduced, and it wasn't easy for them originally, but they introduced a modest relocation support package, and that ultimately helped them not just attract but also retain the talents that they were looking for. And, ultimately, it helped them find talent from the Middle East, in this case from Pakistan, but also other countries, and they joined their digital teams. And, as you can imagine, as a beauty retailer in the last two years of COVID, digital really rose to the forefront. And, as I'm hearing, access to these talents has greatly helped them actually deliver on their pretty ambitious digital transformation roadmap.
GEORGIE FROST: We have great technology. Why do we need to move across physical borders?
JOHANN HARNOSS: Great question, and actually one that obviously we've also asked ourselves in the last two years. We will definitely see much more remote work and globally remote work, that's for sure, obviously coming from a very small base but clearly growing very, very fast. But, interestingly, it's not either/or. People get hired fully remotely, then they start working from their origin countries just for a couple of weeks.
Frankly, sometimes it's just necessary due to visa delays or just some operational challenges. But then, after a couple of weeks, it's not just the talents who would like to move mostly, also the companies. The classical operating model now these days is we give people two days, three days work from home. However, we also want to see them in the office, and that typically means that companies still do relocation, frankly, by my own estimates, more than ever, but they require people to move more closely to the headquarters or to the units where they're basically working at.
GEORGIE FROST: It sounds very expensive.
JOHANN HARNOSS: Let's think this through. So, in practice, the biggest cost, which maybe doesn't necessarily always directly show up in the accounting books, is the opportunity cost of not having these talents. Douglas was able to deliver on their e-commerce ambitions, roll out a platform that they didn't have before, in part thanks to the talents that they were able to get also on global talent markets.
GEORGIE FROST: Could you prove that they couldn't have done that without going global? Were the talents not available in Germany or surrounding countries in Europe?
JOHANN HARNOSS: Well, I mean, if you look at it simply empirically, then you see that they have done it, and for lots of good reasons and ultimately also equity, they're clearly paying these global talents the same as they're paying to the German ones. So there's not just some hidden advantage that they're leveraging when they're hiring global.
If you look at all available statistics for Europe, for UK, for the US, Canada, any country, then you see the typical vacancy rates. So, how many days do you have certain jobs open? In particular, for IT jobs, they're to be enormous. So there's clearly well established a huge talent scarcity, which ultimately means that certain companies, frankly, don't survive, and certainly that they don't grow as fast as they would like to. So that is the real cost. And, frankly, you got to weigh it against, let's say, relatively modest relocation costs, basically just a one-way airplane ticket.
We see companies paying maybe one or two, but, frankly, mostly the standard is one month initial rent. Now, look at visa and bureaucracy management costs. So they also have come down significantly, basically are quite manageable in particular when it comes to Europe, Canada, and still manageable for UK-based companies as well. Things are much harder for the US, for sure.
GEORGIE FROST: Why are they harder for the US for sure?
JOHANN HARNOSS: Well, the US is, as always, fascinating. So, on the one hand, if you look at the composition of their population, they're definitely an immigrant country, maybe the first original immigrant country, but what you read in the headlines is largely true. There are huge administrative issues when it comes to the Green Card process.
The US has a huge range, even confusing jungle of skilled visa categories. Many of these categories tend to be volume capped. There's a lottery. There's a high degree of unpredictability. Lots of lawyers involved as a result. Easily lots of costs involved. And, hence, trying to relocate a global talent that has not been working for your company is just prohibitively complex and expensive.
GEORGIE FROST: What will need to be done to make that much easier?
JOHANN HARNOSS: Lots of wise minds are thinking about this every day and, frankly, just spending a fraction of my time on the US. But, to some extent what the UK is doing right now with visa that are linked to universities, that can be an inspiration. I would certainly not suggest to just copy/paste what is currently happening more broadly on the immigration and visa front in the UK, but, nevertheless, it would be very a easy fix to simply say, we, as the US, we already have lots of international students coming into our world-renowned universities.
Let's define certain programs, such that certain categories of these international students, maybe in more digital or technology fields, can stay under certain conditions. I think that would be very easy, could be easily limited to so-called highly skilled talents. Let me make a side note. Not because I would particularly care about highly skilled talents. I think, from a human and moral case, we should care about the contributions of all human beings that they're able to make. But, nevertheless, from a political point of view, I think what I'm just outlining would be quite easily sellable in theory, but let's admit it hasn't happened yet. And so I think the topic is extremely polarized in the US right now to the extent where I, as an amateur political observer of the United States, I'm also skeptical that there can be any agreement between the two sides.
GEORGIE FROST: I'm wondering more broadly across the globe, not just the UK, not just Europe, not just the US, but across the globe. We are witnessing perhaps nations becoming more insular, certainly in this current climate. Are we witnessing a reversing or indeed a reshaping of decades of what seems unrestrained globalization? You speak about the practical difficulties of bringing global talent over, but there's also political. You mentioned political difficulties in giving, quote unquote, local jobs to people from abroad.
JOHANN HARNOSS: So the topic itself in particular of the freer movement of people has enormous tailwinds, and they come simply from the fact that the younger generations tend to be generally much more liberal even than I am, much more inviting towards more individualistic lifestyle choices, and, ultimately, they're also much more friendly towards more open immigration policies.
It is not clear that what we're seeing right now on the political domain is entirely reflective of the preferences of today's voters on average and certainly of the younger generations. And you can see this over the last 50 years of very good long-run data for the United States, but that also tends to hold more broadly globally. So that is a massive tailwind.
Frankly, in these times of high inflation and low growth, our societies all need a certain boost, not just a boost of growth but one of new, fresh ideas and innovation. Again, immigration can help here. And then, finally, except for the US and China that are indeed sort of closing off to the global flow of talent, you actually see many other countries, Middle East in particular, Europe, you can argue also the UK, go the opposite direction.
And even countries traditionally seen as more closed, like Japan, are doing some intensive soul-searching and are certainly also slowly but surely opening up to foreign talent simply out of pure necessity.
GEORGIE FROST: What do you think the wider implications of what you're witnessing with this two-speed world, if we can call it that, will be?
JOHANN HARNOSS: Ah, that's a great question. Maybe one that we should explore in future research. The idea that the world is becoming ultimately also a more peaceful place through the exchange of goods and services and through freer flows of people, even though it has been challenged now, still has some merit.
Even if the US and China are making it harder and harder for so-called expat talent or people to move there permanently, I think it will be very, very important that these countries both independently remain open towards, let's say, temporary flows, student exchanges, and ultimately also tourism, if we take the very broad view, right? Migration is much more than just workers relocating permanently. If you accept that as a premise, that we are in a two-speed world and we will remain in it, then there's an enormous opportunity for the UK, for Europe, and for many other countries to catch up in a race for the best talents globally that traditionally have gone to the US and increasingly also to China in the last decade or so.
And if you think about these debates about the future of AI, artificial intelligence, about semiconductors, and many of these high stakes technologies, they require a lot of capital but also a lot of latent human knowledge and ingenuity. You know, it might seem pretty obvious to state that, but that knowledge isn't codified in books, or not just. It actually resides in people. And so, if the UK, Europe, Middle East, and many other Asian countries provide much better framework conditions for those folks to join them, then there's at least some hope that we can catch the pretty massive advantage that China and the US have in those domains.
GEORGIE FROST: We've focused on the positives, obviously for individuals, for companies, and for those countries where those companies are based, but I want to perhaps zoom out and look at the countries where these talents are coming from. Now, we've mentioned Syria. We've mentioned Afghanistan. There are, of course, others.
What does this do for those individual countries? Because presumably you are taking the best of the best out of we've mentioned two troubled countries. There's a worry about a brain drain. Does this do much for social mobility if you're just creaming off the top? Is there perhaps arguably a better way to do that? Look to move businesses to those countries instead.
JOHANN HARNOSS: Absolutely, I mean, helping talents move out of certain places into others is one solution but not the overall solution that those origin countries need. And while it's life-changing for those migrants, it, in the very short term, leaves those origin countries actually worse off, but very, very quickly, there are lots of, let's say, ripple effects that, taken together, and this is well established, actually lead those origin countries to be also net benefiters.
So first is basically those migrants send back cash. It's called remittances. This isn't just some trickling. This is actually a gigantic river. And if you add all of these remittance flows up together, they're much higher than the ODA, the Official Development Assistance, as it's called technically, all of these funds being sent from the so-called rich north to those so-called developing countries.
So that capital flow alone is hugely beneficial, and not just because it's coming to those origin countries, but actually very often those flows actually benefit women and girls' education more broadly because they go directly into the families and hence have very positive effects for so-called human capital acquisition in developing countries. This can be shown.
Then, second, if you have folks that have acquired some education, if you have them move out of a country, they actually act as success stories and examples that education can be worth it. And, again, this isn't just anecdotal. Other researchers have looked at it. And so there are, again, net effects, right? So, to make it in numbers, you see one person moving, there might be maybe two or three others being inspired to actually also acquire more education. Not all of them make it and not all of them ultimately move, and, as a result, you actually have a net increase in the human capital in these countries.
GEORGIE FROST: Earlier on in the podcast, you mentioned about WhatsApp. What does it mean to build a global product, apart from having a team from across the globe? And, therefore, could you give me a blueprint for a company finally to go global?
JOHANN HARNOSS: So, indeed, we have a blueprint. In fact, we have an entire C-level agenda for the topic. So, basically, two things to it. First, we looked at the stage of adoption, of this topic of global diversity and the thriving of global teams across lots of countries and also lots of industries. And what we found, not too surprisingly, is that there are many companies that still struggle with even making the first steps.
But obviously, and in particular in the startup scene, there are lots of companies for which everything that we're discussing here is basically yesterday's news. They're doing it since day one. What explains this gap? And I think there's a cultural gap and basically just an execution gap. The cultural gap basically means we see that companies that are led by executives who are open to this potential and, frankly, ultimately believe lots of the science that we see on this topic, that they also tend to lead companies that are more open to towards globally diverse talents. Ultimately, it starts with very hard-hitting questions on your own companies and corporate culture.
What's your fundamental belief? Is global diversity truly value-creating, or is it just, you know, the fad of the hour or something that you have to do in order to please certain stakeholder demographics? So that's more the cultural aspect that ultimately drives how much strategic importance you are giving to that topic. Because, let's admit it, there are many other things executives rightfully have to worry about, so why also take an active stance on that topic of global diversity?
We see that those companies that then actually see it as a lever to grow and a strategic one, that they then basically execute on a certain playbook that we've defined. And we differentiate between a talent play, there's an ecosystem play, there's an innovation play, and a purpose play ultimately. The talent play basically means, do you have fully digital recruiting and onboarding processes? If you don't have that, then, ultimately, you will fail right from the start. So there are, let's say, very practical process topics that, if you solve them, and, frankly, it is not too hard to solve for them, you can already make a difference when it comes to the talent side.
So, on the innovation side, what you obviously want to do is then, when you have the diversity, that you bring out the best in those people. Frankly, managing a globally diverse team is not easy. And so, very practically speaking, I've seen one pattern of success, and that is obviously you don't want to and maybe you don't need to start bringing global talent in everywhere in your company.
So, very intuitively speaking, you want to start where you see the biggest bang for the buck, clearly, in particular if you're just motivated by the business case. And so what we see is that companies first start with their digital or their innovation or R&D teams, so, basically, those teams where you truly see a huge payoff from the added creativity that these talents can bring.
And you can either do this by integrating them directly into your existing teams, or you form smaller digital hubs or innovation hubs or R&D hubs. And so you basically create a smaller environment that attracts those global talents, and, frankly, also lots of folks who speak English, speak it fluently, and would like to work together in these types of environments. And so you start small from that base, and once you're comfortable there, once you've seen the effects of it and the business case, then you can start slowly scaling throughout the organization.
GEORGIE FROST: Johann, thank you so much for your time and to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: Global health inequity is rising. Climate change, migration, and COVID have exacerbated longstanding problems, not just between countries, but within them. If the causes are manmade, the solutions must be, too. Business, including the global pharmaceutical industry, not only has a responsibility in promoting health equity, it has a big financial interest to do so as well. I'm Georgie Frost. This is The So What from BCG.
JOHANNA BENESTY: Health equity is not about charity anymore. It's not philanthropy, it's a necessity for us to continue to live the lives that we want to live. Just because our economies are so interconnected, we need all of the people to be able to fully live their life to their full potential to contribute to the economy.
GEORGIE: Today, I'm talking to Johanna Benesty, global sector lead at BCG for global health.
JOHANNA: So just to frame it, we're talking of inequities between countries like high-income countries, low-income countries. And also inequities between groups in a given country.
That's even for a, it's funny if you think of it, but the way we classify some of those diseases, we have a category that's called neglected tropical diseases. So it tells you a lot about the fact that some are neglected. So I can give you some examples of that complexity. When we talk about fragmentation, for instance, the first one. If you think of Africa. People often think of Africa as one big homogeneous market. But in fact, it's many different countries with many different regulations and different distributor networks and different health system structures and different languages.
And so if you want to address Africa, in fact, you really have to address 54 different countries and understand 54 different situations. And so that has a sort of transaction cost that you don't have when you address larger or more homogenous markets. The second is really the experience or the expertise because addressing those markets is quite different from the general markets like between the laboratory, where the product is conceived and the patient who will actually use the product, there are many, many steps needed that manufacturers, regulators, CMOs, distributors, etc., will have to work on to ensure the supply. That's one thing.
But there are also many, many steps that health care professionals, patients, implementers will have to work on and ensure so that there is demand for that product. So working with many actors on the supply side and many actors on the demand side. And that is a very specific expertise for those particular markets. That's why in the middle of this chain, you have international organizations helping.
The first one that comes to mind is Unitaid. What Unitaid does, because I think it's a good example of how to address these kind of challenges is that they identify innovative products that would help accelerate progress to some of the disease and the epidemics that they're tackling. Like tuberculosis, HIV, malaria. So they identify those innovations and they work with their partners to fund actions to remove those barriers to access one after the other.
And removing that means for instance, bringing the scientific evidence that you would need to write the right guidance. Forecast, developing forecast to encourage manufacturers, to set up the right manufacturing capacities; supporting the development of operational guidelines, to make sure that there will be implementation. It could be agreements with generic players, etc. And a number of things that are very diverse along this chain, just to name a few.
GEORGIE: But this is more than just access to medicine because you can put drugs into a country, but if you don't have the professionals there and the education to know how to use those, to implement those then, it's not useless, but you're not going to get the full benefit.
JOHANNA: Absolutely. So that's a super good point. So if you realize that for instance,
Let me take an example, simple one. If someone has HIV in a high-income setting, you would go to a specialist doctor that would look at what HIV type you have and define the exact cocktail drug that you need to better fit your specific disease and have the right treatment for you. If we were to do that in low resource settings, where we don't have the same ratio of health care professionals having 15 years of training in infectology for each individual, then the wait lines would be so long that you would never get the treatment.
So the thing that I mentioned before when I said like over 15 years, we've managed to put so many people on treatment on HIV, it was a combination of three things. It was working on the price and introducing generics. That's one. It was standardizing the treatment. So that in fact, in low resource settings, there is a standard first line course that you get. The treatment protocol has been simplified so that we could scale up more easily. So a health care professional will say, if you have that disease, then this is the treatment that you get immediately. You wouldn't have to be referred to a super specialized doctor.
And the third thing is the fixed-dose combination. It's all pills in one. Because that makes it much more convenient for the patient to take. So you see it's a change in the protocol, it's a change in the price and the full manufacturing setup, and it's a change in the product itself.
GEORGIE: How do you do that? How do you bake that into your design of a product? Who do you need to talk to? How do all the parts of this jigsaw need to fit together?
JOHANNA: It's clearly a part that is very difficult because you need to get close to the end users. Design thinking and all of those theories that we're using, you can apply that to pharma in a way. So who are the end users? The end users are going to be the patient. Are going to be the health care workers around that patient. The patient you have to take into account that we might be speaking of someone who has other conditions. Someone who is immunosuppressed for instance.
So think of who is going to use that product and make sure that you have the clinical trials and that you have a product that works for those specific groups. Then the other thing you need to think of is how is that person going to use the product? For instance, when we were doing focus groups in Uganda, people were telling us I'm not taking my medicines because I have to take them at noon. And it means I have to take them in front of my colleagues. If I do that, it means that I'm disclosing my status to people around me. And it's not something that I'm willing to do. I don't want to have that conversation.
You've had examples of people, of children, for instance, having to take drugs for multidrug resistant tuberculosis. A handful of pills that they have to swallow every morning. Well, kids don't swallow every morning handful of pills, that's just a nightmare. It doesn't happen. So you need this dissolvable formulations. So you need to fix those combinations. You need to rethink all of that to make sure that the people who need to take that product will take it.
So a number of things in the end-user perspective, then you also have the health care practitioner perspective because sometimes it's going to be a remote setting. It's going to be a mobile setting for instance. We've had that in high-income countries quite a lot that if you want to reach specific groups or populations, you can't be sitting in your super sophisticated lab and wait for people to come to you. It's actually better to be in the mobile clinic or something. But that means that the equipment that you need to conduct those tests have to be different.
Think of the COVID self-test that we have right now. It's much more convenient to be able to do it at home than to have to book an appointment to a lab or stand in the line in the lab.
GEORGIE: What's in it for every part? And let's start with a big global pharma company. What's in it for them to put money and investment into research and development, perhaps, into medicines that really a high-income country doesn't need?
JOHANNA: The people who don't have access to health medicines in the future are in new markets. People who don't have access to health products right now are a new market for those pharmaceutical companies. Now the question is how do you make that market a sustainable business model? And how do you make it profitable to the level of profit that you're willing to accept? Something like this.
I think a while ago, people were very much in the idea that access was a matter of charity with the philanthropy. And so the main actions that pharmaceutical companies would be willing to go for would be donations for instance, or trying to reduce the prices. And that would be the focus of what they would do. Experience from improving access in low- middle-income countries and around COVID has shown that it's not just that. There's much more that you can do. Why would you want to do it?
You've seen over Christmas, that people were panicked because there would be shortage of the products that they would want to buy for Christmas. Why that? Because of the disruptions in supply chain, Why that? Because in some parts of the world, people couldn't be at work the way that we expected them to be. And that's because they were sick and that because they didn't have access to the products that would help them to not be sick.
So just because of the level of interconnections between our economies, we're all in this together. And we have to all be super healthy and be able to live our healthy lives, to contribute to that economy. So that's a necessity for the lives that we want to live and for the sort of level of comfort that we are seeking for. If that was not an argument, a sufficient argument, I can say it's also an opportunity from a commercial standpoint. Because it's a new market, an additional market that that companies can extend.
And there is a lot of appetite from private sector, public sector, to understand where we're losing patients so that we can have actions that are triggered to really address those specific points. So is it because the diagnostic test was not available? Is it because the patients are too far from the center? Is it because the treatment was delayed? Is it because the treatment is so inconvenient that people don't adhere to it? With the data, you can start understanding that, and then you can address it specifically.
Whether it's going to be by commercial action, education action, changes in your product, changes in the regulatory space, a number of things, but that will help you unlock new markets in the end and expand access to health products for patients. So more patients being on the treatment and having access to the products they need.
GEORGIE: What role do public bodies, do governments, do global health care bodies have to play in all of this? Because it brings to mind the discussions around COVID and a fourth vaccine when there are countries in the world that haven't even received theirs. And you spoke about the fact that we are so interconnected, does the messaging need to be better, I guess, from governments and global bodies as to why it is so important to sort out health inequality?
JOHANNA: Yes, and I think the message is shifting from a question of fairness and fairness speaks to charity and philanthropy, to a question of really necessity.
So it's clear from an economic standpoint, it's a message that needs to be conveyed more and more strongly, in addition to the fairness message that is still very present. And that's why conversations are shifting. When you talk about health security now, it's shifting to ministries of finance, that economic sphere, and not just development agencies.
GEORGIE: You spoke about health inequity between countries, but I think it's fair to say that exists within countries and even within high-income countries. And that's, to my mind, been exposed by COVID having that disproportionately high impact on certain racial and ethnic groups, those on low incomes, and the vulnerable.
JOHANNA: Absolutely. I think we've seen that. And it it's something that is becoming a more and more hot topic these days. I think we've heard it a lot about like geography in the past, but now, it's becoming really obvious because we have data to demonstrate it about some minorities or ethnic groups that have more limited access to some products or receive different services and health services than others.
There's a conversation also about gender and how women don't have the same access to health products than men. It's been exposed by COVID, I think, because we had a lot of data and it was a hot topic and just the access and the coverage rate that we were reaching for was really top of mind for everybody and we were all looking at those numbers. What I found super interesting is that it's been the core of what global health institutions have been working on.
And when I say global health institutions, I mean international institutions like the World Health Organization, like the Global Fund Philanthropies, like the Gates Foundation, like a number of other foundations implementers on the ground countries, etc.
GEORGIE: In your experience and your role, and speaking to all these different players in this ecosystem, as you call it, what are the big stumbling blocks to finding a solution?
JOHANNA: I think first, we've made a lot of progress. HIV for instance. There was a 15-years gap between the moment where we had ART in high-income countries and the moment where the products were brought in low- middle-income countries and started bending the curve: 15 years. If you think of the COVID vaccines, it was just weeks between the moment where we had the first vaccines in high-income countries. And then we got to the vaccines in low- middle-income countries. Of course, the coverage rates are different and we're not there and there's a lot of progress to be made.
There are millions of things that you need to do at the same time. And that's why it's a bit daunting for a single organization to try and address that. Whether it's a pharmaceutical company or whether it's a government, because it's really an ecosystem play.
If you're a single company to trying to address it, it feels like wack-a-mole a bit, you feel that you are alone trying to fight against all of those things. Where in fact, it's more a Velcro strap that you try to unscrunch. And you need millions of things to work at the same time, you need to work on the product, on the price, on the regulatory aspect, on the adaptation, at country level, on the supply chain. You need to work on culture. You need to work on all of those things.
JOHANNA: I wish I could tell you how long it's going to take. And I wish I could tell you that it's going to be resolved. It's a long journey. There are targets to close the gap on well-known pandemics on TB, HIV, malaria, maternal and child health immunizations, which are like the usual suspects that the community has been working on for years. That would already be fantastic. But things like COVID and things that happen are putting a setback to these things. And then there is another wave of conditions that we need to address.
So if you're thinking of oncology, for instance. The prevalence of cancers in low-income countries in significant as well. And in high-income countries, in a number of places, but we need to work significantly on understanding where we're missing patients and what is the bottleneck and solving that by combining a new vision of the product.
Well, so we need to get the science right, and making all the progress that that is in their way. That's one. Once we know how to do that, we need to get the protocols right to fit the patient needs and to fit the needs of the health systems in those places, and then make it affordable and accessible to the people who really need it.
GEORGIE: Very diplomatic. You said there that COVID has held us back in some regards, but do you think it has spurred pharma, indeed, the whole global health system, governments, the public to pursue actionable efforts towards reversing health inequity?
JOHANNA: At least in the conversations that I'm part of, I feel a different momentum than a few years ago. It's a combination of raising awareness on equity in general, and the fact that there are different groups who have access to equity at work, equity in health, equity in education, a number of things. So raising awareness that we need to solve the inequities in general, in our society. That's one.
And then apply it to health and the impact that it has on the economy. I think that's the thing that COVID put spotlight on. And if you combine those things,
GEORGIE: Johanna, thank you so much. And thank you for listening. We'd love to know your thoughts to get in contact, leave us a message at firstname.lastname@example.org. And if you like this podcast, why not hit subscribe and lever rating wherever you found us? It helps other people find us too.
GEORGIE FROST: Imagine trying to stick to a shopping budget, but none of the goods in the supermarket have a price tag. or losing weight, but there's no information about portion size or nutrition on the food that you buy. How can you reduce what you can't measure? This has been the problem with reducing greenhouse gas emissions. They continue to climb and we haven't been able to accurately measure the climate impact of our actions. So does AI have the answer? I'm Georgie Frost. This is The So What From BCG.
DEXTER GALVIN: Over the next eight years we need to see climate solutions becoming "the thing." And if we don't see that transition then we're going to lose this battle. It's those technology companies, those winners in technology that are going to help us get where we need to go.
GEORGIE: I'm joined today by Dexter Galvin, global director of corporations at CDP, an international nonprofit organization that helps companies, cities, and regions disclose and manage their environmental impact. Joining Dexter is Charlotte Degot, global leader of CO2 AI Solution by BCG.
DEXTER: At CDP, we've been gathering data from companies for the past two decades, and we now have over 14,000 large corporations disclosing data to us every year. That's obviously a very significant challenge. It's a very significant technical challenge, in particular. And one of the things that brought us to BCG is that they have very strong capabilities in this space and a really powerful solution in CO2 AI. We've actually developed a new platform together called the Product Ecosystem platform which helps companies measure the life cycle impact of their carbon emissions across their product portfolio.
GEORGIE: Charlotte, Dexter has outlined there the problem with emissions being so difficult to measure but why are they so difficult to measure accurately? How far off do you think that some companies actually really are?
So the data challenge to be able to collect all the data about all the activities that the company can perform to be able to access accurately a carbon footprint, is a massive challenge especially for large corporations and the corporations that have a big scope.
So emissions coming from their supply chain. Last year we did a survey with more than 1,000 corporations across the globe asking them their own assessment about the level of margin of error of their carbon footprint. And what they said themselves is that on average they think they have 30 to 40% margin of error on their measurement. So anything we can do to better measure more accurately, more granularly, is of course, more than welcome.
GEORGIE: Thirty to 40%, Dexter. And this is what companies are actually telling you. I imagine in some instances it's a lot higher than that. So is everything we've been reading so far has just been a load of rubbish?
DEXTER: Well, obviously I find that statistic a little bit depressing as the organization that's been gathering this data for 20 years. I think it is a reflective of reality though. I think there is a serious challenge of data accuracy. What we've seen at CDP is the evolution of reporting capabilities over time. So when companies start on this journey they understand how to manage their electricity bills. And then they start to understand how to turn that into carbon emissions data. And then they start to look at their own operations more broadly. And that takes a while, actually.
Some of the larger corporations that have been disclosing to us for a long time, they have emissions verification in place. So there'll be a lot of credibility in the data that they're reporting. But a lot of the companies, particularly in the supply chain that are just starting out on this journey, have really a long way to go to gather more accurate data. And that's the great thing about the sort of technical solutions that are coming into this space right now. Organizations like BCG have said, "OK, look, there's a problem here. Organizations are really struggling to gather this information. How are we going to help them?" Technology can really play a massive part of that puzzle and help to solve that problem.
GEORGIE: I want to get more into the technological solutions but you touch there on the supply chain. I mean, it's hard enough as a company to measure your own greenhouse gas emissions but then to factor in a supply chain. I mean, it must be nigh impossible.
DEXTER: Well, yeah, we often talk about this in terms of an iceberg. Imagine an iceberg, right? As an organization, you're accounting for your direct emissions. These are called Scope 1 and 2. They're quite geeky terms, but basically your direct and indirect emissions. And that's really only the tip of the iceberg.
GEORGIE: Charlotte, how were companies measuring it before? How involved was tech in those measurements?
CHARLOTTE: Very limited, close to zero until very recently. And that's part of the issue because as we were saying, it's a massive bucket especially the supply chain emissions. It's super complex to get access to the data. So it's a data issue. But if you don't have tools you end up in exile and you end up doing super big averages that gives you a first figure, which is good, right? It's a first step. And as Dexter was saying, it's a journey. So no shame in starting with something averaged. But it's important to get to a more accurate figure because otherwise there is no way you can really identify the right actions to put in place. And there is no way you will be able to measure the results of the actions you put in place.
GEORGIE: You touched there about the need to have accuracy to put the right measures in place, but surely ballpark figures would be good enough, would they not? I mean, who else benefits from accurate measuring? I'm asking you this, for you, just to explain to me for all the stakeholders involved, why accurate measuring is so vital?
DEXTER: At CDP, we represent over 590 institutional signatory investors. Some of the world's largest investors with $110 trillion of assets under management. So more than half of the world's invested capital is interested in this data.
CHARLOTTE: If I can add something about, it's not accuracy for accuracy, it's really accuracy or so to be able to drive action. And when you get into the details and you take precise examples of what can change, the accuracy value can be massive. If you take a wine and spirits company. Usually a big bucket of emission is coming from the glass they buy for the bottles.
If they just take an average number for the emissions of all the glass they buy, independent of the color of the glass, the country of origin, the supplier, the type of production they have for the glass, the recycling content in the glass itself, et cetera. They are going to end up with a super average number. If they go into the details the difference can be factor two or even more sometimes depending on those parameters. So it's really about identifying what are the drivers behind the carbon emissions to be able to identify where to act. And then of course, when you have done the action, being able to measure the progress.
GEORGIE: OK, Charlotte, this is where AI comes riding to the rescue, is it?
The second thing is once you've collected all this data and you can do a much better job in terms of accuracy of the calculation of emissions from the activity you have covered. The ultimate step is all the decision making support that artificial intelligence can enable. For example, enabling simulations of decisions about multiple scenarios and helping corporations make the right decisions for their trajectory in terms of net-zero roadmap. Doing some forecast of what is going to happen in the future, depending on what decisions they are making for their business and what abatement levers and actions they are implementing to reduce their carbon footprint.
And how does the full picture come together? And is it positive or negative? There is also the field of optimization, just directly using algorithms to recommend to users, employees, the best decisions to make. For example, in factories, just putting process parameters under control and helping reduce carbon emissions by making better decisions in day to day.
GEORGIE: Dexter, with your two decades of experience with this, how exciting is this a prospect? What's your assessment?
DEXTER: Yeah, I think this really improves the way companies are going to gather this information. We've always been of the belief at CDP that we need the companies to build the capabilities internally and start to understand how to gather this information and really understand where the impacts are across their organizations. So that that then drives emissions reductions. That's the reason we ask for these sort of disclosures every year. It's less about giving them fish and more about teaching them how to fish. But these tools are the fishing rod. It's really helpful and it helps speeding up the whole process for the company to really accurately identify where the emissions are in their organization.
GEORGIE: Charlotte, you did say there were big gaps in the data. How can AI fill those gaps? I mean, surely it's working on inaccurate numbers anyway. There's always going to be a margin of error until we can get much more accurate figures from source.
CHARLOTTE: Instead of keeping a gap because you don't have the data, it's better to identify first the wrong information because that also happens a lot today in systems and data-sharing, that they are wrong data that are shared. And artificial intelligence can spot and help improve the quality of the data that is shared or fill in the gaps, by doing some extrapolations, et cetera, et cetera. And because we are on a journey of identifying hot spots and improving the accuracy along the way, this is super important to avoid to leave just some gaps because we don't have data.
DEXTER: Yeah, I think filling in the gaps is pretty important because that then helps you understand the relative impact of different activities. So that's really important. I'm very cautious about us relying on emissions factors.
And as we start to gather more granular product level data around the world, that's when we can start really using AI to its full effect to say, "Actually, we thought a glass bottle was 20 grams of CO2. But actually, with all of this primary data that we've been able to put into the system over the years, we've actually identified that it's 22 and a half grams of CO2." And in fact, that might drive somebody else's decision to go, "I'm not going to use a glass bottle in this case I might use a carton." And so it can really, really drive meaningful emissions reductions activities on a product level, which can be super powerful.
GEORGIE: Dexter, getting the data is one thing but how we choose to act on that data is another in terms of the more holistic global target of reducing greenhouse gas emissions. Where do regulators and governments come in?
DEXTER: Regulation is absolutely critical. I'm a big supporter of the market taking action on this topic, of course. And it's one of the key MO's of CDP.
What companies are crying out for is clarity around the regulation that's coming in on this topic. When we were coming into the Paris negotiations, back in 2015, we set up our science-based targets initiative where companies are saying, "Yeah, we're willing to make this really ambitious science-based target that's going to reduce emissions in line with the needs of science." And then we were able to take that to the governments and go, "Listen, governments, all these big corporations are making commitments to reduce their emissions. Now you guys need to set really ambitious targets at Paris."
And so there's this virtuous loop, this feedback cycle which is really important. So yes, the corporate world and the financial markets can make significant advances, but they can only do so with regulatory certainty. Because without regulatory certainty, you can't make long-term investment decisions.
So we were looking at some of the emissions reductions activity disclosed by companies in China recently. Sixty percent of them had payback periods of less than a year. So you've got those quick wins early on, but then you have to start making significant capital investment. And that is a challenge without regulatory certainty. Without knowing that in a couple of years the carbon price is going to be this, or there's going to be taxation on this, or there's going to be a mandatory reporting requirement on this. So the two, the market mechanism and the regulatory environment are absolutely critical.
GEORGIE: Charlotte, before we end, let's go back to the technology and look to the future of AI. What does it look like in this space? When I talk to you in five, ten years time is this going to be absolutely 100% perfectly accurate? AI has saved the day.
And then if I look forward more to the next ten years et cetera, we could speak about, I think, for 30 minutes about potential ideas of what we can do. I mean, it's a data issue. It's a massive issue. Artificial intelligence has a lot of techniques that can help. For me, the angle is really driving action and acceleration of the action. And there are tons of things that can be done. Again from measuring better but also helping on the decision making. Doing some better recommendation on action, optimization on the ground of tons of things that can be better managed, leveraging a algorithm. Just a side note. That does not mean that we should not measure and track the emissions related to artificial intelligence itself.
DEXTER: I think this is critical.
We need to see that same transition in the climate space over the next eight years. So in a shorter amount of time we need to see climate solutions becoming "the thing." And if we don't see that transition then we're going to lose this battle. But I think it's there. And the great thing is it's those technology companies, those winners in technology that are going to help us get where we need to go. So we have to lean in on every possible solution in the market. And AI is one of the really key tools that we can lean on to help us in this transition to a better world.
GEORGIE: Dexter, Charlotte, thank you so much for talking to me and to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you liked this podcast why not hit subscribe and leave a rating wherever you found us, it helps other people find us too.
GEORGIE FROST: Technological progress and automation is infiltrating and altering every facet of our lives and the lives of our children, and soon their children, and their children's children. But in many ways, education in the current system of learning hasn't moved on very far from Edwardian times. Is it time for new progressive era of education? But what would that look like? And where do values sit in this digital world? I'm Georgie Frost, and this is The So What From BCG.
LEILA HOTEIT: If we get this right, education would become the great equalizer, and it would lift up the whole of society.
GEORGIE: Today I'm talking to Dr. Leila Hoteit, a specialist in human capital topics and global lead of Boston Consulting Group's education, employment, and welfare sector.
LEILA: If you look at a drawing of education classrooms at universities centuries ago, and you look at universities or classrooms today, they look very similar. It's very much teacher-centric, people sitting in rows, and looking at the teacher, and listening to the teacher, so very much true. Now we see so much change happening very fast, led by technology, by other trends, and education has to innovate, has to catch up, and I think it is going to start to happen at a very fast pace.
GEORGIE: What will that look like? You said it needs to innovate, it needs to change, and it is strange that it's one of those areas in which it really hasn't, and yet it is so fundamentally important to communities, to society, to the world.
The second one is befriending technology. So technology is not the enemy. How do we befriend technology so that we can use it as a tool for equity and progress and we mitigate the risks that come with technology? And the third one is lifting each other up and working towards better social equity through education and learning.
GEORGIE: To achieve those three points then, the right skills, befriending technology, lifting each other up as you say, what levers do you think we need to activate?
LEILA: So if we think about the first point around making sure we armor ourselves with the right skills, when I think about education, it's key to prepare people to unlock their new potential. And when we talk about education or certainly when I talk about education, I'm not thinking classroom and campuses. I'm thinking very broadly about education and learning inside and outside the walls of education institutions and across all age groups, children, but also adults. It's all about life-long learning today.
GEORGIE: How do those two things marry up? When you talk about the way you think about education inside classrooms and campuses and outside, do you see there's a time when there is no space for classroom, it's all going to be done remotely outside?
GEORGIE: So you've spoken about where learning happens, but what about the type of learning? So much focus now is there on coding and technical skills. But what about the so-called softer skills, the values, those sorts of things that we tend not to emphasize so much with education and yet, I mean, maybe I'm wrong here, but seem to be more important in society than ever?
LEILA: Absolutely. So when we talk about the future of work and the future skills that you will need to be able to work in the future, you're hearing a lot about STEM skills, you hear a lot about the importance of teaching coding and things of the sort. And while it is important to teach technical skills, for our kids to have technical skills, with technological advancement, what we're witnessing is, by the time our kids graduate, the skills that they've learned are already obsolete.
On top of that, what you see is that most fields of work are becoming increasingly intersectional. So there's no domain of knowledge that is standalone today.
And if I take just a single example, the Stanford marshmallow experiment. So in this study, a child is given a choice between either one small but immediate marshmallow that he or she can have now immediately, or two marshmallow rewards if they wait for a certain period. So this is all about a skill called delayed gratification. Are you able to wait to get more? And what was found is that though the children who are able to wait for a longer period tended to have much better life outcome. So whether on educational attainment, but even in other life measures.
So how do you make sure that you teach at a very early stage in life such skills such as delayed gratification?
Another example when we talk about social-emotional skills, if you look at existing jobs today, like the job of being a doctor. Today, the physician is supposed to be the single source of truth on everything to do with your body, with your health, and that's what makes a good doctor mostly. It's about how good he or she is in terms of really understanding human biology and all things to do with health care. But tomorrow, Gates was talking just the other day, that you'll have an electronic tattoo on you that will be capturing all of your health care data 24/7, and you'll have the machines telling you all the diagnostics.
So as a patient, you'll be extremely well-informed. And the doctor then, the good doctor, will become the one who has the emotional intelligence to be your thought partner, your emotional partner, and make decisions with you about your health.
What we see is that these skills are becoming incredibly important to be successful in life and to contribute to society. We look at employers, and they're looking for workers who have very strong skills such as resilience and professionalism, and they often report shortage of such skills more than they do on technical skills. On the other hand, when you see employees are also looking for more empathetic and more collaborative employers, and now you see a whole great resignations phenomenon because of that exactly.
GEORGIE: I want to go back to the marshmallow experiment because I'm not sure how much it was taken into consideration the background of those children, the environment they grew up in, the support of their parents, their education level before they did the experiment. But do you think that the current framework for our education system support skills that perhaps aren't technical but no less important in our future?
LEILA: This is a very good question, Georgie, and it's about the nature versus nurture debate. When I was younger I used to think about school choices for my kids, and I used to think I really want a school that's very strong in mathematics, very strong in science, and in languages, and everything, all these core subjects and literacy where they have to be very academically rigorous. And now I really think very differently about the choice of school and what's important in terms of the skills that the education institution has to incorporate.
