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1. (Advance) planning: short- & long-term strategies

Return to March 2020 Update

Includes the following three subcategories:

Length: 20 min read;  4,143 words.

Note: The following paragraphs summarize the category of (Advance) planning: short- & long-term strategies observed in March. More information about the specific category from March (and previous months) can be found in the downloaded report(s).The number in square brackets (e.g., [X]) refers to a reference where the reader can find more infomation about a specific statement.  The references can be found in the References list below, Systematized References page or in the dowloaded report.

 

The interest in this category has slightly picked up from December lows (29% in March ‘21 vs. 26.3% in December) because we are finally at the start of the crisis’ end and the companies are planning reopening and post-pandemic new normal. We do not expect this topic ever to reach the number one position from June 2020. Strategic planning remains among the three most discussed topics in March ‘21, mostly due to a higher interest in leadership and self-improvement strategies. The two remaining subcategories (Sustainability/ Green future – opportunity to address climate change and Businesses (economy sectors)) have been at the approximately same level, with 1% higher interest than in December (10.7% and 10% in March vs. 9% for both in December).

a) Businesses (economy sectors) / projects

In a recent survey, 80% of executives believe their organizations have responded effectively to the pandemic. Nevertheless, some companies have proven to be more resilient than others, rapidly adapting their strategies to address both the challenges and the opportunities created by the crisis. Three major findings stood out: 1) roughly half of executives reported that the crisis exposed weaknesses in their companies’ strategic resilience, which is the extent to which an organization’s business model and competitive position prove resistant to disruption; 2) business-model innovation was by far the most important strategic lever in addressing the crisis, with three-quarters of respondents reporting such initiatives—including almost 90% of those who felt their company’s response to be very effective and 3) 60% of the executives expect these innovations to persist beyond the crisis, with more projects to come. Those who adopted new business models have tended to focus on 5 areas: 1) new digital experiences, products, and services in response to changes in customer behaviors and needs; 2) new partnerships, both within and outside of the industry; 3) supply-chain and operating-model adjustments to manage risk; 4) sales-model changes; and 5) faster product development through more rapid iteration. 4 ways to adapt to become more strategically resilient: 1) set bold aspirations; 2) develop scenarios, not forecasts; and 3) create a hedged portfolio of big moves; and 4) adapt your strategy dynamically. [151]

Current business world trends include: a) more flexibility, fewer meetings (in 2020, employees put in an average of two hours more a day at work than they did before the pandemic—and complained about how much more time they spent in meetings and answering emails; some researchers think managers’ anxiety that workers might be slacking drove the increase in check-ins. But the post-pandemic trend may be more flexibility over schedules and a decline in needless meetings) [152]; b) CFOs’ new focus is HR (finance directors are focusing more on people issues during the pandemic, and for good reason: investors, now more focused on social factors, want to see companies invest in worker training, education, and diversity; companies will be better positioned to innovate if they focus on retaining top talent); c) Why it matters (in an increasingly winner-takes-all business environment in which McKinsey research finds that up to 95% of economic profit is earned by the top 20% of companies, any organization that isn’t seeking new approaches is on borrowed time.); and d) build for the future (as leaders take action to reenergize their people and organizations, the most forward-looking see a larger opportunity; the chance to build on pandemic-related accomplishments and reexamine (or even reimagine) the organization’s identity, how it works, and how it grows. To better organize for a post-pandemic future, leaders should embrace 9 imperatives that collectively explain “who we are” as an organization, “how we operate,” and “how we grow”. Who we are: 1) take a stance on purpose; 2) sharpen your value agenda; 3) use culture as your “secret sauce”. How do we operate: 1) radically flatten structure; 2) treat talent as scarcer than capital; 3) turbocharge decision making. How do we grow: 1) take an eco-system perspective; 2) build data-rich tech platforms; and 3) accelerate organizational learning. [153]

