Winning in a fragmented world … 7 paradoxes for business leaders to resolve through smarter innovation

January 23, 2018

Davos has become a festival of rock gods and global presidents, Asian entrepreneurs and African charities. Whilst Bono strolls through the party scene and plays with the latest gadgets, Prime Minister Narenda Modi extols the virtues of the Indian economy, and founder Klaus Schwab reminds us of the big challenge to get the world back on track.

The agenda for this year’s World Economic Forum focused on “creating a shared future in a fragmented world.” Schwab describes the new context as “geostrategic fissures have re-emerged on multiple fronts with wide-ranging political, economic and social consequences. Realpolitik is no longer just a relic of the Cold War. Economic prosperity and social cohesion are not one and the same.”

You don’t have to look far for signs that we live in tumultuous times. Geopolitical uncertainty, cyberattacks, and jobs threatened by artificial intelligence are just a few of the topics that dominated headlines in 2017.

7 paradoxes for business to resolve

For me, what should be clear, is that our world, our markets and customers, have become increasingly polarised. A new set of tensions – or paradoxes – have emerged. From Brexit to climate change, Trump to the Catalans, we see challenges to our stability and progress that were not even imagined a few years ago.

  • Global v local … big or small, international or provincial, centralised or decentralised, homogeneous or heterogeneous, institutional or individual, standardised or crafted … Or instead, how can we get the best of both worlds – like Amazon’s Treasure Truck bringing unplanned surprises to local neighbourhoods, from global platform, to local people?
  • Human v technological … digital or physical, robotic or human, artificial or authentic, transparent or private, ideas or algorithms, fast or slow, interfaces or experiences … Or instead, how can we combine the two to do better – like Dalian Wanda, China’s answer to Disney, with a new generation of multi-media, entertainment-based shopping malls.
  • Individual v collective … individuals or communities, transactional or relational, producing or co-creating, enterprises or ecosystems, competing or collaborating, protected or open sourced … Or instead, how to achieve both, like Supreme, the hip-hot skater brands that uses pop-up marketing driven with incredible hype by social-media, driving a millennial after-market in fashion?
  • Business v society … purpose or profit, shareholders or society, responsible or reckless, transparent or untrusted, diversity or division … Or how can we find a new balance, like Adidas’ Parley running shoes made from recycled sea waste plastics in collaboration with Ocean Clean Up from the Netherlands, then sold as ultra cool and twice the normal price?
  • Change v continuity … innovate or optimise, growth or efficiency, flexible or stable, experimental or perfection, change mindset or fixed mindset … Or instead, how to connect the two dynamics, like GE which seeks continuous revolution with its FastWorks innovation process, connecting design thinking and lean development to experiment and reduce time to market by 90%?
  • Simplicity v complexity … linear or networked, corporate or entrepreneurial, planning or hacking, creator or adapter, analytic or intuitive … Or instead, how to embrace both, like the world’s largest white company Haier, which uses a “rendanheyi” business model, built on thousands of micro-businesses within one organisation, entrepreneurial and focused?
  • Tomorrow v today … tactical or strategic, incremental or transformational, safety or risk, boldness or parity, tangible or intangible, sales revenue or future profits … Or instead, how to drive radical change whilst delivering everyday, like the “double time” model embraced by Jeff Bezos in driving 25 years of relentless growth, but staying focused at the same time?

The biggest challenge for leaders today, is to resolve these paradoxes, to align the opposing forces or apparent contradictions. The biggest opportunity for leaders is to find ways to achieve both – which means reframing the context, and rethinking solutions. Third ways, new ways, better ways.

Increasingly it is new technologies that enable these new ways.

Take blockchain, for example, offering the ability to “democratise” markets and brands, through local engagement and decision making. Or 3d printing, through mass customised production on demand. Or neuroprosthetics, enabling artificial limbs to work as well as real body parts. Or AI-based scanners and trackers making more accurate and predictive medical diagnosis. The applications of technology can redefine our possibilities, and our choices.

The point really is that business has the power to solve these problems, to innovate in new ways, to engage people in positive ways, more than an think tank or government could ever achieve.

What matters most to CEOs in 2018?

New research launched in Davos this week shows a record-breaking percentage of CEOs told us they are optimistic about the economic environment worldwide, at least in the short term. That’s one of the findings of PwC’s latest Global CEO Survey, launched in Davos this week. Here are three highlights:

1. Soaring short-term CEO optimism

This year’s survey showed a record jump in the all-time highest level of CEO confidence regarding global economic growth prospects for the coming year. For the first time since we asked the question in 2012, a majority (57%) of the CEOs surveyed told us they believe global economic growth will “improve”. Strikingly, this unprecedented optimism is about twice as high as last year and it is truly global — from North America to both Western and Central/Eastern Europe, as well as Africa, Latin America, the Middle East and Asia Pacific.

This confidence waned, however, when we asked CEOs about their own company’s growth in the next three years. While last year, 51% of respondents told us they were “very confident” about their organization’s longer-term growth prospects, only 45% shared that view this year.

CEOs may justifiably feel that the future is simply less predictable than it once was. With technological disruption and geopolitical unpredictability verging on commonplace, longer-term confidence may be increasingly elusive.

2. A focus on the geopolitical positives

In the short-term, CEO optimism appears unimpeded by shake-ups such as Brexit, the Trump administration’s withdrawal from trade agreements and climate accords, and increased anxiety over North Korea. Undeterred, CEOs continue to invest in and grow their businesses.

Simply put, 2017 looks set to be the best year for the global economy since 2010. As we kick off a new year, global commodities prices have recovered from their trough and the world’s major economies are growing. Even Britain’s economy seems to be persevering despite Brexit. This upward trend is set to continue in 2018, with PwC predicting that the global economy will grow by almost 4% in purchasing power parity (PPP) terms this year.

In the US, the Trump Administration’s pro-business policies — with the notable exceptions of trade and immigration — look to be fuelling a stock market boom, corporate confidence and low unemployment. With deep corporate tax cuts, deregulation and infrastructure spending on tap for 2018, it’s no surprise that North American CEOs are our most confident survey respondents: more than half (53%) of CEOs from the region are “very confident” about their company’s growth in the next 12 months.

Only time will tell how well-founded CEOs’ short-term confidence is but the economic indicators are on their side, with booming stock markets and strong predicted GDP growth in most major markets. Also, while risks seem to grow and multiply, CEOs are, on the one hand, becoming more used to high levels of multiple risks; while on the other hand finding ways of managing them. There are plenty of potential potholes in the road ahead for business but CEOs have become better at predicting where they are and navigating around them.

3. Taking technology in their stride

Technology is affecting businesses in varied and complex ways. As we continue to hurtle through the digital age, business strategies for technology are in flux, and the numbers show that. On the one hand, technological advances — like cyberthreats and the sheer speed of change — are high on the list of concerns that keep CEOs up at night. Last year, 24% of the CEOs we spoke to told us they were “extremely concerned” about cyberthreats, but that number has jumped to 40% this year. In contrast, business leaders see enabling universal connectivity as the chief benefit of globalization.

There is no question that the impact of AI will be enormous, potentially transforming business and society at large. PwC’s recent global AI report predicts AI will contribute an additional $15.7 trillion to global GDP by 2030. But those benefits are unlikely to be shared evenly: the US and China are slated to account for 70% of the boom. There will also be winners and losers in the jobs market when machines can replace cheaper labour. Certain jobs will become redundant and new ones will be created. However, while CEOs are focused on the potential benefits of AI, they are for the time being relaxed about the impact on employment with fewer that one in five CEOs expecting to reduce headcount in the next 12 months.

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