Do I think in general we do enough even from the youngest age in terms of parenting techniques? But then in education institutions, kindergarten, and schools, do we do enough? No, but certainly good schools are evolving to really incorporate these skills and in their curricula.
GEORGIE: Where then do values and principles sit when we're progressing so much, when automation is inevitably going to come into education? You're going to have what you were talking about earlier, perhaps not that classroom structure in which these values and principles can develop. So how do these sit do you think in the future of education?
LEILA: I think they need to be incorporated across the curriculum. So I'll give you a simple example. If it's a language class to very young kids and we're reading to them and discussing with them "Little Red Riding Hood," a simple story like "Little Red Riding Hood." But this time, instead of just telling the story and it's black and white, and there's a good person and a bad person in the story, the teacher would try to show it or to discuss from the perspective of the wolf and try to ask the students why the wolf might have acted the way that he has.
Maybe he was hungry. And that if he was hungry, what would you do instead? What should the little girl do instead? maybe she should just get him some food and he would have reacted differently. It might sound like a very funny example, but this teaches kids critical thinking. It teaches them empathy. It teaches them also how to control emotions to think of better solutions, and we can see in the world today how important these skills are for a better world.
GEORGIE: How would you measure that? Is it important to measure it?
LEILA: So measurement is extremely important. And I remember in a class, in an MBA class, one of the first things we were taught, was you get what you measure. So if you really want to get an outcome in education or you get an outcome at work, you have to be able to measure it. So being able to measure these skills also gives a signal that these skills are important. And you look at all the organizations that do standardized tests, international standardized tests, like PISA. They are trying more and more to measure skills like collaboration, so collaborative problem solving, creative thinking, etc.
GEORGIE: Where did you go to school? I'm talking secondary and primary school.
LEILA: I grew up in Lebanon, during the war, and then I left Lebanon at 18.
GEORGIE: Very different to me. I was born and raised in Norway before moving to school in the UK. I ask you this because in conversations around values and principles, inevitably, the future of education will turn to a universal framework for education. Is it possible to even have it? Is it possible to have it when we have such differing values and principles?
LEILA: There's a lot of organizations that have tried, have put a lot of effort into trying to develop a single universal framework for skills.
GEORGIE: What would be the benefit of that though? What is the benefit of having a universal framework? Before we even look into whether it's possible, why would it be a good idea?
LEILA: The benefit of having a universal framework, when you think about the global citizens, when you think also about machines and the need to provide the machines with our set of values, so that they can make the decisions that we want them to make as humans, we need to all agree on what are the right values.
So these are just at a very quick, very high level of important benefits of having a single universal framework for skills. And so organizations like the World Economic Forum, like OECD have tried to do that and to standardize. And to some extent, you can try to converge and agree on some specific set of skills. But there are some where you would start to disagree at the cultural level on very basic things where you'll be quite surprised.
I'll take one example. If you ask me about one of the key skills that I would like my children to have, that would be, and that most people would like their children to have, that will be curiosity. So you can explore, and investigate, and learn. And then when you look at certain cultures, like Japan, for example, they ascribe less value than we would to unstructured curiosity, and thy would put much more respect and much more learning from the experience of the elderly. So it's very difficult to get to a single universal framework of skills and of values because there are a lot of cultural differences.
GEORGIE: I'm actually listening to both of those points. Both have great merit, respecting your elders and being curious. It would be a shame to try, and then do we have to prune some things out to have a universal system that actually...? Could we work in another way, a hybrid system that we can still have some kind of universality, but we're still keeping those amazing qualities that each culture and society brings?
LEILA: We should definitely try to work to converge, and respect, and celebrate the differences and incorporate that into what makes a global citizen. At the end of the day, a global citizen is one that also is very in tune with cultural differences and very tolerant of cultural differences. Where we need some form of decisions, if you will, are when you come to, for example, the need to control technology as I was saying.
So I'll give you a simple example. When you think of the example of the trolley problem, which I'm sure a lot of us are familiar with. But instead of trolley, you think about the driverless car. And a simple example, if you think this car can either hit a child or an elderly, what would you choose if you could code the car? The Japanese people might decide that the elderly can then teach and share their experience with many more, every old person with a hundred children. Whereas in other cultures you might think, he or she has his whole life ahead of him. So in this situation, we would need to try to come up and converge to a set of values because we need to control technology before technology controls us.
GEORGIE: You said at the start, befriend technology for progress and mitigating its risks. Tell me more about that.
LEILA: Let me start with the befriending part that you mentioned. Technology has and continues to solve many societal problems. It's a key enabler, if you want, to deliver innovative education. So one example we're seeing is more of the use of artificial intelligence to deliver personalized learning, learning that is customized to the need of every single student. And today we are even talking about hyper personalization in education where you're really personalizing to every single aspect of a child.
GEORGIE: How does that work? What would that look like? Children are developing and changing all the time. It's the beautiful nature of childhood. You'd have AI that can adapt with that child?
LEILA: Yes, children change, but technology is also very adaptive. So whether it's AI, and also you see genetics, brain science, technology more generally, all of these fields are intersecting and will be adding a lot of value to education. So a simple example, there's a lot of research and scientific experiments to support autistic children in learning better by measuring their attention through various devices that they place to measure how the eyes are focusing or not.
This same technology can be used with a larger population to see whether the individual is attentive, whether they require additional support to grasp a concept, to measure the cognitive load and see how much that child can understand at this point in time, and what factors are affecting his or her absorption of learning. So the number of hours of sleep, etc. And you can imagine optimizing all of that and mapping content that he or she is learning to cognitive development levels.
Genetic testing can also be used to see, to understand to explore the student genetics and understand how best they learn. So you can imagine how science can go extremely far to create this super child, super human. Now how much of that do we want is also a good question. Does this become the equivalent of the performance enhancing drugs in sports? Where do we draw the line? Those are all ethical questions that need to be posed and agreed on universally by everyone so that education moves in the right direction.
GEORGIE: Glad you mentioned that because I was going to talk about, as a parent yourself, just looking at the risks at the moment, that being online and being in a digital world for children, pose--online bullying, and we can go very dark and very deep-- troubling for a parent? How can you mitigate the risks? It's one of the eternal questions, isn't it? How can we get the most out of technology and the advancements? Because they've transformed our lives in many wonderful ways, but there's always hanging, as I said, those dark, deep risks.
LEILA: There are indeed these dark, deep risks, and we need to change our education systems in a way that teaches kids how to navigate technology, how to protect them from online bullying, from inappropriate content, from digital addiction. There's all these digital competencies that our schools are starting to teach the kids. They tell them how to behave online, what to share, what not to share online, etc. The solution cannot be simply on the children obviously. Parents have to play a role but also other actors. There's currently a generational digital divide where parents don't know how to educate their kids on safe practices regarding the use of technology because they grew up in a very different world. And beyond parents, there's a whole ecosystem that needs to be activated to protect children online, including the tech companies, law enforcement, child support services, the schools obviously, and international agencies. So this is a very urgent and critical issue that needs to be addressed head on.
GEORGIE: I know that people get kind of nervous when we talk about business involvement in schools and education, but do you see a positive role?
LEILA: I think the role of businesses is critical in making sure that education evolves in the right direction. Innovative for sure, but also preserving the right values. So whether it is to make sure that children online are kept safe, the role of business is extremely important there, whether it is to make sure that we don't stretch too far when we think about augmented intelligence, etc., that we are still keeping our humanity and are doing the right things, whether we are developing education in the metaverse, and we need to make sure that the developers there and the businesses there are working closely with educators to ensure that the education that's going to happen in the metaverse is the right one. These are just three examples of where we need to make sure businesses play the right role to ensure education evolves in the right direction.
GEORGIE: Before we end the podcast, I want to go back to the start if that's all right, when you spoke about what we can do to thrive, and your third point, and I like this because I think it's a quite nice, hopefully uplifting, end to the podcast when we've spoken about perhaps some of the troubles that lay ahead, but you said it could lift each other up working towards a better social equity. Talk to me about that.
LEILA: So this is where education can be a great equalizer if you may, and technology is a great enabler to this. When we think about access to internet or access to data, it's now viewed as a basic human right. So when we look at refugees, for example, and we think about access to water, access to food, making sure that they are safe, now we also say access to data and access to internet is a basic human right. Because with access to data, you have access to education, to knowledge, but also data to jobs, to health care, to social services. And we recently worked on a paper on bridging the digital divide in the US. Basically, what the conclusion is, with full digital connectivity and permanently closing the digital divide, this is critical not only to achieve educational equity, but also to accomplishing all sorts of endeavors to promote equitable, economic, and social opportunities.
GEORGIE: What a lovely point to end on. Leila, thank you so much. And to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org. If you like this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: Not too long ago, supply chains were relatively straightforward, but the world's changed. So how do you lead your company to success in the face of rising inflation, global shortages, and conflict in Europe? By putting suppliers at the core of your business and by making procurement a leadership imperative. I'm Georgie Frost, and this is "The So What from BCG."
DANIEL WEISE: It's probably what every CEO dreams of. You will actually increase your sales and profitability, and you will actually have cost savings available to refuel your innovation pipelines once again and invest the money.
GEORGIE FROST: Today I'm talking to Daniel Weise, global leader of Boston Consulting Group's procurement business line and author of "Profit from the Source: Transforming Your Business by Putting Suppliers at the Core."
DANIEL WEISE: For the last 50 years, the Iron Curtain fell down. We had WTO supporting us with free trade. We can go to China. We have a billion of people helping us to produce stuff. All of this was available. There was no scarcity in supply, and it was always getting cheaper as well. It was paradise.
Now, the world has changed. We have a pandemic. We have a war in Europe. The US-China trade conflict, and many other things. And I think the new Iron Curtains we are seeing, they will not actually go away again. They will last. I don't think there's a way back to source in Russia quite soon. We will see how the US and China will go on.
The chip supply, for example, is also scarce, amplified by the Ukrainian situation. Last year, 10 million cars did not get produced. This year, we thought it was five, but it's going to amplify because there's neon gas shortage out of Ukraine. So potentially, another 10 million cars don't get produced.
That's a complete paradigm shift.
GEORGIE FROST: So basically for the past decades, companies have been resting on their laurels, and they find themselves very quickly, perhaps over the past two or three years even, with a situation that is incredibly difficult. What do you do as a company when faced with such a level of uncertainty? And bear in mind, this has not been your priority largely in the past.
DANIEL WEISE: I think, and that is what we see. You have to dramatically rethink. You also cannot afford to make it hypothetically or theoretically. There's no benefit in chasing black swans. We don't know what will happen, but there are those gray rhinos.
We know from the Spanish Flu that the pandemic is not happening for the first time. We cannot prepare for everything, but we need to have a fact base ready that if something happens, you know what to be doing and potentially can even take action before.
And we see some companies doing this better than others. There are companies who are still producing. There are companies who can deliver goods in time. And then, of course, there are others where they are actually losing market share because they have not invested in preparing their supply chains. And we see this a lot.
GEORGIE FROST: We'll get more into the role of the CEO shortly, but I just want to know, and you were right. I was a bit unfair by implying that every company have been resting on their laurels for decades. I don't think that's the case. In fact, it's definitely not the case. What are the benefits of the companies that have prioritized procurement?
DANIEL WEISE: There's, for example, a simple study with it. We took a look at the S&P 500 in the US, and out of the top 150 companies, one-third has actually a chief procurement officer on their board and/or part of the leadership team. That one-third actually outperformed the S&P 500 in the last 20 years by 134%. So that's some evidence.
When you take a look at certain industries, for example, in the tech space, where procurement is actually owning the innovation process, where a CPO becomes a CEO, take a look at Tim Cook following after Steven Jobs. Those are examples where you can see really benefits when people who are savvy about procurement and supply chain take actually an office and can lead a company to success.
GEORGIE FROST: And you know what I'm going to say. Correlation does not imply causation. So while that looks very good, what other evidence is there that actually by putting procurement first, as it were, that you will get the benefits, you'll reap the benefits?
DANIEL WEISE: There's another thing.
And I think in those times we live in, when, yes, there is inflation, you potentially can do still cost savings. This is not good enough anymore. We talk about multi-currency procurement, where we want to come to a place where we reduce CO2. And this only works when you work with your supply chain. We want to de-risk supply chains so we want to have the goods available you can produce. We want to have good quality and speed.
Think about a vaccine in Europe. If you have smart people thinking something through, you need still a home where you can manufacture that vaccine. That is what happened with BioNTech and Pfizer. That's procurement. And that is what we're arguing, that those times are over when you have a simple focus on getting something in for cheaper.
GEORGIE FROST: Is that where it's been just on cost-cutting?
DANIEL WEISE: I think cost-cutting is not anymore the paradigm of procurement. It is still important because we still need to finance innovation. Everyone will take a cost-cutting, good, accepted, but it's not good enough. We have to be completely different in thinking through, for example, where we want to make trade-offs.
GEORGIE FROST: I'm wondering about those companies that have prioritized procurements. Is it a certain type of companies that have, tech companies, perhaps where it matters more?
DANIEL WEISE: I think you're very right. Tech companies, probably, that cluster of, at least in our of thinking, companies which are more most advanced in procurement. I mean, it's not only rare that the CPO becomes CEO. That's the Apple example, but take a look at Dell and Apple and also Tesla. It is the supply chain and the procurement guys who own to a large extent the innovation engineering cycle. It is them who have a say in where to produce, what to do, and how to actually make those supply chains resilient.
And that's a difference to many other clusters. Take a look at automotive, for example. In automotive, engineers tell the procurement team what to do. Procurement team is tasked to get it in for a good price. But at the end of the day, that is not working out anymore because we don't have the full supply ready.
You're operating in scarcity. You're operating in inflation. And you have to actually achieve the sustainability targets, assuming you want to be leading in the sustainability piece. If you only have a cost focus like in some of those industries, this will not fly. And I think there's a lot to learn from actually the tech cluster.
GEORGIE FROST: You make a lot of claims in the book about how your company, if you do make this a priority, you lead the way, competitive, innovative. If it was so beneficial, why have companies not prioritized it? Why are CEOs only spending 1% of their time thinking about it? And if it is so vitally important and the benefits are what you say they are, or have they just been caught with their pants down, basically, over the last couple of years?
DANIEL WEISE: I think there are two reasons. One is, for 50 years everything was available, and it was not a need to focus on procurement. You just found the stuff, and you bought it. But now with the shortages there, the pandemic being there, with so much uncertainty, this is not good enough.
Those are the negative events, but there are also positive events which are changing the world like the push for sustainability. And that is then something where we need to rethink, I think, supply chains and where companies potentially too late understood on how very much they can benefit from supply chains.
If you take, for example, the CO2 footprint of a car, 60 to 65% of the emissions come from the supply base. So if you want to come to CO2-friendly cars, you have to work with your supplier. You have to put new teams behind. You have to put new teams behind with a different skill set. And that is what we are completely missing at the moment.
GEORGIE FROST: You mentioned that it starts, I guess, with CEOs. CEOs have a fundamental role to play. Why do you put so much emphasis there at the top?
Why? Because you need to be talking to your important suppliers, and offer something. And offer something means co-investment. It means certainty in demand. It means so many things, but those things, nothing a procurement professional can offer. That's a board decision. That is true partnership for the important suppliers.
So we think that only a CEO and the board can make that happen because if you leave it to the people stuck in corporate Siberia, they don't even have the mandate to take those decisions.
GEORGIE FROST: Okay, where do you start then? Where do you start to build this emphasis on procurement into your company? Obviously, it starts with the CEO getting on board with the idea. Then what?
DANIEL WEISE: The next thing for us is to actually change the company in itself.
One push is invest in digitization, make the company as much as possible bionic. Why? Because we want to get all the effort out of the transaction operational stuff, free up the people's time to become creative to work on the strategies.
Second, have human folks own the lifecycle of the problem, at least co-own it, and make sure that whatever we learn from supply chain gets embedded in the way we source the product.
In our thinking, yes, of course, costs savings also in an inflationary time still matter. However, we need to have a focus on CO2, human rights, on the sustainability agenda. We need to think about speed, getting goods early enough to market to be able to sell it. We need to think about quality. We need to go out thinking about risk. In times when supply chains are unstable, in times when we have shortages, we need to have an emphasis on resilient supply chains and availability of products. So that is, I think, what needs to change, A, within the company, and, B, also what we ask from our suppliers.
GEORGIE FROST: Transform the company sounds quite a large undertaking. That's what it takes?
DANIEL WEISE: We think so. At the moment, many companies tick internally, and you can do so many cost-cutting efforts and so many pushes in R&D. But if you understand, if you typically take your 20 or 30 biggest suppliers, they typically entertain R&D teams 20-, 30-, and 40,000 people available. They could be working for you if you partner with them rightfully and do something together with them in a meaningful way.
And that is where we think it is a transformation because we need to become a lot more focused on the supplier and allowing partnerships to happen. And I think that's a dramatic shift from the way we operate today within the boundaries of your company, so to say, but really extending that, leveraging your global supply chain.
GEORGIE FROST: Can you do that without breaking the bank?
DANIEL WEISE: We think so, yes, because by all honesty, that sustainability and all the other dimensions are important, cost will always matter in a supplier relationship. And we have seen those investments in suppliers truly paying off because if you give them stability and security, if you invest in longstanding partnerships, you will get also cost benefits.
But we don't think that is reducing profitability. It's actually the opposite.
GEORGIE FROST: Is the ultimate to get to a stage where almost you factor procurement into the design of products, if that's your business, obviously?
DANIEL WEISE: I would clearly say yes. Take a look again at Apple. Procurement is in the design process, early on involved. It's their job to get innovation insourced from the supply base. It is their job to actually have global capacity available, then to produce those products integrating those innovations. And that is different to many other industries where procurement only comes involved very close before the start of production.
GEORGIE FROST: Should every company have a lead in procurement then?
DANIEL WEISE: I'm not sure if everyone needs one. There potentially are industries where procurement is not that competitive or is not creating competitive advantage, I don't know, for some more service-oriented companies who basically only buy real estate or an office or IT infrastructure. But for all those companies where there is a physical product out, I would clearly say yes.
GEORGIE FROST: Mm. It is great having, if that's what your company will need, a lead in procurement to have your, as I said, the CEO on board, and start to build this emphasis on procurement. But then how do you take it to the next level to maximize it, to get the best partnerships that you spoke about with suppliers?
DANIEL WEISE: By doing it differently. I don't think it's enough to say, hi, here's my new email. We are going to change the world we have been living in for the last 50 years.
No, you need to reach out.
If you really want to make breaking decisions, both CEOs, the client and the supplier CEO, need to be involved. And then of course, they can delegate it back at one point of time to the teams, but it's a true change. It is not coming from procurement. It is, or it has to come, from the CEO in changing the way you have interacted before.
GEORGIE FROST: What can suppliers do to help companies to position themselves into greater advantage?
DANIEL WEISE: I think one of the most important things suppliers can do is understand your client's strategy. Reach out and offer on how you can help. reach out to those people who make decisions in the company. Get heard. Be very clear on what you can offer to those companies and be selective. I don't think, and that's not what we are saying, you can be friends with everyone.
You cannot partner with everyone, but pick those, that number which is relevant and feasible for you where you can partner and then reach out and do it. But I think that is what many times the relationships become very, very transactional. That is, I think, what is missing most.
Why don't you reach out if you have something in your innovation pipeline which is great and do a cool innovation partnership? Why don't you secure early on selling on that stuff? Why don't you even pitch it? And I think that is a change we are now seeing in certain industries, but it's truly not the case everywhere.
GEORGIE FROST: So if you were to give companies then a blueprint to leave us with as to how you would do this best, what are the key takeaways?
DANIEL WEISE: I think I don't know any company who does it perfect, not even the tech cluster. Potentially they need to improve a lot more on sustainability and putting their supply base into action also on this topic.
And lastly, escape the mono-dimensionality of procurement. It is not only about cost savings anymore, but equally important is sustainability, is the resilient supply chain, is quality, is speed, and is innovation. And if you put currency behind that, incentivize the procurement team to not only deliver on the cost basis, but also on a CO2 basis, on the innovation basis, that is, I think, the best advice we can give because if you put emphasis on it, people typically start to act.
GEORGIE FROST: And if you do that, spell out the benefits for me.
DANIEL WEISE: I think it's probably what every CEO dreams of because you will actually increase your sales and profitability because you have those products, A, available in those times and, B, hopefully a lot more innovative than those originating from their competition.
And lastly, you will actually have cost savings available to refuel your innovation pipelines once again and invest the money. So the benefits are quite numerous, and it's not only cost line which we can drive out of procurement. It's truly the top line.
GEORGIE FROST: Daniel, if you and I are to meet up in five years' time and do this podcast again, let's hope we do, what sort of things do you think you'll be telling me? What will have changed?
DANIEL WEISE: I hope that we will move to a lot better world. Potentially, we have advanced on the sustainability topic, and it becomes again a priority. Potentially, we have left some shortages behind, but for sure, we will have not left some geopolitical conflicts behind.
So I think ultimately what has changed, I would predict a lot more focus on risk management, a lot more emphasis on sustainability. And I would hope some companies have actually put suppliers at the core and are really benefiting from still working supply chains.
GEORGIE FROST: Thank you so much, and thank you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us, too.
GEORGIE FROST: If you've ever hidden anything significant about your personal life at work, then you know how exhausting it can be to lie. We aren't performing at our best. Perhaps you're going through a divorce, received a cancer diagnosis, started IVF, or you haven't come out to your colleagues yet. But creating a culture of openness and acceptance is not only beneficial for the welfare of your staff, certainly, but also for your bottom line, and for designing policy suited to attracting and retaining the best talent. I'm Georgie Frost. This is "The So What" from BCG.
DAKOTA SANTANA-GRACE: It's because it's the extra mental labor to navigate that identity that it's important that people feel comfortable. Now, they don't need to share anything about their lives, but they shouldn't spend time thinking about what they're not sharing as they talk about it.
GEORGIE: Today, I'm talking to Dakota Santana-Grace, BCG principal and expert in e-commerce package delivery and leader in BCG’s Pride team.
DAKOTA: Every year my Instagram fills up with people talking about how stressed or agitated they are by all the companies with their rainbow flags and their policies that don't actually support queer people or their funding of lobbyists or politicians that are actively homophobic.
I wouldn't tell anyone not to do it, but they should be asking themselves, is it matching what they're actually doing for their employees and what they're actually doing when they are influencing their external world? Are they also supporting those employees from a broader social context?
GEORGIE: What they're doing for their employees, you talked about policies. Just explain what some of those might be.
DAKOTA: Yeah, so I'll break it up, right? You've got your culture policies, which is how you bring queer people together, build allyship, make people feel included. I think back to my first time hosting a large Pride festival in our Boston office, and I brought a drag queen to the office.
Everyone was completely startled at the thought of a drag queen walking into a consultant office. I was not the first to do it. New York had done it the year prior. And it still sits with people. It sits with people who were allies, how exciting it was. It sits with people who were members of the Pride or LGBTQ community, how cool it was that the office wanted to experience part of their culture that's a little bit more niche.
But the only reason that that was worth anything is because there were policies to back it up.
And you know, very personally for me, do you cover Truvada, which is an incredibly lifesaving medication that actually prevents the transmission of HIV AIDS. So it actually essentially creates high level of resistance for people who want to take it proactively to avoid getting HIV AIDS.
GEORGIE: I don't know if you have the stats to hand, but do you have any idea of what percentage of companies in North America, where you cover, have policies like that in place?
DAKOTA: I don't, but I'm comfortable with saying too few.
GEORGIE: Right, that's fair enough. That's fair enough. What would it take to get those policies in place? How do you build them? Where do you start?
DAKOTA: Listen, I think it always starts with listening to the employees and what they actually need and what they're looking for. In most companies, assuming there's not a breakage in values where they actually don't want to support their LGBTQ employees, at which point I can't help them, but for those that do want to and I hope that's a majority, it comes down to actually listening to what the employees are looking for.
I still remember when we were advocating inside of BCG for shifts in our paternity and maternity benefits and shifts in our adoption benefits and surrogacy benefits. And those have evolved over the past two to three years. And they've meant a lot to our employees. And that's how it came forward, though. It was actually just listening to people and where they are and what they're prioritizing.
GEORGIE: Obviously, it's wonderful to have those sorts of policies in place for your workers to make people feel included, but there is also a great business case for this as well.
DAKOTA: Yeah, I think if we decide that we want to have the strongest employee base and you decide that you want the most diverse and capable employee population that you can build, and there's tons of research around the value of diversity in the workplace that we don't need to get into. Almost every executive will have read it. How does this translate then to the importance of retention and attraction of LGBTQ talent, I think is the real question. And the reality is that queer people are 13 times more likely to quit a job if the culture isn't right.
GEORGIE: Culture isn't right. Explain to me, what do you mean when you say the culture isn't right, for example?
DAKOTA: Yeah. Not just policies that are right. Places where there's open discrimination.
DAKOTA: Places where there's not consequences for implicit discrimination, and places where they don't feel comfortable being out is one of the core drivers. And that's also a core driver in how we attract talent. The reality is we're seven times more likely to not go somewhere because of a culture, a perception of the culture.
Now for me, I've been very lucky, right? I sit back and I think, well, these questions are so obvious. I feel very supported. I walk around in four-inch red stilettos on a Friday occasionally, and no one bats an eye, which I find actually offensive at this point. I'd like someone to bat at least half an eye.
And I have mentorship across the country and world of queer leaders that I really respect. So for me, it's always been there. But when I think about the conversations I have with dozens and dozens of queer recruits every single year, this comes up, and it's a reason that they don't look at other places. And it's a reason that they're prioritizing coming to us. And it's something that I'm really proud of, but it's something that I would encourage any company to be stepping up to focus on, because it's the only way you're going to pull in as diverse of an employee workforce as possible.
GEORGIE: Dakota, we live in the real world, you and I, most of the time. I am offended by the four-inch heels purely because my back could never handle four-inch heels and I'm jealous. [laughing] But no, we live in the real world and we live in a world where people are quite easily offended by certain things. And there will be people who don't appreciate seeing you going around the office, I don't know if you go around the office in four-inch heels, but if you do...or a drag queen.
DAKOTA: I do.
GEORGIE: Well, there you go; take care. Or a drag queen in the office, that might offend people as well. So are we swinging too far in one direction to appease one section of society or one section of the workforce while risking offending the others? Or do you say, well, boo-hoo to you?
DAKOTA: Well, I would love to talk to the person who is emotionally wounded by my heels, and we can have a conversation for how it harmed their self-perception and identity. But on the front of the drag queen being in the office, it's well announced; it's optional attendance. You don't need to go. I think the reality is unlike 40 years ago when it was a boys' club in a cigar room where I would not be invited, we did invite everyone. And you can opt in or opt out of that journey of your own volition.
GEORGIE: I have spoken about this on BCG podcasts past, that bleeding of private and work life. And I think the last couple of years where everyone's been on Zoom and you can see in the background pictures of my family, it's become much, much more intertwined. Too much so? There might be some people that argue, why do you need to say what you do in your private life in your workplace? Just get on with the job.
DAKOTA: It's a fair question. And I think the question comes from a place of I always say that a lot of our questions on these topics come from blind spots, not necessarily from malice, same with where companies have policy gaps, right? I think it's a blind spot, not an intentional choice.
But the reason that it matters is because there's so many times that the person who asks me that question about why does it matter that I can talk about my personal life also mentioned their opposite gender partner, talked about their kids, their family commitments, all describing their weekend within the past few days.
And the minute you have to start filtering, we call it covering, covering pieces of yourself as you're working through it, describing your weekend, say, it's the week after Pride, do you mention that you went to the Pride festival? If you're covering, no. Now you have to come up with your Saturday story. But then you just bumped into your straight colleague who didn't know you were out while you were on the street because they went to witness the coolness of Pride, and now half of the people in the office have heard about how they saw you on the street and now you're covering again. And so it's because it's the extra mental labor to navigate that identity that it's important that people feel comfortable. Now, they don't need to share anything about their lives, but they shouldn't spend time thinking about what they're not sharing as they talk about it.
GEORGIE: Well, for different reasons, I'm sure that many people will know what it feels like to hide things at work and that weight of having a secret, whether that's you're going through a divorce or IVF or cancer treatment, as I said, not the same thing, but you can understand that trying to hide what's going on. And it impacts obviously on you mentally and possibly physically, but also the quality of your work. To put it bluntly, you're not going to be performing at your best when you have things on your mind that you can't get out.
DAKOTA: Yeah, I mean, from a pure corporate value perspective, right, it is materially worse if you have some of your queer employees spending the day worrying about what they say about their weekends. I mean, we all understand basic professional norms. I'm not saying that you need to hear every detail of every single Saturday evening I've had. I'd prefer that you didn't.
But I am saying that I shouldn't have to think about whether or not I give the top-line narrative that I went out to a restaurant and then swung by the Pride festival, or that I swung by a gay bar for two seconds, or if I happen to name the bar that I went to and it is gay, that I'm not somehow jarring the world by saying that, and that I didn't have to spend time making up a restaurant name.
Because it's actually a very natural question when someone says, "Oh, where'd you go out this weekend?" You might actually answer that question. Now I'm in DC, so the answer's probably Number Nine, but that's a gay bar. Now if I'm trying to cover, now I have to spend 20 seconds quickly choking on my words as I figure out where I went out.
That is exhausting to do, and I've done it, right? I went to a client, and I've always been out with my clients, and for whatever reason, this client I felt was conservative. And I work largely in industrial goods and package delivery. I work with a fairly conservative base of clients as it is, and I've always been out, but for whatever reason, and I've never had an issue and I've been very lucky there. But for whatever reason, in this instance, I felt the need to hide it. And I was stressed. I was more stressed than I had ever been with a client. I was stressed in meetings. I was stressed coming in on Mondays. I wasn't having a good time, and that was rare.
I actually like my job. I was just sitting there wondering three weeks in. And I was lucky one of my best friends was on the team. And she looks at me and was like, "Well, it's because you're not out right now." And it was dumb stuff.
And I'm coming from a fairly privileged position here. Right? I am a largely white-passing Latino gay man, which means that I get many of the benefits. I don't pass as straight, to be very clear, but I get many of the benefits accrued to men in society. And I'm neither trans nor a woman, right? I am on, of the spectrum of discrimination that I face day to day, I probably face some of the lesser within our queer community. And my trade-offs are different when I do that math. But for me, I really was materially more stressed, more tired because constantly in conversation, I was adjusting the words coming out of my mouth and I did not enjoy doing it; it's tiring.
GEORGIE: And how was it received by the client?
DAKOTA: There was a soft smile on this man's face as if he was happy that I had finally come out. And again, like I again have sort of the joy and curse that I mean, I really don't pass, right? People have screamed explicit phrases at me on the street just walking home from friends' weddings. And I live largely in the New England area. So this is not the most homophobic part of the States. And I still get heckled and cat-called and insulted on the street regularly, over the past two, three years, probably five, six times. And I got chased by a man maybe four weeks ago, screaming "You're giving us all HIV AIDS." So discrimination is real and it happens. But for me in my corporate setting, I don't live it and I don't pass as straight. So I have given up ever trying to hide my identity.
There's one other story if you'll let me tell it that I think will be helpful. I was in a client meeting, and I always say this is one of the best moments of allyship. Allyship is about meeting people where they are, and that's all it is at its very simplest.
And when I left the client meeting, I was probably in my second year at the firm, and one of my closest mentors now, we were sitting at an airport. Our flights had been delayed and he says, "Hey, like we haven't done feedback in a while. Can we quickly chat?" So we're chatting and he said, "Hey, I just want to mention, like you deepen your voice in meetings. Why do you do that?" And I said, "Oh, well, I'm trying to hide my gay voice."
And in this moment he had choices. He could have said, "You don't need to do that." I would've been really annoyed because he doesn't know what it's like to try hiding your queerness. Instead he said the most honest thing he could have. "It's not working and you're less effective."
GEORGIE: How did you respond?
DAKOTA: I was so happy. He took a risk in that moment to say those words. And he took a risk that he knew that I would perceive them honestly. And it was super important because I never again spent time trying to sound super straight because it just wasn't worth my time, and it was making me worse at leading my meetings. But it's simple things like that where I have tons of energy that was getting totally bogged down by trying to deepen my voice because I thought that's how I needed to sound when presenting.
GEORGIE: I'm glad you mentioned that story because I do think it's really relevant. Because earlier you were talking about blind spots, unintentional discriminations, and I think it's twofold. It's one, the blind spots obviously that we can't see, we don't know are there. We can't do policies for people that we can't understand what they're going through, etc. But also it's the, am I allowed to say this to him? Will he think I'm being discriminatory if I say this?
DAKOTA: It's so, I don't even want to write it off as easy, right? It's so hard.
And that is why mentorship, openness, and the reality is, I also personally was sending out signals that gave openness to do that. And he read those signals accordingly and it was helpful. It's a hard line. It requires judgment. It requires, I always joke the best allyship is very close to an HR violation because you're talking about really personal topics about someone's identity and helping them navigate it in a professional setting. And that's hard. And that's why leaning on allyship is just as important as leaning on fellow queer mentors who implicitly have a bit more license to go there with you.
The problem is just by statistics and the realities of our corporate world, a majority of senior people are not queer, by a huge margin. And so we do need to figure out how we navigate that gray zone. And it starts with intent and it starts with an understanding.
And you don't have to go right straight to "You still have gay voice, right?" You can go softer into it like saying you shouldn’t deepen your voice, and he didn't need to say it's not working. He could have said, "Well, let's talk about how you could be more comfortable because you're more effective when you're emoting as your full self." He had other ways to go.
The reality is we had a relationship where he felt super comfortable shooting the straight shot on that. There are circular ways to arrive at that same outcome, just would've required a ten-minute conversation instead of a three-minute conversation and a chuckle.
GEORGIE: How do you know though if you're getting it right or wrong as a business leader, with all the things you've spoken about: policy, language, culture?
DAKOTA: Well, I always say in any of these topics, anything that has to do with diversity, the first assumption I always have is we're probably not doing it right. In some place, somewhere, somehow, we're probably not doing it right.
But the way that you know that you're doing the right thing, I guess I would say, is one, is this on your agenda? Is this something that you are thinking about from a leadership C-level and minus-one-level perspective? Because that matters. If those people are thinking about it, that cascades. Are you present as a leader with the communities?
I actually find it...I'm planning a Pride conference right now. It'll be our first one back in person, and leaders are scrambling to be invited to this conference. And I have to now navigate that, which puts me in a fun position, but it is because our leadership understands the importance of their visibility. And that's the second thing.
So that's what I would say. Is it on your agenda and is your agenda visible? Because if those two things are happening, everything can flow from there and there will be animated, excited people to help work with you.
GEORGIE: Does language matter? Does it matter if you say homosexual, gay, queer, LGBTQIA+?
DAKOTA: Oh Lord, it's a fun one. This is going to have a variable answer.
GEORGIE: I had to ask, I'm sorry.
DAKOTA: You have to ask. No, you have to ask; it's right. Because I mean, I can jokingly say like I mean, we'll debate if we cut this, I mean, I can jokingly say like, I can barely track the letters if we went the whole way out.
And we would debate what Q stands for. If you set members of our LGBTQ community together in a room, we would still be debating what the Q stands for. Questioning or queer, who knows? I think it's queer. And what's the plus? And so listen, that is such a real question, and it's important.
The first thing I would say is each region of the world's going to have its own journey here. So I think it's important to figure out what is right for your local community and for your employees.
For me, personally as a queer person, I find queer makes my life a heck of a lot easier because it is super inclusive of gender identities, of people's different sexualities. It's a very inclusive term. That said, it makes people who are not queer cringe to say it because it has been historically a derogatory term.
So I've generally driven people towards LGBTQ+, LGBT+, something that just signals the inclusion. If you can get comfortable with queer in a lot of spaces, particularly in the United States, that can work well. But it's going to vary, so I'd say listen to people, but that language does matter.
Most people actually don't want to hear homosexual. It's fairly clinical and reductive. I rarely see it actually existing in an actual term, how we all refer to ourselves. And it matters because words have historically shaped this community. Queer was reclaimed, and those words shape how people identify themselves, how they relate to others and how they want to see themselves within the world. So figuring out how to be as inclusive as possible is really important. I think that words matter.
GEORGIE: The words matter, but listen, and respond to what people are telling you, how they identify.
GEORGIE: Dakota, thank you so much. And thank you for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: When you're buying something, what stops you from making the ethical choice? Is it time, price, cynicism, or is it transparency--you simply don't know enough about the product? Despite grand pronouncements and targets by governments and businesses, progress in encouraging consumers to buy sustainable and ethical products is slow. Could a big part of the problem be that too often people are left out of the equation? I'm Georgie Frost, and this is "The So What from BCG."
SHALINI UNNIKRISHNAN: This is a test of leadership for many of the companies, of their boards, of their CEOs, of their C-suite, and of their shareholders to make these moves.
GEORGIE: Today, I'm talking to Shalini Unnikrishnan, global lead for societal impact in the Consumer and Social Impact practices at BCG.
SHALINI: If you think about people-centered design, what you want is to really dig into what are the motivations, what do people really care about when they're using that product. What makes them happy? What is giving them satisfaction from that product? Then thinking about, well, how do I create that experience sustainably? And putting that at the center of the innovation process, of the marketing process, of the pricing process, of every part of how I'm taking that product to market.
Here you can take the example of Tesla, for instance. Before them, there were plenty of car companies that came and said, well, I tried electric vehicles. Nobody really wants them. They've failed. People don't want to pay the premium, etc. And fast-forward, we've seen what design that people really want, features that people really want that happens to be green and electric, can do, and it can fundamentally disrupt an entire industry.
GEORGIE: Isn't it at a price point that people want as well, particularly with Tesla?
SHALINI: It is at a price point that people want. We are seeing, though, that if you look at the data, let's say in North America,
GEORGIE: A bin bag is slightly different than an electric car, though. I think a lot of people might be a able to stomach the 15p or 15 cents or whatever it is, extra, but when you're talking about things that are worth a little bit more, but there are also, there are other elements to, for example, an electric car, charging points, availability, those sort of things I imagine you also need to factor in when you're designing this people-centered approach.
SHALINI: Absolutely. Absolutely. I think one of the key things is no product has to address every part of the market, right? So that's an age-old consumer segmentation theory. In the same way, the innovator, the Tesla, doesn't have to appeal to every single consumer in the market, but what they are doing is proving a business model. What they are doing is proving demand. And now we have the Chevy Volt that goes with the Tesla as well, right?