Shorter planning cycles, higher cost-cutting targets, and hybrid working models are defining how organizations reimagine their sales, general, and administrative (SG&A) functions for 2021 and beyond. For many companies, the pandemic has been a catalyst for transformative changes to operating models, and once-temporary fixes are now becoming embedded into new ways of working. Moreover, given the pace and the scale of the changing nature of the pandemic’s effects (vaccines providing hope for some parts of the world, while new variants of the virus are increasing concerns for many) organizations are increasing the frequency of forecasting and shortening their planning cycles, building granular, driver-based budgets while preparing for multiple scenarios, allowing them to be more resilient and better manage volatility. 5 emerging trends are shaping the future of SG&A: 1) increasing volatility - more frequent, larger, and less predictable shocks that have larger consequences for company performance; 2) globally dispersed workforce - need to manage a global workforce dispersed across locations, work models, and contractual arrangements; 3) extreme digitization of work - shift of work from data manipulation to insight, decision-making, and rapid execution; 4) stakeholder capitalism - challenge for corporate performance to meet a wider range of goals than just traditional shareholder-value expectations; 5) changing talent needs - demand for talent to deliver new capabilities, such as agile and big-data skills, will significantly outstrip supply. Three out of five CFOs are increasing forecasting frequency, undertaking more regular scenario planning, and using the outcomes of these exercises to build driver-based budgets. Furthermore, companies need to ensure that people have the skills they need to get the most from digital, analytics, and automation solutions in the next normal. Doing so will improve resilience for long term, even if uncertainty persists for at least the early part of 2021.[154]

Most of the AEC companies have suffered backlog decline and revenue fall in 2020. For example, Fluor, a multinational construction and engineering firm, had revenue of $15.7B, down 9% compared to the year before. Backlog also fell, from $32B in 2019 to $26B. 2021 will be “a bridging year”. Its guidance for 2021 assumes increased opportunities for new awards in the second half of the year as post-pandemic capital spending improves. Fluor’s CEO explains: "Each pursuit must have the right scope, the right client, the right location, the right contract terms, the right size and importantly, the right execution team and resources. Our goal is to deliver predictable earnings and not chase top line growth. This will be especially apparent in our infrastructure pursuits going forward." [155] Other companies are also hopeful about more federal infrastructure funding.

Accelerated digital transformation is changing the industry from a highly complex, fragmented, and project-based industry to a more standardized, consolidated, integrated and product-based one. The bulk of short- and long-term pandemic-driven construction industry issues will be solved with technology. Based on research of successful companies, McKinsey suggests how firms can excel at software development; a) modernization of technology (balancing flexibility and consistency for developer tools is critical, data and security capabilities unlock the next level of performance, and cloud adoption requires a partnership between business and tech); b) the architecture and engineering practices that facilitate the work of high-performing talent (architecture and agile need to go together for impact, open source adoption matters—not just usage but contribution as well); and c) the importance of the development organization’s maturity to attracting and building talent (companies can attract top talent by emphasizing their real-world value proposition, while product management remains a stumbling block even for the best). [156]

b) Individuals

The pandemic accelerated existing trends in remote work, e-commerce, and automation, with up to 25% more workers than previously estimated potentially needing to switch occupations. The physical dimension of work is a new factor shaping the future of the work, brought to the fore by health and safety considerations. COVID-19 accelerated three trends that could persist to varying degrees after the pandemic with different implications for work: 1) hybrid remote work could continue ( 20 - 25 % of workers in advanced economies and about 10 % in emerging economies could WFH 3-5 days a week, mainly in the computer-based office work arena; that is 4-5 times the level before the pandemic and may reduce demand for mass transit, restaurants, and retail in urban centers); 2) the growth in share of e-commerce and the “delivery economy,” which was 2-5 times faster in 2020 than before the pandemic, is likely to continue; and 3) companies have enlisted automation and AI to cope with COVID 19 disruptions and may accelerate adoption in the years ahead, putting more robots in manufacturing plants and warehouses and adding self-service customer kiosks and service robots in customer interaction arenas. These trends will likely affect work arenas and countries in varying ways and raise new questions for cities. The four work arenas most affected by proximity account for about 70% of the workforce in the 6 advanced economies, whereas they amount to about 60% in China and just 40% in India, where more than half the workforce is engaged in outdoor work. Among advanced economies, too, there are variations. For example, computer-based office work is most prevalent in the UK and US, whereas Germany has the highest indoor production from its large manufacturing base. This results in different potentials for remote work and job displacement. Large cities may feel the impact, as remote work reduces demand for transportation, retail, and food service, and smaller cities that were declining before the pandemic may benefit. [157] Digital roles top the list of jobs on the rise in 2021. The hottest jobs for 2021 can all be done remotely, according to LinkedIn’s analysis of work trends in 15 countries. It predicts 150M new technology jobs in the next 5 years. 84% of employers plan to expand remote working, according to a World Economic Forum report. The digital revolution means a career change for many. [158]

