Tag Archives: strategy

Megatrends and board of directors strategic agenda

photo-by-alex-wong

By Ronaldo Ramos*

In his book entitled Homo Deus, Yuval Noah Harari tries to understand what challenges humanity has faced so far and to imagine from the present, what the challenges will be in the future.

One of the functions of a Board of Directors acting in my opinion, is the protection here and now in the present, of the future of the company from its own past. The implicit hypothesis I use is that in our comfort zone we tend to repeat the actions that brought us to success paying little attention to whether they will still be effective in the future.

According to Harari, our great obstacles and pains until recently were war, famine and plagues. I will not go into ideological matters here. I believe there is no doubt that these problems now have their solutions well-known and relatively under control, as well as accessible in every corner of the planet. I will not focus here on the issue of whether or not they are available to all individuals, even though I consider it extremely relevant, just because I think we will move away from the central theme of this panel.

Harari imagines for the future a world where the fundamental issues, or obstacles, will be immortality, happiness and divinity. I in particular believe that immortality, or the death of cell death, is closer than we can imagine, and that happiness, in a way, will be very well simulated by constant episodes of joy, a feeling very similar and easier to purchase.

And of course, we quickly become hybrid, bionic beings, with parts restored when necessary, predicted or not by the analysis of our genome. We may make use of a 3-D cultured or simply skin tissue or simply produced from genetic engineering or any other nano process.

We will also deal with artificial intelligence, both private and general, robotics, energy cheapness, processors in neural networks and cognitive computing that will facilitate our diagnostics and analytical tasks.

In its most recent publication on Megatrends in 2017, the PwC lists accelerated urbanization, shifting global economic power, demographic and social changes, climate change and associated resource scarcity, and technological advances such as major Areas of attention.

A menu and so much to be digested by the executives of an organization and its advisers, mostly trained in traditional schools, by methods of teaching where the knowledge is presented almost always compartmentalized and coming from a society where the specialization and the depth of knowledge were critical success factors.

Until recently, our expectation of a productive life in Brazil led us to believe that after retirement we would have a decade with a good quality of life and that after that we would be nearing the end. It would be possible to survive without great efforts of adaptation to the few changes that the world proposed to us.

It was possible to live a lifetime with a single job, or even with a single profession. We know today that those present in this room will most likely live to be 100 years old with relative quality of life, and able to remain productive until they are 80 years of age or older. Not necessarily with the same profession but still performing activities or professions relatively known.

Our children and grandchildren, however, will have a different world where they may not need to learn to drive or learn languages, but they will certainly have to prepare for a job market that will require constant changes of profession every five or ten years. Yes, no more job changes, but profession! And most are still unknown!

The anguishes to be lived due to the increasing degree of uncertainty, the multiple options of choice, the constant changes and also the many stimuli for the pursuit of happiness, the immediate satisfaction of desires, can bring as a consequence what is already observed in the world Including the work environment of large corporations. An increasing number of suicides, abuses of chemicals that reproduce feelings of happiness, which increase our power of concentration or allow us to need fewer hours of sleep will be part of our daily lives.

We are likely to live in a world where mental disorders will reach a significant part of the population, feelings of inadequacy and uncertainty are frequent, and where there will be a greater need to seek emotional, intellectual, physical and mental balance and above all, to learn to live together and embrace diversity in all its manifestations.

In my experience as a multinational corporation executive, and as a mentor for CEOs, I have observed that in general our greatest and most common quality is technical training and the ability to solve problems from the inside out, In resolution of “complicated” problems.

I understand the complicated problem as one where a classical scientific solution, identifying independent variables, modeling subsystem solutions and then combining the subsolutions to compose the answer to the larger question works well, and generally leads to the relative control over the company’s activities, its markets and its value generation.

In Boards of Directors in general, we find trained professionals, but essentially still attached to this belief. The paradigm that an individual, classic, Cartesian scientific action, close to that of his performance as an expert executive still produces satisfactory results. These professionals do not necessarily have their attention turned to cultural change, to challenging, transformative thinking, and to chalenging existing truths. Few are the advisors who seek to move through the ability to act in teams, build collective proposals, look at self-development as a key factor for generating value for the company and its stakeholders, creating an environment of mutual learning, enabling it to create the cultural platform that will be the reference for navigating future uncertain and changing seas. The ability I still see is scanty to deal with “complex” problems where correlations between variables are much more subtle and difficult to control. When we interfere in a network of stakeholders for example, many of the results are unpredictable, and our ability to act in constant motion and develop an increased understanding of other points of view and aspirations becomes paramount. Investing in innovation in the formation and composition of Boards of Directors seems to me to be the first and important step to be taken by the shareholders in order to create the capacity of the company to deal with the new challenges.