And so over time, that creates the ability to have a wider range of products in the market. So we don't have to constrain ourselves just because it hasn't solved all the problem yet. And then we get to, of course, none of this can work by purely innovating cool products. It has to happen in the right ecosystem.
No one company is going to be able to solve this. No one government is going to be able to solve this challenge. And finding new friends, finding new people that you're going to collaborate with is going to be a really important part of this journey.
So you can take the problem of plastic waste. You'll have the consumer company put up their hands and say, well, I've made it recyclable. What else can I do? You'll have the downstream players talk about their challenges. You'll have upstream players talk about their challenges.
I was recently working with a very large consumer company, and they'd spent a year looking at what it would take to meet their sustainability goals. And they have bold sustainability goals, not just around being net zero, but around nature and being nature-positive, around equity and inclusion. They went through the process of identifying lots and lots of things they could be doing. It was an entire company process to identify all the little initiatives they could be doing, tweaking their own product, the packaging, the production, the energy mix, etc., etc.
And at the end of the day, they were 25% of the way through the journey, and that's it. That's all they could find within their business and even within the core suppliers that they have. The remaining 75% of the answer needed to be fundamental changes to their business, to who they're partnering with, how they're sourcing their entire procurement structure, suppliers, all of that. So we have set out on a very big journey here. I think at some point we have to realize that it's not going to come with little tweaks and changes. It's going to be big things that need to be changed.
GEORGIE: I always have to caveat this, but I do think this all sounds absolutely in the direction that we should be going. Who doesn't want us to be more sustainable, more ethical, more green? However, as a business and in a capitalist system that works on quarter-to-quarter growth, you would be looking at those sorts of stats and thinking 75% of my entire business model needs to change. And we're in a situation we mentioned earlier about consumers. Do consumers really want it? Do consumers really want to buy green and ethical? When companies are shown very clearly by the media, very publicly to be doing the wrong thing, people are still buying it. And what I think of immediately is things like fast fashion. How then as a company, as a leader of a company with shareholders, do you then get everyone around a table and say 75% of our business model needs to completely change? They're not doing it over there. That company there aren't doing it. I'm not entirely sure our consumers are really behind this either, but I think we should do it for the right reason.
SHALINI: It's not easy. Let's start off there, right? If there were easy answers, we would've done this by now and moved on. It will require some companies to step ahead of others. There is now mounting evidence five years ago, 10 years ago, some of these even longer, some of the leading companies already stepped out. Patagonia already stepped out, Unilever already stepped out, even before some of this evidence was mounting. They've had great value created from this.
As I mentioned before, sustainable products are small, but they're the biggest part of the growth. I'm doing this to capture the new pockets of growth. I'm doing this because there is a sustainability scarcity that will emerge for many of the commodities that I am going to need as climate change begins to have more and more effect on agricultural outputs and other outputs. Some of these commodities are going to start fluctuating. There's much more risk in the system, and this is about creating resilience. This is about creating access to scarce commodities, making sure my business is strong for the future. So it's preparing for growth, ready to capture growth, and it's preparing for resilience and for the risks that are coming.
And by the way, in that process of getting growth and getting resilience, capital markets are shifting, and there's a large amount of capital that is looking for sustainability targets. And I can take advantage of being a first-mover and capturing that. It's more efficient. It can save me money. So, more and more and more arguments building up for businesses that want to tell that story. It's not without risks. It is not without getting uncomfortable. You've had a certain business model that's worked for a really long time, and this is a disruption. But we've seen over and over again that any time there are big disruptions, whether that's a digital disruption or all the way back to industrial revolution, the companies that get going and that start and that ride that wave are going to come out more successful and more resilient in the long run. So this is a test of leadership for many of the companies, of their boards, of their CEOs, of their C-suite, and of their shareholders to make these moves.
GEORGIE: Where do you start?
SHALINI: I start always with the purpose of the company. What are you trying to accomplish for whom? Who are your stakeholders? And for each of those stakeholders, what's the value that you're creating? Climate action, sustainability action, equity, diversity, any of these agendas are anchored in purpose, and they are core to the company rather than something that is being done to the side of the business. That is much more likely to succeed. And to me, that is the simplest but most important starting point for a business.
GEORGIE: But what if your company's purpose is to find fossil fuels, to do massive shipments across oceans, to make petrol cars?
SHALINI: Yeah, this is a great conversation to have with that leadership. Is the purpose to find fossil fuels, or is the purpose to provide energy that powers mobility? Is the purpose to identify energy that powers the production of products that create value in our lives? And if that purpose is understood and described properly, these companies that are facing some of the biggest challenges will also be able to make their transition to a resilient and profitable future.
GEORGIE: All of this seems to start, go forward, and end with people, people-centered designs, people in leaderships who are willing to take risks. What happens to companies that don't put people at the center?
SHALINI: Yeah, I think what you end up with in that situation is potentially great technical answers that really struggle getting adopted, with having the energy and the momentum of the organization to make it successful.
So we have seen many examples of products, solutions, services, business transitions, etc., where companies have had great ideas and great products, but they never take off. And there's lots of reasons for them, but I strongly believe one of those is not really thinking through the people aspect internally, or your consumers and your customers, etc. And by the way, this is not just about the person in the grocery store picking up products, right? That's not the only people part of it. It's the other end of the spectrum. If you are a company, I don't know, making bags of chips, the people to think about are also the farmers that are involved in producing that crop who are about to go through probably the greatest transition since the green revolution if they do change to regenerative practices and so on. So it is a people transition up and down that value chain throughout.
GEORGIE: And yet we live in a digital era where tech is being advanced, automation, algorithms. How does that marry up?
SHALINI: Could we do this all in the metaverse, right? Well, digital, I think, is the most powerful enabler on this journey. It's going to be very exciting to see that intersection of digital and sustainability and how that's going to create the solutions that we need for tomorrow.
I'm personally very excited in BCG for the team that has been working on leveraging artificial intelligence to help companies dynamically understand their very complex carbon footprint and be able to run scenarios and simulate their business decisions and democratize sustainability throughout the organization because digital is creating different interfaces to that very complex data to different parts of the organization and helping them understand and grasp and make decisions with sustainability data in the same way that you would with financial data.
To me, that's one of the most powerful tools we are going to have as we move forward, is where can digital create a dialogue at the intersections? Because the value is not in silos anymore. The value's going to migrate to the intersections. How does digital help us talk across these boundaries that we've created of: you work in this sector, and I work in that sector, and you are my competitor, and X and Y? Digital is going to be powerful at helping conversations and partnerships and collaborations to happen at intersections and boundaries.
GEORGIE: How do you see this in the future? In this ideal—silo-less, everyone connected—how would it look?
SHALINI: I think you would still have, absolutely have competition and the innovation that competition spurs and the advancements that competition spurs. None of this is meant to be anti-competitive. It's not meant to be some fuzzy, theoretical approach. It's meant to have us rethink some of the boundaries and find new sources of advantage.
At the core of this, sustainability is a source of advantage. This is not about a "kumbaya," let's all the good to each other and be happy solution.
It's going to come from new collaborations. You see pharmaceutical companies, airline companies, across the board you're seeing companies come together pre-competitively and co-investing in solutions, where actually instead of every one of them designing sustainable aviation fuel, they are co-investing to create that technology that they can all benefit from. They will still compete to get you and I on the cheapest and best way to our wonderful island vacation in the summer, but that doesn't mean that they can't generate advantage from pulling in their resources pre-competitively.
GEORGIE: You mentioned there about engaging with your consumers. How can companies best do that?
SHALINI: I think the first step is to listen. A while ago, we did this piece of work where we were trying to understand why there were so many financial services products aimed at the small-business holder. So think of the corner shop in Indonesia or in Nigeria or the small shop in that's in rural Tennessee, a lot of financial solutions aimed at helping them digitize, helping them save, so on and so forth. The adoption is very low. Sometimes they try it out. The stickiness to those solutions was very low. So we went out and did this anthropological kind of survey. It wasn't about asking them about financial services.
We actually asked the shop owners, men and women in Indonesia, in India, in Nigeria, in Mexico, etc., what's money for? What's happiness to them? What's a good day? What's a bad day? What do they do with the extra money? What does happiness mean, so on and so forth. From that, we uncovered an incredible set of rich insights.
We talked about who do they trust, why do they trust who they trust. So what you could discover for product design for this company from those insights was actually what really mattered to people, what kind of incentives would motivate them, who the message or the marketing message should come from because those would be the more trustworthy individuals, etc.
It starts from listening and really understanding what lies underneath people's motivations and why people act the way they do. And then I think the other side of it is it comes from narrative and storytelling and recognizing that just creating the solution doesn't mean that people can get it. We're surrounded by a cloud of information right now.
GEORGIE: It's one thing to listen, but I imagine a lot of what people say is very different. So you're listening to lots of different messages. And I haven't read your research on this, but I imagine from Indonesia, India, Nigeria, rural Tennessee, I think that the responses and cultures will be very different and will reflect different responses in people's answers. So if you are a company that has to factor that in, that is something that will be quite difficult to measure or not?
SHALINI: It is. The simple answer is you have to customize. We customize products all the time. Why not customize technical solutions? Why take a solution that's worked and been designed in a city in the US and try to make it work in a developing country? We have to customize, and it's not always going to be a transfer like it was in the past of a solution created in the West and then taken to developing countries. We're going to need innovation and solution design happening everywhere. We are going to need collaboration to happen and solutions to be traded across.
So the simple answer is yes, and that's OK. Let's actually work with those cultural needs, etc., and design something different. But maybe there is also a point to be made, as we looked across these countries, there's plenty that's similar as well. At the end of the day, there are a lot of values, and there are a lot of things that are quite common across people no matter where we are. We all have aspirations that are common. There is value around family. There's value around safety. There's value around well-being and health and wellness of my child, etc. There's just so many values that are common that I don't think that it's as complicated as we may think it is.
GEORGIE: I was listening to another podcast that was talking about barriers. Now, there was a bed company. and a lot of people, a lot of customers, kept going onto this site, designing their own bed. And when it came to the purchasing, they stopped, and the company couldn't work out why until they did a bit of research. And they found out that the biggest problem was people didn't know what to do with their existing bed. So, as part of the process, they said, "We'll remove your bed for free." And as a result, you can imagine, sales went up. By that, I mean, do companies focus a little bit too much on trying to push products without thinking about what is holding people back? And this feeds back into that argument about sustainability. If we want consumers to be more sustainable, are we focusing enough on the reasons why we're not, what is holding us back?
SHALINI: Yeah, I think it's a great point. We see it over and over again, that if we can get rid of simple barriers that we all are actually quite willing to change our behaviors.
There's a toilet paper company. It's actually quite successful. They're called Who Gives A Crap. They don't do plastic packaging. The loo rolls are wrapped in paper, and they're made from sustainable materials and so on and so forth. All that's great, but the simple thing that they do is they deliver loo rolls to your door on a subscription service that works for you.
And over and over again that we see, you take Patagonia, for example, yes, they've got sustainability deeply embedded in what they're selling and the products they create. But they have tied that very closely to a central thesis of their marketing positioning, etc., which is quality. They say fast fashion or clothes that are disposed of are part of the problem. We want things to last. That's better for the environment. We design for things to last.
I don't know if anyone has done the disaggregation of how many people are buying Patagonia for just the fact that they're green or just the fact that they're higher quality or the intersection of both, but those two are actually very closely linked. And it is a sustainability argument to have a higher-quality product as well as it's a value argument. If I'm paying this higher money or this larger sum of money, it should be a higher-quality product that lasts me longer. So, it's a great point. There are important ways in which we need to understand the barriers for people to buying products and what appeals to people and not make it just about, I've created a better widget, and, therefore, people will just buy it.
GEORGIE: Thank you very much to Shalini and to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us, too.
GEORGIE FROST: Every company wants to unlock more value and growth, but how much bias is being allowed to creep in? Biases across your business, but especially from leadership in the recruiting process, can seriously stunt those aims. Acknowledge and compensate for them, boost your business, or ignore them and risk letting competitors steal a march on you. I'm Georgie Frost, and this is "The So What from BCG."
NAN DASGUPTA: Bias is everywhere, and it's everything that might seem small. And then it's big bias. It's unconscious bias, and then it's pervasive systemic bias that's been built into what we do.
GEORGIE: Today, I'm joined by Nan DasGupta, a lead in BCG's People & Organization practice, and an expert in people and organizational strategy.
NAN: Oftentimes, you have a direction in mind. You want to achieve certain outcomes. But the real question is how do we get there? Gender equity and inclusivity is one of those big areas where, actually, we know we need to do better, but we simply don't know how. It seems a little bit too big of a problem. So companies are looking for, we are all looking for, ways to move the needle and actually make progress on that really good ambition.
GEORGIE: Don't worry, Nan, we're going to solve this in the next 20 minutes, aren't we?
GEORGIE: Let's start with unconscious bias. How big an issue is it in the workplace and how do you understand it?
NAN: Well, I think bias is a big term, and it's pervasive. I mean, it's certainly in the business context, in the corporate environment that we work in, bias is everywhere. And it's everything that might seem small, and then it's big bias. It's unconscious bias, and then it's actually fairly pervasive, systemic bias that's been built into what we do. And if I were to describe, Georgie, how I think about it, I mean, fundamentally, this may be a provocative way to say it, but our business world, our context, was made by men for men, and it works for men.
GEORGIE: How? I like provocative, and that's OK, but it's a sentiment that we hear quite a lot, and I think it needs some qualification. What is the evidence of that and how is it manifesting itself?
NAN: Well, I think the evidence in that is how we make decisions in the context of recruiting people into our talent pools.
GEORGIE: While we will have unconscious bias of some sort, to varying degrees, that individual bias can filter through a company, from a leadership level, to become that systemic bias that you spoke about.
NAN: I agree. I agree. And I'll give you a couple of examples where I see this at play.
GEORGIE: Are we not in danger here of putting women in a box? Should the emphasis be less on encouraging companies to perhaps accommodate these more, quote-unquote, "traditionally female" ways of working? And more on the men themselves, getting men to want to, to take up some of those caregiving roles?
NAN: For sure. I think that's why it's important that we focus on the act and the work of caregiving and not just the act of making the workplace equitable for women. Honestly, that is a bias that impacts men in a very dramatic way as well. I think, I believe, I know, there are many men in this day and age that actually get tremendous purpose, reward, satisfaction, joy out of caregiving. And yet biases prevent them from really dedicating themselves more fully to that role in their family, whatever their family might look like. So yes, we have to break that stereotype that caregiver equals women. It does so happen, though, that in today's day and age, in most societies, women are carrying the massive load of caregiving, if you will, more so than men. So that is the way it is today. And that's why that bias against caregiving, the fact that we don't recognize caregiving as valuable, we often don't pay for it, or we underpay for it. All of those biases are impacting women in a very, very dramatic way today.
GEORGIE: Actually, this can be a lot smaller, a lot more pervasive in the way that people think about the way that women react to certain things. There's a famous chef here in Britain who has made a comment about why he prefers to work with men, because they deal with pressure better, because women are too emotional. A famous scientist once said, "One of the problems with women in the lab is you fall in love with them, they fall in love with you, or they cry." Right, those are two examples of very stereotypical ideas of women being emotional. My first question would be, what is the damage of that? And two, what's wrong with emotions?
NAN: I think that's the right question, right? So of course we have so many stereotypes, and those examples are excellent ones. I'm not saying that there are no differences between men and women or between people in general. We have so many differences between us. The problem is how we've been ingrained and trained and systemically biased ourselves to thinking emotion is bad, right?
GEORGIE: I'm curious, you and I both come from backgrounds in industries that are heavily male dominated. Me, before finance, which is heavily male dominated, I was in sport, and you in engineering. How did we manage? Was there something that we can do better or differently, or did the rules not apply to us? Or did they, we just didn't realize? Saying that, I've got lots of examples of sexism that I could talk to you about, but this is only a 20-minute podcast.
NAN: We'll do that another time, Georgie. You know what, Georgie, I don't know about you, but for me, as I grew up loving science, loving sports, participating in sports, it actually never occurred to me this was unusual or I shouldn't. It just didn't occur to me. And I credit my parents. Absolutely I credit my parents. At no point in time did they ever reflect to me that, "Hey, wait a minute. That's a weird path. Don't do that." They weren't thrilled that I was playing soccer, because I was injured a lot, but it wasn't because I was a girl. I think somehow the truer you are to yourself and have the confidence, that self-expression is valued, the more you're able to sort of filter out some of how others are perceiving you in that field. But I'm not trying to diminish the impact of being the lonely only or always the minority. You do feel it. It does take lot of resilience and resolve just to say, "You know what? That doesn't really matter. I know what I bring to this party."
GEORGIE: That's made me think of two things. One, do you think that we, to a degree, internalize that? Some of the comments that are made: "you're emotional," "perhaps women shouldn't be in sport." It's already within us. We've just for some reason chosen to ignore it. But also the importance of role models, because my parents played a very important role in me deciding that I could go into sport or I could do anything I want to. Because, well, my mom was always the main breadwinner. She was always the one out at work. And so that's the role model I had growing up. How important are role models in business?
NAN: Incredibly important, in my opinion, I mean we hear all the time, and I certainly felt this way, moving up through the ranks in my corporate career that it's very helpful to look ahead and say, "You know what? I can see myself being that person. I can see myself following that success pattern." And it's troubling when you look ahead, and there's no one that you can relate to. You just feel like you have to forge a path. You have to blaze a trail. You have to prove to everyone that you can do it. So role models are very important, and we're stuck in a numbers game right now where we don't have enough role models. So there's an additional ask and tax and burden on those that we have to really make sure that they are able to have the impact on all those following them.
GEORGIE: How do you solve that problem in a business context?
NAN: Well, ultimately,
GEORGIE: Now how much can and, indeed, should we force change? Because on many levels, women are smashing it. I mean, girls in the UK are doing better in school than the boys. In the US, women reportedly make up almost 60% of all college students. I only need to look at my own old profession, sports journalism, and see how far that's come. Shouldn't we just wait? I think there's an argument that says, "Look, it's going to happen anyway, and actually we should pat ourselves on the back for the speed of that change and where we are now."
NAN: Heck no, as my daughter would say. Heck no, no. I mean, look, I don't feel like we're smashing it. Look at the representation alone of women, the CEO ranks, and the board tables, the important decision-making tables in politics. We are dramatically underrepresented. And that doesn't make sense. That's not right. I mean, with all due respect, as a society, as a human race, I don't think we're crushing it. I don't think we're crushing it. We have a lot of things that we can do better on. And I have to believe that giving other voices a greater chance to weigh in on how we do things, on how we lead, on how we drive society is going to make us better as a race, as a human kind, as a planet. We have to keep reminding ourselves that, you know what? We don't have equality in the workforce, certainly, in society as well, in many societies. And yes, we do have to push that conversation.
GEORGIE: To go back to the unconscious bias conversation we were having before. There's obviously unconscious bias with leaders and how that filters down into a company. Of course it does. But what about, I speak as women here, our own unconscious biases, perhaps toward ourselves, our own ambitions. Is there something that we could do as women to put ourselves in better positions that we could feel more comfortable in the workplace?
NAN: Yeah, I think first of all, unconscious bias is in everyone.
GEORGIE: I want to ask you, because actually it's something I've been focusing on a lot at work, about menopause. Seems a strange start to a conversation, but I think it shouldn't be. I think it should be a conversation that we all have. There's some research in the UK from our trade unions saying that one in four women have considered leaving their job due to symptoms of menopause. And yet only 19% of businesses say they have any policy toward menopause in place. This is something that is affecting 13 million women in the UK. And it is something that doesn't seem to be considered by businesses. Why is that?
NAN: Because nobody wants to talk about menopause, Georgie, let's face it. I think it's a great question, right? And it is such an interesting point that menopause occurs in a woman's stage of life where they're probably at that very senior stage of their career where they might be in consideration for something bigger, where they are asking themselves, "Do I really want something bigger? Because right now I'm not feeling it." It happens at a very, very particular point in a typical career life stage. And nobody wants to have that conversation, right? Nobody really wants to talk about it.
GEORGIE: But why is that? I mean, technically, menopause is just one day, but perimenopause can last over a decade. It can affect women in their late 30s, 40s, 50s. These are key periods for women building a career and trying to reach the top. And I'm wondering if the reason that it's not talked about or considered in company policies goes back to that idea that you were talking about right at the start of the podcast of the business environment being created by men for men. Can, should, businesses do better here?
NAN: Absolutely. Absolutely. But to be honest, because there are so few women in those positions that might be asking the questions that you're asking, Georgie, it doesn't get brought up, right? It does not get brought up. But it should be, it should be. And honestly,
GEORGIE: Exactly right. I mentioned menopause much as we mentioned caregiving, having children, taking career breaks, all things that that affect women, largely. If you were to talk to, as you do, you go into businesses regularly to discuss these sorts of things, where do you start as a business leader?
NAN: Well, to me, the starting point is always when you look at representation, when you look at just the raw numbers: Is that right? Or is that wrong? And you have to fundamentally believe that we have to change it, right? We actually aspire to more balance and complete balance, complete equality, if you will. Every part of the organization. That has to be the aspiration. I think as long as you think that, "OK, well, this industry is always going to be skewed this way, or it's always going to be challenging for a woman to devote herself to her career the way men do." As long as you keep those beliefs at the back of your mind, I think we're stalled. We're stalled. So I think that's the start. So the belief and just the general acceptance that there's got to be a different normal is the starting place. Then I think it's systematically looking at all of the processes that we have in place, all the practices that we have in place to grow our talent and our organizations. Everything from who are we recruiting? Where are we recruiting them from? What is our message to them? What are our belief systems about? What "fit" means? What experience you need to have. Being willing to challenge that with the overarching North Star in mind that, you know what? It ought to be equitable in the end because that's actually what normal should be.
GEORGIE: Do you believe in targets?
NAN: I believe in ambitions and goals. I think quotas and targets are dangerous if applied in too crude a fashion, right? I think what's important is setting an ambition that is a good ambition, a bold ambition, and then really keeping yourselves accountable to making progress and doing the right things to drive that progress.
GEORGIE: What if it's a choice? What if women want to get to an age and have children and leave the workplace and not have those sort of high-pressure jobs? And what if that's what, not all, of course not all, but what can you do then as a company, if you're trying to not necessarily fill targets but certainly have a wider diversity of thought?
NAN: I think these are all individual characteristics, choices, preferences, priorities, and values. So absolutely there will be women, and I would argue there will be men, who would actually prefer to devote their lives to their children, for example, who would like to step out of work at an earlier age. Absolutely. I think at the moment, the forces out there are making those predominantly choices that women feel they have to make because they don't really see a good path outside of that choice spectrum.
GEORGIE: Is there an argument though that, yes, to a degree, you could say that the way that industries and work are structured in businesses is not conducive perhaps to women wanting to push themselves to leadership roles, but could that also just be society? Aren't businesses just playing a role, which is very difficult to change when society has those norms and expectations?
NAN: Well, I think, obviously, there's a big societal question here, and societally, we need to change and make progress. But I disagree with business's role is small. Actually I think business's role is huge. And if not business, then who? If businesses aren't actually declaring that, "Look, we actually aspire to something better. We know we will be a better company. We'll be more innovative, we'll drive better results. We'll be a better home for the best talents if we are more inclusive. We know this and therefore we will work on that and we will do better. And we will actually move the needle." If companies don't do that, oh my gosh, this is going to be so slow, right? Society moves slow. I mean, absolutely parents play a role, institutions play a role, governments play a role. Absolutely. And a lot of the pressures and the stereotypes and the biases are really driven by societal factors. But every company can control their culture.
GEORGIE: Nan, thank you so much for joining me. An absolute pleasure. And thank you for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org, and if you like this podcast, why not hit subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: Right now when it comes to climate, business leaders are watching each other carefully. There have been big promises and big commitments, but the world is a volatile place. If you're a CEO, you're focusing on threats to global trade, the Great Resignation, and your customers' tightening belts. So is it better to let your competitors move first on climate policy and learn from their mistakes, or be out in front investing early? Or is treating climate like an oncoming storm for your business exactly where we're going wrong? I'm Georgie Frost, and this is "The So What from BCG."
GEORGIE: Today, I'm talking to Rich Lesser, former CEO and now global chair of Boston Consulting Group who led BCG's presence at COP26.
RICH: While this COP overdelivered against the political backdrop and incoming expectations, it still underdelivered against the science. We need to be on a pathway ideally to 1.5 degrees, if not that, as close as we can get. And while this was the targets that were put forward were meaningful improvements, we're not yet on the pathway that we need to be on.
GEORGIE: The desire from businesses and business leaders is clearly there, but if the systems and structures aren't in place yet with which to meet that demand, how can we hope to achieve what we've already committed to, let alone even more?
RICH: First, getting to the commitments that have already been made will not be easy, and frankly, in the very short term, what we're seeing with the war that's going on, the implications for energy security that many parts of the world are feeling, let alone even worse challenges like food security, but even on the energy side, we face near-term challenges and we face, you know, broader medium-term challenges to realize it.
And some of it is working with governments to put good policies in place, policies that encourage decarbonization, ideally, including a price on carbon, policies that encourage investment in new technology, because while we can make enormous progress with the technology that exists today, we will never get to the net-zero goal unless we bring down the cost of advanced technologies that'll be critical to go after--the harder to abate parts of our global economy. So we do need action from government. But it is also true business can do a lot even with the mechanisms already in place. And what we see in working with clients across many, many sectors is that you can actually take out more carbon than you realize, not just in your own operation, but with your business partners, more than you realize with the technologies that currently exist. It does require a change of mindset, it does require reprioritization, it requires some investment. It's not easy, but it is doable.
GEORGIE: Rich, how did you as CEO of BCG reach your own climate commitment?
RICH: I was fortunate. When you're at BCG, you have very smart, passionate people around you. It's just part of being here. It's one of the privileges of being here actually, and I was fortunate to have a number of colleagues, who felt like the world was not acting fast enough post the Paris Accord, so this is in the 2017-18 period. We weren't seeing the actions that we had thought might come out of the Paris Accord.
That was true across the full economy, and frankly, around the world, and that BCG was in a unique position to have impact in accelerating progress, because we have this privilege of working with businesses and governments around the world. We know how to make really hard change happen; we know how to solve hard problems, and while we were working in this space, we weren't working at the level we needed to, and if we were going to be credible to work with others and advise others, we had to walk the walk ourselves and our own commitments, while we had green initiatives in place in different offices, but we were not doing what we needed to do to show our own commitment to being net zero, let alone then have the credibility to walk into somebody else's office and say we can help them. When you first hear tough messages, I think we all have a tendency to maybe put up antibodies at the beginning to, to resist a bit, but--
GEORGIE: Did you?
RICH: [laughs] Yeah, for a bit, you know, I'll send a video to the entire partnership of how we are not doing enough, whatever. You know at first you say, wow, you know, really? But then you say, you watch the video and you say, OK. And I was just entering my final term as CEO, you also start to think about your legacy. And I feel like this is like a really important thing, and if I don't do this, I'm not meeting the responsibilities to our partnership, to the world, to what BCG lives, tries to live in our own purpose statement. But I think at some point I said, I really just thought they were right and I was wrong to have...not ignored it, but not taken it at the level of seriousness that it deserved to be treated.
And so I told the partners that. I said, we are going to change the way we act, but we're also going to realize that our biggest impact-- that we do have to get better ourselves-- is to help our clients, because we work with clients across so many sectors of the economy, get tons of emissions across our whole client base, and how do we help them improve? And for some it'll take longer, some will go further, some will go less far, but we should be a force for good and a force to help drive positive change and do what BCG does best, which is help our clients understand how they make changes they need to make and do it in a way that leads to sustainable and lasting advantage for them, and that we are uniquely positioned to bring those kinds of insights and then to also contribute to the world through our Social Impact practice. So then you get to work.
GEORGIE: With so much volatility in the world, are we in danger of taking a step back perhaps from the commitments made in Glasgow? I say this because I was at a financial services event last night actually, and there were a people there who were saying to me, do you think consumers really care about green anymore with the cost of living crisis, inflation so high, a war going on in Europe? I mean, it's also been argued the Ukraine war spells the end of globalization, yet this is surely a global problem and a global solution is required. Do you sense that some of that momentum from COP26 is being lost and actually, given the current situation, could seriously be dented, or are you more hopeful than the people last night?
RICH: Both. War--when it leads to energy issues that are going to raise energy prices, and food security issues that are going to raise food prices, and people worrying in a way they haven't about security and all of those pressures--how can that not take up a high share of mind? So in that sense, I think those concerns in the very near term are justified. We're all hoping we'll get beyond this before too long. And I won't try to project how that's going to evolve, but we just have to remember we're in a 30-year battle here.
To your point about consumers, I think it's a fair observation, not in every sector and not every consumer, but many consumers in many sectors are currently unwilling to shift behavior, or pay premiums for more green products, at least not high shares of them. A few, a small percentage will, but not enough. But frankly we're making it so hard for consumers right now. There's no consistent labeling. The messages of what it means to be green aren't clear because the measurements aren't fully transparent. At one level, it's easy to say consumers don't care. It's another to say it's our job, as business leaders and government leaders, to create an environment where consumers who are committed will make smarter choices on this just as they hope we will in other aspects of their lives and where we invest to educate consumers on what it means to make smart choices.
And very little of that has happened. And so to write off the consumer over a ten-year horizon I think is both wrong and dangerous for a business who thinks that way because they could really miss the boat. As we've seen on what's happened on electrified cars and how fast that market has taken off versus what people were projecting five or ten years ago, that will happen in other categories. But it's also underestimating the consumer. Yeah, if I make it really hard for people, of course they won't do it to the extent we want. We need to make it easy for people to make those choices.
GEORGIE: I said at the start, a business leader balancing their responsibility to their company with that of the planet, but do you think there is that sort of split, that you can only do good for your company or for the planet, or actually we're at such a stage now that if you don't consider the planet in your business planning, you're not considering your business?
RICH: believe it's that logic, of it's one or the other, breaks down for two reasons. One, just in general, companies that live purpose, companies that come at things with a multi-stakeholder mindset, yes, of course they have to deliver value to their shareholders and their owners, but they also deliver you to employees and society and customers and doing the latter is essential to being able to create long-term value for the investors. We've seen that over and over. And what, in BCG parlance, it means the total societal impact and total shareholder returns are synergistic rather than in conflict with each other, if done well, if done with strategy and thoughtfulness and good execution. It doesn't mean one automatically is synergistic with the other, but it means it's very possible to make that.
The second thing specific to climate and sustainability:
To not think that it's in your business's interest to figure out how to align with that tailwind rather than to argue for the status quo and to face that as a headwind, as a business leader, (I heard Indra Nooyi, the former CEO of PepsiCo, talk so passionately about, the first starting point for good strategy is look to align with tailwinds rather than try to run your business against headwinds) if investing in climate and sustainability, when the world is going to spend trillions and trillions to do this, and governments and customers are going to change their behavior, sometimes faster, sometimes slower, if that isn't the kind of tailwind you want to align with, I don't know what is.
Now, does that mean it's easy, does that mean it happens in every business at the same time? Of course not, and it doesn't mean you can do everything that the world might want you to do all at once. It does mean, considering this is a core part of how you develop strategy and then not just how you could develop the strategy, but then how you actually act on it, how you engage with society more broadly to be an enabler for good rather than a resistor. I mean, I think all of those things take on great importance.
GEORGIE: There is also tailwind and headwinds within moving forward in this space and trying to reach net zero. Do you want to be a company that just goes with the easy approach and tinkers around the edges, does the minimum of what you need to do to get to where you want to go, or do you want to be a business that stands out in front, that perhaps makes bolder moves, bigger investments, or is there a first-player disadvantage here?
RICH: It's going to be some of...and part of the job of leadership is to figure out how to do that which is right in the right way so that you can also be successful as a business, so that you can thrive, so you have reinvestment capacity, so that you can take market share and then double down with winning strategies that are aligned with our planet and climate and sustainability, and other priorities. I would argue diversity and equity and inclusion would be another one of those. It's not the only one. It's just the one that touches all of us globally in such a huge way. I think that's the responsibility.
But if you know that the right change is a really hard change, government policy that forces everyone to be transparent, that allows it to be easier to show that you're differentiated if you're outperforming, because others can't obfuscate it so easily, that force everyone to incur some level of transition cost to a lower carbon economy, so if you're the one making the investment, it doesn't seem like your costs are going up and no one else is, everyone else has a cost advantage, I mean, those things are in your interest.
And I use the business to government example, but I could say that for companies in the same sector. Imagine being a supplier to four different companies downstream of you and each one of them sets different standards of how they want to measure, of what data you need to submit, of all those things. Imagine how complex you made it for a supplier, which might just be a mid-sized company, to try to live up to its customers' expectations. So when sectors align and say, we're not going to align on our plans, we each make our own plans, but we are going to align on the kind of data we want from our suppliers, the formats we want it in. Sectors aligning on things like that help everyone.
So while I do think individual actions of companies need to be bold, they also need to be thoughtful about how we move together in ways that make it easier and less risky for all of us to move and don't have the ones that go a little faster feeling like they're really taking risks in terms of their near-term performance in ways that will scare off their investors or put more pressure on them to not take those kinds of actions.
GEORGIE: You spoke a lot about engagement, so engaging across industries, engaging with sector leaders. It seems that messaging, communication, engagement, collaboration are absolutely fundamental.
RICH: I completely agree. I would argue that engagement strategy will be different for different companies and different sectors, but is critical everywhere. I think almost every leading company needs to engage across its supply chain, should be engaging with others in its sector to align on standards, to talk about initiatives that they can move together on that will make it both less risky and more impactful than each company trying to do it alone, to engage across industries on things like breakthrough energy catalysts, where companies from across sectors try to fund new technology or do other things to ensure progress, and of course, of course, with the public sector, to try to get smart government policy that can allow us all to go further, faster, and to still have a very productive and growing economy in the process.
That engagement strategy is absolutely essential, and every CEO needs to think carefully--three things: Commit, act, engage. Commit, you do as an organization, or as a leader and as an organization. Act, you have to mobilize your team and figure out how to make it real.
GEORGIE: Rich, you finished your final term as CEO of BCG very recently, but are you still personally as committed as ever to the climate cause?
RICH: Yeah, so I stepped out of the CEO role at the end of September. It was a big change. I'd been doing that role for a long time, and honestly, I didn't know what I would do next. Even a year ago, I wasn't sure what, where my time would go. But as it turns out, it's probably about 60% to 70% of my time now is working on climate- and sustainability-related topics, partly helping BCG, because we've started this new practice under my successor who formalized it as a practice, and I'm so excited about that. So I try to contribute to that team in any way I can.
Some of it's talking to CEOs and other business leaders. Some of it's helping a few clients specifically because I have to stay on top of what it takes to do this; and the real problem...it's easy to talk theoretical, it's hard to be on the ground, actually making it happen. And then of course, to contribute to society, meeting our COP delegation as senior advisor, to the WEF CEO Climate Leader Alliance, you know, and in other societal ways where I can contribute and make a difference.
I feel like I have this privileged position where, having been a CEO who had to step up to these challenges myself, and as I said, wasn't the first person to realize that, you know, I had to come along on my own journey to get to talk to leaders across so many businesses and across society, and to have the time now to really engage, whether it's in the science of new technologies or the operational challenges of changing supply chains, or CO2 AI and how you put a whole new measurement and AI infrastructure in to make this better. I've got this privilege of time and now it's my job to use that privilege in the most productive way I possibly can.
GEORGIE: Do you think this situation makes the job of a CEO much harder, or is it just another challenge to be faced, and actually there's a real opportunity? As you said, I mean, just one aspect, to leave a legacy, to leave a very positive lasting legacy on a company and on the world.
Yes, it is a harder job. It is also a more privileged job because I think a decade ago when you stepped into the CEO role in most companies, BCG was a bit different because we're a private partnership, but I'd say for most companies, the focus really centered around the shareholders and investor returns, and that was the one yardstick. I think what we've seen over this last decade, where purpose has come much more to the fore. There's so much more emphasis on how do you articulate purpose? How do you live it, how do you tie it to your history? How do you use it as an engagement tool within your company and in the world? It's a privilege for a CEO to have the license to do that versus just thinking about like what they're going to deliver over the next year or two in terms of performance.
And then the other thing, I'd say, the tools that are at our disposal to make a difference. I mean, what's going on in technology, and not just the technologies we've already put in place, the ones that are coming, offer enormous opportunities to build a deeper relationship with customers, to have better data to make smart decisions, to have new tools to create better offerings for customers. I mean, it's an extremely exciting time, but you know, with excitement comes stress, and there is a lot of stress too.
GEORGIE: Rich, thank you so much. I really appreciate your time.
RICH: It's really been a pleasure, Georgie.
GEORGIE: And thank you too for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you like this podcast, why not hit Subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: How do you feel when you wake up on a Monday morning? Invigorated at the start of a brand new working week or full of dread? Here we go again. When it comes to employees, most leaders focus on their thoughts and behaviors. But when it comes to creating the right culture, feelings and emotions are just as important. As our work and home lives become ever more entwined, and more of us reassess our work life balance, is all this about to change? I'm Georgie Frost, and this is The So What from BCG.
GABI NOVACEK: We don't quit jobs always because somebody's going to pay us better or there's a better benefits package. Absolutely, that does shape decisions, but a lot of the times we quit a job because of how it made us feel.
GEORGIE FROST: Today I'm talking to Gabi Novacek, a core member of Boston Consulting Group's, Consumer and People & Organization practices, and a fellow at the BCG Henderson Institute working to advance diversity, equity, and inclusion in the workplace.
GABI NOVACEK: I personally have been on a little bit of a roller coaster and it actually started before the pandemic began. If I rewind to March of 2019, my wife was diagnosed with stage four colorectal cancer. And I mean, it's a traumatizing piece news to receive. And at the time when I had to figure out like, how was I going to balance dealing with this incredible kind of crisis together with a job that I love and I am passionate about, but it is incredibly all-absorbing of your time and energy? I had to really rethink how I was going to make it all work.
And I started to reconfigure my work life and I started to drop leadership positions and step away from things, but it was really the pandemic then that was the next big inflection point for me. And it was all of a sudden finding myself- I was at home and I was on Zoom or I was at my computer and I was doing work, but there was so much going on behind the door in that personal life, and
And I found myself a really reprioritizing where I spent my time at work on the things that challenged me, that delivered impact, that that allowed me to continue to learn, to influence others. And if it didn't do that, I dropped it away. And now, we're 18, 20 months into the pandemic. I'm continuing to work part-time, which I never thought I would have done, but I it's really become kind of my new normal as I look to balance things in very different ways.
