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COMMENT BEYOND20


Uncertainties of recovery reinforceadual strategy


A NEWWORLD ORDER IS COMING, AND NOTHING SHORT OF THE FUTURE OF CAPITALISMIS UP FOR GRABS I


JEAN-MARC OLLAGNIER


n economics, as in medicine, a recovery is rarely clear cut; different cases respond dif- ferently to treatment. While the international consensus is that


global gross domestic product (GDP) will rise this year after last year’s calamitous 4.2% fall caused by Covid-19, the diagnosis varies. The OECD predicts global GDP will rise by


4.2%, boosted by vaccination campaigns, health policies and government intervention, and the IMF’s latest forecast is even brighter, foreseeing 5.5% growth this year and 4.2% in 2022. Yet, at the same time, the fund high- lights real unpredictability—warning the pan- demic could yet halt the rebound if surging infections, renewed lockdowns and vaccine distribution problems conspire. Such uncertainties help to explain diverg-


ing regional expectations over the pace of recovery and mixed levels of confidence in the ability of industries tomeet growth targets. A survey of 4050 C-level executives in large


companies worldwide by Accenture, for exam- ple, reveals that business leaders in Europe and North America foresee a U-shaped recovery tak- ing up to 18 months, while their Asian counter- parts anticipate areboundin12months. Indeed, executives in the Asia-Pacific (Apac) region are far more confident about meeting 2021 growth targets (60%) than their European and US coun- terparts (45% and 48%, respectively). The crisis has also exposed large differences


in the resilience of companies. Just one-third (32%) of Europe’s executives expect profitable growth in the next recovery phase, on par with the US, but behind Apac (41%), and while some European firms (4%) are reinventing them- selves and doing better than before, more are doing so in Asia (7%).


Dual strategy This fragmented picture not only highlights the uncertainties of the recovery, but it also offers clues about how companies should respond to the main forces that will shape it. If digital transformation defined the landscape in the 2010s, global change today is being defined by sustainability; those companies pur- suing both — and integrating them — are likely to recover faster andemerge stronger. Research suggests this intersection of digital


technologies and sustainability holds tremen- dous concealed value — and Asian companies


44


have so far been marginally better at tapping it. Accenture datasuggestsuch“twin transformers” are nearly three times more likely to be tomor- row’smarket leaders, as resilience during the cri- sis will catapult them rapidly into a rebound. These companies are unique and display com- mon strategic traits. Most twin transformers (61%) already generate more than 10% of their revenues through business models driven by sus- tainability and enabled by technology — and nearly80%expect to do so in three years’ time. They have learned how to combine


resources in order to scale technology applica- tions to sustainable practices. Not only do they plough more into innovation — 45% are invest- ing more than 10% of annual revenue pre- Covid,jumping to57%over the next year—they target initiatives that combine sustainability impact and technology at scale. They are also distinct for engaging suppliers in their sustain- ability journeys, forging broad partnerships to ensure sustainable product lifecycles and improve traceability. Additionally, they assign key performance


indicators that go beyond financial results by linking performance to progress on cutting emissions, the share of their products with pos- itive societal impact and the share of the resources they procure from sustainable sources. And if there is one characteristic by which twin transformers can be distinguished above all others, it is their conviction that tal- ent translates into concrete business value.


European leadership Data suggest Europe’s twin transformers, for example, believe passionately that failing to nurture their workers will hamper digital and sustainable transformation. These companies take real responsibility for the continued employability of staff in a radically changing labour market, acting decisively to give them the skills they need for the post-Covid future. They realise instinctively that sustainability attracts the very best people, inspired by values and commitment and often at the forefront of efforts to address climate change. European companies are particularly well


placed to undertake this twin transformation — andwiththe right strategicmix can leadit. That is because success requires a commitment to cutting-edge innovation applied withpurpose to enable sustainable solutions — a mix that plays


www.fDiIntelligence.com February/March 2021


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