Recruit directors with proven emotional and adaptive intelligence, aimed at cultivating the diversity and transformative ability of the company culture, aware that they can not commit interference or jostle with the board, and that they have an insatiable appetite for seeking news in other fields and Establish synapses with other areas of human knowledge, seems to me to be the central challenge. In this sense, the mentoring of CEOs, Board Members and Directors has proved effective and accelerated in general learning, in the sense of horizontalizing perceptions and increasing the repertoire of behavior and transformation strategies. Once this issue has been resolved and solved … the composition and effectiveness of the Board and its social and organizational dynamics of operation, we can try to guide the discussions on megatrends and new technologies, formally creating a thematic agenda that includes a mapping of risks, besides the traditionally done, that systematically seeks to identify opportunities for entry of new competitors by application of concepts of rupture theory and by internal stimulation to innovation by the implementation of specific processes of construction and ideation.

It is also important for the Board to identify whether the innovations identified and proposed could be at risk of internal cannibalization because the company’s culture is extremely dominant, and therefore evaluate spin-offs or separate business creation decisions that allow proper incubation. From the mapping of risks of rupture and threats and opportunities to competitiveness, we can then include in the company’s strategy the ability to search for internal or external critical success factors and establish metrics for progress in innovation.

Nowadays, I believe that because of the lack of proper mentoring to Board members, CEOs and directors, companies in general still spend a lot of time discussing whether they are doing things correctly, often looking only at the past, for results Obtained and similar matters. If the company’s performance is satisfactory, of course, the Council’s eyes should turn to see if the company is allocating material resources, managing its talents, and investing in the necessary subjects to have continued success in the future, arriving in many cases until planning the very obsolescence of the current business model. The Board should specialize in asking the right questions, just as mentors do. Questions that inspire, provoke reflection, and above all, induce the culture of innovation: In which market are we actually operating? Is the market changing? Do we still know our customers? Providers? Stakeholders? Regulatory agents? Who are our competitors today? And tomorrow, who will it be? How is management really stimulating innovation? Removing barriers? How can the Council set expectations about the future? Profiles of risk, agility of the market? What is the company’s appetite for inorganic growth, considering not only In competitors, or complementary, but startups? In summary, in order to address issues of megatrends and new technologies and incorporate innovation risks, opportunities and strategies, the Council needs to equip itself with new skills that include not only emotional intelligence to operate in a collaborative and contributory psycho social environment, but also Recruit and develop advisors who are willing to embrace diversity in the broad sense and horizontality of repertoires of synapses and behaviors that allow them to act no longer as executive operators but as true mentors able to bring to the fore the relevant questions for the design of the routes of Transformation of business models and value generation. Inspiring the CEO and its directors is also part of the Board’s responsibility.

Ronaldo Ramos
*Founder of CEOlab
ronaldo.ramos@ceolab.net

 

Sustainability: a shared value

Foto de Ronaldo Ramos

By Ronaldo Ramos*

The concept of sustainability was created 40 years ago due to environmental concern. It now faces the challenge in becoming shared value by business, professionals, consumers, citizens and governments, going beyond the corporate arena and spreading through society. It’s meaning has expanded throughout the years and has gathered many concepts: ecological liability, economic feasibility, socially just, multicultural, renewable, recyclable, natural resource exploration efficient, conscientious consumption and respectful use.

It is crucial to corporate survival to include and keep up with sustainability issues in governance, professional development, and their results. How to apply this concept in day-to-day business actions? What measures must be taken so the partners can incorporate this shared value in a sustainable fashion?  How to assure it’s fulfillment as well as the inclusion of budget investment?

Usually, sustainability is limited to a specific business venture. It is necessary to check the environmental and cultural aspects of the area to grant advantages or to compensate the community for necessary adjustments before proceeding. The business venture must be carried out to consider the community’s needs, cultural, religious, ancestral and environmental values. A central challenge is identifying the sustainability inputs in tune with corporate strategy, presenting them to the steering committees, incorporating to operations, and permeating the concept and practice throughout the company and stakeholders.

The Brazilian companies greatest difficulties in expanding and effectively adopting sustainability guidelines is the lack of reference when returning to projects. The second edition of “The managing state of sustainability in Brazil” (“O Estado de Gestão para a Sustentabilidade no Brasil”) study, published by Fundação Dom Cabral in 2014, suggests no significant changes and that the main challenge in 2012 is still valid: to reduce the gap between discourse and practice.

Since business does not carry out sustainable ideas, the companies are unaware of the financial benefits and efficiency that could be brought to the chain of production, including its longevity and renewing operation licenses with greater ease. Governments and citizens have the duty of comprehending and applying the concept in their initiatives, attending public hearing for the implementation of business and projects as part of a fundamental education to guarantee sustainability. By these measures, it is possible to suppose that government incentives for the implementation of sustainability projects can boost business in the internal administration and their relationship with society. Contrary to transparency it is based on a systemic and long term concept.

We are now in the era of shared management and sustainability should be regarded in a chain of valued perspective. The search for operational excellence also must be understood and stimulated by domestic business as a path to bring forth and differentiate its practices and products in a global market. A company that does not introjects sustainable values will have difficulties in the internationalization process.

According to HR specialists, the company should manage the employees in a sustainable method, aiming their wellbeing, promoting health, security, and balance in the work/life relationship, diversity and inclusion, gender equality, just rewards, fair pay, promoting development, internal positive communication, open dialogue and community relations. The approach of topics associated to the concept must be rooted in the business. It is a task that requires the effective communication of business values and mission.