GEORGIE FROST: Your role in the work you do with diversity, equity, and inclusion in the workplace to me feels very much driven by feelings of emotion. Had you ever looked at it in the same way that you do now? Having that experience, has it impacted on how you look at your role and how you approach trying to find solutions?
GABI NOVACEK: I can't even begin to describe how much it has. I mean, I think there's one- there's an inner level of that, which is, I'm not a mom. You know, I had never taken maternity leave. I had never had to figure out how to balance work and kids. And I think there was one slice of this which was just taking on the role of caretaker, completely reshaped my understanding of what it is that folks are wrestling with every day.
But I think at a more profound level, it really prompted me to step back and say, we spend so much of our energy on DEI work, doing- it's profoundly critical, the efforts to say, how do we address issues of pay equity? How do we address issues of equity and promotions and hiring and the like?
And as we think about a way to drive that next big step change of diversity, equity, inclusion, there's a big missing link, which is every one of us is going to make a choice. We're going to make a choice to get up, to feel happy, to feel motivated, to want to stay in the job. Like how do we actually tap into that? You know, and as somebody who's gone through crisis and has had to make that choice, what is it about the job that says, "I still want to keep doing this. I still want to get up, I still want to engage. I still want to put my energy against this." It's such an important part of the equation.
GEORGIE FROST: I want to talk about the way that that we think about work. And I'm wondering if we've got it all wrong in a way. You only have to look at children to see that the best way that they learn and develop is through stories, through narratives, through play, and we still love play. And you just have to look at some of the astonishing figures coming out of how many hours we played Fortnite, not me included, during the pandemic, many, many hours. And yet of us get this sense of enjoyment, this sense of achievement through playing something like Tetris. You can tell how old I am. Satisfying though nonetheless pointless, than we do from our work. Can businesses, can leaders incorporate that mentality, that play more into our work so that we can get more of a sense of purpose, more of a sense of motivation on Monday morning?
GABI NOVACEK: I think we can, and I think it can happen in two ways. So one is when we research the underlying drivers of what really motivates people in the workplace every day, I think we often confuse this idea of advancement with achievement. And there is this real sense among a very large proportion of the workforce that I come to my workplace every day and I am motivated, I am happy, my brain lights up because there's something that I'm doing that is challenging. And I'm interacting with others in order to do things that solve a problem or get to something different, or allow us to tackle something that's complicated. And it doesn't matter what job role you're in.
And I think it feeds into that idea of play a little bit, you know, which is this notion that we're not always motivated by the next big job title or the award.
And I think the second piece that we've really seen throughout the pandemic is as we have been pulled apart from one another physically, it's been so fascinating to me, as we think about coming back from the pandemic and what is the time that we spend together? What is it best used for? It is when we need to connect, to affiliate, to play, to find joy, to creatively solve problems together. That's actually when we are best when we work together.
GEORGIE FROST: So how then do businesses respond to that change?
GABI NOVACEK: So I think we, just at a fundamental level, we need to get away from talking about emotions as something shameful. You know, like I can think about times when I have broken into tears in the workplace and sitting in my office and trying not to be seen through the glass wall that everybody can see. You know, we've all had those experiences. And I think we've all been trained and coached to feel like that is something shameful and that's something to hide. That's not really what I'm talking about when I talk about emotions.
When I talk about emotions, what I mean is that we are all prompted to make decisions every day based upon a set of things that are going on inside our brain that transcend the functional. So my mom wouldn't let me eat sugared breakfast cereal as a kid, and now when I'm walking the aisles of the supermarket, I pick the one that has the most colors and the most sugar imaginable, not because it makes any kind of rational nutritional or economic sense to pick that box, but because it triggers that emotion that 40 years later is saying, "You know what? I'm going to stick it to mom and get that cereal, right?"
I mean, this is everything from frontline retail to the executive suite. It's like a collective post-traumatic growth experience that we're all going through at the same time and actually really evaluating the calculus by which we make these decisions, and some of those factors are starting to play a much bigger role than they ever had in the past. And so businesses are not recognizing that the people who I depend upon to be successful, I mean, we're at the point where restaurants are not opening because there's nobody to serve the table. I can't possibly have a successful business if I'm not thinking about my talent in a way that includes a conversation about what is it that they're looking for when they come here beyond just the paycheck?
GEORGIE FROST: Is it as simple as saying this great resignation is due to the fact that we've all had a pandemic, we've all sat down, we've all been at home and all realized that actually there's more important things in life than earning money and working, or is it something else at play?
GABI NOVACEK: Think it's multifaceted. I mean, I think there is a very fundamental set of issues that are going on in that we have had massive segments of our labor force who have not had wages that have kept pace with economic growth and inflation, who have not had security when they come to work.
When we talk to certain segments of the workforce that are more hourly in nature, or perhaps were more in the frontline roles during the pandemic they talk a lot about this idea of security and that of course gets manifested in things like I have an employer that doesn't respect my health, welfare, and safety when I come to work. I have an employer that doesn't provide me with health security in the US market where we're dependent upon that from our employer. And so there's some very fundamental issues that are going on, which are just about equity in the workplace.
But there are now also these broader questions as individuals have retreated into these workspaces in our homes and said, "What is important to me?" You know, I think the simple fact that I'm an executive in a fairly intense job, and I haven't worn business casual from the waist down in 18 months, right?
GEORGIE FROST: When I'm having a bad day or something is on my mind personally, I love going to work. I love the fact that I don't have to think about what's going on in my life. I don't want the two bleeding across. What would you say to people, businesses, who say this has all gone too far, this wellbeing, this diversity and inclusion, all of them are wonderful things to have, but have we not just gone a bit too far? Is it not just go to work and do your job?
GABI NOVACEK: Yeah, it's funny. I don't know if you ever watched "Mad Men," but there was this great scene where Don Draper is mad at Peggy, and but I he's like, "I pay you, I pay you the money." You know, like that's it, like you have the job and I pay you the money. That's what I owe you, you know?
GEORGIE FROST: I sure there's a lot of bosses that think that, right?
GABI NOVACEK: Yes. There's something to be said for that, and I think at the end of the day, we are businesses and we are in business for a purpose and we need to fulfill that mandate. That is what we are here for. I think the challenge that gets presented by that though,
And you depend upon that human capital to generate the things that drive the business. And when you struggle to hire your fair share of talented people in the market, when you struggle to keep them employed and staying with you, when they come to work distracted and unmotivated and unhappy, they don't generate the types of work and thinking that you would hope. And there's a very, very real impact on the ROI that you get from those human beings. And the world is becoming more complicated and it's becoming more diverse, and it's simply a cost of doing business is to be able to actually see a diverse group of human beings be successful inside of your environment if you actually want to be a successful business.
GEORGIE FROST: Agreed. And we're talking about sort of inside your environment, the things you control. I was reading about a company that asked their employees at the end of the working day in the lobby to press a button, smiley face if they're feeling happy, frowny face if they feel sad. I don't know about you, it sort of reminds me of service station toilets and how clean they are, but anyway, somewhat crude and maybe a little gimmicky. Of course, it depends what you do with that information. But there's certain things that businesses can control. You know, the quality of your work. Is there some bullying going on, those sorts of things? But they can't control what happens outside. So where do we draw the line? How, as a business, are you trying to measure, trying to promote satisfaction at work with the things that you can't actually control?
GABI NOVACEK: So we have focused on the things that we can control, but we haven't been broad enough in what we understand that to include. Like I talk a lot about we focused upon what happens to people when they come to work. Am I experiencing kind of unconscious bias from my manager, or did I get left out of a promotion opportunity because there was something that was perceived about me, did somebody use language that was offensive?
Like, there's a lot of things that happen to us that are squarely in the realm of businesses to say I need to create an environment that's free of discrimination and bias and the like. But I think there's a broader aperture to that.
Or do I actually need to say, I actually want to motivate them to be innovative, I want to tap into their desire to be successful, I want to find a way to give them the mentorship that they seek, because for them it's really important to feel like they have role models? Like I'm actually creating a broader environment that breeds success in the workplace environment. I'm not going to solve everything.
You know, I think there's been a lot of very well intended work on topics like racial equity and the like that have been trying to bring a lot of discourse into the workplace, and it's really interesting and it's really important, but at some point you start to say, "Okay, is that book club, is that going to be the thing that actually changes the outcome for somebody at work?" Like, yes, it might make them feel better, because somebody's listening, but is it really going to change what they experience day to day when they work in a team?
Is it really going to change whether or not they get that opportunity? Does this tap into their motivation to do work that has impact? Maybe, maybe not. And I think that's where we start to run into trouble is we don't always compute what the intended outcome is of where we're focusing.
GEORGIE FROST: Some of the argument that's been thrown up about diversity, inclusion, wellbeing, been viewed as actually causing divisions between people, the mothers that are allowed to work flexible hours and then other people saying, "Well, that's not fair." Could some of these things create divisions? How do you make sure that that is not the case?
GABI NOVACEK: Oh, absolutely, absolutely. And I think we're seeing it in the data as people talk about in our survey and research work, their perceptions of the value of DEI programs and whether they benefit from them or are harmed by them, etc.
GEORGIE FROST: Do they explain why?
GABI NOVACEK: So we follow up survey data with focus groups and interviews to try to understand and what it boils down to is this sense that, and I'll make it sound academic, but it's a little bit of there is a fixed quantity of power, resource, and opportunity available, and when you disproportionately allocate some of that to people who have been identified as marginalized, I lose out.
The reality is those disadvantaged groups have missed out. You know, we actually are righting what have been intensely discriminatory and unequal processes that have manifested through time, and we are trying to reshape behaviors and outcomes such that they reflect what should be sort of everybody getting their fair share at the end of the day, and that is very painful.
But I think the there's another piece of it, which is you can focus on how do I better allocate a total quantity of things or you can say how do I actually make that quantity of things bigger and more substantive and more kind of inclusive of everybody? And so one of those things might be to say,
At the end of the day, we have to actually deliver on our jobs. We have to do what the work output is that's demanded of our role, but I can actually step back and say, "I can re-craft the rhythms, the rituals, the routines of the day in terms of how we work together to get that done so that more people can be successful in delivering that."
And what you're doing is you're taking the conversation away from: a target has been set and I'm not part of that target and I'm going to lose out, and instead, what we're saying is no, we're going to reshape how we think about kind of the nervous system of the way we work every day, and we're going to rebuild it in such a way that we're actually expanding the breadth of who can be successful in that context, in that environment and who can tap into the things that matter most to them. It's a win-win when that happens.
GEORGIE FROST: You spoke about humanity. I'm wondering if you have optimism that what's happening at the moment, whatever you want to call the great resignation or the pandemic or whatever, is actually making a seismic shift in the way that we view work, all of us?
GABI NOVACEK: I really hope so. Before I was a consultant, I was a PhD in the social sciences and so much of the work that I did was studying through these great inflection points in human development. And I would love to think that this is one of them.
But now I look and I say, "My God, like we've got this generation who is growing up in the middle of this and saying the constraints that defined how we work are gone, that defined where we need to live are gone. I can reshape how I make decisions in ways that look really different. What I value can now look really different. The pressures I can put on kind of my workplace and how I want that connection and relationship to look can be different."
GEORGIE FROST: Gabi, thank you so much. And thank you for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org and if you like this podcast, why not hit Subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: There aren't many businesses or industries that have gone through the pandemic unscathed or unchanged, but there is one that's been continually buffeted by COVID and whose future looks more uncertain than most. What will the lasting impact be on the travel industry, and what do leaders need to do in the face of such volatility to ensure their businesses not only survive, but thrive? I'm Georgie Frost, and this is The So What from BCG.
JASON GUGGENHEIM: Consumer behavior is one that I think will shift and has shifted. And then I think a use and a willingness to use technology to disrupt their own models and processes to get better, quicker, more reactive.
GEORGIE: Today, I'm talking to Jason Guggenheim, global leader of travel and tourism at BCG.
JASON: Historically, many companies, including travel companies have used history as a guide to the future. So what did the previous three years look like, the previous five years? And within reason, you could leverage that as a means to plan, what do the coming year or two or three probably look like. And I think what COVID has done is created a world in which you can't rely. History is no longer necessarily a lens to the future.
GEORGIE: Which of course leads me on to the question, Jason, of how do you as a business leader predict the future with such volatility and just explain to me the importance of doing so, the short,- the medium-, and the long -term.
JASON: Yeah. Many travel players, not all but many are still quite fixed capacity, very asset-intensive businesses, whether it's land and buildings, in the case of hotels and resorts, airplanes, cruise ships, etc.
I think in terms of the need to do that more long term, so if you move beyond medium term and say where do I think we'll be in three years or five years, I mean, those are obviously really hard questions given just the volatility in the short term. And sometimes we are seeing that short-term volatility actually in some ways being quite crippling of executives' willingness to look three or five years out because it is so uncertain today and tomorrow. But again, I think executives have a duty and onus to drive value. And so I think thinking through business models that will be more resilient to this type of volatility, the next, who knows what that will be, pandemic, etc. There's just an onus to think both in the short term to survive, but also in the long term to ensure that their business models are resilient enough to thrive in whatever gets thrown at them.
GEORGIE: I'm wondering whether many of the patterns of change to the industry that we're seeing now were already put in motion, already set and likely to continue after this disruption. That's in no way seeking to minimize the impact of coronavirus. I'm just curious about how fundamental some of the changes have actually been as a result of coronavirus.
JASON: I think some of the patterns were set. And look, I think some will probably continue. And one of the things also, it was interesting when you started to see the results of COVID show up in travel, you saw very different outcomes starting to emerge across the world. For example, you saw Europe was much slower to come back and has been slower, where domestic US certainly on the leisure side is pretty much back to where it in 2019. Some of those patterns will come back. Some models that relied on types of travel that have been more affected, more threatened, more reliant on cross border, etc., I think maybe slower or may come back in a different form. People will choose alternative behaviors, right? Whether it's video, whether it's hybrid, whether it's train, etc. And so I do think there are some adjustments into how businesses will be run.
GEORGIE: Coronavirus is of course incredibly impactful. We've seen the impact of it already. It won't be the only factor and hasn't actually been over the last couple of years the only factor in influencing this industry. It's important not, I guess, to be blindsided by it and forget everything else. Climate change of course is the one thing that I'm thinking about here and one of the biggest ways, of course, that we can reduce our carbon footprint is to stop flying.
GEORGIE: You spoke about predicting the future, but before I get you to tell me ways in which you can do that using data and technology and building resilience, I want you to tell me what you think, crystal ball gaze now, what you think the future of this industry will look like. Let's say I'm the CEO of a travel firm. I come to you. I want to know what I should be doing, what will my consumers want in the future.
JASON: Yeah. Let me maybe take that from two different angles. So one is the consumer, as you mentioned. Then I think the other pillar around which I would build a prediction of the future would be technology. And so let me take consumer first. I think there is going to be a huge onus on travel companies to truly understand behavior going forward. We're all working differently; hybrid models, flex models, people in offices certain days of the week, at home other days of the week. It's going to fundamentally disrupt our travel patterns. It also has and will I think fundamentally disrupt the way we take vacation. More shorter trips, more trips that are combined work and leisure, more trips where I may be socializing with my coworkers as opposed to actually only meeting with my coworkers at meetings and events, etc.
GEORGIE: Do you really think that's the case now that we're in the Zoom era? Why do we need to make those business trips anymore?
JASON: Yeah. So when we do research and talk to executives, but also talk to leaders of companies, travel managers and companies, we see a few things. One, culture, human connection amongst employees is still a critical part of collaboration. People want to know who they're working with. And yes, you can get to know somebody, so to speak, over technology platforms, but really you don't create the sort of bond and trust in many cases that you do when you're at an event team building, training, etc., where you're live in a room and you're having the proverbial water cooler conversations about what you did that weekend. A lot of that disappears on Zoom, right?
Zoom is incredibly efficient, but it's not very effective at building bonds and relationships amongst people. I think we also see when you talk to leaders that their belief is, and I think you're even starting to see this now in travel behavior, you will not replace the connection between, let's say somebody selling something and somebody buying something, those client relationships in whatever form they take, right?
So I think that's part of the onus on travel companies is to try and understand how that affects their product, the way they market, the way they price, the way loyalty programs recognize those who used to travel maybe 50 weeks a year and no longer will, but that doesn't mean they're no longer the most loyal. And so how do you adjust a lot of the things that you have within your business? There had been a lot of talk and there has been a lot of talk about data, big data, AI and the use of it.
I think in travel, one of the things that I've seen both amongst my clients, but more broadly amongst the companies we spend time with is an acceleration of how companies are using and looking to leverage advanced analytics and data to in some ways predict or sense the future, whether that's looking for signals from consumers that help them better predict who's going to show up on a website to book or taking what used to be robust processes, so to speak, like the long tent poles in the business model, it may take me three months or six months to sort of, in an airlines example, build a network, schedule, assign the fleet, get the crew assigned. But in a world of volatility, I may need to learn how do I do that now instead of in 180 days in 15 days. And so you're seeing technology combined with humans really try and dramatically reduce the time taken for what were historically in some cases, very long, very manual, very linear processes in big complex operations.
And so I think if I had to sort of think about the future, consumer behavior is one that I think will shift and has shifted. And then I think a use and
GEORGIE: Human brute force?
JASON: So if a change happens, historically it took a lot of just human hands to push that change through the business, right? Whether that meant repositioning aircraft, repositioning ships, etc. I think now with the use of technology become less reliant on a lot of people making things happen and some combination of technology and people to make it happen more quickly. And in many cases more accurately, right? Faster and more accurately.
GEORGIE: On that theme, the companies that seem to have been the most successful during the pandemic are those that have been able to pivot their business models, be flexible, adaptable, move quickly, find opportunity perhaps where they hadn't looked in the past. A really simple example perhaps would be, I don't know, a beer company that makes hand sanitizer. For many in the travel industry, and I'm thinking big airlines, for example, where do you see their space for that sort of adaption? They seem so linear and not just linear, they work within an ecosystem that is large and seemingly so immovable. How do you square that circle?
JASON: Yeah. That's the billion- or trillion-dollar question that many of them are asking. I think some of it will start as we were talking, with innovating and being willing to sort of really change some historic ways of working and processes and challenge the way things are done in order to get faster and more agile, that both allows them to take costs out, maybe make costs more variable than it had historically been, which allows them then to react to changes that happen just with more agility, right? Less fixed cost and more agile. I think some of it is also going to require executive teams to think differently about value and where does value come from? Obviously, in many of these businesses, there are still going to fly people or sail people around put people into beds, but
And so I think you'll see some creativity around business models that could emerge maybe initially as adjacencies to the core travel business. A great example of this is Qantas down in Australia, not driven by COVID, but driven by other sort of threats to their existence from other competitive entrants, etc., went down a path of creating a data business, a loyalty business that really had a robust currency. They pivoted that into a health care insurance business based on the data and customer set. And so they thought differently. They thought about assets beyond just a steel tube and a network. And so I think hopefully those that are innovative will look to do more things like that to find pools of value that historically hadn't been tapped within the business.
GEORGIE: Where do you think collaboration will fit in in the future? With that, I mean, companies that work within the same space, perhaps two airlines, as well as those companies that work within complementary areas such as hotels, airlines, insurance firms.
JASON: Yeah. I think that's a great question. I mean, over history, you've seen collaboration often become the key to solving some really big industry challenges. So over the arc of my career, if you go back, one of the early things I worked on was Orbitz, right? A collaboration between the major airlines in the US back over 20 years ago in creating an online web-based distribution challenger to the others, Expedia and at the time Travelocity. And so I think collaboration can certainly play a role when any individual player, whether it's airline or other on their own was unlikely to solve or really make a dent in that problem. I think more recently you've seen ACT come into being with two plus global airlines or aviation climate task force where we as BCG were sort of instrumental in coalescing airlines to collaborate on sustainability, alternative fuels. Our view is no individual airline will solve this on their own. There's very little, if any, competitive advantage for one airline solving it and not the other. It's a global problem, it's a problem of humanity, and so why not collaborate? Ten or 15 or 20 or 25 airlines working together to fund technology and innovation, alternative fuels regulation, is far more powerful than all of them trying to do it individually, sometimes pushing in the same direction, but sometimes pushing in 20 different directions.
So I do think there is a role for collaboration in solving some of the structural and other problems that exist in the industry. Another example is four or five years ago, we had a thesis that there was a better ability for data to flow across people's travel journey. And so today your airline data doesn't talk to your hotel booking, doesn't talk to your car rental booking. And so we helped with some partners sort of create a business by the name of Journera that really looked to create a safe, well-governed data platform that travel players—hotel, air, and others—could plug into in order to better serve their customers by knowing more of out their travel journey to knowing that I was going to get on a plane, but then I had a hotel on the other side. And so should I get disrupted, why not let the hotel know that I'm actually not going to arrive when I was meant to arrive? And so I do think there is a role for collaboration, for sure.
GEORGIE: Is the future bright for the travel industry?
JASON: Yeah. I think there's opportunity. I think the opportunity is finding those green shoots, those places where the consumer is going to be optimistic. I think leaning into leisure, finding opportunities for how the new business model, like how new businesses will meet and gather. I think it's probably too early to say it's bright. I think there's opportunity. I think there is still more strain to come, right? As the latest variant showed us and the numbers very quickly dwindled, those flowing through airports. But yeah, I think, look,
GEORGIE: Jason, thank you so much, and you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: Businesses and organizations have been working toward greater gender diversity for decades. Some are moving faster than others. Women account for just 16% of senior-level tech jobs and 10% of executive positions. So why is an industry that looks so far ahead falling so far behind? Has anything been learned from the way we've been working during the pandemic that could change all that? I'm Georgie Frost, and this is The So What from BCG.
NEVEEN AWAD: What happens is oftentimes women get dissuaded and frustrated by having to convince, challenge, and repeat the concept of where they see the future going multiple times before it's taken seriously.
GEORGIE: Today, I'm talking to Neveen Awad, a core member of the Technology Advantage practice and leadership team at BCG. Neveen also leads the Women in Technology Initiative in North America.
NEVEEN: When I graduated with a degree in computer science, I was the only woman in my graduating class. I originally got involved because I grew up in a house where my dad was an engineer, and he always had these early computers, and I thought they were so cool. He was always in front of them. So I wanted to understand these devices that he was really obsessed with.
Then when I got to college, I mean, I think it was a mix of I didn't really like memorizing and so I thought I wanted be a doctor, but I didn't like biology. Then I started understanding how fun it was to make a machine do something. Put together a bunch of code that really made no sense to lots of people, but that actually structurally broke down a problem into a way that you could sort things, you could figure out patterns.
Honestly, to this day,
Or you'd walk in and people would be talking about things that you were just totally uninterested in. I always kind of felt like, "OK, well, it's OK. I'm different, but that's fine because I like what I'm doing, and I have the people that are like me outside of this role." But it did, I will say, when I first graduated college, I didn't want to just become a programmer.
And a lot of the males who graduated with me just wanted to go work for Microsoft and develop Microsoft Word or...well, there was no Google at the time, but I'm sure they would've loved to go to Google. But that wasn't what I wanted to do. I wanted to be at the interface of the technology and communication because I felt like I was uniquely positioned at that place. And maybe I was, or maybe there was a part of me that was like, "I don't know. Do I want to be sitting in rooms with a bunch of males just grinding away at computers for the rest of my life?" Maybe not.
GEORGIE: I'm curious, Neveen, how that feeling has continued as your career has gone on and what you've seen from the experiences of other women as well. Because we do from the outside, speaking for myself here, no offense intended of course, we have this view of those who work in tech as a lot of guys in dark rooms playing with computers. It's interesting you say that as someone from the inside. Do women have a different role then? Are we advertising those roles enough? Are we employing our own bias here by even suggesting that?
NEVEEN: Yeah. Now, some of the most innovative people in the field are women and you see what they do and you see that there's so much more to it than the technology.
What's very critical for any organization that wants a diverse leadership board is to see that there are different ways of getting from point A to point B, and for enabling those different ways to occur. So that once you get to leadership, which is point B, there's people that got there from lots of different trajectories and then therefore see different paths forward for the organization.
The companies that have the most diverse leadership do that the best, and then therefore they're more economically resilient. They see better profits. There's been research that their margins are higher.
GEORGIE: I'd suggest it's more than a shame. [LAUGHTER] When you think about the industry that you work in, perhaps like no other, is shaping our future in our society. We hear a lot about inbuilt biases in creating technology such as AI. Is that a legitimate concern?
NEVEEN: I think if you look at the places where people have been really successful on changing society, like how we search, how we take car rides, how we buy things, it's been a lot of men that have charted those.
There's a lot of flip side to technology in terms of, yeah, there's wonderfulness of connectedness, etc., and progression, but if we were seeing all this stuff about the Facebook whistleblower and everything else where if things are handled incorrectly, there's a real downside to humanity. That's where the checks and balances, the different thoughts, the different ways of like what this could mean is very important if we're actually going to further our society right.
GEORGIE: And not to the exclusion of a big sway to society.
GEORGIE: It brings to mind a book called Invisible Women that looks at the gender data gap. This world literally built by men for men. How the absence of sex disaggregated data in things like medical research, in transport, indeed in the size of our mobile phones is having a real-world impact on women, sometimes tragically so. Are we in danger of repeating this with AI, with machine learning, the metaverse even, that inbuilt bias? Or will it be so good, the technology, that it will learn not to be biased?
NEVEEN: Well, you hope it will learn not to be biased for sure.
So both last year and this year, we've done research with women leaders in tech. So over 1,000 minority and nonminority, senior, mid-level manager, women in tech, and there were just so many fascinating things that came about. A really clear difference of perspective for the senior women and how much agency they felt in terms of whether it meant rebalancing what was important to them in a job they took, whether it meant switching jobs because they just didn't want to be in a big organization and they knew they could get something at a small organization, and whether it meant just taking some time off for a period of time.
Middle-manager women felt much less agency in that. However, they felt much more value came to them from being in an environment where everyone was remote and so it was all balanced. So now you come back to the question you had asked me about the impact of making sure that men, women, everyone have similar impact in terms of how technology is used for the future, how it's used for society.
One of the things that's so important for organizations to figure out is how to create environments where there really is equal agency and equal voice. What that comes down to honestly, one, is making it very clear that differences are celebrated, not squashed [LAUGHS], which sounds so basic. But if you actually look at how every type of large-scale organization is run, it's often the case that there are few very key paths to success.
How do we create more paths to success that are just as quick but allow different levels of engagement? That's kind of one. By doing that now,
The last thing I would say is that the other thing that's super important is how do you get access early? Not everyone wants to be in STEM or it's we're not getting the diversity. We're definitely not getting diversity in tech that's racial, and we're getting more gender diversity, but there's an opportunity for more. So why is that when you look across our early systems, everything from like the Lego programming to building the robot. And you analyze the bulk of the people on those different teams, they do skew to non-minority boys. And so how do we encourage everyone?
GEORGIE: I'm interested to go a bit more into this research that you did, but because you did it in the two years that we've been obviously having the pandemic and the impact that that's had. You talked about things like paths to leadership. What will those paths to leadership look like when we don't even know what the world of work is going to look like? It feels like someone's ripped up the rule books, thrown it in the air and waiting for the pieces to land. They may all land together as they were, maybe go back to normal and everyone back in the office, etc. But I sense that's not going to be the case. So how do we navigate this "new normal" to the benefit of women?
NEVEEN: The first way we navigate it is to acknowledge that we don't have the playbook of what it looks like in the future and to try and just say, oh, in April, we're going to go back to what we looked like in January of 2019 is clearly not optimal for anyone. We also, the second way we navigate it is to say what the future of work looks like for Georgie may be different than the future of work for Neveen may be different than the future of work for Jack, etc. And as organizations, we have to figure out kind of what our parameters are of what we think needs to be, you know: these are how we want the team to work together, but then we don't necessarily dictate what that means for each individual person. So that may mean for some people being completely back all the time. That may be for some people hybrid and that might not actually affect productivity by any stretch and that now the teams have learned really how to work across these different environments.
The third way that we go back is we acknowledge that there's a couple of things that are very clear in terms of trajectory of diverse leadership. One is
GEORGIE: Do you mean bringing in that promotion quite soon? Is that what you're suggesting or is there something else to it? You have a big promotion, have more responsibility?
NEVEEN: Exactly. OK. You've done this job for a year, even if it's not officially, like you went from level seven to level six, like is it that you take on something, you take on managing a part of the team where you hadn't been before?
GEORGIE: Don't leave someone languishing.
GEORGIE: So if you are a business leader listening to this podcast, because you don't have to be in tech, this is across the board in terms of diversity, but what can you learn from this?
NEVEEN: Yeah. I mean, it's a great question. One thing that we didn't talk about and I know everyone knows, but just the research really shows is that women have borne greater number of hours of the ecosystem of the household than men. And actually for minority women, for non-Caucasian women, what that has looked like has been different. It's been kids and family versus just kids, for example. So that creates different types of pulls. So why do I say that?
As an organization, as an employer, understanding that and understanding that that's part of the reason you have to create different work models, different paths to success, different journeys through the organization is because actually those people can bring in a very valuable perspective that may be different than someone else's perspective and therefore will make you a more effective organization is really critical.
So with that as context, key lessons for organizations moving forward. So one is in the vein of the ecosystem. People like men, women, everyone, are looking for work life balance. And what that balance means is very different for everybody. That's why creating different ways for people to take step-backs in careers and making it more normalized.
Second thing is that there's been a lot of learnings around the value when you're in the middle of your career of feeling equal voice and equal space. So how do you structure interactions, meetings, your operating model, etc., so that you make sure that you're giving equal voice, equal space, same manager attention, same manager and coaching and guidance across your entire set of mid-level and junior people, because that's actually really important in their career trajectory. The third thing, just kind of thinking again on like the value that the manager plays.
The fourth thing would be, as you look at your work models, as you look at like what it means to come in and then advance, look at how much you enable people to chart their own course, how much that's encouraged, how much there are examples that you can show. So those would be the ones I would say are kind of very critical. All that comes together to basically create an environment that feels inclusive and supportive and enabling to everyone.
GEORGIE: One of my big fears, Neveen, is this move to working from home that we've seen through the pandemic will potentially set women back. What seems liberating and make no bones about it, for many people, this is liberating. I work from home and I'm enjoying the benefits that that brings.
But I also have a fear of not going into studio, not going into the office, not speaking to people, not being present and in people's faces. For all sorts of things, for creativity, but then also the material impact of that. Will I get promotions? Will I get pay rises? Those sorts of things. And also this idea of reinforcing old gender stereotypes, because all of the research shows so far that women are still doing much of the housework and caregiving, regardless of whether both partners are still at home. I just worry.
So that's one thing. This other thing I would say that has come out of interviews and research very clearly is take on things that are different, take on things that are challenging, stretch into places that are uncomfortable in a positive way, because that's expected in a career of everyone. And then communicate when you've done that successfully and you've had wins because everyone communicates their wins and there's nothing wrong with it if you communicate in a way that's like productive to the organization and the team. So I do think just as organizations have responsibilities, we have responsibilities too.
GEORGIE: Amazing, Neveen. Thank you so much. And to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: "Imagination is more important than knowledge," so stated Einstein. "For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution." But how can we understand and shape the murky mental territory that leads to good ideas; that realm of imagination? I'm Georgie Frost, and this is The So What from BCG.
MARTIN REEVES: Companies don't shy away from trying to harness other complex aspects of human affairs, like consumer psychology, or team motivation, or team composition. So, it's really rather strange that we shy away from having a handbook of collective imagination.
GEORGIE: Today I'm talking to Martin Reeves, chairman of the BCG Henderson Institute, BCG's think tank dedicated to exploring and developing new insights by embracing the technology of ideas. Martin is also the author of a new book about imagination in business called The Imagination Machine.
MARTIN: Imagination is something every five-year-old can do, but CEOs complain it's very hard for their companies to do. And every company is founded on an active imagination, but we don't have a handbook for it. And then if you're successful at imagination, you're likely to get complacent, so that could be the beginning of your demise. So we thought the world needed a handbook of the imagination, and to play that up a bit the fact that you can actually bias the odds in favor of imagination, we called it The Imagination Machine. Because in the long sweep of history, we really do believe that companies have changed the world as much as any poet or visionary. They're in the business of taking ideas and turning them into new realities.
GEORGIE: You said that any child can be imaginative. Is that why, perhaps, we don't take it that seriously in business, or is it taken that seriously? Maybe I've got that wrong.
MARTIN: Well, I've been working in strategy for longer than I care to admit, and not much has changed on some dimensions. But there's been one absolutely huge change, which is what's called the competitive fade rate—that's the time period over which you can enjoy leadership—has gone from about ten years to about one year. What that means is, it was perfectly reasonable in the past to coast on your previously successful business model, because it would probably last at least ten years. Now it won't, on average, across all public companies. Therefore it's reasonable, I think, to say that companies are in the business of constantly reimagining themselves. You could say that imagination is the new execution. If you don't constantly reimagine yourself, your advantage will decay very quickly.
GEORGIE: Is there an argument that you can imagine too much, too often? Is there any argument to, I don't know if it's resting on your laurels, but sticking true to what your principle was? Is there a danger that we are all trying to be too innovative?
MARTIN: Theoretically, yes. I mean, you could imagine being so hyperactive that you have lots of ideas and you execute on none of them. I think that's sometimes visible in startups. I remember looking at an oncology startup that was spending a lot of cash to develop a new cancer drug, and they found one. But they were so interested in the science, that instead of commercializing that one, they went on to run out of cash by developing many more ideas. So it's possible, but in large companies, it's almost exactly the opposite is a much more common scenario. Which is, you don't have enough ideas or a big enough portfolio of future possibilities so that you renew yourself. The proof of that is we can measure something called vitality, which is the future growth potential of a company. And it declines on average by three percentage points for every doubling of the size of the company, or every doubling of the age of a company. If you call that the gravity of size and age, essentially you could describe the competitive struggling business as defying the gravity of size.
GEORGIE: Why is that? What stops large companies from being imaginative as they grow?
MARTIN: Well, there are a number of things that stop them on average, but fortunately there are many exceptions. I mean, one of them is just the sheer physics of size. If you increase the size of a sphere, then the surface area to the volume decreases. More and more of the mass is internal, and the same thing's true of a company. Companies become more and more introverted. And the one thing we know about the neuroscience of imagination is it's based on surprise. If you're not seeing the surprise in the world, which is the trigger and the inspiration for imagination, then you're not going to imagine anything new. So, that's one reason.
I think a second reason is what some people call the success trap. Which is if things are going pretty well because you successfully came up with an innovative business model in the past, then you don't feel that hunger, that sense of danger that an entrepreneur feels every day, and you relax. Now, the problem is that the financial indicators may all be in the green, but that's because they're lagging. You need to constantly reinvent yourselves.
And then the other one is, the procedures of yesterday's business model often restrict thinking about tomorrow's.
GEORGIE: Tell me more about surprises that spark imagination.
MARTIN: Well, one of the unique things about humans is that we have mental models in our heads of reality, and we change those mental models. We reimagine reality in response to a surprise if something doesn't fit the pattern. That surprise can come in different forms. It can be an anomaly, which is: Most of the points look like this, but then this customer is doing something different. Or it can look like an accident: I was trying to do this, and then this other thing happened. Or it can be an analogy, which is: That's a bit like this. What if it were more like that? These are the ways of encountering surprise and triggering imagination.
GEORGIE: It brings to mind when I was at university a very long time ago, Martin, and I took part in a psychology experiment of a housemate. I asked them about my response to it. It was all about whether a certain chap was a good or a bad person. Lots of different things about this guy that I had to read examples, but his behavior was so erratic. One day he was good. One day he was bad. I said, "You can't decide." So I just put a big line through the middle and just said, "Well, that's it. I can't decide either way." And I said, "What happened to that?" And he said, "Well, it was anomalous, so we threw it out." Do you think that happens too often in companies? Could I have been actually telling them something else there?
MARTIN: Well, one of the greatest simple-but-powerful mathematical inventions is the average. Companies have to measure and manage vast amounts of information, and so they use averages and aggregates. That is very efficient, but it suppresses the visibility of the points that don't fit. But sometimes those points that don't fit are actually the beginning of a new trend or the seed of a new idea. So it's very important to think like a novelist, and not an accountant, for the purposes of imagination, and to look at the particular.
GEORGIE: For example? Any companies?
MARTIN: Well, there's a great example of a company called Brooks Automation. It was a leader in semiconductor manufacturing equipment, and it was maturing, so it actually deliberately set out to be surprised. So it created a map of all of the people that were using its patents, and all of the people that were referring to those patents, and essentially asked the question, "What's surprising in this picture?" They found that amongst the more predictable electronic companies that were quoting their patents, there was a group of bioscience companies that were using their patents, and they didn't really understand why. They went out into the field, and they investigated, and they saw that biological tissue handling was extremely primitive relative to the sterile, precision, computer-controlled way in which semiconductor wafers are handled. They imagined that, "Well, this could be a new industry. The biobanking industry. The biological materials manipulation industry." So in fact, they created that industry. Became a pioneer in it. And then just a couple of weeks ago, in fact, they sold the previous core business. And now their core business, the new core business, is actually this business that was imagined, triggered by a surprise that they deliberately went out to seek. So, it can happen very practically in very down-to-earth companies.
[Note: In late 2021, Brooks Automation changed its name to Azenta Life Sciences after divesting its semiconductor business division to focus exclusively on the life science business]
GEORGIE: So how do you spot those surprises, those anomalies, those changes? Because, of course, by the time you can see them, it's almost like it's become a trend and it's not going to spark certain imagination and drive in certain directions to give you a competitive advantage.
MARTIN: Well, if you're talking about a trend, by the time something is an established trend, indeed, it's probably too late. It may have been arbitraged away by competitors. It's no use at this point in the evolution of COVID in business to say, "You know what? I've got this great idea. There's a trend towards home-working using video conferences." Well, everybody knows that. That's too late. But incipient trends, nascent trends, anomalies that could become a trend, are quite important. Now, the difference between an anomaly and a trend is manifold, actually. One of them is, it's much earlier. Another one is, it's not a slam-dunk. It's before something becomes an established trend.
Also, it's not an inevitability. It requires shaping and nurturing by the company, and the data may alert you to the possibility, but the possibility has to be imagined. When the company I gave an example of, Brooks Automation, was looking for surprises, the data didn't say, "You must create them via banking industry. There's an opportunity here." It simply said, "This is the way that people handle samples, and it doesn't appear very good relative to the semiconductor industry. Let's think about that." "Well, I have an idea. Let's create a new industry."
GEORGIE: Do we have a case where an anomaly is just an anomaly?
MARTIN: Yes, absolutely.
GEORGIE: Like my psychology experiment that should just be chucked out.