The US Securities and Exchange Commission made history with a major new rule on human capital: companies are now required to include not only a description of a company’s “human capital resources,” but also “any human capital measures or objectives that management focuses on in managing the business.” And according to the rule this should include any measures that address three areas: “attraction, development, and retention of personnel." Leaders see more clearly than ever before the connection between the personal sustainability of their employees and the sustainable growth of the company. But we still need to widen our idea of sustainability. We need to leverage the connection between personal sustainability and planetary sustainability. [159] Employee engagement will be the new measure of a brand’s success. The companies should: 1) stop asking employees to tell you what you want to hear, and find out what they REALLY think; 2) give your values an assist with a unified and powerful brand narrative; and 3) let employees build a meaningful experience together. [160] As organizations evolve their operations for the next normal, their talent requirements are simultaneously evolving. While the importance of reskilling is almost unanimously acknowledged, with 89% of respondents telling us that they believe reskilling will be essential in the future to meet new needs, organizations are not clear on the best way to run such programs. Strategies range across creating new programs for the whole organization, taking a more targeted approach, or relaunching existing programs. However, 29% of respondents have yet to identify how they want to develop any program. [154] An essential responsibility of business leaders is to create a safe and respectful workplace. Psychological safety is important for not only individuals but also team performance. [76][77] Investing in leadership development across an organization—for all leadership positions—is an effective method for cultivating the combination of leadership behaviors that enhance psychological safety. The organizations should 1) go beyond one-off training programs and deploy an at-scale system of leadership development; 2) invest in leadership-development experiences that are emotional, sensory, and create aha moments; and 3) build mechanisms to make development a part of leaders’ day-to-day work. [76][77] Five ways to design a better mental-health future for a stressed-out workforce: 1) open the lines of communication; 2) understand and meet the need; 3) know the signs of distress; 4) make help available; and 5) embrace and encourage self-care. [71] Six ways to ensure that mental health benefits serve a company and its people: 1) measure behavioral health; 2) make behavioral health a transparent priority; 3) hold leaders accountable for making progress on employee mental health; 4) explore a range of new services, including online interventions; 5) work closely with your health-benefits administrator to ensure adequate behavioral health coverage; and 6) consider on-site mental health services. [161]

Self-reflection and self-improvement are still trending. When hiring and promoting cognitive ability matters 5 times more than emotional intelligence. Research showed that those with high cognitive ability generated more than $195,000 in annual revenue. Those with moderate cognitive ability generated $159,000. And those with low cognitive ability only generated $109,000. Emotional intelligence had almost no impact on results. People with high emotional intelligence and low cognitive ability didn't perform better than those with low emotional intelligence and low cognitive ability. [162] A shortage of qualified professionals is forcing hedge funds to train teenagers as billionaires flock to Singapore. [163] Word choice and tone matters in success at work (especially while working remotely). Research shows that about 7% of a message's impact to words, with the rest coming from vocal cues (38%) and non-verbal communication (55%). Researchers suggest: 1) write confidently; 2) say "sorry" less’ 3) consider your tone; 4) don't be toxic; 5) turn around negative phrasing; 6) don't be passive-aggressive; and 7) watch your jargon. [164] Effective leaders need to handle 7 challenges: 1) develop a simple plan for your complex strategy; 2) walk the talk to create a winning company culture; 3) build teams that work together to drive strategy; 4) provide leadership to drive a transformation; 5) really listen for danger signals and bad news; 6) avoid predictable mistakes in handling a crisis; and 7) manage the conflicting demands of leadership. [165] To retain remote workers emotionally intelligent leaders do the following 1) they don’t assume everything’s okay; 2) they opt for screen time; 3) they increase personal contact; 4) they set up supportive networks for staff; and 5) they host virtual celebrations.[166] According to hostage negotiators, to argue productively (online and off) one should first convince the other party that they respect them (whether or not they actually do). This could be done with a well-timed compliment, or just by avoiding name calling or other humiliation tactics. Also, many of our views are as much about asserting our belonging to a certain group as they are about the actual content of our opinions. If you want to change minds, your "goal should be to prise the disputed opinion or action away from the person's sense of self, to lower the identity stakes. The skillful disagreer finds a way of helping their adversary conclude that they can say or do something different, and still be themselves. This might involve reassuring a climate change skeptic that you too care about jobs, or telling an anti-vaxxer that wanting to educate yourself on medical matters is understandable. It may also be useful to frame the disagreement as an information gap, i.e., the other party's belief is reasonable given what they knew at the time. You're offering new information, not asking them to repudiate their core values. [167] To remove emotion from your decision-making, first identify the emotions driving your actions, and then implement the cascade of consequence. For each decision you make, run through the following four questions: What will happen in the next 30, 60, and 90 days if I take this action? How will this action (or inaction) affect our cash flow? How will this action (or inaction) affect our employees? How will this action (or inaction) affect our customers/clients? [126] The best leaders promote people who lack confidence. [168] To hire a good leader, ask these three questions: First, she asks the candidates to share the three adjectives their peers would use to describe them. Then, she asks candidates how their managers would describe them in three adjectives. Finally, she asks candidates to share the three adjectives their former colleagues would use to describe them. "If you're hiring for integrity, you don't want people to manage up differently than they manage down, and you want people to work just as well with their peers and superiors as they do with their subordinates." [169] Build a strong personal brand. [170] The best leaders: 1) remember that humility trumps arrogance; 2) go out of your way to soak up the wisdom of others; 3) practice patience. then practice it some more; and 4) always choose integrity, over and over and over. [171] Good leaders always establish high expectations. [172] [173]