One of the largest annual researches in the corporate sustainability world, the “Managing State of Sustainability 2013” (“Estado dos Negócios Sustentáveis 2013”), indicates that HR is precisely one of the corporate functions least committed in matters of sustainability. Corporate treasure was classified as the least committed, not much behind R&D, Strategic Planning and Marketing. This lack of concern shown by main departments reflects the current state of underdevelopment of sustainable values.

Although CEOs consider that commitment to consumers is the main motivation factor for accelerating sustainability investments, they are generally out of tune with the motivation for the purchase of sustainable products and services. A global study published by Accenture brings out that only one third of consumers consider sustainability.

Pioneer way of thinking and managing requires business that intends to be sustainable, to have smart, creative, committed and keen leaders that cultivate the culture of purpose.  The most valued persons do not contend with fund raising and donation politics. They need meaning in their work and their surroundings. The culture of purpose can be dismembered in three stages: cultural expertise, characteristics and attributes. Also requires energy, resilience, opening and personnel truly committed to these objectives.

According to the guidelines of the best practices of corporate governance published by IBGC (Brazilian Institute of Corporate Governance) in 2010: “Corporate governance is the system by which organizations are administrated, monitored and encouraged, involving partner, board of directors, managers and management control relationships.  The good practice of corporate governance turns principles into objective recommendations, aligning interests to preserve and optimize organizations value, providing easy access to resources and contributing to its longevity.”

The board of directors is responsible for orienting the process that defines tools and management indicators, including pay, to link sustainability matters to strategy options. This posture should spread out throughout the productive chain. The public authorities and the population’s participations are essential to the society’s responsible economic evolution. The individual challenge relies in rethinking our habits and customs in a sense of giving small but certain steps towards a sustainable future.

*Founder of CEOlab
ronaldo.ramos@ceolab.net

Dreams and budget planning

By Ronaldo Ramos*

A detailed budget planning that is aligned to the partners and company’s central values is vital to fulfilling the manager’s dreams. It is necessary to consider the shareholder’s wishes in all its dimensions: financial return, perpetuation, family income, growth, sustainability, corporate, social, and environmental liability, innovation, market, and diversity.

The dreams must be put in terms of critical factors for success and performance indicators, with short, medium and long term identification. The event horizon can range according to specific business characteristics and depending on the company’s financial health and the magnitude of imminent risk. The greater the awareness of threats, the shorter is the planning period. 

These objectives, drawn by the partners, must be shared, validated and accepted by leadership and collaborators. As to build and organization on track and committed, ensuring implementation of strategic thinking in its multiple levels. 

It is better to be prepared for an imaginary risk – one that does not materialize, but has a relevant probability – than to be caught by surprise. If the crisis is not addressed properly, we end up mining the company’s outcomes or going down drastic roads towards financial downfall. 

We must always keep in mind that budget planning represents an exercise where everyone thinks, plans, and identifies opportunities and risks together. We must also anticipate and define courses of actions to mitigate uncertainties and potentiate opportunities.

A round of budget planning can be done once a year and cover multiple periods. Such as a more detailed version for the following year and an indicative, that can cover periods between 3 and 5 years, depending on the venture. Some managers and entrepreneurs fail to be this thorough, alleging that the market’s dynamicity and volatility reduces the practicality and relevance of this long, expensive and complicated task.

The complete process can take up to 3 to 4 months and should be ready for final approval before the beginning of the regarded time period. The round should involve every decision maker, including partners, counsel (if there is one) and directors. The business key departments should also be represented, since their corresponding leadership will be responsible for setting plans of action.

It is best to leave all coordination to the financial director if he is capable of gathering technical plans from each department and identify opportunities, risks and mitigations, as well as questioning assumed premises, reflecting his observations to the final approvers. A solid financial formation and a certain dose of general business knowledge are essential attributes.

Each leader’s basic role is to identify what is possible to fulfill production, sales, investment, and profitability goals defined by the partners, council and CEOs.  Furthermore, the business maximum potential should be checked, as well as recommending investments and productivity programs, with the outlining of operations risks – be they of commercial, technical, circumstantial, political, compliance or any other nature that could have a significant impact in results. 

The models outlined during planning must be capable to identify the financial impact of the above mentioned in every line within the financial statements, from the main quantitative performance indicators. This way, a sales increase must have the expected or mitigated capital impact; a production increase must have the considered corresponding resource allocation; the release of a new product’s ramp up and start up phases must be outlined.

Plans of actions can go beyond current business resources. Some can be limited or discarded in time according to the situation. Restricting plans, cutting investments, increasing debt, capital calls, and preparing to go public or to sell are alternatives brought up from a well carried out budget planning. 

Tax and financial impact resulting from debt increase or from regulatory change, cost reduction opportunities and operational excellence programs, an overview of synergy and new structural organizations, and benefits and demands of automation investment: everything must be incorporated to the model. As the practice gains credibility, the budget planning becomes an important tool for a well informed and conscious decision making. 

*Founder of CEOlab
ronaldo.ramos@ceolab.net