MARTIN: Well, an anomaly, we often throw away the anomalies in a chart, don't we? We say, "That's an outlier." Sometimes that's right. It was an experimental error. It was a freak, one-in-a-million event that won't be repeated. But when you see an interesting anomaly, you can do a couple of things. You can say, "Well, let me look at that from a couple of angles. Is that robust? Do I see it again?" You can look for momentum. Is that anomaly that you're seeing, growing? You can imagine how you might shape it so that you can actually create your own fate. You can say, "Let us do an experiment to see whether in fact there is an opportunity here."
Another example is a company called Turo, which is a company that rents out private cars. It creates a contract between the private car owner, often a luxury car, and the person who wants to rent it for a couple of hours. So they thought they saw an opportunity, and they tested it by handing out postcards saying, "Would you like to hire this Porsche or this Bentley for a few hours at this price?" They handed out a couple of hundred postcards, and the response told them that there was a shapeable opportunity there. They could have got the opposite result. They got a very positive result.
GEORGIE: Well, that's an important one, because imagination is just a step. It's what you do with that.
MARTIN: Right. So we outline six steps, and I just described them briefly. So the first one is, we call it the seduction. It's when the anomaly seduces you to look more closely and to imagine the trigger. The inspiration, if you like. That's all about looking out of the window. Seeing and caring, basically. Caring about what you see. The second stage, we actually call it the idea, which is the art of working an idea. So, it goes from being a one-liner to a fleshed-out model that you can test.
There is a well-described skill of counterfactual thinking, imaginative thinking. But most of us haven't been taught it since kindergarten, so there's some skills that one needs to build there. And then the third step is what we call the collision, which is when you collide the idea with the reality, maybe in an experiment or by handing out postcards on the corner. Of course, one thing that's going on is, you're validating the surprise, the idea. But another thing that's going on, because most new ideas fail, is that you're actually triggering new surprises. The fourth stage is what we call the epidemic, which is the spread of the idea. Ideas tend not to spread in large corporations, and if they don't spread, then they remain private fantasies. The fifth is the codification of the idea so that the success can be replicated, which is much harder than it sounds. And then the last stage is called the encore, which is not falling into the success trap, and having successfully imagined a new business model, doing so again and again. Not being caught in the trap of the assumptions underpinning your own success. So, it is an entire process.
GEORGIE: When you talk about imagination in terms of business models, and what you were describing earlier about how companies do need to change and to innovate regularly, more regularly than they used to. They can't sit on their laurels. Do we have to reimagine the entire business model, or can imagination just come in little, little steps?
MARTIN: Yes. Well, it comes in little steps and big steps. And the longer you postpone it, the bigger and riskier the steps that you have to take.
GEORGIE: Forgive me. If imagination is just thinking, and we do it all the time anyway ... hopefully that's what we do when we're at work. We think of ideas and ways of doing things, and hopefully ways of doing things better. Why are we measuring it? How can you measure it? Isn't it just obvious?
MARTIN: Well, it's obvious to a five-year-old, but that fade rate that I talked about implies that it's not obvious to large groups of people that are trying to renew their advantage. Which is why we think we need a handbook for collective imagination and for the harnessing of collective imagination.
Now, that may sound unreasonable, because this is a conjunction of the word machine and imagination. Some people say, "Well, we don't need to have a guidebook, and we can't have a guidebook for something so mystical."
GEORGIE: And then apart from reading the handbook, obviously, what do you do as an organization? Do you fill your company with polymaths? Is the traditional division of labor idea dissolving, and if so, is that welcome?
MARTIN: Well, there's a number of things to do. I think the first one is to make sure you have a balanced portfolio. So you have some new possibilities in the portfolio, as well as some things that are delivering cash. That sounds obvious, but if you're using current financial metrics, metrics of current financial performance, you may miss that because they don't measure future option value very well. I think the types of people in the companies is very important. I mean, I think in recent years we've seen the rise of the specialist, and I think there's a role here for imaginative types, for generalists.
GEORGIE: Such as what? How would you find those people? Where would you look? What sort of people?
MARTIN: I think you can measure people in terms of their response to novelty. So Alibaba, for example, the Chinese internet company, has been rather successful--measures not only tolerance of change, they actually measure liking of change. They measure energization by change and new possibility in their recruiting, and they try to fill the company with those people, because those are the sort of people that the company needs right now.
Another interesting thing that you can do is, because often...we all have the capacity for imagination, the other side of this, are we utilizing that in the workplace? Another idea in the book is actually harnessing play, because play is a very serious business. Biologically, play is de-risked, accelerated, spontaneous learning. We play when we're small because it's a lot safer and a lot faster than waiting until opportunities for mortal combat. And we don't find that large corporations are very playful. So there are 16 executive games in the book, which are designed to have people loosen their assumptions.
GEORGIE: For example? Give me a couple. What games can we play?
MARTIN: Let me give you two. So a good icebreaker game is what I call the anti-company game, where you list on one side of a piece of paper all of the core assumptions, all of the sacred assumptions of the business model. And on the other side of the piece of paper, you list all of the things that you would never do, you would never contemplate doing. You reverse of columns, and you create the best business case for the anti-company. Now, it's often humorous. It breaks taboos, but out of this humor emerges some ideas and a flexibility to go on and play a more detailed game.
So a more detailed game, for example, is, we have a game called the pre-mortem game. Where essentially you assume that you're in a press conference in five years' time apologizing for the failure of your company, and you're describing exactly how it happened, and thinking through exactly how you might go off the rails is a very good way of underlining the case for imagination.
GEORGIE: Where does imagination fit it in an ever-increasingly digital world?
MARTIN: Ah, well, that's a great question. So probably over the next decade, we're going to see the substitution of many human managerial activities for machine learning. Many routine cognitive activities will be taken over by machine learning, and the experts are largely aligned that the response to that should be for the humans to focus on more uniquely human capabilities. The three obvious ones are anything to do with empathy—dealing with other human beings—anything to do with creativity, or anything to do with ethics, that machine learning can't do. But it raises the question "Well, is that safe too?"
Well, eventually we have artificial general imagination, and we believe, based on our research, that that is very far off indeed. So, no we won't. But technology, traditional technology, doesn't oppose the activities of imagination. There's a synergy between the two. In fact, we've already discussed one example today, Georgie. The example of Brooks Automation, where they used network mapping software in order to analyze their second-order patent map in order to see the surprises, which triggered the thoughts about creating a new industry. So the new analytical tools can help us to imagine, and throughout the entire process, the six-stage process we talked about, there are tools to that we can use that can power that process.
GEORGIE: Is there an argument then that actually an increasingly digital world will bring out more of the human in us? We get more imaginative?
MARTIN: I think so. Some people lament the demise of routine work because of employment insecurity, and so on, and there's a certain aspect of that. Will we be able to employ the same number of people in companies in the future, or will it require some sort of universal basic income? I see it as a sort of liberation from drudgery, actually. The imperative to emphasize these more uniquely human aspects of ethics and imagination and empathy, I think should lead to a re-humanization and a revitalization of the workplace, which personally I'm very excited about.
GEORGIE: So then where can leaders start?
MARTIN: So, I think they can start by accepting the need for imagination.
We have an example of a wonderful company in Japan called Recruit, which actually has an entire personnel system that's based around the celebration of entrepreneurial activity. They have these hero entrepreneurs that they say are the most important people in the company, and they have a festival where they celebrate new businesses, and anyone can start a new business. Providing one other person wants to join their team, they get first-round funding automatically. And they don't separate the ideas from the initiators of the ideas. They keep them together, because they're interested in creating heroic journeys and a lot of excitement around entrepreneurship. And they have been, in fact, a very successful serial business model innovator.
GEORGIE: Well, thank you very much, Martin, and thank you for listening. We'd love to know your thoughts, to get in contact, do leave us a message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: In 2020, the Black Lives Matter movement sent shock waves across the world. In response, grand pledges were made by governments and businesses to move much faster towards a more inclusive society and economy. Yet the financial wealth gap when it comes to race, gender, and disability is still huge. So how can we make sure that these promises translate to action and progress?
GEORGIE: I'm Georgie Frost, and this is the So What From BCG.
KEDRA NEWSOM REEVES: Being inclusive is an active commitment. It requires action because it is not our norm.
GEORGIE: Today I am talking to Kedra Newsom Reeves, a partner at BCG who focuses on financial services and social impact. She leads the Center for Inclusion and Equity and guides governments and businesses on how they can address inequality.
KEDRA: I think when we look at COVID, whether we're talking about the US or North America or globally, if you look at any ethnic minority, globally, COVID certainly had a greater impact in terms of infection rates and in terms of deaths for ethnic minorities. We think about that in terms of loss of livelihood, for those that were ill and may have long COVID. We think of that as loss of treasured family members and the emotional impact of that on people and in the families.
And then certainly as we look at, outside of those that were affected by the illness directly, those that were affected by the shutdown of industries, as we tried to stop the spread. Which, I think was necessary in terms of stopping the spread of COVID, but certainly had economic and financial impact for individuals in terms of the service industry shutting down. If we look at—whether it be food service or home health care aids, etc.—many of those industries have a much higher percentage of minorities in the US certainly, of women certainly. And so when we think about those spaces sitting down in the unemployment, that it caused, that certainly was another factor that again decreases the income and the ability to grow wealth for families. And so certainly COVID has exacerbated the gap if you will. That that gap was already incredibly large and quite challenging to begin with.
GEORGIE: How big is this task and closing the wealth gap, because as you said, it's been something that's been around for a very long time, and it crosses so many different demographics. How do we go about closing it and just explain to me what exactly do you mean by the wealth gap?
KEDRA: Certainly. So, I mean, I think firstly, we measure it simply by assets minus liabilities: your assets, your home, your cash, your retirement accounts, minus whatever debt you might have. When we look at that for Black Americans versus white Americans, it's a 10X gap. For Latinos versus White Americans, it's I think at 8X gap now, and it probably has been exacerbated. We don't know the results of COVID on the wealth gap today. I think that is yet to be seen.
GEORGIE: Why so large? Why so large in those groups?
KEDRA: I think consider what wealth is and how you attain it over time. Just think about your own personal journey. And I think we have to start with the fact that intergenerational wealth plays a huge part in the wealth gap. Did your family have wealth to pass down to you? And that's everything from a trust fund or a massive business or tons of equity in a public company or private company, global company. And that certainly is a big part of the total wealth gap. So that affects a small percentage of people. But in fact, in even larger percentage of the smaller things. Could your parents make the down payment on a home? Could they give you a home? Could they pay for your college? Do you have to take debt out for that?
And you think about wealth accumulation, growing assets versus wealth extraction or decumulation. Debt creates extraction and decumulation, so if you don't have intergenerational wealth, you are heavily reliant on debt to grow your potential in our economy, and to grow your wealth over time. And so I think that's one big factor, is that intergenerational wealth is our starting point.
Where do you start at day zero of your life or year 20, of your life, as you become an adult? And then everything after that. It is what's your education level? Did you graduate from high school? And did you graduate from college? What are therefore the employment opportunities that are available to you? What are the income bands that are therefore available to you? What are the benefits packages in terms of health care, health care savings plans, which allow you to, do some of that tax-free? All of these seemingly small things have a huge impact on our ability to grow wealth.
And as we get older and have more steady jobs and have benefits and have retirement accounts and invest in other businesses and perhaps start businesses, all of those things contribute, as well as home values. So we like to think of it as a loop.
If you think about it that way, you're going up this ladder, if you will, and then looping back as you get the intergenerational wealth.
GEORGIE: Which is a big task. I mean, there's nothing we can do about intergenerational wealth. That's kind of done. So we're starting at a different point. Therefore what point are we starting at? What needs to be done? What needs to be changed? Where do you look across all areas of the economy? You said that things like education, that's just one part.
KEDRA: Right, that's a very small part. And I'll just say, an intergenerational wealth point, I think, yes, we are starting at different places. I do think you're seeing things that are really interesting where wealth is being given back to families. So you take, there's land in California that was taken by the city and now has been given back to that family. And the city is now paying for that land from that family. So that wealth that family had, a hundred years ago, has now been given back to the family that it belonged to. And now their wealth position is totally different, if you think of it that way.
I don't want to totally put that aside. I think at scale and mass, that will not be the solution for everyone, but there are opportunities for that to happen. There's some work going on in Evanston close to where I live here in Chicago, around reparations. And so there are some efforts to address intergenerational wealth gaps where feasible. Direct money, direct dollars.
GEORGIE: So direct money—direct dollars, direct money or dollars—could be one solution?
KEDRA: Could be part of the solution yes, yes. And I think that's a governmental solution. I think we are seeing pilots and experiments in that space and in various places.
GEORGIE: How else would you like to see that played out? I mean, could you have sort of parachute payments for certain groups?
KEDRA: I mean, there are really interesting ideas like baby bonds. How do we ensure that every child starts off with some level of wealth? I will say this, I think my only challenge, I would say when I talk to my clients in the public and private sector, is that it can't just be a government solution.
There are things that we can do in the private sector that are really, really critical. And I think education is certainly one of those. So we actually look at, for Black families, education is not a true wealth driver. Education is not a panacea. It doesn't solve all issues. I think the thing that we see employers doing, if we just talk about income for a minute, that I think is a big driver of equity is thinking about skills-based assessments of potential employees.
So rather than saying, “You have to have this college degree from this set of ten schools that we always recruit from,” employers can say, “We're looking for something very different. We're looking at an assessment of what makes someone successful in this organization.”
If you think about sales, think about the things that are important in a sales job. It is about being personable, being able to connect with people. There are a lot of different profiles of people that can do that role really well. So how do we find those individuals and ensure that they're getting equal opportunity to those types of roles that someone else might? And then you think about the benefits that come with that, the retirement account, etc., that I think is certainly a level that's really interesting.
GEORGIE: How do you find those people as a business? Because part of it is knowing where to look. And I guess the other part is giving young people or anyone the confidence to believe that they can go for those jobs.
KEDRA: Most, certainly all about exposure. I mean, how did I become a consultant? And how did you sit in the role that you're playing today as a journalist? You were exposed to something at some point in your life that said, "Huh, that looks like an interesting job. That looks like something that I could do."
I do a lot of community work and go into schools. And it's interesting to talk about consulting. To help students understand that everything you see and do and touch is someone's business. Anything that seems interesting to you, there's a role for you to get there. I think the question is what's the path.
GEORGIE: And the role that businesses can play in that?
KEDRA: I mean, I think that a lot of that is about connecting back to your community. What is the community service that you do?
When we talk about diversity, equity, and inclusion at BCG, we really talk about it in three ways. It's what are you doing in your community? Which I think businesses often really do think about. I don't know that they really think about how that is a channel and a pipeline to talent for their organization and for the economy more broadly, they think of it as perhaps more of a charitable donation, a charitable activity. But really investment in our communities is critical to how our nation will thrive over the long-term. And so I hope people start to think of it that way, but certainly one is that philanthropic piece.
I think the second way to think about is team and culture. And I think what we're talking about right now is the connection of that community work to that team and culture and the path into those roles over time.
And then the third piece that we think about is, from a business perspective, what are the products and services that you're putting out there? Are you being equitable in that piece? And certainly in financial services that plays a huge part in the wealth gap and the opportunity for families to accumulate wealth over time.
GEORGIE: What should leaders be doing? How do you get investors and consumers on board with this? Why does this matter so much from a business perspective?
KEDRA: I think from a business perspective, from a sustainability perspective as a business, and we often talk about sustainability as it comes to climate, but we also have to talk about it when it comes to people and communities.
When we are excluding large portions of our society, we are not setting ourselves up for success, quite frankly. One of the things we're really trying to do at the Center is to really think about how do you deliver services equitably, and what does that mean for people?
So take health care as an example, if we have truly equitable health care in the US, we don't have a public system in the same way that we see in other parts of the world. If we're not taking care of our people, we see outcomes like COVID, right?
And that comes back to wealth. Health is wealth. If you aren't healthy, you can't work. If a family member passes away, that is a livelihood that has gone, that has disappeared. And if that person passes away at an early age, think of the kids that no longer have those parents that can provide for them. And so health certainly is a contributor to this.
And we think about the health care organizations that are out there, that are shooting to do some of this work that is incredibly important to the wealth gap. I think on the financial services side, we talk a lot about how do you deliver services equitably?
How do you ensure that people are not experiencing wealth extraction by using really unfair, high-interest predatory lending products just to get by on a week-to-week basis? It's really difficult to be at a low-income status. It's hard, it's hard to make a budget meet. It's actually not hard at all to be wealthy. [LAUGHS] There are many things that you can do with that wealth, and you can make it quite difficult for yourself depending on your goals, but it's actually not that difficult. What's really difficult is living on a very tight income. And when our products and services don't meet the needs of those families and those individuals, there is no choice but to use products that are really quite predatory. And I think we talk a lot about wealth accumulation but we don't talk a lot about wealth extraction, and high-interest products are doing just that, they're extracting wealth every day, every week, from families that don't really have wealth to really grow at this point.
And so I think what we talk a lot about in our practice in financial services is what can banks do? What would equitable products looks like? What would equitable reach look like? And in all ways, from very traditional banking services, just like your checking and savings accounts to your mortgage accounts, to investments. How do we make that access more equitable for people? And how will that have an impact on those higher parts of the wealth loop, if you will, than the intergenerational wealth piece that we started with?
I think, the question is, are we reaching the folks that need the product and are we building the trust in the community that that relationship can be held? And how do we look at that product suite, on the investments we make there versus everything else we're trying to do as an organization? That's where the real challenge comes in. Are we making the investment necessary to make those products successful, to have the reach that's necessary to reach the communities that need them the most?
GEORGIE: How do you make the investment? How much is the right investment? Where does it come from? How do you direct it? What resources you need to achieve this?
KEDRA: First, let me just start with people.
I think the thing that's going to change that, I think one is, being a CEO-level priority and seeing that investment can be made—that it's not fundamentally dilutive to your margin. I think that's part of it. Do you have the leadership commitment?
I think the other question is what will investors do? And this gets back to the thing that you asked earlier: what about investors and consumers? A majority of the assets in the world are controlled by a relatively small number of pensions, sovereign wealth funds, etc., foundations, endowments. And I think when we start to see investors taking a different tack, demanding to be part of the goal set for companies, that's when you'll see change, really I think more fundamentally. And I think we're starting to see it. I think we see most of the major banks in the US have made those big pledges. I think all of them are working to deploy them. I think they're running into the investment challenges that we talked about. How do you prioritize this versus other things? But I think we are seeing a lot of those pledges come forth.
GEORGIE: Is there only so much the organizations can do? And by that, I mean, do you think the system, the economic system, governmental system, is rigged against Black Americans, Hispanic Americans, maybe to a large degree women too?
KEDRA: I don't think our economic system was set up to be inclusive of women, minorities, LGBTQ, to some extent, people with disabilities, it's just as simply the case that our economy was not set up to be inclusive.
GEORGIE: What was it set up for? How was it set up?
KEDRA: I think historically it's been set up for white men. You think about our government leaders. You think about our business leaders over time, and you think about the laws that are in place in terms of employment of women and minorities over time. These were not things that happened by happenstance. There's some work we recently released around climate that just says, you know, systems are not organic things. There are people, individuals making decisions.
And I think for hundreds of years, we were not making decisions to be inclusive. That's just not how our economy— and the global economy—not even just the US, but our global economy, was really set up. And so being inclusive is an active commitment. It requires action because it is not our norm. And I think you see that certainly for ethnic and racial minorities. And you also see that for women.
You know, I do a lot of work in wealth management. We did a study a couple of years ago, just looking at women in wealth management, looking at women that are actually high-net-worth, ultra-high-net-worth—very desirable to serve for banks and really being completely underserved.
And still a lot of conversations that you would have expected to be happening in the 1960s and 1970s of a woman sitting at the table with her husband: the woman is the CEO, the husband's a stay-at-home dad, and the husband is the one who's getting spoken to. And the husband's the one that's getting the advice and getting the packet that comes after the meeting. And so there's a lot of work to do. It requires focused and intentional activity because it has not been our historical norm. You could have a perfect credit score outside the traditional lending system and still be turned down for credit in the traditional lending system.
And so these are the types of really ingrained, I think, business practices that we have to attack and really look at very closely if we're going to build a more inclusive economy. And I think that intentionality around that focus of time and investment and study is the thing where you need those business leaders who are truly committed and are going to say, "You know, [inclusion] is an important innovation for us. Similar to how digital has been an important innovation for us, similar to how data's been an important innovation, inclusion is an important innovation for us.
We recognize that it is something new that we have to do differently, and we're going to put dollars against it, and we want to see progress and we're going to set goals." That's what we have to see from business leaders, if we're going to see real impact and real change.
GEORGIE: What did the Black Lives Matter movement last year—well not just last year because it's continuing—but what did that moment mean to you in your life, in your work? Are you optimistic that this could be a real point for change, permanent lasting change? We've had so many false storms along the way. Could this be the final one or is it just the way that progress happens?
KEDRA: It's a great question. I think, I think for me personally, one, the Black Lives Matter movement has been around for a long time, there's a great quote. I'll just speak very personally for a moment. There's a great quote by an activist. Actually I think on the West Coast in a press conference, and she said something like we've tried every way of protesting, we've rioted, but we've also made music and drawn pictures and made movies and tried to excel professionally to be in places of power as a way of, our presence being a protest, if you will.
And so I think the racial reckoning, which I wouldn't say is just Black Lives Matter, I think I would say the racial reckoning that occurred last year, Black Lives Matter has been, as a movement, has been happening for a very long time under that kind of name, if you will. But I think the reckoning of last year, which drew in people outside the Black community. I think that was an important moment. To me the impact of that moment, launching people outside the Black community on their own personal journeys of realization and reckoning, and then asking themselves the question: what should I do at this moment?
Unfortunately, in a way it took all of that to get to where we are today. And had we not seen so many protests by people in the streets, had we not all been confined to our homes and really unable to look at anything else, I don't know that we would be where we are now. And so I think for me, what's been really meaningful about, the last year is this: I've been in financial services for a couple of decades at this point. I've been at BCG for 13 years and been doing equity work outside my job for years. And in some ways doing it inside BCG for a number of years as well. But as we said earlier, systems are not organic, systems are driven by actors that are in places of power—and having actors that are in places of power care about these topics is what is making the difference.
And I think how we all choose to remain committed to this work and make it a core part of our businesses and our organizations is again what will determine whether or not this movement will be, you know, "Three years in the late, you know, early 2020s, something happened, and no change was...no progress was made." That could be the line in the history books. I think there are a lot of people who don't want that to be the line. I'm certainly one of those people.
And for me, it's a very personal journey. I want my kids to have a very different experience over the long term. I've been incredibly privileged, but I can look to my left and look to my right and my family and see a very different outcome. It's really heartening. I think it's really exciting to see where we are now versus where we were even 18 months ago. And it is heartbreaking, I think, that it took a global pandemic and a televised murder of a man for that to happen. But I think, I think that is what it took. And so now what do we do with all of that is the question.
GEORGIE: What do we do with all of that?
KEDRA: I think we stay committed, we stay committed to doing the work.
GEORGIE: Thank you very much Kedra. And to you for listening, we'd love to know your thoughts to get in contact, leave us a message at, firstname.lastname@example.org and if you liked this podcast, why not hit subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: We live in an era of cognitive overload, that cell phone on your desk when you're working, even if you aren't using it is draining your brain and reducing your cognitive capacity. It's bad for us personally, and it's bad for business. So, what can we do about it? I'm Georgie Frost and this is "The So What" the podcast from BCG.
MICKEY MCMANUS: We don't have something that pops up and says, "Hey, here's your cognition facts" the same way that when we pick a bottle of orange juice that says, here's your nutrition facts. But what if we did?
GEORGIE FROST: Today, I'm talking to Mickey McManus, senior advisor and leadership coach at BCG and research fellow emeritus at Autodesks office of the CTO. He's a holder of 12 patents and author of "Trillions: Thriving in the Information Ecology."
MICKEY MCMANUS: For all that our cell phones are powerful tools for us. They take a piece of our cognitive reserve, and I think that as we move into the future, our cognitive reserve is going to be just as important as our capital reserve as an individual or as an organization. There was this recent study that showed that even not having your cell phone turned on, but having it in the same room with you when you were asleep, drained your cognitive reserve by the morning, the phone is kind of like this animal.
If you think of our primitive ancestors, and we don't know if it's going to bite us, we don't know if the next text message that comes in is going to be from our cell phone provider, just nudging us to join or do something new or whether it's going to be some horrible disaster.
GEORGIE FROST: That's an absolutely astonishing fact and I'm feeling very, very proud of myself for having in the last week, I decided to leave my phone outside of my room when I sleep. But it's, this is so much more than mobile phone smartphone hygiene. But before we get into the, what we can do about it, cognitive function, cognitive load, what are we actually talking about here?
MICKEY MCMANUS: So if you think about it as almost like a fuel tank, you wake up in the morning and you've got a pretty full tank of gas to be able to do things through the course of the day on your dashboard of a car, you've got both a fuel meter that shows how much fuel you have. And then you also have this thing called RPM or whatever, which is just how fast you burn it. So think of those as two gauges, you wake up in the morning, you've got a full tank of gas, and then you have that really important meeting. And that consumes some of your cognitive capacity. The important meeting consumes it really quickly. And so, then you're depleted by like, half a tank.
They did a study of thousands of judges in Israel, and they looked at whether the judges were throwing people back in the penitentiary during a parole hearing, or whether they were letting them go free. And one of the things they discovered was right around the midday break. You found out that they were actually throwing more people back in prison. Now, the question was, were those parolees or potential parolees, those prisoners worse right around lunchtime? No, they were the exact same thing, but what happened is the judges had depleted their cognitive reserve and it was just easier for them to look at them as a blank statement rather than evaluating their cases right after lunch.
GEORGIE FROST: Were they not just hungry, Mickey?
MICKEY MCMANUS: They might have also been hungry, while they saw this during the morning break at ten o'clock. And they saw this during lunch and hunger might have actually been one of the things, but ultimately what happened is they basically depleted their cognitive reserve and they couldn't make rational decisions necessarily as good about that particular case. So this gives you a sense of kind of what is cognitive capacity. We don't have a standard way of measuring cognitive load, but what if we did and what if we could kind of see that as a little bit of a quantified cell fuel tank and we could detect what depletes us and what gives us energy.
GEORGIE FROST: And this is where the rub lies, I think. If we're talking about having solutions to this problem, how do you measure this, empirically speaking?
The problem is that it's mostly in the labs, but what we're seeing now is with the advent of things like AirPods that can actually measure your head orientation, your temperature, your basal temperature, your galvanic skin response, the ubiquity of these new kinds of sensors, like an iWatch that allows you to detect heart rate.
We're starting to see people being able to use these things. A AAA game company, this is a company that makes video games recently came out with something called Akili and it's for 12 year old kids and it got FDA approval. And what it does is it use your iPad to measure your ability to pay attention and your ability to deal with distraction. And it uses the sensors in the iPad to be a prescribable game, to help with ADHD.
And it's the very first prescribable video game that can actually be used to help 12 year olds or 65 year olds, frankly, deal with distraction and build their capacity to actually cope with distraction without taking a pill. So there are some glimmers on the horizon that show that we really may be able to help people. The doctor can prescribe it and it can be paid for by your health insurance. And instead of it being a shot gun blast to your system, the way a lot of these ADHD pills are, it actually uses the sensors in the iPad along with kind of a game methodology to build your ability to deal with distraction and to build your working memory.
So they've actually found that in 70 year olds, the same game actually helps reboot your cognitive capacity for memory and for dealing with distraction down to the 22 year old. And it has lasting effects when you stop using the game, they actually see that your neurons have wired themselves differently. And they've been able to demonstrate this. So the science is actually there. It's just that it hasn't really made it out into the world yet because the sensing component of it is only now starting to become easy to sense.
GEORGIE FROST: How have we got to this stage, Mickey? I mean, I said it's more than just smartphones. Smartphones are huge part of this great brain drain, but how else is it manifesting itself and how will it look in the future?
MICKEY MCMANUS: Well yeah, no, I think it's not only our cell phones. It's also just the rise of complexity in general has made it harder and harder for us to cope with reality. We've got so many more things begging for our attention, whether it's the social media, asking us to thumbs up something or like something.
And in some cases you're not even the product, you're just the raw material. And they're trying to get your attention through salacious content, through any way that they can. And we are still pretty basic animals in some regards. So we find what they're doing is they're pushing all of our are kind of cognitive bias buttons.
And there are over 190 cognitive biases, which are just shortcuts and they're built into us, but some of them are past their sell-by date. Maybe we built this cognitive bias when we were hunting wooly mammoths, and we don't need it anymore, but these systems and these companies have learned ways to do what's called dark patterns, which are basically design patterns that trap you in these cognitive capacity, draining situations.
GEORGIE FROST: In that regard, then it's the answer to have solutions. And I want to get onto those solutions in a minute or chief cognitive officers in your workplaces, or is actually, are our brains going to adapt sort of Darwinist theory here, those people who are perhaps more suited to this new-
MICKEY MCMANUS: That's a great question.
GEORGIE FROST: Quote, unquote, cognitive overload or distraction environment. I mean, is there evidence that some people may thrive on that, a 20 minute nap for you may make you feel invigorated where me working in a very highly distracted environment brings the best out of me?
MICKEY MCMANUS: Well, no, I think that's a great point. There are some people that really are thriving in some of this. And the question is sort of, will we evolve our way towards this? The big problem is some of these are super deep inside of our psyche. They're not something that is different between you and I, but I do think we're going to ultimately need something that's N = 1. That's just like actually dedicated to me and helping me deal with it.
So my PhD intern, Netta, has ADHD and she also has dyslexia. So reading research papers is really hard for her. Reading things for me is really easy for me. It doesn't pull down my cognitive capacity, gives me new ideas all the time. So I do think we're going to have to have this be targeted per person.
Now, the other thing though, is that my brain is no different than my grandfather's brain. Evolution just doesn't happen that quickly. And so, consequently, I don't think we can count on evolution. I do think what we'll see is that some people are just natively able to cope with it. And the other thing is that I think we're getting a whole generation of kids that have been grown in this space, and frankly, they are learning that they have to figure this out.
They have to curate their feeds a little differently. And so I'm already seeing hopeful signs from teenagers, even who are very bluntly. Like they understand the stuff that we don't understand in some ways, and they're starting to curate their own feeds because they understand that they need to, they can't just kind of accept whatever thing is coming by.
GEORGIE FROST: Can we leave it to our own individual decision making ability as it were? Or do you need change from a governmental level?
So the Environmental Protection Agency, came around in the 1960s because of something called silent spring. Rachel Carson was a environmentalist who documented what happened when companies went in and strip-mined and created chemicals and then dumped all the stuff in the waterways of local villages and towns. And she wrote this serialized story that was seen by the President of the United States at the time, President Kennedy in the "New Yorker" where she talked about a fable of one spring, the birds didn't chirp and the bees didn't buzz. And basically, things weren't born because of this sign silent spring.
And I think we're facing a kind of silent spring 2.0, but we don't have something that pops up and says, "Hey, here's your cognition facts." The same way that when we pick a bottle of orange juice that says, here's your nutrition facts. But what if we did, what if we had the ability to say, "I don't mind that this is going to deplete my attention. I don't mind that this is going to habituate short-term attention spans, I need it." For some other reason, and that's fine. Maybe sometimes you want to drink that juice because you just feel like a little, a jolt of something, but today we don't have anything that's even flagging that.
And so I suspect we will have to have some either regulatory body that says cognition is a human right. Like we should probably have the ability to think, and we should defend that. But right now I don't see it on the horizon in the short term, but there are a lot of discussions going on right now about the debilitating effects of cognitive capacity.
GEORGIE FROST: How would you measure that? What would that look like? So is it, I pick up my mobile phone and automatically it flashes at me and says this mobile phone, full stop, is a, we use traffic light signals over here for like salt content. And I don't know what it's like in the states, but I mean, is it going to flash up red? I mean, am I going to have a Facebook or an Instagram which flashes up red? Are the BBC going to be green and Daily Mail going to be red? I mean, how would that work?
MICKEY MCMANUS: Well, yeah, I don't know. I think there's an interesting question. First of all, like I said, I think it'll have to be tuned to you. Not just something that's a blunt instrument, because you have different things that deplete you than I do. So it might be like, imagine the nutrition facts that you see on the side of your juice bottle, it might pop up something, it says cognition facts. This will reduce your ethical decision making by 20%. Don't use it for more than 20 minutes. And in fact it's pretty trivial to reduce people's ethical decision making.
GEORGIE FROST: How would you measure someone's ability of ethical decision making as opposed to any other decision making?
MICKEY MCMANUS: Yeah, so there's a famous study by Kahneman and Tversky who are cognitive psychologists and behavioral economists. And they basically studied that if you take a deck of cards and you flip up a card and you ask people to add three to the number that you see on the card. So if I flipped up a card and it said the two of spades and I said, come on Georgie, just add three to it. What would the two of spades be if you added three, what would it be, Georgie?
GEORGIE FROST: Five.
MICKEY MCMANUS: Five, okay. So, if I flip up another one and it's the nine of hearts, what would it be if you had three.
GEORGIE FROST: Queen, queen.
MICKEY MCMANUS: Queen, I think queen. So if we did this for about 20 minutes and then we administered a test, that's kind of one of the classic tests for ethical dilemmas, pull the lever on the big thing. And the train either hits one person on the track or hits the entire thing. You would make horrible, ethical decisions. And that would be depleted for about 24 hours after you slept.
And so there have been pretty powerful studies about being able to reduce your ethical capacity. And that's just using math, like just asking you to add that for like 20 minutes or even 10 minutes or even five minutes.
That sounds really dangerous in some ways, especially if we've got people that are open, like let's imagine your frontline in an organization that are working in different parts of the world. They've shown that things like corruption are infectious, that if you're offered some kind of a corrupt deal and you turn it down, within the course of a year, you'll be more open to actually saying yes to it later. This is a study out of the Duke Center for Advanced Hindsight, where they've been able to basically demonstrate that corruption is contagious.
GEORGIE FROST: Well I'm glad you mentioned that because I mean, this is the podcast called "The So What," so it's one of the big questions with all of this is if you're a business, if you're an individual, so what, what does this matter? You've called it civilization's cognitive collapse, but why should business organizations care? Because if you care then you know to do something about it and where to put your resource.
MICKEY MCMANUS: Well, imagine you're a corporation. You realize that every time you buy in a new piece of software, it's either going to amplify complicatedness and make it harder to think, or it's going to actually help your employees cope with this. It's an unfair advantage if you actually have more cognitive reserve than your competitors. And so consequently, you might have something that helps the CIO or the CTO, CHRO, the human resources person, right, between that and the it guy. Maybe that's an opportunity to say, when you buy these things that you think are productivity apps, are they really going to help you with productivity or not? And people on the front line, we might want to teach them new things.
There's a study out of, again, out of the Duke Center for Advanced Hindsight, where they actually looked at decision myopia, this is just short-sighted vision for making good decisions. And they made a game called Happy Money and they played it out in different places in the world. It tested you to try to make better decisions about how you save and how you spend money. And one of the interesting things they found is that you have had very low decision myopia, you had basically made bad decisions pretty quickly for conserving your like local money for your family or friends. But after you played the game, two or three times, your ability to make better decisions was better.
So playfulness in games help you simulate the future before doing anything real serious with your real future. So for people in the front line, we might have new kinds of tools that help them build their ability to not be blindsided by things.
GEORGIE FROST: I mean, we've spoken about food, signaling. I sense that sleep is a new thing that we're focusing on something that seems pretty obvious, but it was only in the 80s, the 90s, even now you can hear people saying how impressed they are. They only asleep for four hours. And I thank Margaret Thatcher, was very famous for that. And now we're suddenly realizing that, how important sleep is to our physical health, our mental health. Do you think cognitive health, I suppose, is the next thing? The science is perhaps just a little bit early and organizations really, really, and governments and individuals really need to start taking this a lot more seriously, but what is that point? What do we need for that to happen?
MICKEY MCMANUS: Well, I think we are already seeing it happen in some regards because of COVID, because of the great lockdown we saw that more people were dealing with mental health issues and we saw that people had to really think differently about how to on wall-to-wall Zoom meetings all day long, not having the capacity to just take a break. And you heard things like Zoom fatigue.
Now typically, mental health challenges have been stigmatized or they've only been open to the one percent-ers, the people who are high performance athletes get, get help with their, coaching with their mental health, people who can afford having a therapist or that things. But it's actually a fairly rarefied place where you can actually get that. But I think during the COVID crisis, we saw a lot more people having open conversations about mental health. And I don't mean mental health, like at the extreme side of it, where you might have bipolar disorder, things like that. But just generally, how do we recharge?
There was an amazing study by Dr. Ming Kau in Chicago, where they looked at kids that were going to school. This was before COVID and they looked at, could they get them outside just to be out in the forest or out in like a park. And over a ten-year study, they found that kids that were given a chance to walk outside during the day and be in parkland, had lower rates of diabetes, had lower rates of illnesses and had higher rates of passing tests and being able to do things just by doing what the Japanese would call "forest bathing."
So I think COVID has accelerated the urgency on it because it's forced people to say, I don't even have a boundary between my office and my home, but I also think there's been a lot more discussion of it just being a human right.
GEORGIE FROST: What do you mean human right?
MICKEY MCMANUS: Well...
GEORGIE FROST: Who's taking this away from me, companies they're taking away my human right?
MICKEY MCMANUS: I think they are, yeah. Every IOT device, every internet of thing device is begging for your attention. That smart speaker wants to sell you something. You go into a store like Amazon Go store. That's like a robot you're walking into and it's trying to figure out how to sell you more things. There's no sort of click-through license when you walk into the store that says that you're OK with that. But you know, there are.
GEORGIE FROST: Do we have no free will in this then? Do we have no free will? When I look at social media, am I being duped?
MICKEY MCMANUS: Well, I love that question. I think we do have free will.
But on the other side of the aisle, we've got machine learning algorithms that are trying millions of little ways of doing this. And each child, each person, you and I are pitting our brain against like a building full of servers that are all trying to get your attention. So it's an unfair battle and we don't have any sort of circuit breaker to say, give us a chance to deal with this.
GEORGIE FROST: It's a tricky one though, isn't it, Mickey? Because I mean, I think about me and my profession. I'm a journalist, I'm a podcast host. There are millions of podcasts out there. I want to do what I can to grab people's attentions for 20 minutes. I mean, as soon as they start hearing my guests, then of course they'll listen, but it's like trying to grab people's attention away from whatever they're doing. I am part of that, as are many businesses.