c) Sustainability; Green future – opportunity to address climate change

As the world looks beyond the COVID-19 pandemic, a consensus is emerging: certain measures to curb the growth of greenhouse-gas emissions will be central to global economic recovery. Natural climate solutions (NCS), conservation, restoration, and land-management actions that increase carbon storage and avoid greenhouse-gas emissions, offer a way to address both climate change and nature loss and to increase resilience as the climate changes [174] The COVID-19 pandemic has given everyone a front-row seat to catastrophic risk. It has impacted the world on a scale beyond living memory. Like a pandemic, climate change acts as a threat multiplier, undermining economic security, political stability, and social welfare. Both pandemics and climate change carry deep uncertainty as to when and how they will unfold and how much damage they will exact. As communities begin to build resilience to the accelerating threat of climate change, the successes and failures of the world’s response to COVID-19 can help illuminate the way. Just as our society transformed itself to contain the coronavirus, so too will we have to adapt our thinking and approaches in the face of escalating climate risk. (Alice Hill) [175]

Global Energy Perspective 2021: A) as the world rapidly exhausts its carbon budget, there is growing momentum toward decarbonization of the global economy. Policy makers, business leaders, investors, and consumers are showing increasing levels of ambition to reshape energy systems. Yet the CO2 emissions projected in our Reference Case and even in our Accelerated Transition case remain far from the 1.5°C Pathway. This shows that to further reduce emissions, significant additional action is needed, and more ambitious initiatives and policy measures must be specified and implemented. B) Fundamental trends shaping the energy transition in the coming decade remain in place and appear resilient to the COVID-19 crisis. Renewable resources continue to decline in cost. When combined with battery technology, they become cost competitive with fossil-fuel-based power generation in many parts of the world. Similarly, electric vehicles (EVs) are likely to become the most economic choice in the next 5 years in many parts of the world. In the case of hydrogen, a further acceleration in ramp-up plans and commitments is likely. C) Fossil fuels continue to play an important role in the energy system. Fossil fuels will remain relevant despite a peak in oil demand in the late 2020s and a peak in gas demand in the mid-2030s. Yet even if oil and gas demand returns to pre-COVID-19 levels in a few years, it will not return to its pre-COVID-19 growth path. Key insights: 1) Long-term demand impact of COVID-19 is modest; 2) Power wins and hydrogen changes the landscape (electricity demand grows significantly through direct electrification and the uptake of green hydrogen; Renewables quickly ramp up and account for half of power generation by 2035); 3) Peaks in fossil-fuel demand continue to occur earlier (peaks in demand for hydrocarbons occur earlier than projected (oil peaks in 2029 and gas in 2037); Yet fossil fuels continue to play a major role in the energy system by 2050, driven by growth in areas such as chemicals and aviation); 4) Change is too slow to reach the 1.5°C Pathway (despite rapid shifts, GHG emissions decline by only around 25% by 2050, implying a 3.5°C pathway; Moving to the 1.5°C Pathway requires stronger ambitions and accelerated implementation at a global scale) and 5) Investment flows remain stable over the next 15 years (renewables in the energy-investment mix grow at the expense of conventional power generation, but fossil fuels maintain a large share; Several tipping points lie ahead in the energy transition; tracking signposts will help business leaders assess the direction and pace of change in the years to come). [176] Oil and gas companies are navigating the energy transition. [177]