How do you marry that up? When so many diverse businesses are based on trying to grab people's attentions and you are proposing that what we're doing is breaching someone's human right, essentially. And we need to bring in traffic lights to say whether it's good or bad for us. I mean, would this podcast be good for someone, cognitively speaking?
MICKEY MCMANUS: Well, I love that question. I mean, I think in some ways the journalism side of things is both built on getting people's headline, getting the attention. But the question is, will I get a value from this podcast?
Like I can't really listen to every single episode today, but if I could pace myself and if I can sleep in between, because sleep is when we actually rebuild our cognitive capacity and I have a chance to have that refractory period, many of these things that are high cognitive load, actually give me more potential, actually add more batteries to my system.
Unlike say, my metaphor of using an electric car where you've got like, kind of the electric fuel gauge that that says, you've got more or less battery. You can't add more batteries to that electric car. You can do regenerative braking and when you hit the brakes, it like recharges the battery, but you can't build new batteries. The human brain is not like that at all. The human brain can add new batteries. We can actually build our cognitive capacity. And I think that's what's hopeful about this.
GEORGIE FROST: Finally, before I let you go. What can organizations do to find ways to protect, to restore, to build the cognitive powers of their employees, not just their employees, their partners, their customers?
MICKEY MCMANUS: Well, I think, we mentioned a little earlier, what if there were a chief cognition officer and I think we're going to have something like that. Somebody who stands between the human potential side of things and the technical side of things inside of an organization.
There's a company that basically has their board of directors go to a mixer the night before a board meeting. And they're challenged with finding out something interesting happening by talking to the rank and file employees. What they're doing, what you're doing is you're enlisting them to be able to help us discover weak signals that might be in your organization already, that could hurt you later.
So you're enlisting the board of directors in a different way, and they found that this is really powerful to do this. If it's the middle manager, they've got to deal with how to manage expectations above them and how to manage the frontline team.
Take a look at the software that you're installing, take a look at the things and evaluate them on cognitive load or complexity. And whether it's just helping increase complicatedness and complexity, or it's really helping people do this stuff.
GEORGIE FROST: Mickey, thank you so much. And to you listening, we'd love to know your thoughts. To get in contact, leave us message at email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us, it helps other people find us too.
GEORGIE FROST: "Mend your speech a little, lest it mar your fortunes." Words, they're most powerful tool. You can share your greatest ideas, your most intimate feelings, but they can also wreak havoc intentionally or otherwise. So, are you paying enough attention to the language that you use? I'm Georgie Frost. This is The So What from BCG podcast.
ASHLEY GRICE: It's not about being a word snob, even though I self admittedly, probably am one. It's not about feeling as though you've got intellectual superiority over somebody because of vocabulary. It's about choosing the right word.
GEORGIE FROST: Today, I'm talking to Ashley Grice, CEO and a Managing Director of BrightHouse Consulting, a BCG company.
ASHLEY GRICE: He boldly states it to the room, A thought refined. First offered quietly, then boom! Repeated loudly, now it blooms. Nods of assent, they're all aligned. I shake my head, my face bemused. His thought's acknowledged as sublime. I like it too. As it was mine.
Language has always been a really important part I think of my identity. I was a big reader when I was a kid. I learned to read young because my sister forced me to play school at home, and I always kind of felt that language and words were a superpower. It's something that I loved. It's something that I like to be able to use and to flex. It's something my good friends tease me about occasionally. And it's something that as I grow older, you start to sometimes lose the ability to pull out just the right word in the exact moment, and so it's like it's joyful but also has a little bit of nostalgia to it.
In this particular poem, it's a little snarky, but the reason it's like that is because it talks about this concept of having somebody take your voice and take your language. And what they're really doing when they do that is they're taking your identity. And then sometimes they express it really well, but then sometimes they express it with a different intent. And then it's like, then a foreign concept to you. So, that idea of wanting to hold on to that identity through those words and the way that you express your wonder and ideas is incredibly important to me and it always has been.
GEORGIE FROST: Firstly, Ashley, thank you so much for reading out your poem. I have to say, this is a first for The So What from BCG, having a published poet on. So, it's very exciting for me, but apart from mansplaining, how else does language manifest itself in your role? Those aha moments if you like, where you acknowledge it, where you understand its importance, where it has resonance for you in your job. Those moments where companies really need to get it right, some do, and some of them fail hugely.
ASHLEY GRICE: So I help companies find purpose for a living. That's what I do. And ultimately when you are doing that, what you're trying to do is take the concept of their ethos and marry it to their future aspiration and set a goal for who they want to be, what they will live up to in a very pithy phrase that is memorable and deep and unique.
GEORGIE FROST: Ashley, words can create movement and change. They can convey great ideas, our passions, our thoughts, but they can tear them down as well. Get the language wrong, get the context wrong, even if you mean it as a joke you can destroy your business.
And the famous example that comes to my mind, the most obvious example, is perhaps that of Gerald Ratner, the former chairman of Britain's, at one time, largest jewelry chain describing one of its products as, I think I can say this "total crap." And essentially, he brought down the whole operation with those two ill-chosen words. So apart from describing your goods as rubbish, never advisable thing to do, what are some of the most common, less blatant though no less important mistakes that you see companies make?
So, we are always telling executives, you need to make this personal, you need to understand the story that you are going to tell as a human because people want to see authenticity in their leaders, and that is a combination of strategy and empathy. And that sense of empathy often comes through how one expresses themselves, and so you really need to think about what words do I use as a leader, as an individual?
Why is it so important in business to really push beyond the boundaries of this normalized language, this lingo that we speak? I think it's important because using our vocabulary to its fullest, it increases wonder, it increases expression and then this creates value by reaching different people differently, and by spurring imagination.
I really do think that imagination and this concept of wonder can lead us to resulting innovation that sometimes we cut off when we use our language in a really narrow way. And I also think that language can help push this empathy-driven culture of trust that as we continue to be digitized and working remotely, and we continue to be globalized, that's an important piece of creating value in business.
GEORGIE FROST: Now Ashley, you are, I think it's fair to say, a bit of a word snob. Indeed, I think you have admitted to me that before.
ASHLEY GRICE: I am.
GEORGIE FROST: If you haven't, then I'm very sorry. Yes, thank goodness. You did say you're a bit of a word snob. So, it's not just about using everyday language, the common vernacular, but a specific type of language. But isn't there a danger with that, that we exclude a lot of people from the conversation creating a barrier between the, I use the good language from the Ivy League schools, I use the Queens English and you don't.
ASHLEY GRICE: So it's not about being a word snob even though I self admittedly, probably am one. It's not about the two-point words or looking important or, you know, feeling as though you've got intellectual superiority over somebody because of vocabulary,
GEORGIE FROST: So I was reading an article in The Economist a couple of weeks ago that was highly critical of a certain company's mission statement, I won't name the company. But having read the statement, I can see why. Now it used some good words and big words, but put them together and it was nonsense. Guff, I think the journalist called it. You must see this a lot in business. Pretty words, no real meaning about what your aim is.
ASHLEY GRICE: We do, and in fact, a lot of the work that we do is to help companies use the be beauty of eloquence to be able to express what they do. In fact, half of the work I do always begins with, there is a difference between a purpose statement and a vision statement and a mission statement. They have different intentions. They need to be expressed differently, but yet they also must be complementary, and everybody within that organization knows how to use them.
So when you do have an empty statement, if what you do every day is not within that mission in an inspiring way to the people that work for you, it's not effective. It's almost worse to have a bad one than to not have one at all.
GEORGIE FROST: So if you were advising a company to write their mission statement for example, how would you go about doing that? Give me three ways that a company could start looking to use the right language to convey what their purpose really is in an authentic way. Now we spoke on this podcast previously to Sarah Willersdorf about high fashion and the metaverse. But she highlighted that what mattered most to Gen Z consumers, was authenticity of brand. So how can you convey that with the right words?
ASHLEY GRICE: First way, I think you start from your ethos. You go back into your organization and you understand fundamentally who you are, what is in the company DNA, because that will always be at the core of the work you do really well, of the way that you can create impact. The second way would be to consider your tone.
And I think the third thing would be to focus on uniqueness. There's so much jargon in business that all of us slip into all the time. I'm guilty of this. I had a client call me out on it recently, too much jargon, and I had to go back and look at the the Zoom recording and say, why did they say that? And I listened to it, to pick out those words because that kind of blithe, that glibness, I don't want that. That concept of really getting to what makes you unique and not being afraid to use all of your words.
I was having a conversation with a colleague of mine I hold in very high esteem, his name is Martin Reeves at Boston Consulting Group, and Martin and I were having a discussion about how we don't use the word beautiful enough in business, and how the idea of a strategy being gorgeous is something you never hear but actually can be incredibly true, right? The idea of something being splendid, or magnificent or multiplicative, like all these words we don't use but really lend themselves well to differentiation and uniqueness in that moment. So, I think don't be afraid to use words that other people don't use, but that describe you really well. I think that will get you far.
GEORGIE FROST: I'm smiling Ashley, because my conversations are liberally sprinkled with gems, such as splendid, marvelous, fabulous. I'm not sure if that's because I'm British from the books I would read as a child, but there you go. I do want to ask you about social media. I certainly don't believe it is a universal evil, I'm not in that camp. But in terms of language, what do you think that it is doing to the language that we use offline too? I don't want to get Orwellian here and talk about double-speak but you can see where that's going. The way in which able to express ourselves, the quality of debate.
There's so many, I don't want to say rules, because I think that's a little old school, but there's so much formatting or thought that goes into the certain types, right? You have to be incredibly choosy about the words that you put in there. And there's something to be said about being succinct. You know, that whole concept of, I didn't have time to write you a short letter, so I wrote you a long one. There's that, that can be a good thing. I do think that, you know, on the other side, you are also setting up some kind of barriers generationally in terms of people understanding acronyms and just words that the other generation simply doesn't understand. I know, I have a 16 year old and a 14 year old.
GEORGIE FROST: It's a different sort of jargon, isn't it?
ASHLEY GRICE: Completely, it's their own jargon, and it gives them great latitude to do the teenage eye roll and say, you simply don't understand what I'm saying, and I'll say yes, figuratively and literally, I do not understand what you're saying. But for those generations, they're creating a vernacular that has a sense of belonging to it. That's what that is. And so, there are good parts about it and bad parts about it, right? It does cause discussion in our household over dinnertime, isn't that what we're supposed to be doing? So in some ways, I think it can be good and bad.
GEORGIE FROST: I agree, it's not one way or the other but in terms of businesses, it is certainly rocky terrain. One, to get the language right for it to be engaging and relevant, otherwise why on earth are you in that space in the first place, but also the substance of what you say. Now this is an issue on or offline, but notably online. We exist in a world of cancel culture, of "no" platforming. I'm wondering if you think this is having a chilling effect on the way that we communicate in expressing our authenticity. We're told to be genuine. We're told to be authentic, but only in so much as it conforms with the morals of the day.
ASHLEY GRICE: It's very true. You know, I was having a conversation yesterday, very specifically about this, under the umbrella of diversity, equity, and inclusion, we were going through a training, frankly. And one of the comments that I was making about it was so much progress happens in micro conversations, right?
I was telling a story about how I was describing something and a really good African-American friend of mine said, "Hey, you don't know but Black women really hate it when you describe something like that." And I said, "why?" It was meant to be complimentary. She said, "I know, I know you, I know your intention, but let me tell you why." And she took that moment to educate me on that particular word, which was loaded and I didn't know. It was the word articulate, right?
To me as a white privileged woman, it didn't have a load. And to her, it did. And she took a moment to explain that cultural nuance to me and I will forever be grateful for her doing that. But those micro-conversations changed how I approached my own language in a way that was a big learning point for me, that was a blind spot I didn't see. If we don't allow ourselves to use words that are uncomfortable and to have those small conversations in the moment, we will forever be stuck in this hamster wheel of, you know, lack of change, and I don't want that for us, I don't want that for anybody.
GEORGIE FROST: Those small conversations in the moment are tough though, aren't they? Choosing the right words to say something that could be a cause of conflict, we hate it, but this is something that we all need to do, isn't it? Personally and professionally, get good at saying those things that may make ourselves and our listener uncomfortable, unhappy, but that ultimately need to be said if we're going to grow and we're going to progress. And I quoted from King Lear, at the start calling on his daughter to shower him with words of affection. He doesn't want an authentic daughter, he wants an obsequious one. But in the current climate, are we to become masters of that glib and oily art? Are we to become sycophants, frightened to say anything that's going to offend anyone or may get us into trouble?
ASHLEY GRICE: I agree. There's this woman, Francesca Gino, who is a behavioral scientist. I believe she teaches at Harvard Business School. And she made this comments around conformity gives us comfort, But there is something to be said about the kind of progress one makes when they are in discomfort, which is something as human beings we are terrible at doing. We try to move forward, we either flee or we fight.
GEORGIE FROST: I'm wondering about when you speak to people who don't share your mother tongue. Now I know this from my own personal experience, my other half is Spanish, how something seemingly innocuous, just words or comments can be taken in completely the wrong way. How do you bridge that divide in your career?
ASHLEY GRICE: It's very true. Well, you slide into it. I think everyone naturally slides into it because they like to belong. Right from the days when we were in caves, you had to belong with everybody else, and if they moved without you and you were alone, you died. So, everybody constantly wants to create that group. For those that know me and listen to me a lot, you can tell I've worked for a British company because I will use words like chuffed or brilliant or one of my favorite blagging, I love that word. I think it's an incredibly good word for exactly what's happening in that moment, you know? But there are words that I have used in English in the British context, which do not mean the same thing.
GEORGIE FROST: Pants, pants in America don't mean the same thing in England, by the way.
ASHLEY GRICE: They simply do not. Yes, they simply do not, they create a whole fish bowl. The concept of fanny pack in America is just simply not the same, right? You know, there are things like that, you see what I mean? I have made that mistake. Part of that too is creating a cultural connection that is just simply human. You know, right now for example, I am taking French lessons. At 47, it is near impossible to cram French into my brain. I am trying for lots of reasons. I have an office in Paris and when I go to Paris to be with the team, clearly they're all speaking English for me. It's beautifully done. They make my life easy when I am there, but I try really hard when I'm there culturally to speak as much French as I can. It's a disaster. All the folks with whom I speak are thoughtful about it but I'm trying to make connection through word, and I think that intention goes a long way even if the accent is just horrendous.
GEORGIE FROST: I'm glad we're having a bit of a joke with this and a bit of a laugh because actually, I do want to focus on the the joy of language. And used well, what it can communicate can be such positive things. And I know you've got another poem and I'm desperate for you to read it out to us. So, the joy, let's focus on the joy and the comedy and the beauty and how splendid language could be because it'll make me really chuffed to hear you talk about that.
ASHLEY GRICE: Aha, I love it. All right, this is not published work. This is menial beginning work but I was laughing about the concept.
GEORGIE FROST: Exclusive BCG podcast, yeah?
ASHLEY GRICE: Exclusive, you're right. Now I'm feeling very important. It's an exclusive, and I was joking about the fact that consulting bingo exists. Do you know this, right? You have the board, and if you really want to, during a long call you can chuck off the words you hear. So, I wrote this little thing called "Death by Jargon". Doll Zoom, let's play bingo. With consulting lingo, we'll listen for paradigm shifts. Agile and best practice, synergistic action, win-wins, decks, and benchmarks and gifs. Manage up, then top-down running I'll hit the ground while white-boarding key attributes, 30,000 feet high, A sea-change clouds my why obscuring the low-hanging fruit. Now, new action plans drafted prove quite value added. Assuming we sidestep scope creep, we'll drill down on pipelines, find green fields and landmines. Bingo, my engagement's complete.
GEORGIE FROST: Ashley Grice, fantastic. Thank you so much. And thank you for listening. We'd love to know your thoughts. To get in contact leave us a message at firstname.lastname@example.org. If you like this podcast, why not hit subscribe and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: Empty supermarket shelves, everyday items going up in price. And where is my online order? All of us have been impacted in some way by the global supply crunch while there's little we can do about COVID, could some of that disruption have been avoided if we just did things differently? I'm Georgie Frost and this is "The So What" from BCG.
DUSTIN BURKE: In the past, there was a high degree of trust put on suppliers to deliver. And now I think companies are of the mindset, that's not sufficient.
GEORGIE FROST: Today I am talking to Dustin Burke, a leader of BCG supply chain practice and an expert in shipping and logistics.
DUSTIN BURKE: Many industries run at very high rates of capacity utilization in plants and they don't carry a lot of inventory. We've seen that in places when we've had say natural disasters in specific areas, any given point in time. But COVID has been a global disaster and so it has impacted many different industries all at the same time, so it's making us very aware.
And at the same time, our logistics infrastructure in many countries is under invested in, it kind of worked before COVID. But what COVID did is it skewed what we were buying, how much we were buying because many of us were stuck at home. We're not taking as many trips as we used to. So we're doing different things with our time and with our money and that has driven a shift which has stressed the infrastructure we use to import and distribute goods. So those weaknesses were there.
It essentially means that in many of our supply chains, we just weren't able to cope with shocks and COVID has brought many little shocks all at once.
GEORGIE FROST: That's too much emphasis and I do appreciate everything you've just said there about the impact of COVID, it's been huge and it's impacted every area of our lives and every link along the chain. But has too much emphasis do you think then put on reducing costs and promoting efficiency over resilience? When did that start? When did things start to change towards that?
DUSTIN BURKE: It's a good question, I do think a lot of emphasis has been placed on that and probably primary emphasis in most supply chains. Too much, I think depends on your competitive context. So companies are often trying to ring waste, right? Out of their systems, increase their margins in the face of steep competition. And if you're making something or you're distributing something, most of your costs are tied up somewhere in your supply chain and wringing that waste out of it is not all bad, it's what helps many of us get reasonable prices on the things that we want to buy. Waste can also mean carbon, right?
So looking forward, we're trying to take waste out of the supply chain in that way. And so, that's an important driver but it can get out of balance and in any given quarter or any given year, it is understandable that a company's primary objective is going be trying to make a little bit more money but we can lose sight of the robustness of that supply chain.
Do we have the right buffers? Do we have backup or secondary suppliers when we need it? Is there enough capacity in our supply chain? Those things are important but it's very tempting to get rid of that buffer and to essentially lean out resilience when you're trying to remove waste and I do think that we've gone too far in that direction.
GEORGIE FROST: Is this been a massive wake up call do you think for businesses, supply chain managers?
DUSTIN BURKE: I would like to think so. On the one hand we have had massive disruptions in specific industries before in companies and the leaders who work for them, the supply chain leaders who work for them really they compete within industries for the most part, most days, right? When we have had say, for example, floods in Thailand or we have had tsunamis in Japan, or it's not uncommon that we have hurricanes on the Gulf coast of the United States, we have disruptions in supply chains and particular industry value chains suffered during those times.
Right now we have several of those things at once. So I think there is more consciousness about it. Now I am hopeful that we won't miss this opportunity or this awareness that we now have, say two, three, four years, hence and that there will be a renewed emphasis on supply chain resilience or at least a better balance but it won't happen by itself because human nature being what it is, competitive pressures being what they are, people doing most easily, what they know how to do, I think will tend to make us behave in the ways we did pre-COVID unless we actually think now differently than we did before about how to make our supply chain stronger.
GEORGIE FROST: So before we actually get to what you think we can do to make our supply chain stronger, I do just want to address first, a couple of myths, perhaps, ideas that I'm sure you've heard, I've heard that things like we could just easily move our supply chains away from far-flung countries, that's the problem. And back to the U.S. or wherever that this is all just temporary, that self-driving trucks would solve the driver shortage, will they?
DUSTIN BURKE: Yeah, it's a good question. So there are, I think a lot of solutions that are either a little bit unrealistic because of maybe their boldness. Here's, what is a problem, long supply chains that don't have appropriate risk mitigation around them, such as the right inventory levels. Manufacturing in any particular place is not without risks. So long supply chains can involve risks.
So for very far from where we're trying to source things, then a lot of things can happen in between. We might have, like I mentioned, natural disasters at one end of the supply chain. And to be sure if that chain were shorter, then there would be less risk there. On the other hand, it's not without risk. So many manufacturers in north America, for example, right now we're facing shortages of important residents that they need to make plastic products. And I'm only talking about a distance from say, Houston to Chicago, it's not that far.
And so, location is not everything. It's how many suppliers we have. Are all of our suppliers in the same place and subject to the same risks, be they natural political pandemics or whatever. So diversification or lack of diversification is a problem. And people are focused on autonomous vehicles, it's very exciting, I think and I actually believe someday we're going to have that. It will take longer than we think.
GEORGIE FROST: Why would that make a difference? Why would that make such a difference?
DUSTIN BURKE: Yeah, it's a good question. So in many markets, we have a very tight labor market right now, particularly around commercial truck drivers. It's a job that has been challenging to attract people to. It's a difficult job to do. And so, one of the things that we could think about doing is to remove that capacity constraint or ease it at least with some autonomous vehicles.
That will not happen I think in most jurisdictions for at least a decade for the type of trucking that you and I think about. So it's not a solution for the problems that we face today. And frankly, for a lot of the problems we're facing today, lack of trucks, lack of truck drivers, it's a cost issue but it's not the primary thing that is causing shelves to be empty for example.
GEORGIE FROST: So do you think that supply chains need a major rethink? A brand new model of working? I mean, hopefully we're never going to get a situation like COVID again, but it has exposed issues here.
DUSTIN BURKE: Sure.
GEORGIE FROST: Or can we just make certain tweaks at the side that will be enough to make sure that this doesn't happen again.
DUSTIN BURKE: Right, I don't think tweaks will be enough. I do think that many of the things the supply chain managers have been doing for years to drive reasonably good service to their customers, be the consumers or other companies to take cost out of the supply chain. I hope in the future taking carbon out of the supply chain, actually mostly work.
What is missing, I think is new ideas or sufficient emphasis around the resilience of those supply chains. We, as consumers should ask the companies that sell us things, we should demand resilience and reliability. Companies should demand that more of their suppliers. And I think that we need innovation and how to get there because in the past, the tools at our disposal were just not attractive, carry more inventory, okay, well that has a cost. Source maybe from nearby despite higher input costs, well, then maybe I'm uncompetitive. Those are just unappetizing and they're really not sustainable in the face of intense competition.
So we need, I think some major rethink of how we actually get to more resilient supply chains in a way that people will find acceptable and stick with.
GEORGIE FROST: Well, talk to me about that. How can we get there and what do you mean acceptable and people will stick with?
DUSTIN BURKE: Yeah, I mean the managers, you know, let's say you are leading a company and your job is to be sure that that company delivers great products to its customers at a good price and also value to its shareholders. It would be very tempting to take waste out of that system if you were falling behind. So we need to drive a resilience with minimal waste and that can be hard to do. So often we carry that waste or that buffer in the form of inventory, in the form of capacity, capacity being extra lines in the plant or extra workers around because we don't know what will happen. There is uncertainty and therefore we carry extra.
We need to think differently about how to address that uncertainty. The other way that you address uncertainty is you try to become more certain about what will happen and you can only do that with information. It's sometimes hard to get this information but this is where the energy needs to be focused. And so for example, it is not uncommon that companies sure, know who their suppliers are but they don't necessarily know who else is buying from their suppliers. And they often don't know who their suppliers are. And so, there are points of vulnerability that are just not knowable now.
GEORGIE FROST: Why does that matter to a company to know that information?
DUSTIN BURKE: Yeah, great question. So for example, if you and I like to buy the same product, it doesn't matter so long as there's enough of it. If you suddenly have a change in your condition, such that you're going to buy much more of that, and therefore there's not enough for me, that would have been nice to know because then I would actually look and see kind of how you're behaving and I would try to predict that.
GEORGIE FROST: To say it's jumpers and the weather gets cold and I want a lot more of them, right? Okay.
DUSTIN BURKE: Exactly. If there are not enough jumpers, I might want to know whether you're going on a ski vacation soon but I don't know that, we're just customers and I normally don't need to know but if suddenly there's a shortage in jumpers or as we say sweaters, then yes. And then the other kind of example on suppliers suppliers. So let's go with the sweater example again, the company that makes sweaters and there's only some, not enough sweaters to go around needs to source wool. Well, perhaps wool is being used for other things, right? To stuff materials of some sort.
And so, I actually want to know if demand is exploding in the world of wool stuffed pillows and that would be helpful for me to know but I just don't know that yet because I don't know where else that wool goes. We can bring a lot of innovation to this and there's some energy now but it's a very early stage. And when we think about what companies particularly in the startup sector have been able to do and bringing some visibility into other spaces and bringing technology to these problems, this is where it needs to focus in supply chains. Being able to see up the supply chain, several different levels, being able to see across to companies that are not even in my own industry, but I know that I am linked to because of the things that we depend on that are in common. We have seen this during COVID and this is, I think of the wake up call.
Companies are scrambling for these semiconductors because they're relying upon the same common scarce source of supply. And these are companies they normally wouldn't even think of each other because they don't compete against each other. They don't play in the same industry. Solving this problem, focusing on redefining, identifying risk and tools for driving some resilience to mitigate that risk, I think is the main frontier for supply chain management for the next several years. And this is where I hope innovation will come.
GEORGIE FROST: So that seems very sensible knowing who my supplier is also supplying to but it feels like a first step. What comes after that? How do I work better with that information? Do we look towards further collaboration? And if that's the case, how does that work alongside competition?
DUSTIN BURKE: I think it is what you mentioned. I do think it is around coalitions, partnerships. I think it's around cooperation which is also challenging to do but it's not impossible. We have companies that cooperate in supply chain topics on specific things. You know, we have recently airlines collaborating on driving sustainable fuel sourcing and we have companies that collaborate on supply chain problems around say human rights concerns on particular commodities such as on seafood. I don't think it's unreasonable to think that we can have companies that collaborate with each other to look at, hey, this is a critical input for us. We should really work closely with our suppliers, require them, certify them, some mechanisms such as that, to make sure that they have enough capacity to make sure they have their risk mitigation plans in place or we don't source from them. Or at least we label them as somewhat quote unquote, higher risk and we need to know that.
It is hard to get companies to compete on things like this but I am optimistic that it can happen because we just mentioned, we have interests in common with companies who are not our competitors, so that actually should make it much easier. The hard part is identifying who those companies are but we could do that. We can do the work of mapping our supply chains. Ideally with technology but otherwise with brute force. And once we know, we can see companies that have interests that are common to ours but they're not our everyday competitors necessarily. And that actually, I think opens up interesting possibilities for these coalitions or partnerships that are looking to drive some resilience farther upstream in our supply chains.
GEORGIE FROST: You mentioned there semiconductors, is there ways that we can better reflect, products that are actually really critical? Can we protect those products in some way to make sure perhaps they are not as disrupted? I mean, I don't know how it'd work but-
DUSTIN BURKE: I think it depends who it's critical to. When there's a public interest, this is probably a role for government and in some instances it is and we know that didn't work perfectly at the outset of COVID-19. So when it comes to something like masks, critical medicines, ventilators, those types of things, there is a public good. The importance of having them in supply is not reflected in the price. And this is probably something that only governments can fix adequately or governments collaborating with industry.
Otherwise, what is critical is it really in the eye of the beholder in a particular industry or between individuals what you view as critical as an input to your life is probably different than for mine. I do think companies can look and say, for this particular input, this particular component or this raw material, how long could I go between shipments or how easily could I find an alternative source? And so, you can look and see which ones are higher risk and by that definition critical. But when you're making something like a car, really by definition, every part is critical. You could have a car waiting for lack of tail lights, for example, that kind of thing is happening. So I think it's more about what is more vulnerable rather than what is more important.
GEORGIE FROST: You mentioned their governments, what role can and should governments play when it comes to supply chain logistics?
DUSTIN BURKE: Yeah, so when it comes to supply chains and ensuring resilience, I really think the governments are in a position to lead in some of the ideas I proposed in terms of defining what resilience is in key sectors and ensuring that the companies who play in those sectors have that. And so, you know, that stamp of approval whether it's literally a regulatory approval to operate or whether it's an ability to sell to the government or something along those lines in terms of having the right risk mitigation plans in place, excess capacity, redundant suppliers, that could be led by government. I do think the private sector is probably going to innovate on the technology solutions to do that most efficiently. So that is one and that will pertain to those things which are important to public health and public safety for the most part.
You did mention logistics and logistics is dependent on infrastructure and infrastructure by definition has a huge role for government, through funding and through regulation. And many of the countries where we live and work, we have exposed vulnerabilities in our logistics infrastructure and fixing that does take time but it can only come largely through funding. And I think the important thing is that we're funding the right things, the things where we see bottlenecks today. The main bottlenecks is around sort of the importation of goods and specifically around full distribution centers and warehouses. We have too little space at least here in the U.S. and especially in Southern California to put these containers of things that are being imported at record volumes. And that is really gumming up the works.
And so, sure it makes sense to try to fund port infrastructure but that's not primarily where our bottleneck is here at least right now in north America. Our bottleneck is in place to put that stuff. And so, whether that's through allowing more land to be developed into distribution centers, whether that is through developing port regions outside of Southern California to diversify our infrastructure, those are I think the directions that we need to fund and innovate as opposed to say, throwing more truck drivers at the problem. And we've kind of tried that and it's not working.
GEORGIE FROST: It seems it's quite a large problem which is going to require quite a lot of deep thinking about it across a lot of different areas. And we'll take some time, are there any indications we're moving in that direction at least or is this really something that has caught a lot of people, to borrow in American expression with the pants down, a little bit?
DUSTIN BURKE: So I think it has but I think most companies and governments are admitting that at least. I do see momentum toward changing it but I don't think you and I will see a big difference in the next few months. And here's why. Changing those infrastructure problems which I mentioned does take quite a bit of time. You need to identify projects, approve projects, build them out. And this is all at a time when we're worried about a lack of available labor in the United States and now we want to build new bridges and roads. It will take quite a while and it doesn't happen overnight. And then also for companies to identify new suppliers, maybe for their existing suppliers to invest in plants in different parts of the world, also takes time.
But I will tell you from the client conversations that I've been having, that is the direction in which companies are thinking. They don't see you know, abandoning a global sourcing activity as the future of their businesses but what they do see is risk diversification thinking about those right buffers and they are acutely interested in having more visibility, farther upstream into their supply chains. In the past, there was a high degree of trust put on suppliers to deliver. And now I think companies are over the mindset, that's not sufficient. I want to know more about the supply chains further upstream. They don't necessarily know how yet but they are interested and they are investing and they're exploring exactly how right now and so, yes, I am optimistic we will see change, that change we measured in years.
GEORGIE FROST: Talking about years, is this just a blip? How long is it going to last?
DUSTIN BURKE: So this has been a massive blip because we experienced supply chain issues and other instances, it's because of geopolitical turmoil somewhere or a natural disaster. And those are relatively localized. COVID-19 is the most global adverse event that we've had in generations. It's a blip in many different places at the same time and it will subside but it will take time and
I think what we should experience, at least in terms of the availability of goods, the things we want to buy, having them on the shelves, having our parcels arrive on time, is a change over the coming months and and here's why, factories in China, for example, typically shut down over Chinese new year. So that's going to last a few weeks, that gives a bit of a pause to the volume of containers coming into most Western countries and a bit of time to work through that backlog. Not enough time to work through all the backlog but a bit more. We are seeing consumers in Western countries in particular and especially in the United States, spending more on goods than they did before because they're very flush, so savings are very healthy and also they're spending more on goods than services. That cannot last forever.
And then I think finally, some of the more innovative ideas and some of the attempts to actually just remove the bottlenecks will finally start to bear fruit but I think that also will take time. So all of those things together, I think mean we can work through it in the coming months but I think it's not two months, it's more you know, well into 2022, at least as far as moving things through our infrastructure with speed.
GEORGIE FROST: I asked you earlier in the podcast about whether this is a wake-up call moment because it does sort of sense that, oh yes, in a couple of months, this will just go back to normal. And actually, do we want business as normal?
DUSTIN BURKE: That's I think a very good question. The answer should usually be no if we believe the world will have be more uncertain going forward or have more shocks then those systems don't work particularly well and we need to change them. I also think there are other reasons to do this that are very timely. It is very hard to know how ethically produced something is. Or what the true say carbon footprint is of something.
Unless you know where it came from all the way up the chain and unless you know how it was made all of the way up the chain and consumers and governments and increasingly companies now I think have much more attention paid to this and I do not believe that this is a flash in the pan. I actually believe this will be with us for some time to come. And so, there are so many reasons right now to invest energy, technology and creativity into supply chain transparency and visibility to solve not only resilience but to solve the other things we want to change about our supply chains as well.
GEORGIE FROST: So where should companies then be putting their focus at the moment? What are the new, the troubles, the opportunities perhaps on the horizon? Where should they be looking?
DUSTIN BURKE: Yeah, it's great question. I think there are a couple of things they need to be doing. One, they need to be exploring with technology partners or how they can build themselves some way of accumulating data from suppliers, supplier suppliers, and supplier suppliers' other customers and keeping that in some particular way that they can actually monitor real time.
Two, outside of technology, I think it's the coalition and partnership idea. With some intelligence about who shares our risks, we should be bringing those companies to the table at least to start. Then the solutions that come out of that I think can evolve. So I think that's the second main area. And then I think the third one is revisiting or further exploring some of the solutions that might not have been chosen in the past.
And so, for some companies, let's say you're managing warehouses or running stores or running plants. You know, labor has been in short supply. We think about automation. Some companies haven't taken that step because of costs. Going forward, that might not be only about costs, that might be about the ability to handle the volume of work, production, distribution that you need to do.
And so, reframing those questions around how I make things and how I distribute things in my facilities and do I need to automate it, I think is also important. So I think that visibility technology, partnerships, further exploring automation are three things companies can be doing right now.
GEORGIE FROST: Dustin, thank you so much and to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at "The So What" at bcg.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us, it helps other people find us too.
GEORGIE FROST: Accelerated by the onset of the coronavirus pandemic, the world of work is changing. The debate is raging over where we work, home, office or hybrid, but is it just a red herring? Are we thinking too small? There's a lot of talk about the great resignation, but are we headed for the great recalibration? I'm Georgie Frost and this is the So What from BCG.
DEBBIE LOVICH: Work before COVID doesn't exist. Done, it doesn't exist. We've been at this for what? A year and a half, almost two years?
BRIAN ELLIOTT: The problem is we keep on falling back into these conventional wisdom tropes. My favorite is water coolers are the source of innovation. It's just sort of insane when you think about it.
GEORGIE FROST: Today I am talking to Debbie Lovich, Managing Director of BCG. Alongside Debbie is Brian Elliott, executive leader of the Future Forum, a slack back think tank in partnership with BCG.
DEBBIE LOVICH: The way we work is completely broken. It hasn't really changed since the industrial revolution when people had to leave the home, go into the factory, performed repetitive task jobs, create hierarchy and spans and control to manage them and fix time and place. It's never changed. Even with knowledge workers, people get fixed job descriptions to be performed in fields of cubicles from 9:00 to 5:00. And what COVID told us is that's totally broken and it's not just the fixed place element. It's all of it. It's the fixed job description, time work gets done, what a leader is in command and control. All of that is broken and if you really dig into it, this do we let people work from home one or two days a week is like a tip of an iceberg. In executives minds, they're saying, well, relative to work before COVID, this is super generous. And what they don't realize is that work before COVID doesn't exist. Done, it doesn't exist. We've been at this for what? A year and a half, almost two years? So, we've been showing something very different can work. So, relative to that, anything edict driven is a step backwards.
GEORGIE FROST: Do you really think that it's done, Debbie, work before COVID? COVID has changed fundamentally the way we work, the way we want to work, the way we think about work because the noises that we're getting certainly from a lot of CEOs, many politicians as well is head back to the office everybody. It's business as usual and actually your career will suffer if you don't. Are we going to miss an opportunity here with thinking like that?
DEBBIE LOVICH: Brian and I, we as part of Future Forum, right, we're advocating for the world to realize work needs to be redesigned and the answer lies a lot in the last year and a half. But the other thing you can't ignore is that we were lonely. We needed to see people. There are some things you can't replicate on Zoom. So, in advocating to rethink work, don't misunderstand and say we're advocating that every company should be remote only. Our point is that there are a lot of things that need to be done in person, but it has to be purposeful, right? Like socializing and getting to build community is hard to do by Zoom. So, yes, we need to go back to the office for that. Working on unknown, hairy problems, collaborating in a room together, some digital natives can do that better remotely. I can't, right? So, some of those things are better to do in person. Going back for everything is not the answer and those companies are missing it and they're going to see it happen with an exodus of talent when you can work from home and only go in when it makes sense. To go in and sit in a cubicle or sit in an office and be on Zoom all day, right, that just doesn't make sense. So, if you could do something that makes sense and get the same salary and exciting work or better salary, people are going to walk. They're going to walk. You see it happening already.
BRIAN ELLIOTT: That's where the entirety of this conversation lies. One of the executives in one of our working groups the other week said this whole notion of the battle for talent presumes that it's really a choice on our side. The talent is one. Talented people, attracting, retaining and engaging. Highly talented individuals is now where competition advantage is. It's not in physical capital. It's not in financial capital. And if your job as a senior executive is to get the most talented people you can, then you're going to use flexibility as a way of leveraging that. You can attract people from a broader geography, you can attract a more diverse population. And people are clearly in our research saying that flexibility is key. It's the second most important thing after compensation to them. 57% of people in our survey globally are open to new jobs this year. If you're in a company that is saying, we're not going to be flexible, we think everybody needs to get the work done in the office, your competition is going to come and attract your most talented people, whether that is your salespeople, your marketing folks, your engineers, you name it.
DEBBIE LOVICH: And I think you have to dig deeper and say, why are some leaders saying we need to go back? And we know that statistically, right? Executives want to go back full-time. I think it's what Brian, 3x?.
BRIAN ELLIOTT: It's 44% of executives want to come back five days a week versus only 17% of their employees.
DEBBIE LOVICH: And so, the question is, why do executives want to go back, all right? So, one, they have nice offices, they have secretaries, they have good food. Their average worker does not have the same setup they have. Two, they've learned to become an executive by remember management by walking around. When I see someone that means they're productive, which is kind of doesn't make sense. What this past year and a half almost two years has taught us is that executives need to build new muscle to lead in very different ways than they used to lead. And that's hard. Going back represents so many things that they're just comfortable with. The important thing is we've got to teach executives new muscles because that disconnect is pretty profound between leaders and their people.
BRIAN ELLIOTT: There's this core issue of trust that we're seeing pretty consistently in transparency, which leads to trust. 2/3 of executives told us that they were making their future of work plans with little or no input from employees. 2/3 of executives also thought they were being transparent with their employees. Surprisingly or not really surprisingly, employees disagreed with them. Didn't feel like they were being transparent. And you can kind of see why. If you're not engaging your employees in the conversation, then they're not going to trust that you have their best interests at heart because you are living a very different life than they are. And so, what we're seeing pretty consistently when we talk with executives across companies is that the leaders are the ones that are leaning into this and admitting something that's sometimes hard for an executive, which is I don't have all the answers but I want to enlist my team in figuring out what the right answers are. And that's where you get much higher sense of belonging in an organization, which leads to higher retention, to more engaged employees.
GEORGIE FROST: We've touched on a lot of issues already. Transparency, flexibility, trust, productivity, where you work, when you work, how you work and the new muscles, of course, that leaders need to build. Is this the great recalibration that you talk of? And I want you to explain to me, Debbie, if you could, if I was to work in this ideal way of working in the future, that's so different to the industrial revolution style that we've seem to have got still at the moment, what exactly will it look like? What will I be doing?
DEBBIE LOVICH: There have been a lot of things that have been really broken about what work is. It's not just, again, flexibility and going into the office. In that I mean if you look at the income gap between the highest earner and the lowest paid earner in every company, that's been expanding and expanding and expanding. And it's not surprising, compensation has skyrocketed about what's important to an employee. Guess what? Compensation is up there because this gap is just terrible. And the other thing is that COVID has pushed people to realize there's more to life than just work. And we've got to work to live instead of live to work. And we can't contort ourselves around work anymore. Work, you contort yourself around us a little bit for a change. That's one part of the great recalibration. The other part is, what is a job? I started off by saying we've been working this way because of how factory workers were. And so, you had this very narrow definition of what a job is. Repetitive tasks, so you can do it really fast. And what happened at the beginning of COVID? We forgot what our jobs were in those first weeks and months. People just banded together to get stuff done and we did it in little ways and we also did it in big ways like taking people from stores and putting them in call centers. Or in China, taking people and moving them across companies to fill in. And what did that do? Not only did it use talent efficiently, but people learned, they grew, they broke down silos, right? They built their networks. They felt like they were working on the most important things. So they felt accomplishment. So, we've got to bottle some of that. That's all part of that recalibrating what work is.
BRIAN ELLIOTT: Debbie, I love the work to live versus live to work because so much of the decades worth of experience about how work is set up in that factory farm of an office is based on the live to work ethos. It's the senior executives who, to be honest, look a lot more like me. And it doesn't work very well. In our research, it consistently doesn't work as well for black employees, Hispanic employees, Asian American employees. They want and need more flexibility. And for caregivers in particular, reschedule flexibility is such a key issue. So, if you want to win talent, if you want to win people over, if you want to attract them, retain them, engage them, you have to really think about how this actually opens doors for people that don't look like you. That requires that you really rethink the workplace as well. We've gotten even more factory farm like in a lot of ways for the past couple of decades. Average space per employee dropped by like 50% because we'd shoved even more people into open office floor plans. We need to go from thinking about how do managers keep track of their human capital by monitoring them in a space to how do you actually re-skill managers to think about measuring on the basis of outcomes? How do you help people understand what the purpose is in their organization and free them up to do their best work. Georgie, to your question about what's the workplace of the future look like, there's definitely still space involved because there's huge value in bringing people together to build belonging, for socialization. That's what employees want it for. But to give them a lot more flexibility and freedom, and to be blunt, this sort of movement of people into offices or into a physical headquarter space needs to get broken down because digital actually is your headquarters these days. It's where you share knowledge and information. And think about everyone who ever worked in what we like to call a satellite office or remote office. Not a remote employee, but all of you who've ever been in that situation before you always felt second class to people who were in the headquarters building. Digital helps level that playing field.
DEBBIE LOVICH: There's so much there. And even remember before COVID, you point back, right? People were in satellite offices or working from home. But I remember, people were in the same office building and they wouldn't come to the meeting room because they'd rather dial in from their desks so they can multitask. And so, what's the value of meetings? And one of the reasons people are dying, right, of these back-to-back Zooms is because we haven't thought through the right interactions for the right goal. Let's just think about it, right? If it's information sharing, record it and have someone to it when they're working out in 1.5 times speed. If you need to brainstorm something and be creative, get in a room together or if we could all upskill on Miro or other collaboration tools, we could do it remotely. And so, we've got to be intentional and think about what interactions for what work. I want to get back to your point of the paradigm of seeing people, meaning they're productive. It's crazy how many times in the past year and a half I've been asked the question, how do I know my employees are productive when they're at home? For call center and sales, I can measure it, but for other employees, I can't measure it and I just have to go back. Well, how'd you know they were productive when they were in the office?
BRIAN ELLIOTT: One of the chief people officers in one of our conversations last week said, "For everybody who says that, "I'd like to remind them that when I was in my 20's "and I was in an office from 8:00 a.m. until 8:00 p.m., "I was woefully unproductive for about half of that day "and really not doing a lot of work." The problem is we keep on falling back into these conventional wisdom tropes that the office was good for... My favorite is something like water coolers are the source of innovation. It's just sort of insane when you think about it. You're going to rely on completely random chance of people bumping into each other as the way in which knowledge gets shared and people meet one another across organizations. So, think instead about how are you going to actually foster that kind of environment, where you're bringing people together episodically? That's where you're going to really get those sort of crosscurrents working. And if you can do that, those connections, even if it's once a month or once a quarter persist on an ongoing basis. But that's why this blending of physical space together to build a relationships plus digital tools to stitch it together, it requires that we rethink and not just assume that the right answer is just put them back in an office.
DEBBIE LOVICH: Yeah, there's a bucket around what does work look like? This asynchronous flexing time, flexing place, measuring impact instead of activities and output, like even calls per hour, right? You're measuring cost per hour, but how do you know how many were good calls? How many led to a sale? There's a second bucket of things around culture. What does leadership mean? How do you be what we used to call an agile, a servant leader? You're there to set a vision and remove barriers. You're there to coach and inspire and help and provide connection. So, there's a whole bucket of the future that is going to redefine what leadership means. Then there's a third bucket around the structure of an organization. So, back to where we started around the industrial revolution, do you need hierarchy? Do you need spans and layers? What is a job? I think there's something like 200 startups working on this fluid talent platforms for organizations to staff people on projects 'cause right now everyone has a day job that they're evaluated on and narrow swim lanes and then off to the side, you get put on a zillion projects. Well, why have that day job? Just go project to project to project to project based on what you're interested in, what your skills are, what your learning agenda is and what the company needs. That will make a much more fluid talent model. So, what an organization and jobs structure looks like, and then finally, there's the tools and space and technology, and I know the technology companies like yours are just all scrambling to reinvent tools to match this future that we just described. And even when you think about space, so, a lot of wisdom is we're going to need space for collaboration and social, but we also have to remember not everyone has a home they could work from. So, we need to think about providing offices more local, whether it's we work subscriptions or distributed facilities that give people options or just extroverts. They don't want to be at home all day. They need people around them. Buy water coolers, real water coolers to give them energy not to innovate.
GEORGIE FROST: Funny it all sounds, like a lot of things need to change. Very positive, very exciting. It sounds like a lot of things are changing already, but as a business, a CEO, quite intimidating, I think. Debbie, give me the top three things that a CEO or leader can do to facilitate this change in their company?
DEBBIE LOVICH: So, I think working on what is the work model, where it's not just days per week, but it's what are we intentionally together for? What are we intentionally a part for? Together could be to be together in person, together could be together on Zoom. And also what are we, fixed time? Research tells us people are much more interested in flexing time than place. That'll help them manage life. So, really thinking about what are the work models and so many companies are doing this already, as you said, Georgie. Thinking through function by function by function based on the nature of the work not how the work needs to get done, but actually taking a fresh look at the work and say, "What really needs to be done together versus apart?" The second is culture and Brian, you talked about this beautifully beforehand, right? Trust, we're going to let you work from home except not Friday 'cause we don't trust you not to take a long weekend. Okay, so how do you get trust? And there are formulaic approaches to get trust going, right, and you should lean into that. And how do you get your culture there and how do you systematically upskill your leaders at every level, C-suite down to the first line manager to work in these new ways that you set direction and you let go and you support. And how do you role model that from top? So, that's the second. The third is redefining what a job is and this more flexible talent models, more project staff, more persistent cross-functional agile teams, really thinking about, okay, what are the priority work? 'Cause the other thing that's happening and you see this in service sectors, productivity skyrocketed, which work-life balance has plummeted, even though we're not traveling. And so, how do we start to prioritize work, the backlog of what needs to get done, and continuously reprioritize that task list of highest priority stuff that needs to get done and kill the stuff at the bottom and then assign teams to those priorities so you no longer have this fixed industrial age widget, narrow job description. So that would be the third. Those to me are the three most important places to start the what to do. The how to do it, and Brian and I talked about, and we could talk for a full hour on how disconnected leaders are from the shoes of their frontline dual-career, time pressed and compressed employees, co-create the future with your people. This is new for everyone. We're not going to get it right the first, second, third, fourth time. Everyone's been talking about fail fast forever, forever, but we never really do it. This is like if it doesn't fail, you didn't do it right. Demand failure and try and learn, try and learn, try and learn. And if you're not failing, like they say, if your muscles don't hurt the workout is doing nothing. Okay, if the muscle is not failing here, the workout is doing nothing. And so, this co-creation demand failure. Learn, share learnings across companies. That's what Brian and I are trying to do, right? We have something like what Brian? 100 companies around the world in these working groups talking about the future of work, because none of us have the answer. So, we're trying to learn from each other across companies as well.
BRIAN ELLIOTT: A lot of this is creating a culture for learning, right? We talk about that all the time, but how do you actually do it? It means that you actually have to, as an executive, you have to admit that you don't have all the answers to get your people enrolled in the first place. You also have to invest in it. You can't just say to people, "Go run experiments and try stuff out." You need to support them, but you have to start it in terms of creating that culture by admitting you don't have all the answers. Second one that we just hear consistently in these executive working groups is about re-skilling managers. Your frontline managers need help. They really do. They're burnt out, they're fried after the past year, but they also need help in terms of thinking through things like what's it mean to be outcomes driven? How do I measure my employees? What's the right way to deal with this? The third and probably the most important, you got to lead by example. If your executive team is not having this conversation about how you're coming back to work or if you're having it and it doesn't look like what you're promoting to the rest of your employees, either way, people will know that it's false. If you say to people, "We need you all back in the office "four days a week. "You can take one day a week off, "but it's never Friday," but you yourself are taking a lot of Fridays off, people are going to see through that. On the other hand, if you're saying you can be fully flexible, but all of your executives are showing back up five days a week, people are going to understand the power dynamics at play here. So, as an executive team, you've got to have this conversation. You've got to have the conversation about how do you exhibit the flexibility, how do you make sure that you're not falling back into executive reviews happen in a conference room in headquarters where everybody else feels like they're either in the room where it happens or their career opportunities are going to be limited.
DEBBIE LOVICH: It's almost like on highways, you have a minimum speed limit. I think we need a minimum speed limit for days in the office for leaders and a maximum speed limit for employees. But I also want to say something important because I don't want you to misinterpret what Brian and I are saying as an attack on leaders. I have a lot of empathy for the change. If I was a basketball player and you asked me to play ice hockey, I could not do it. And it's that magnitude of change we're asking. And so, the message is also for employees. One, before you leave, try talking to your leaders about what you want. Don't wait for them to ask you. It just may not be in their information set and will leaders get it right the first, second, third or fourth time either? No, no. So, as soon as one leader does something wrong, it's like an elephant sneeze, the whole building shakes. You know what? They're human too and they're going to fail and they're going to learn And so, I do think the employee population has to recognize our shoes are different than their shoes too and we need some empathy, patience and support as well and it's got to flow both ways.
GEORGIE FROST: Thank you very much to Debbie and to Brian and, of course, to you for listening. We'd love to know your thoughts. To get in contact, leave us a message at email@example.com and if you liked this podcast, why not hit follow and leave a rating wherever you found us. It helps other people find us too.
GEORGIE FROST: "I haven't failed. "I've just found 10,000 ways that won't work." So goes the famous quote by Thomas Edison. Great products and great services are built on experimentation. That not only requires a great deal of hard work, but for you to constantly question the status quo, your own way of thinking. So how do you build the right environment for sustained capacity for experimentation? By giving people a nudge, of course. I'm Georgie Frost and this is The So What from BCG podcast.
JULIA DHAR: Don't be led by where you think you can experiment because you're thinking too small. Where are the places where you can value hunt? Listen to operations leaders, listen to customers, listen to the folks who run your businesses who will tell you, here are the problems that are just really hard to solve.
GEORGIE FROST: Today, I'm talking to Julia Dhar, cofounder and leader of BeSmart, BCG's behavioral economics and insights initiative.
JULIA DHAR: We have all suddenly, haven't we, found ourselves in the world's largest experiment, for which there is no up/down and for which there is no control group. I feel like one of the things we've learned over the last 18 months is that the human capacity for adaptation is almost limitless when we really have to, but when we don't really have to, when we're trying to make small, incremental changes, our capacity for change suddenly feels really limited, it suddenly feels really difficult to make small changes in your own life, in your teams, in your organizations, and how do we move a little bit closer as organizations, as teams, as as a society, to that world where our capacity to adapt, our capacity to change, is something that we learn about all the time and we talk about all the time, and we test all the time? That, to me, is what I think it means to have the culture of experimentation. That's what we're trying to build.
GEORGIE FROST: When you talk about experimentation, what exactly do you mean? What does that look like?
JULIA DHAR: Think about a couple of different versions of it and think about some experiments that you are knowingly and unknowingly part of all the time. So if you're a Netflix subscriber, for example, you are, whether you know it or not, continually participating in a series of experiments that Netflix is running. The most obvious one is at any given moment, they are showing you a whole range of instantiations of the homepage, and in particular, are varying the picture associated with the film that you might choose to watch. No longer is it kind of the VHS cover that is the only thing that you will see, or that's the only brand that you'll see associated with the movie. They wonder which actors mobilize you to click on it, what color of the font associated with the title of the film will cause you to choose it.
GEORGIE FROST: I miss those days. I do miss those days, Julia Dhar, of the VHS and not having the many, many choices to go through. It's time-consuming now but I assume those experiments are trying to get it to a stage where that will not be the case. I won't have to keep deciding what to do. They will know my mind and tell me exactly what movie I shall watch, but I think that that's quite a shame as well because you always find that old VHS you've not see in ages and hadn't thought about watching and you put it on and it was marvelous.
JULIA DHAR: So there's a really fundamental principle of rational economics that is "more is strictly better." Any time that you have more of something that has some utility associated with it for you, more is strictly better, and behavioral science and behavioral economics is directly in confrontation with this principle that more is strictly better. That confrontation, that conflict, hinges on a principle called cognitive overload, cognitive overwhelm.
And it's the idea that there are many choices that it is difficult to be a human being out in the world making the thousands of decisions that are required of us every day and that there is a role, what behavioral economists call choice architecture, and choice architecture is helping you make that decision in alignment with your own values, your own preferences, your own needs. It's helping bring you to the decision that the best version of Georgie Frost would make for herself were it not so overwhelming to be out in the world.
So, I mean, it cuts a little bit both ways. I get it. It's like, easy to go into a video store, younger listeners, video store, it's kind of like a physical Netflix. Like you can go into it, there'll be forms, rent one, you take it home.
GEORGIE FROST: You're making me feel old, Julia Dhar.
JULIA DHAR: You bring it back. We don't have them anymore. So, for folks that haven't grown up with this kind of store, and helping people actually break through that, is one service that experiments can do. So that's exactly what Netflix is doing in the background, right, is trying to help people make choices that align with their preferences, but there's a little bit of space for discovery as well.
They're building a machine on the backend that is helping you choose things that you might not otherwise come into contact with. Think about things like foreign language films that have similar plot lines to films filmed in your native language, and you might not necessarily, because of all kinds of biases we bring to decisions, choose those first off, but Netflix says like, because you like this, you might like this. Because you have a reference point of something you've already enjoyed, let us show you something else that we think you might enjoy. That's one way to do it. That's a really big experimentation engine.
GEORGIE FROST: Just, how on Netflix, and I don't know how much you know about the inner workings of Netflix, that's not really what I'm after, but how is that happening? Is it a case of algorithmic trial and error, do you believe it's the culture in the company that's saying ah, you know, should we try this this day and if it doesn't work, not failure, if it doesn't work, then they try another way? How is that going to be looking in a company that does it well, like Netflix?
JULIA DHAR: It's both. So it starts with a systematic commitment to building a culture of experimentation and people might say to themselves, well, that's really easy if you are a consumer technology company and particularly if you are a software-led company, so yeah, it's easier for some organizations than others, but if you say at the outset, we're going to have a systematic commitment to a culture of experimentation, what you're saying is we're looking for ways to do things better, and you try to bring two things together.
High quality measurements based on a theory of what you think people will do under certain conditions as well as a willingness and ability to test those things. So think about big industrial operating cultures where people are often doing very hazardous work that requires a lot of focus. There was a theory by priming people, inviting people to focus at the beginning of a shift on safety. Who would actually, not only build their education of what the hazards were out there, but force them, cognitively, to focus on those safety challenges throughout the course of the shift. Like, here's a hazard that we are particularly mindful of today and that might be working at heights, and over time, you find that brings the rates of accidents and hazards down.
But if you think about it for a second and you say at the beginning of implementing that, someone says, you know what, like I've got a theory and my theory is that at the start of shifts, we should just tell stories about things that have gone wrong in other situations or things we want people to pay attention to. You can imagine that people would have said like I'm sorry, like in addition to giving people all the gear and making them go through training you want to tell some stories and you think that will help?
They might have even said there's a risk by talking too much about risks and hazards and incidents that people start to believe that that's normal and commonplace. In this case, that's not right. That the institution of safety moments in work sites drive down the rates of incidents, accidents, fatalities, it drives the proactive management of hazards.
It's a little bit unexpected but it has a really sound theoretical basis that if we can get people to focus on something, then you can probably, over a sustained period of time, the hours of a shift, make people attend to it, make people focus on it, but you have to have that really consistent practice. So that's a totally different way of driving a culture of experimentation, a culture of behavioral intervention in a completely different environment. That you can actually build that culture in any environment. Begin with really what we call small-end experiments, like where you have a small number of participants. Start with one team, start with two work sites. See where that leads you.
GEORGIE FROST: How did you decide as a company where to experiment, where to focus on your attention?
JULIA DHAR: First, I mean, don't fixate on what you start with. Don't say I have to have the best, first perfect experiment, but say you're the person in a company who is trying to build this culture of experimentation. I always say go value hunting, particularly in corporations. Look for the things that print money. In a lot of companies, especially the United States, people quit within 90 days. Because the label market is hot and they can get other jobs relatively easily, maybe they're working from home, they're not feeling a sense of connection. It's expensive to hire people. It's really expensive when they quit early before they've even been super productive for you.
Figuring that point out, what's the attrition cliff? Like when in that, somewhere in that 90 days did someone say like, I've had enough, I'm going to start looking for another job? Figure that point out and then you say, what could we do, what are all the things we could've done to stop that person quitting and then you systematically, to have stopped hundreds of people quitting? That's a place to value hunt. Businesses where you might interact with people annually it's very seldom an annual subscription. Where do you lose people? What causes people not to choose to resubscribe? Don't be led by where you think you can experiment because you're thinking too small.
Think about where are the places where you can value hunt. Listen to operations leaders, listen to customers, listen to the folks who run your businesses who will tell you here are the problems that are just really hard to solve. Ask them what annoys them about customers, team members, management, because what they're inevitably describing is some kind of behavioral challenge, it will feel to them like an irrationality that you can go after.
We actually did some work on a totally different problem of long-term unemployment which is a really difficult, it's what I call a wicked problem. Not wicked in the surfing sense. Wicked in like the political science sense of like it's a long term, persistent problem that has defied a lot of solutions, and one of the things we found by looking, in this case, at a large amount of data, was if people are able to get a job within the first four weeks of receiving an unemployment benefit, an unemployment payment, they can pretty smoothly reenter the labor force.
But there is a real break at that four-week point. If after four weeks, you don't get a new job, you will statistically be on an unemployment benefit for nearly five years. You can have all kinds of theories about why that's happening and how the populations of those folks might be different, but the answer is pretty easy. The government should be throwing all of its resources into those four weeks, then it floats back into paid employment. And so that's a much larger scale version of the same thing.
So even if you have really limited data, you can say I'm beginning to get a sense of what might be going on here and how might I help people change?
GEORGIE FROST: Hearing you talk, Julia, reminds me of the incredibly fortunate time that I found myself during a conference at the lunch table of the extraordinarily interesting Professor David Halpern, the Chief Executive of the behavioral insights team of the UK government and a special advisor at the Department for Work and Pensions and they were outlining exactly what you're talking about there, just what a big problem long-term unemployment is and how desperate the government is to fix it, which makes me think, especially talking about David Halpern there, about the role that behavioral science plays in governments, in societies, in public bodies. I'm aware we focus a lot on companies, but where does the sustained capacity for experimentation fit in the public sphere? I imagine just as importantly.
JULIA DHAR: Absolutely yes, and what an extraordinary service that David Halpern, the behavioral insights teams, others who lead this kind of work around the world have done to bring the science of behavior into Whitehall, into the other corridors of power, like we're all very lucky to have them all and I think have benefited tremendously.
GEORGIE FROST: Where? Can you give us a couple of examples that really struck you, just to demonstrate to us the impact of what that has done to the UK?
JULIA DHAR: Yeah, so let me give you some really practical examples of some of the successful interventions that probably no matter where you find yourself in the world now, you're experiencing. The first early intervention was around timely payment of taxes. This is a perfect example of value hunting.
Right, you come in, you say I want to learn a little bit more about human behavior and Her Majesty's Treasury says "I don't know." Come in, and you say hey, we need to drive a timely collection of revenues. Her Majesty's Treasury says, "listening." And it was a really simple intervention. Right, a series of letters and you know, probably Her Majesty's revenue and customs are going to write to you anyway and say you have to pay your tax bill, and is the addition of a variety of simple sentences that made the point, like most people in your post code pay their taxes on time, and it goes to a principle called social proof. Right, the people around you are already doing this compliant behavior. You sort of know you should be too. We're inviting you to do it as well.
In social psychology, you call that social proof. If you're in high school, you call that peer pressure, but the idea is the same. And that simple intervention, the addition of sentences in letters that nudge people towards a compliance behavior, towards the performance of a positive behavior is worth, not just in the UK, but around the world, hundreds of millions of dollars in terms of getting people to pay on time, then think about like these more substantial things that you need behavioral intervention around, and these are more controversial, but things like negotiation with food manufacturers, with people who retail, you know, like fast casual food to say, what can we do to, for example, intervene in the amount of salt that's contained in those products.
And reducing the amount of sodium in some of those products, you know, 1%, 2%, 5%, that's a complicated negotiation, obviously, but that has tremendous potential to drive down the rates of chronic disease to improve overall health and wellbeing. So you have these really micro interventions and these really macro interventions at scale. It's one of those places where you actually really see government leading on this around the world and it's a place where corporations, for-profit enterprises, have a lot to learn from this idea of saying let's get a small team of folks and see what's possible.
GEORGIE FROST: I'm a huge fan of behavioral economics so I'm just positing this as the devil's advocate. As is my role. Is there a point in which we get used to those nudges and they are less effective. You mentioned the tax bill and I think for the first couple of times, I can imagine that that would be fair enough. Then after a while, I would just get so used to reading it. I would probably discard it as I would any other, if I was not going to pay my tax on time which I would like to point out, I always do.
Another example, I guess, was the bag tax. And this was sort of psychology. In the UK, I think it was, it was quite embarrassing to ask for a bag. It's only five p, who cares? Before it was free, and we don't like paying for anything that we used to have for free, but I think a lot of it was the social aspect, is they haven't asked for a bag and I feel guilty. But once you kind of get over that, well, it's fine now, you kind of get used to the five p. I'll just swallow that. Is there a point in which these become less effective, and we have to find another way?
JULIA DHAR: It depends a little bit on the context, but interestingly, generally, no. Like, this idea of like, is there either a decay effect or is there like a magician effect of like "Aha, I've read your nudge, I know how your magic trick works and like, you're not going to scare me now." Like does knowing the existence of the nudge make the nudge less effective?
And Cass Sunstein previously at Harvard University, now back in the Biden Administration has done quite a lot of work on this, and so, as a general principle, and it's dangerous to generalize, the fact that you know you're being nudged, doesn't necessarily weaken the strength of the nudge. That's particularly when the nudge is kind of moving you in the direction of where you want to be anyway, right? A person who reduces waste or a person who exercises or a person who's climate conscious.
Where you're trying to nudge people away from something that is identity-coherent for them, like it is not in alignment with who they want to be, it gets a little bit harder. Of course the other thing you want to figure out is like when do I need to keep nudging people. Right, like, how quickly does the nudge decay? And so that brings us back to safety moments where we say okay, we actually have to start talking about this every shift. We have to normalize and standardize a culture of talking about safety all the time so that people, it's not surprising to people, people get used to it and it becomes habitual.
So I'm moving you from kind of constantly thinking, do I want a bag, am I going to ask for a bag, is the cashier judging me for asking for a bag, are people in the line behind me judging a bag... And move you to whatever the new habit might be. I will say, I think you're potentially given an outlier, there, like a price or a tax or a fine, call it whatever you want, on plastic bags. Is one of those wildly effective behavioral interventions. Like it cuts by a factor the number of plastic bags entering the system.
GEORGIE FROST: I would like to say I'm pretty good, pretty good at having my own bag. At least one or two and I do appreciate, it's reduced plastic bags by about 90% so without a doubt, this is unbelievably effective, but it was just a point, I don't want people to think I use plastic bags willy nilly, of course.
JULIA DHAR: The listeners, Georgie Frost is paying taxes on time. She always has her reusable bags, don't worry. This is a Public Service Announcement.
GEORGIE FROST: Julia Dhar, I have to ask you. What are your top three nudges. Coolest nudges that perhaps I won't have heard of, most people won't have heard of, but just tell us what they are and why.
JULIA DHAR: It's a phenomenal question. Firstly, there is so much interesting research going on around this. If you are trying to make a change in your life, one of the most powerful things that you can do is what we call bundling. So you stick two behaviors together. Let me give you an example. You make a rule for yourself that you can only watch Game of Thrones while you are on the treadmill at the gym.
So you want to watch Game of Thrones, you don't want to be on the treadmill at the gym or you sort of want to go, but it's hard to motivate yourself. Habit bundling. So you bundle something you really want to do with something that you want to do a little bit less in order to make that habit more natural. And the second one is where we can prime ourselves for reflection, joy, curiosity, discovery, that has a really longterm impact on mental health, a really longterm impact on performance, and so I know what some of you are thinking which is I don't want to write in a journal.
Like I've tried writing in a journal and it didn't work for me. But if you might even begin by starting or ending every day by thinking about things that you are grateful for or things that brought you a lot of joy, that itself, can be really, really powerful. And then the third thing I would say, particularly if you manage people, think about the way in which you use praise. So praise itself, positively reinforcing people is a nudge and most of the research suggests two things.
One, like we don't praise as much as we could. More praise is useful for people, just appreciating what people actually do. And the second, and this, I love this as an insight, people feel awkward about praising people. They think it's going to be kind of embarrassing or the person won't appreciate it, so people don't do it. But the person receiving the praise, they really appreciate it. They remember it for a long time and it can change the way in which they perform. So bundle your habits, make space for reflection, praise and appreciate people, even when it feels awkward or unnatural to you because it doesn't feel that way to them.
GEORGIE FROST: Julia Dhar, I think you're very smart and I love the scarf you're wearing.
JULIA DHAR: Thanks, I appreciate it.
GEORGIE FROST: Thank you very much, Julia Dhar, and to you, for listening. We'd love to know your thoughts. To get in contact, leave us a message at firstname.lastname@example.org and if you liked this podcast, why not hit Subscribe and leave a rating wherever you found us? It helps other people find us too.
GEORGIE FROST: Miquela's 19, she lives in LA and enjoys yoga fashion. Miquela's a big hit on social media with over 3 million followers on both TikTok and Instagram. Brands love her. She can command over $6,500 per post. There's one thing you should know about Miquela though, she's not real and she's not alone. I'm Georgie Frost, and this is 'The So What' the podcast from BCG.
SARAH WILLERSDORF: We are increasingly entrenched in the metaverse. The next generation of customers are already spending a huge proportion of their time playing, socializing, shopping.
GEORGIE FROST: Today we're delving into the metaverse and what it means for brands and consumers with Sarah Willersdorf, BCG's global head of luxury.
SARAH WILLERSDORF: I love this topic because it's disruptive and interesting, but also you can feel it happening around you. And my eight-year-old son who wears sweatpants and is not very concerned with fashion, came up to me and said, "Mama have you heard of Ba-lenki-aga?" And I was, had to think for a second. And, and then I said, "Jimmy, Balenciaga?" show me, show me what you mean. And he shows me and sure enough Balenciaga has done a collaboration with Fortnite and he wants to buy a Balenciaga skin. And that was a real, it was a penny-dropping moment of wow, my eight-year-old American child, who knows nothing about fashion is spending real money, you know, for a virtual skin.
GEORGIE FROST: You're going to have to explain this, Sarah, for those who are not eight-year-old sweatpants-wearing kids. Fortnite, I think I'm okay with.
SARAH WILLERSDORF: Yeah.
GEORGIE FROST: Skins, explain a bit. What does this really mean?
SARAH WILLERSDORF: Yeah, so there are obviously many games. There are many esports and games around. In many of them, you have the ability to purchase something called a skin, which is basically changing the look of your avatar. And it's not just clothes. You, you could be a eight-year-old boy and could choose a anime girl with pink hair and, you know, a uniform of some sort. It's like a full body head-to-toe virtual character that fits over your general avatar. It's certainly accelerated during the pandemic. As people have been on online more and gaming in general has continued to accelerate. But we are seeing more collaborations between fashion and luxury brands and gaming companies. And this is in the form of virtual skins. It's also crossing over into real life where, you know, you can often buy product or merchandise that is co-branded. So I think it's really, you know, it's been an interesting area of experimentation for many brands.
GEORGIE FROST: So, I don't know when this even happened with your eight-year-old son, but I imagine you've taken some time to reflect on it and it's meaning. What do you think of the actual tie up though, between Balenciaga and Fortnite? Now this is a Spanish luxury fashion house. It's over 100 years old and then there's Fortnite and a shoot-'em-up video game, that's not a hundred years old being looked at by an eight-year-old in sweatpants. So what is the significance here? Is it the fact that he went to you to ask you about it? So therefore you, you may be more likely to go out and buy it, or is it the fact that he might be a future customer of the real stuff or actually does it not matter? What do you think is the significance?
SARAH WILLERSDORF: Yeah, I think I'm, you know, it's two minds for me. As a parent, do I want my child spending his hard-earned pocket money on virtual things? That's probably a separate topic, but I actually love the notion of brands, luxury and fashion brands, experimenting in this sort of new world.
GEORGIE FROST: Aren't there risks to brands though here?
SARAH WILLERSDORF: Sure, there obviously needs to be a level of care and not just partnering with anything, but it's only through this sort of experimentation that I think many of these brands are going to move forward, and be able to do things in a bigger, more modern, way in the future. So for me, I actually love the experimentation. Does it take me a while to get my head around spending real money on virtual product? You know, I'm obviously a lot older than that. So, that's more of a struggle.
GEORGIE FROST: Tell me about someone called Miquela.
SARAH WILLERSDORF: Yeah, this is interesting because I think, you know, I don't 10 or 20 years ago I could imagine that we would all have personal computers or phones and I could get that. But I don't know if I thought that there'd be a social media platform where I could follow someone like Miquela. Who is an avatar but has 3 million followers and communicates with them. I believe she's repped by CAA. She brings in real money, she collaborates with brands, you know, everyone from Prada to Samsung.
So I think this is really interesting. This growing realm of sort of avatars that are influencers, I believe we're are also going to continue to see more. And it's sort of a tricky topic, I think. But when we speak to sort of Gen Z and young millennials, they tend to describe most virtual influences as authentic. They obviously all understand that it's not a real human, but they interact with her and I mean, Lil Miquela, which is the brainchild of a company on the West Coast.
There's a whole story around her life and an understanding of where she came from, how she grew up, her relationships, what she likes. It's actually some of the most brilliant storytelling in my opinion, but it is, I think for some of us who didn't grow up with it, it's, it's much tougher to wrap your mind around.
GEORGIE FROST: One hundred percent, apparently she doesn't have taste buds, but she likes to tell us what she eats during a day. And yes, she can be in love. I mean, actually, when you really think about it, it's not such a big step from, I guess, famous people and influencers today in a way, because they're not quite real. What I'm thinking with Miquela though is the people behind her, like there's a whole industry, she's worth a lot of money, but who is running that?
SARAH WILLERSDORF: Yes.
GEORGIE FROST: What is the reason: money?
SARAH WILLERSDORF: Yeah, I, I mean, honestly they're always quite secretive, so I never know the reason. And I think there's obviously a commercial element for sure. Although having said that, if you look at her over time, she's supported many young and emerging brands that don't pay her. She supports many political and social causes that it's a positive thing to have a voice. I mean, she was very prominent with B.L.M, and some of these other political social movements we've seen over the past couple of years.
So it's not all commercial in some way, I also think it was an experiment of sorts because the team behind it are amazing storytellers, right? They literally have thought about the life and the curation of the life. And, but it's as much in my mind, creative storytelling as it is data-driven, I think it's really the meeting of, of those two things, but really fascinating. Although, as I said to you before, I think, I think there is this dilemma, because she's, I think she's 19 or you know, supposed to be 19, but at some point, like how do you age? How do you grow older with your community and your fan base?
GEORGIE FROST: And you know, I said to you, I wish it was a 40-year-old avatar with two kids, like barely losing their mind while they're working and- Give it time Sarah, we'll get one of those too. As a financial journalist, I warn a lot of companies, financial companies about working with real-life influencers. Not that some aren't incredibly good, but there's always a danger. You have to do your checks and balances and all that sort of thing. What would you say to a, a brand that's wanting to work with a, with a virtual influencer? What would be the considerations?
SARAH WILLERSDORF: I mean, yeah. I do think some of it is the same approach that you're describing. I mean, there need to be checks and balances, you know, real or avatar, you need to understand what does this avatar or human stand for? What have they been associated with? All those sorts of things. You're right, theoretically there's a greater level control with an avatar than a human. But having said that there's still a human somewhere behind the scenes, right. So I think we're only as strong as our, our weakest link there. You know, so I think there is a lot of cautiousness, but again, you know, someone like Lil Miquela, whether you think it's great or you don't think it's great, she has a really strong community of followers who interact with her and follow and are interested in what she's wearing, and what she's eating, and where she's going, and all those sorts of things. So there's something real there that brands have to take notice of.
GEORGIE FROST: I keep thinking about a facial cream, for example, what can it do to a, a virtual avatar figure? How can she prove that that cream works? She can't obviously.
SARAH WILLERSDORF: Yeah, I think that's, that's a little more complicated than some of the some of the partnerships with apparel or with technology or, or things like that.
GEORGIE FROST: So for some industries obviously, it depends on what your brand is, what your services are still, what technology you should advance into.
SARAH WILLERSDORF: Absolutely, and that's one of the trickiest things. I mean, especially luxury, if you know, is very cautious about the brand protection of the brand is one of the, you know, key objectives. But at the same time, you know, you can be as cautious and protective as you want, but there's still a, you know, you still need to test and trial and find so safe ways to experiment with these new channels. Because interestingly, you know, it exists across the whole purchase journey.
If you think about a consumer from their moment of inspiration, to purchase, to post-purchase, this has relevance throughout that entire chain. And when I think forward, I imagine avatars in general can be actually really useful to brands in the future. We, will, instead of calling a sort of nameless faceless contact center where we actually contact my avatar at brand X and I'll know, it's not a human, but I'll feel like I have a stronger maybe relationship than a contact center, call center.
GEORGIE FROST: I want step into the future. Now, according to Wikipedia, the metaverse-
SARAH WILLERSDORF: The perfect source of all, all information.
GEORGIE FROST: Oh yes it is. But let me just read this. "It is a collective virtual shared space created by the convergence of virtually enhanced physical reality and physically persistent virtual space including the sum of all virtual world's augmented reality, and the internet." Well, it doesn't sound very sexy, Sarah. So take me there, show me what will it look like? What can I do? How will I be engaging with luxury brands? I mean, are we already sort of there? Are we first steps there?
SARAH WILLERSDORF: Yeah, it's interesting. By the way, if I knew it looked like I, I probably would not be sitting here chatting with you or maybe I would. But I think it's hard I mean, depending on your, who you ask, the metaverse can extend to digital fashion, to virtual stores, video games, NFTs, augmented reality, you know, there's a lot of definitions and a lot of people far better versed than I who talk about it, but I think it was Matthew Ball who said, "It's better understood as the quasi-successor state to the mobile internet."
And of course, you know, if for those, you know, still following, we always think the mobile internet was the successor state to the internet. It didn't completely transform. It didn't change the platforms so to speak, but it changed the way we access the internet, when we access it, why the products and services, you know, we buy, and all those things. And so I think it's sort of like the next evolution of that, but honestly, you know, I wish I knew what it was going to look at.
The truth is, we're already steeped in the metaverse in many ways right now. I think some of us more than others, but when I look at the sort of next generation, so for, you know, my children, are a perfect example, you know, any of us with small children see how they interact even in games, which obviously not the metaverse, but I guess a closed metaverse of, of sorts. If you think about a Roblox or Fortnite or Animal Crossing or any of these, because they're already transacting in that world, they have relationships in that world, they have communities in that world, they build things, they play things, they socialize.
And so, you know, fashion and luxury I think is experimenting in that place. But as they're increasingly entrenched in the metaverse and as this next generation sort of Gen Z and beyond spend more of their time playing, socializing, shopping there. Understanding the full potential's really, really important.
GEORGIE FROST: I think for people who of a certain age older than the gen Z, this is actually quite concerning to listen to, but that's for another podcast. So it's not that I'm ignoring the fact that obviously there are issues to be covered here, you know, privacy, young people being so enmeshed in this, etc., augmented reality. I'm sure we will cover this in a later podcast, but in terms of brands, it's an interesting article in Vogue actually. Is it time that companies hire a Chief Metaverse Officer?
SARAH WILLERSDORF: Yeah.
GEORGIE FROST: And what would that role look like?
SARAH WILLERSDORF: Yeah, and I love that notion. And just as an analogy before talking about that specific role, if I think about, you know, luxury and fashion and many industries, when they were progressing along the journey of digital, many of them did hire Chief Digital Officers, same with sustainability. You know, there was a big rush to hire Chief Sustainability Officers. And I do think at points when you're really trying to transform an organization's journey toward something, it does help to have one person.
I love this notion of having a Chief Metaverse Officer. I always think of it as a chief virtualization, you know, officer or something like this. But there's a lot of coordination that needs to happen. Anything to do with not even going all the way to the metaverse, but anything to do with NFTs, gaming, you know, even some of the livestreams you're bringing together technology, you're bringing together creative and commercial elements of the business. So, you know, within a brand you're bringing together lots of different parts of the business. You're typically also working with a number of external vendors, you know, for most companies, especially in fashion and luxury, there are a lot of vendors like the talent that creates a lot of things in this space.
And, you know, NFTs is a perfect example, even skins for games. The talent that creates a lot of this is often not in-house. So in some ways I think the role would be around coordination. In some ways it's probably being a bit of a, a bellwether of what's to come and helping, you know, helping an organization understand the advantages and watch out for the pitfalls. Because I don't think we know all of them yet.
GEORGIE FROST: You've mentioned NFTs. So I want to go into that a little bit more. I mean, certainly they appear to be much talked about if not high topic, what do they have to do with luxury?
SARAH WILLERSDORF: Yeah, so I think NFTs or Non-Fungible Tokens, although I do think most people have seen, or read something about them now is this sort of new type of decentralized digital asset published on the Ethereum blockchain. And they have had a lot of hype or frothiness, much of it started, I think in the art market. I think the art markets actually had some really big headlines around this.
There was the artist Beeple's NFT artwork, which I think fetched, you know, just under 70 million US dollars, which is really phenomenal. Many auction houses are starting to sell this sort of artwork. There's also market places like Zora and others where it's purely for NFTs. So, what does it mean for fashion and luxury? You know, I think many brands again are testing it. You see those like Nike who've used it to create digital shoes linked to real world shoes.
Another example that I think is really exciting because it's a consortium is you know, LVMH, Richemont, and Prada joining together for the non-profit Aura blockchain consortium. And this is sort of a collaboration that's trying to use NFTs for traceability and authentication of product. And that I think is a really interesting use case because actually bringing together all different players in one industry and trying to solve some of these challenges. I always think is really a great use case, and the use case, I think really that's really interesting.
There is one of production, you know, they aim to create a unique digital ID for every product that's traceable during the entire product life cycle. And I think that's really important if we think about luxury items, anything from jewelry, handbags, shoes, apparel. I think that, you know, there are major benefits for both the brands and the consumers, you know, for consumers authenticity and ownership of goods is really important.
And actually it's interesting to be able to access your product history, and you know, where things are from, and also even accessing new services from the brands. For the brands, it's ensuring products are made in accordance with their typically really stringent standards. It's also reducing the risk of counterfeits and in a way it's going to help control or propel the secondhand market. And, you know, just the counterfeit market alone for luxury its just huge, right? So I actually, this notion of different companies or conglomerates getting together to collaborate using this technology, I think is really exciting for our industry.
GEORGIE FROST: I think the collaboration is really important because it does seem to me and I think about the social media and the metaverse aspect of it. There are some companies, quite a few actually who perhaps have looked around and gone, "Hmm we're a bit late to the social media bandwagon, quick jump on it!" Without being really aware of what they're doing and what they're creating.
SARAH WILLERSDORF: I agree, you know, and it's a balance because, you know, on the one hand I'm saying "You should experiment, you should try things." But I do think a bit of cautiousness before you jump on on. So I love that example because it's a collaboration across different companies and it's aimed to propel an industry forward. I think that's really exciting.
There's obviously at an individual brand level, the opportunity of creating NFTs. I would say there's some, you know, there's some friction right now, I mean, to purchase these, it's a browser based Ethereum wallet that I would say the majority of fashion and luxury shoppers don't have. And right now it's, you know, fashion as art, not as utility. Having said that, you know, there's lots of companies working on 3D wardrobes. So I imagine in the not too distant future, I can purchase a virtual handbag, a virtual jacket, and actually be able to post a photo of myself wearing said virtual item on whatever social platform.
But I mean, I always have these debates with some of my friends and colleagues who are deep in this industry. And for me, it's a sad day when in real life, I'm just purely dressed in functional clothes, very utilitarian. And then in my virtual world, you know, I'm an exhibitionist and that's where the real me shows up. But I do think when you speak to someone who, who spends a lot of time in games and has many skins and things, there's tremendous pride in that, you know, there's a real social system in those things.
So actually, it's a little jarring for me. It's not how I necessarily live my life, but I feel it changing. That I mean, there's many people who have a view that we will move into this world of in real life where sort of utilitarian functional and in our virtual worlds, our true self comes out. You know, whether that's stylistically, from a gender point of view, whatever. And I think, you know, it's certain disruptive and interesting.
GEORGIE FROST: This has got very 'Matrix'. I want you to be as creative as you can. I asked you to explain the metaverse a bit earlier and you were a bit coy about it, Sarah, but I know there's very cool nuggets of exciting ideas and tie-ups that are in your head. So let me draw them out from you. Give me three.
SARAH WILLERSDORF: Yeah, sure I mean, because it's true, many fashion and luxury brands are working on things right now, but at this point we've really only seen small-scale experimentation from brands, which is really important and exciting.
But one thing I'd love to see one of the design schools, I don't know, F.I.T, Parsons, Central St. Martins create a multiplayer game of design where there's design creativity and competition. You know, design students are designing either skins or virtual product, competing for prizes. Maybe there's the opportunity for spectators to purchase items, either virtual. Maybe there's an opportunity to have them made, you know, in real life. I'd love to see something like that. I think it's a really, could be a really exciting add-on to creativity and designers or at least the next generation of creators and designers. So I'd love to see that.
The other one that I think is coming and I, actually believe people are working on this is sort of a metaverse mall. So if you imagine a virtual mall, where there's sales channels, where there's stores, where shoppers can talk to other shoppers, where they can engage with store associates.
GEORGIE FROST: Is this a bit like the 'Minority Report' when Tom Cruise walks around and billboards talk at him and tell him what he wants and-
SARAH WILLERSDORF: Maybe.
GEORGIE FROST: Is it that sort of thing?
SARAH WILLERSDORF: Maybe it's a little like that. And I mean, do you, and I want to shop in this place? I'm not sure, but you know, my, my children in, in six to eight years, they would a hundred percent engage and probably shop in this space. And I hope they're buying real items, not just virtual, but I do see, you know, this immersive shopping experience where brands can have a role it's not necessarily controlled necessarily, you know, by someone else as something that's coming.
GEORGIE FROST: There's a lot of sort of technological advances that I'm a bit nervous about Sarah, but I'll have to say as someone who really hates the shopping experience, I just hate the idea of like changing clothes all the time. It's just, just too much of an effort. The idea of what you're talking about now suits me down to the ground. More than happy for this immersive experience. As long as I have to do the least effort.
SARAH WILLERSDORF: Then you are the next generation because maybe you are just very functional in real life, yeah. And then in your virtual world, that's when it really comes to life and your most creative self. I mean, you know, I always debate with a couple of friends who are deep in this space that they think we'll all wear glasses and will be wearing functional, very functional utilitarian clothes. But we'll put on our glasses and we'll be able to see others in different colors, in different designs, in different skins. And so maybe that's your world, Georgie. I don't know.
GEORGIE FROST: Yeah, I like the idea of functional in a way then you don't have to make decisions.
SARAH WILLERSDORF: Yeah.
GEORGIE FROST: I want a final one though Sarah, of all the sort of ties up the virtual slash reality mixes that we are getting at the moment, what do you see is one of the most exciting, or what can you extrapolate from those as to what the future will look like?
SARAH WILLERSDORF: I mean, I do think the most exciting ones are some of these consortiums. So collaborations within industries, across companies, you know, we spoke about Aura, which is about sort of digital authentication, I guess. But I do think some of these collaborative cross-industry movements built on blockchain are really exciting. I think there's obviously challenges in anything that's decentralized that that companies need to work through, but those are the ones that really I think are going to shift our industry forward.
GEORGIE FROST: Ambitious climate change targets are being set across the globe. Veer from that path to net zero, say governments and activists, and the costs will be unimaginable. But does anyone know how much it will cost to stick to that path? Who's going to foot the bill for the investment needed to save the planet? I'm Georgie Frost, and this is, "The So What," the podcast from BCG.
JENS BURCHARDT: I have yet to find a company who learns that a net-zero version of their product just comes at a 1 to 2% higher price, and who does not see that as an opportunity.
GEORGIE FROST: Today, we are discussing why the move to net zero, doesn't have to cost the earth with Jens Burchardt, Boston Consulting Group's global expert on climate impact and co-founder of the firm's Center for Climate and Sustainability.
JENS BURCHARDT: The target is always two and a half, three decades away, this net zero. What I fear gets lost a bit in this is that to get there, we need to change, quite fundamentally change, things today. Most capital goods that we invest in today have asset lifetimes of two decades, or quite a bit more than that. To achieve net zero in two and a half or three decades, the shift to truly zero-emission solutions needs to happen now.
We have to stop investments in fossil assets today to get there by 2045, 2050. And this requires very, very fundamental build up of new types of infrastructure and it will require millions of people, tens of thousands of companies to make different investment decisions going forward than they would today. There's no technological silver bullet solution that will magically make this happen. It means that we have to start today doing things differently with the technologies that we have, and that's a financial challenge, but it's certainly even more an operational challenge because we have to set a lot of incentives marginally differently than they are today, and it's obviously scary for a politician who now faces the challenge of having to regulate this.
GEORGIE FROST: Jens, who's going to pay for all of this investment that's clearly going to be needed? Savings, jobs, further growth will hopefully, as you say, follow, but who is going to foot the initial bill now?
JENS BURCHARDT: I mean on this, I feel that's where it starts to get a lot more, where I at least get a lot more optimistic, from a financial standpoint, people both in a country as well as on a corporate level, tend to overemphasize the financial risks and underemphasize the opportunities of this. For countries, we do hear this rhetoric, that I call the first-mover disadvantage fallacy, quite often. Why should we move if China doesn't? Who is going to pay all of this? No one can. This in, I mean, in my view is a bit moronic. Not sure if I'm allowed to say this word.
GEORGIE FROST: Yeah, that's fine. You're allowed.
JENS BURCHARDT: From a country's perspective, I mean, this is first and foremost, a gigantic investment program. And investment programs from an, yes, someone has to come up with the investment, but in times where capital is extremely cheap, that's not necessarily so big a challenge. In Western economies, many of our industries today, I feel as to very much industries of the last century, and there is an opportunity to transform them into industries of the 21st. The US today is an extremely dominant player in international energy markets. If I look at their policy for the past years, I see a major risk that that's no longer the case in energy markets of the future, and that can't be in their interest. So that was my long answer to this. The short answer to this is, in many Western countries, from a macroeconomic standpoint, this will pay for itself. Countries will be better off after they did this than they are today. What is still a challenge that politicians need to solve is that it's obviously to a degree, a redistribution on the way there, where you have to share the burden of the individual thing that's more expensive that you do, between taxpayers, consumers, and future generations.
GEORGIE FROST: So that was long answer. I like the short answer of they're just morons. That was, that we could have stopped there really, Jens, but I'm glad you gave us a bit more context. And, can this be achieved? These aims, these goals, net zero, by current business models, and capitalist thinking, so far, should you put it that way, free-market thinking. Can the private sector do this alone? The evidence so far, I would suggest, suggests not.
JENS BURCHARDT: I mean, that would mean that non-capitalistic systems are any better at solving this problem than the capitalist system is, and that I would, yeah-
GEORGIE FROST: Or a system we've not tried yet, Jens, of course, as Churchill would say.
JENS BURCHARDT: Maybe. I mean, my view there would be quite adamantly, it will have to, we don't have the time to now engage in a 20-year global revolution that overhauls our entire economic system. So I find this discussion always a bit theoretical, but on a more fundamental level, in my view, the system that we have right now is the best that can come up with the enterprise, the degree of innovation to create the new business models that we will need to turn our economies net zero, to come up with the new technologies, we now need to fill the gap where we haven't found the solution yet.
What we've seen in the past decade is that in power, for example, solar, which 25, 30 years ago was still a technology that you only used in space shuttles, is now one that in India is cheaper even for coal power plant operators to use than shoveling their own coal in their power plants. What you've seen in battery technology will make e-cars more economic than incineration cars within the next decade in most countries, that's a type of development that only happens in capitalist systems, and that's the type of development that we will just have to set better incentives for. So I don't think it's a system problem, but I think it's just a problem of context, and that context has to change. It seems enormous, and it obviously is on a global level, but every individual problem we've tried to tackle so far on the way there, I felt ended up being smaller than it originally seemed.
GEORGIE FROST: Well that's nice to hear, is listening to outline the state of the current situation. I was already to throw my hands up in the air in resignation and crack open a beer, Jens.
JENS BURCHARDT: If I may jump in there.
GEORGIE FROST: Hmm.
JENS BURCHARDT: One of the projects I did was for a global brewer who was looking at their own decolonization targets and how to achieve those, and we actually found out that brewing a net-zero beer would only increase the price per bottle by a cent or two, and they will now likely pilot them.
GEORGIE FROST: I thought you were going to tell me the opposite, and I was destroying the planet one beer at a time, but I'd actually happily pay a cent or two more. But do you really think that the most consumers across the world would be willing to pay a little bit extra, as we would?
JENS BURCHARDT: I mean, there isn't "the consumer," so this will never be the entire answer. What I do feel is that the potential willingness of consumers to pay extra right now, isn't even close to being unlocked, because people today, when they make purchasing decision have extremely limited transparency about what the CO2 impact of these decisions actually is. And I feel that today, the offerings are not really giving them the choice to make purely sustainable purchasing decisions.
We've looked in a project with the World Economic Forum last year, at all major product groups or the seven biggest value trends globally, which are responsible for around half of global emissions, stuff like electronics, buildings, food, automotive, and others. If we would fully decarbonize those, what would this actually mean economically, and what would this do to the cost of products? And we found that for the bulk of all products, the cost difference would be somewhere around the ballpark of 1 to 2% or less. If I had the choice, when I buy a car that is net zero, I would certainly buy it today. I feel I don't have the choice.
GEORGIE FROST: Obviously, we're seeing consumer pressure across many industries that's impacting on the decisions that companies are making, but will it be enough to persuade investors and shareholders? The transparency required that you're calling for, I don't think anyone would disagree with you, that it's a good idea, will also cost money.
JENS BURCHARDT: There was no market research that suggested people will buy automobiles, or that they will buy smartphones. There's this famous quote by, I think Henry Ford, who said that, "If I had asked the people what they wanted, they would've said faster horses." To a degree, the same thing applies here. Companies have to do a leap of faith that this demand will materialize. I mean, from all the conversations I've been having from everything I see in the market, I think the leap of faith they need to do here versus that they needed to do when the first automobile was invented is a lot, lot smaller. And I have yet to find a company who learns that a net-zero version of their product just comes at a 1 to 2% higher price, and who does not see that as an opportunity.
As for the shareholder argument that we, that you made, I mean, what do we see from investors today? If you look at the value of a company, quite a significant share of this value actually comes from things that will happen 30 years from now and later. This dynamic means that companies within inherently unsustainable business model carry an investment risk, and we see that this risk today materializes in valuations.
So companies who are the forefront of decarbonization, for example, in their respective sectors, they are valued higher, 10 to 15%, the highest quota on average, and companies who lack are valued lower. It materializes in the fact that by now every CEO of every major corporation, when he has an investor call is confronted with a barrage of questions about his decarbonization and sustainability plans. And it's manifested in the fact that if companies ask their shareholders, whether they should be bold or not, today shareholders quite overwhelmingly tend to vote yes.
GEORGIE FROST: But will there not have to be a pause at some stage while investment is found in growth? Yes, over the sort of 10, 20, 30 years time, everything you say about job creation, investment, all those sorts of things could materialize, but are we not going to have to go through a bit of period of hardship to get there?
JENS BURCHARDT: Why? So, I mean, if I, if you look at what happened in, let's take the sector that's furthest along on this, power, how did that materialize? First, Western economy, Europe at the forefront, we paid for renewables at a time when they were still absurdly expensive. So in Germany, we subsidized solar and we had our largest build-out rates actually, at a time when the costs for solar power was six times, maybe even seven times, above what you paid for power on the wholesale market. If I look at our economic development over the past ten years, I can't see how this has hurt us.
At the same time, what this has done is bring down the cost of this technology to a degree that today India is the world champion in adding renewable-powered capacity. And where today in India, no one in his right mind would invest in a new coal power plant anymore. And this is what now has to happen with other technologies as well. What I'm not saying is that there won't be hardships along the way.
What I'm not saying is that this is easy for all economic sectors. There will be industries that we need to protect for a while, for example, if not perpetually, depending on what the rest of the world does. But if I look at what needs to happen in Western economies over the next 30 years, I have a lot of respect because I think it will be extremely hard to do, but I'm not scared of what the outcome of this would look like. In my view, we will end up in economies that are larger and living in societies that are non-polluted. I don't see whether this is something to be scared of.
GEORGIE FROST: Which is great, but we still have to get everyone on board with this, as you've said. So what are the biggest challenges, the biggest stumbling blocks that you see to creating the right global context for companies to make required changes? Is it politics? Is it finance? Is it ideology?
JENS BURCHARDT: So getting the right global context is indeed the biggest stumbling block we're facing right now. But I don't think that it needs a global context for things to move in the right direction. So individual countries can, like Europe, like the US can move on their own or much faster than the rest does.
The biggest stumbling blocks that for one, we now have to regulate decisions of millions of people and that's painful, and that's not something that politicians do very easily and they have to do it in an environment with a lot of noise, where the one right course of action might not always seem super transparent for everyone in a given society.
Then two, for countries who move forward more ambitiously than others, there are sectors in the economy that can't do this on their own, where this does create an economic risk like steel, like cement, like base chemicals, which are extremely emission-intensive. And where bringing down emissions at the same time is comparatively expensive. But if I look at how much these sectors make up of Western economies' GDP, somewhere around 2, 3, 4%. So it's a financial challenge and a regulatory one. But if we want to, we have the means to protect these industries and to help these industries to make the required investments while staying competitive on a global level.
The third big challenge that I see, even though I'm optimistic that the path and what needs to happen will get clearer, that more economic incentives will align a bit better, they want all. There's all regulation that now needs to happen, this has needs to happen everywhere, and it needs to happen in societies, that over the next decades will become more stressed due to the impact of climate change. And managing a 30-year transformation under this stress will be extremely challenging even for countries that are willing.
And the fourth big barrier that I see, I mean, obviously, countries whose economic business model today relies on exploiting fossil fuel resources and exporting them. They have a lot to lose from the fact that the rest of the world embarks on this transformation, and for them also the microeconomic business case for transforming their own economies is a lot worse than for the rest. So getting them to move will require a much more international concerted effort, and also providing them with a perspective of where their future wealth will come from.
GEORGIE FROST: Jens, you spoke about the fact, and you said it is a fact and a painful one at that, that we now have to regulate the decisions of millions of people, and it's not something that politicians do easily. Well, it depends where you are in the world, but do you think that COVID, and what we were asked to do during that time, we're still asked to do, the restrictions we've been under has made us become more compliant or more used to politicians making those big tough decisions on behalf of millions of people?
JENS BURCHARDT: In my view, what COVID did was demonstrate what's possible, what governments, what companies, once they recognize that there is a crisis, what they can, what resources they can mobilize and what degree of regulation they can mobilize that largely at least works to revert this. We've looked at for a separate project in Germany recently, how much it would actually take to do the transformation here in terms of annual cost, and from a public spending perspective, we'll have spent about five to six times as much a year on COVID than we would ever have to spend on solving the climate crisis. Whether people are now more willing to accept regulation, there are probably two segments of society that reacted very, very different to that.
GEORGIE FROST: Indeed, we are not all one people. Now, Jens, I want to pick your brain, because this is what you do, you go into companies and advise them. So I want to give you three companies in three different industries and you're going in, you're going to speak to the CEO, they're very busy, obviously, because you've only got one minute, but I want you to tell them or tell me what you'd tell them, where you see the changes happening, and the one big thing they could do today to get on the road to net zero.
JENS BURCHARDT: Will never be the one big thing.
GEORGIE FROST: Well see if you can give it a go, shipping.
JENS BURCHARDT: I mean, for shipping, it's a fuel topic. Shipping needs to move to green fields. The green fields of the future are likely to either green ammonia and e-methanol. That means that today need to rethink every single investment decision they make into new ships. They need to explore technology partnerships to get ships that can use new fuels going and they need to find a way to source these new fuels for their routes while finding end customers that are willing to pay the surplus. That's an industry that needs to change its own context.
GEORGIE FROST: Automotive company.
JENS BURCHARDT: You have to go all in on e-mobility. Better yesterday than tomorrow, And have to recognize that this solves their problem partly, but it also shifts the problem a bit from the road to their upstream value trends. So they need to develop strategies for how to reduce emissions in their supply chain as well.
GEORGIE FROST: A consumer goods, let's say a trainer company.
JENS BURCHARDT: They have in my view, an enormous unlocked demand for a green version of their product. And if they go all in today as the first company in their industry to serve this demand. They will be bigger. They will be more profitable ten years from now than they are today.
GEORGIE FROST: Jens, finally before I let you go, you've spoken in this podcast with a smile on your face, wonderfully optimistic. Sadly, you can't see that when you're listening to a podcast, but it has been there the whole time. But in the face of all of this, Jens, you think, what on earth can little old me do? What can we do as individuals?
JENS BURCHARDT: Yeah, I feel that there are normally two standard answers that people give to this. The one is around analyze your consumption, recycle more, eat less meat, use public transport, and so on.
The other one is if regulation is the answer, then your role in voting is part of shaping this. Those are both obviously true, but in my view, they both utterly underestimate the potential that individuals can make to change something large. In the past years, the whole global debate has been changed by a girl protesting in front of the Swedish Parliament.
In Germany, there were few small organizations that have sued the German government at the supreme court and forced a ruling that has made German climate targets a lot more ambitious. In companies, bold strategies are rarely shaped by a large departments of people. Groupthink is almost bound to be mediocre. If you take a few examples in automotive, at the end of the day, it was a guy who has made e-cars economic and possible and a thing for the rest of the world.
I know several companies where either one or only a small handful of people has shaped their entire sustainability ambition and quite significantly so. And I know several, where whole new green businesses were built on the initiatives of one person at the end of the day. So my answer on this is maybe not satisfactory, but, everyone should seriously ask himself this question and develop a bit more fantasy about what things are that he or she can really impact in his or her daily context.
GEORGIE FROST: As industry leaders attempt to navigate this new reality, what's certain is that uncertainty will continue to be a key feature in our lives. The problem is our brains simply aren't designed for this level of uncertainty. But what if there was a way that you could prepare for it, harness it and use it to your advantage. That would require a whole new way of thinking of bypassing millions of years of human evolution.
I'm Georgie Frost, and welcome to the very first episode of the "So What", a brand new podcast from BCG.
ALAN INY: We've had this COVID thing. It disrupted every industry, every life, every one of us, but there were some winners.
GEORGIE FROST: It's called the uncertainty advantage. Joining me to discuss it is Alan Iny, Global Leader and Director of Creativity and Scenarios at BCG and author of "Thinking in New Boxes: A New Paradigm for Business Creativity. With all Alan's scenario planning, did he see COVID coming?
ALAN INY: Of course not, I certainly didn't predict COVID with specificity, but what I did do, if you look at page 112 of my book that came out eight years ago was imagine a world where in 2020 in the spring of 2020, I don't know if I said spring or not, air travel goes down 95%. And the point is the more we allow ourselves to say, imagine in five years you have to pay to do a Google search. Imagine in five years, this happens or that happens. It allows ourselves to open doors and to think a little bit more prospectively instead of only predictively about what's going to happen or what might happen. We have to allow ourselves to think about if this thing happened, if that thing happens, and if you can manage that, then the prediction itself doesn't matter. You don't have to predict the specific thing that's going to happen, as long as you prepare for a broad range of things.
GEORGIE FROST: Some might questions that look, if everything is so uncertain and you can't plan in detail. Why bother planning at all? 'Cause the example you just gave me there was air travel, well, that's one big, but just one part of what happened as a result of Corona virus.
ALAN INY: Yeah I think the point is you started off by saying, yes, okay, we've had this COVID thing, it disrupted every industry, every life, every one of us, but there were some winners. From a corporate perspective, there were companies who were actually thriving. And I don't just mean Zoom. And some of the players in online education and online medicine and online, this and that. But there were others as well, companies who are really well equipped to deal with home delivery, companies who are really well equipped to think about what it takes to outfit a home office and stuff like this. I mean, there were winners and there were losers from a corporate perspective, putting aside the personal challenges we all faced. That's what it is to have an advantage in times of uncertainty to be better prepared for these wild shocks that affect us all.
GEORGIE FROST: But with a winners as a result of being prepared. So if for example, my workload increased. I'm a financial journalist, people wanted to know about their finances. They want to know about business as you would in an uncertain time, but that doesn't necessarily mean that I'd better prepared for the situation. I was just in an industry and in an area where people wanted to know more. So is this about planning or about serendipity, maybe?
ALAN INY: Look there's always some element of serendipity and luck in life in business and in everything, no doubt about that. However, as Pasteur said, chance favors the prepared. This is one of those things where you can improve the odds of success by being better prepared. Let's put it another way. Uncertainty, risk, when I say these things, they have negative connotations for many people. People think about an uncertainty as a risk or a challenge or a hurdle to overcome and so on. But what if you looked at it as an opportunity to build that advantage, an opportunity to actually think, well, what if we are prepared better than the competition for the next shock that might come. And even if we don't know what it is, let's make a long list of shocks and think about how we can prepare for a range of things. Okay we can't spend our entire day planning for the wildly improbable, but we can at least spend some time thinking about it and thus improve the odds.
GEORGIE FROST: Give me an example where this has really worked well.
ALAN INY: Let's take an example from personal life, okay, just to start with it. You know, we have these massive floods in New York City and I did not have an umbrella. Now, there's a lot of stupidity associated with that or bad luck or whatever you want to call it. But let's think about it. If I claim that an uncertainty advantage as I call it, a competitive advantage in the face of uncertainty has three components, right? And in the corporate world, I can give you other examples, but I frame it as a signal advantage, a decisive move advantage, and a resilience advantage. So a signal advantage is better forecasting. What does it take to actually say there's a 50% chance of rain. I could do that, but no, okay maybe some people are better at it and they could say it's 80%, 90%, actually yesterday the odds were 100% according to our forecast, so it's all on me. But in general, yes okay, we can improve our forecast. We can get better. We can build that signaling advantage. The second thing is a decisive move advantage. Like, do I have a pre-planned approach that I say, okay well, whenever the forecaster says, the odds are more than 70%, I bring my umbrella. It's default, it's automatic, I'm prepared. I've got the decision made in events. Or 50% or 90%, reasonable people can disagree. Or I'm just never going to bring it 'cause I can't be bothered and I hate carrying things around, I don't know. And in that case, I want to think about the third part, which is the resilience advantage. And you know what, it's only a water, I get wet. I don't care that much. Maybe I don't wear my most precious clothes, or care too much about my hairstyle, certainly. But it's this kind of signal advantage, decisive move and approach, and the resilience advantage as well. Those three components can help build this kind of uncertainty advantage.
GEORGIE FROST: Clearly you're not British Alan 'cause it's part of our uniform. We have to have an umbrella. It would be silly not to. But in terms of a bigger scale approach where it's worked for a business to be looking at scenarios, you mentioned there about air travel, but there are other situations that I'm sure you will have gone into a company and said to them, you know, what if. And they've done that and they've been better prepared.
ALAN INY: Yeah absolutely, I mean, if you think about it now, right, imagine an auto company, and you are a traditional auto company who's been making cars for a hundred years and you know how to make internal combustion engines really well, really effectively. You've done all these things. You're popular, okay. But you see these things coming. You see all of these trends swirling around, the face of urbanization is changing, climate change is coming, smart cars, connected cars, electric cars, autonomous cars, all of these things are swirling around. And there's many more. I mean, we could make a list of 15, 20 trends swirling around. The human mind cannot process how all of these things are evolving in parallel. So what can we do instead? Let's think about different permutations of how those things might play out in, I don't know, say 10 years. What might the 2030 that we have to operate and feel like. Maybe there'll be one future where there's been a green breakthrough and everybody's traveling around in their pods that are owned centrally and everything's Uberised and so on. Maybe there's another future where the rich own their own things, but everybody else has to go around in the shared ones. Maybe there's a future where we regress, and because of protectionism and anti-globalization everybody lives in their own little community. I don't know what, but we can make that these scenarios. And we can think, okay, first of all, make sure they're a useful set. We crosscheck to make sure they cover all the relevant inputs. But if they do, then we can think, well, how would I become better prepared for this future if I knew it was coming, if I did have that crystal ball? Are there some, no regret moves that would make sense? You know, I remember working with a client a few years ago on that who literally after exploring all the different scenarios and coming up with these moves, the CEO said, all right, who's writing the memo about how our strategy, about autonomous needs to change, who's writing them. You know, this was a company that had been very reactive whenever Google or somebody else announced the latest thing about autonomous cars. But they said, you know what, we have a competitive advantage because people are still buying our cars. They expect them to last 10, 15 years. And the city infrastructure is actually not going to change that quickly in terms of parking and all of this sort of stuff. So we actually have some time, let's be thoughtful about it instead of just reacting to whatever Uber and Google announce. And let's really rethink our approach to autonomous driving. And that's a traditional Detroit state player. It's a really exciting thing to client.
GEORGIE FROST: Okay Alan, you like thought experiments, so let's try something.
ALAN INY: Sure.
GEORGIE FROST: A speed round. You go into three different companies working in three different industries in one minute each, maybe two, I want you to tell me exactly what you would say to them, what they should be looking out for and how they can prepare. So let's go with the first one, see how this works. A cyber security firm.
ALAN INY: Funny I actually worked with a cyber security firm a few weeks ago and gave them a talk about creativity, about how we can challenge our assumptions. And you know, the biggest issue for them is that they focus on the tools and the techniques for how to protect things. When in reality, almost all cyber breaches are caused by human error, by people clicking on something they shouldn't. So how can they actually focus on people's minds instead of just only the state of the art technology?
GEORGIE FROST: Well done, that was pretty much a minute. You've done this before, Alan. An insurance company.
ALAN INY: You know funnily I was working with an insurance company recently too. They'd been doing health insurance, life insurance, car insurance for decades, but now they're thinking about cyber insurance. How can we possibly price what the next big cyber attack will be? It's not just a question of, for me somebody attacking my savings account and getting a few hundred dollars that the bank will reimburse. No, but what about a company? What about this pipeline that's being attacked? How can they possibly price these things? And so we laid out scenarios for what the future of cyber attacks might be like. Will the world be super globalized will we revert to the status quo? By preparing for all of those things, they felt themselves better able to price this new business, this new product line.
GEORGIE FROST: All right, I have one that you've probably not come up against. Podcast presented from England.
ALAN INY: Huh, a podcast presenter from England, my goodness. If I think more broadly about the media space, right? And how these things might be evolving. It's quite interesting there too. The world is changing dramatically and to come in, maybe not, I wouldn't say the early stages of the podcasting world, but you're not that late yet. And so thinking about where one wants to play in this evolving world, thinking about how the world of podcasts, but also traditional media might evolve is a powerful thing to think about, what are the greatest chances of success in a wide variety of environments?
GEORGIE FROST: What are the themes, general theme with all of these cybersecurity firms, insurance companies, podcast presenters, media professionals, travel companies, all of these things, is there a theme? Is there something that you go in and it's a general idea that you say to them.
ALAN INY: The theme across all companies and podcast presenters is that they're human beings, and human beings think in a certain way. We have biases, we have so many biases that prevent us from thinking expansively about the future. We've all read about confirmation bias and status quo bias and whatever you want. There's a long list of these things. We're also overconfident when we think about the future. If you think about a British one in 1969, Margaret Thatcher said, "I don't think a woman in my lifetime will become prime minister." And then 10 years later she was. But it's not only her. In 2007, Steve Ballmer said, "on an analyst call," he was the CEO of Microsoft, "there's no chance that the iPhone will get any significant market share." But it's not just him. Albert Einstein in 1932 said, "there's no indication that energy will ever be obtainable from the atom." In other words, there's no likelihood of nuclear power. The point I'm making is that no matter how much of a genius you are, or how senior you are in an organization, you're a human being who thinks in a certain way. And therefore, the theme is how can we take a sort of mental inventory of some of our existing assumptions? Like this is the way we think about our customers or our competition or podcasts or whatever the case may be. And which of those assumptions might be ready for a change? How can we challenge some of those things? How can we think creatively about what's possible? And if we're going to think creatively about what's possible, it means taking that inventory of how we think about what is, and being willing to challenge some of those assumptions.
GEORGIE FROST: So much of what you say, and I've watched a TED talk about doubting everything. You know seeing volatility uncertainty is an opportunity, not just a threat, and learning what we've learned. All of this to my mind requires a fundamental shift almost in the way that we view the world. And you just said that we're humans. How do we do that? How do we shut out bias, noise? How do we stop looking to apportion blame? It's the left, it's the right, it's China, it's Putin, it's my next door neighbor's dog. How do we almost stop being human? But humanity and creativity is so fundamentally human. It's actually our greatest asset, but also our greatest weakness.
ALAN INY: I couldn't agree with you more. I mean, if you have a five-year-old child who gets stung by a wasp in the playground, it's very natural for her to start asking, are wasps bad? Did I do something wrong? Why did this happen to me? And then start hating wasps and blaming this, and not wanting to go back to that playground and others. And it's not so different from people in the face of COVID blaming Trump, blaming China, blaming this, blaming the right, blaming the left, it doesn't matter. To be able to overcome some of that, to be able to think what are some of my biases, what are some of my issues to actually try and take that mental inventory is counter-intuitive but really really powerful, especially the hidden implicit assumptions. The more we challenge some of these core assumptions, the better equipped we will be to build that kind of uncertainty advantage and think more expensively about what's possible in the future.
GEORGIE FROST: Alan which industry do you see is right for disruption? Who would you like to work with? Who do you want to talk to? Who needs it, do you think?
ALAN INY: Gosh, those are different questions. Who's right for disruption and who would I'd like to work with? I mean, just yesterday, I was working on the topic of how can we tackle the anti-Semitism in society. And I've done projects on how can we improve race relations and think about black lives matter in a productive way, and all of these sorts of things. So all of that are things that I love, and I'm excited about making a difference for. Working with the Gates Foundation over the years, working with the WEF over the years, helping them make these broad societal changes. This is also a privilege. And yet when you ask which industries are ripe for disruption, my mind goes to financial services. My mind goes to consumer goods, really rethinking the retail experience, rethinking the banking experience, rethinking what a car will be, rethinking so much of what affects our day-to-day life. It's a really really powerful thing.
GEORGIE FROST: Why, why do you think that needs disruption? Why do you think that it hasn't? Why does it immediately come to your thoughts?
ALAN INY: It comes to my thoughts because I've been seeing more and more clients in the last five, six years saying things like, "oh, I'm not a bank, I'm a technology company that does banking." "I'm not a store, I'm a digital company that does retail." You know, those kind of trades. But it's also kind of true, the more companies are able to shift their perception and actually think, what does digital actually mean? How does it change my business? What are some of my assumptions that need changing? It's the same general mindset around sustainability too? You know, it used to be something that was additional thing. And now I'm seeing more and more companies, not only hesitant and not just because of COVID to fly me over for a one day thing, because that makes no sense from a climate perspective, but also rethinking climate as a core part of their business. It's a beautiful demonstration of how changing the way we think about things can actually change the things themselves.
GEORGIE FROST: I know we're talking about the unpredictable, Alan, but I'm going to get you to predict for me, what is coming down the track? What are you seeing? What scenarios are you really thinking about?
ALAN INY: Gosh, there's this sense that in the short term, the world changes much more slowly than people think, but in the long-term more rapidly, right? If you had asked me 40, 50 years ago, well, if you'd asked somebody 40, 50 years ago, 'cause I wouldn't have said much useful. But if you would ask somebody 40, 50 years ago, what would things look like in 2021? First of all, we'd all be flying around on Conchordes at supersonic speeds and that disappeared. Second of all, we'd all be eating these custom formulated things that are personalized to us and take all the pleasure out of gastronomy and what have you. Third of all, we'd have massive headsets and virtual this and all of that. And okay some of that is emerging, and maybe it will, but some of those things have been emerging for a long time. And in other cases, there's these things like supersonic travel that, okay, maybe it's going to come back again, but it certainly, frankly, air travel now is roughly the same as 40 years ago, except the A380, which is a double-decker, but it's still the same. So all of these sorts of things, it's impossible to predict, but it is possible to prepare. And what I do see, I personally I'm not sure if the technology changes will be more incremental or more disruptive. I certainly see a lot of increase in the speed of some of the geopolitical changes, which now happened by tweet, rather than by formal diplomatic treaty. I certainly see things changing in terms of climate as well. I think that the sensibility there will change.
GEORGIE FROST: All right, Alan just one last thing. Give us the key to cracking the uncertainty advantage.
ALAN INY: Step one, acknowledging that uncertainty and risks are two-sided coins. They are not only negatives. They can be advantages as well. They can be beautiful opportunities for an individual or an organization to really make a difference here. There's a thought exercise I sometimes do with clients, and I asked people, "why do cars have brakes?" And your natural answer like anyone would be, well, to slow down or to stop, okay. And this isn't wrong. But the claim I'm making is that if you are a driver who has decent medium range vision and the ability to react well, then actually the brakes enable you to go much faster. And the same is true when we think about uncertainty, if you actually are an organization or a person with decent medium range vision, and the ability to adapt and react to things, then you can think about uncertainty as an opportunity to push ahead while others are flailing around or to pause thoughtfully while others are rushing ahead, willy-nilly. So looking at it in fresh ways, allowing yourself to think about multiple possible futures and how might I prepare if this thing did happen, nevermind the probability of it happening, but how might I prepare for this stretched but still plausible pictures of the future. And there's massive advantages to be having that.
GEORGIE FROST: Alan, thank you so much, absolutely fascinating. And thank you for listening. We'd love to know your thoughts. To get in contact, leave as a message at the, email@example.com. And if you like this podcast, why not hit subscribe and leave a rating wherever you found us, it helps other people find us too.