Increased environmental awareness and sustainability remain globally. One reason are various zero-emission mandates, such as Environmental, Social and Governance (ESG) reporting obligations. Investors and financing banks, as well as certain users of commercial buildings, in particular listed companies, are now subject to ESG reporting making green buildings again a hot topic. The achievement of a balanced economic, social and environmental development is recognized as one of the major challenges the building industry is facing today. What is less clear is how building owners and developers can seize the opportunities offered by zero-emissions directives and disruptive energy technologies to generate business opportunities and value for their stakeholders. Experts suggest that these kinds of initiatives can lead to substantial revenues for every side of partnership in the world of RE (e.g., capital project, additional project, increase profitability and decrease operational costs – bringing enormous value). Specific company can differentiate itself as the best provider from the competitors. This leads to retention which is better for sustainability. ESG allows companies to shine. [178] Various countries and companies continue to pledge net-zero emissions by a certain year, renewables continue to rise, and various sustainability business deals are published. For example, Walmart, the largest retailer in the US, has committed to having zero waste in its own operations by 2025. In 2019, it was able to divert 80% of its unsold products, packaging and other operational materials from landfills and incineration. Additionally, Walmart to spend $350B on local sourcing, work to pinpoint barriers to reshoring. [179] [180] 448MW French offshore wind farm is underway. [181] Kraft Heinz pilots recycled plastic packaging for roofs. The company has several sustainability goals, including making 100% recyclable, reusable or compostable packaging by 2025. This pilot project will be a lasting proof of concept for using recycled plastic as roofing material in industrial buildings. As of 2018, 46% of recycled plastic film ends up as this kind of lumber, according to a report prepared for the American Chemistry Foundation. The biggest problem left unsolved may be how to get consumers to change their behavior and recycle more flexible plastic — something that currently happens only at drop-off bins placed outside retailers.  [182] Beyond Meat becomes McDonald's 'preferred supplier' for McPlant. [183]

According to Gartner, supply chain professionals increasingly see a financial benefit in sustainability, and a majority plan to invest in waste reduction, ethical sourcing, water-efficiency improvements and carbon emission reduction over the next 18 months. On the other hand, an MIT research found that about 35% of companies still lack formal corporate supply chain sustainability goals, while another 49% of respondents said their companies did have such goals. "The irony is that some sustainable practices can, in fact, help companies through tough times. The biggest opportunity is to identify sustainable projects that will save money and add to the bottom line," Kevin Smith, a former SVP of supply chain and sustainability at CVS Caremark Corporation [180] Greenhouse gas emissions, and their tracking and eventual reduction, is a major challenge for supply chains. Many organizations are just capturing GHG emissions from their own operations, but the most significant impacts are typically in the supply chain. The main burden of this challenge falls on procurement leaders. Their task is to utilize responsible-sourcing activities to identify and correct poor practices. But they must also go a step further and encourage suppliers to limit environmental impacts. Starting at the earliest stage of the supplier life cycle, organizations should reflect their requirements in the bidding process, supplier selection, and onboarding processes for new and prospective suppliers. For established suppliers, responsible-sourcing requirements should be embedded into different areas, such as contracting, segmentation, performance management and the supplier collaboration agenda. To design a responsible-sourcing strategy, procurement leaders should ask 5 questions: 1) What should we focus on? 2) How far does our program reach? 3) Which suppliers should be included? 4) How will we make this relevant? and 5) How do we leverage external partners? Procurement organizations can positively amplify their impact by collaborating with third-party organizations. There are four types of third-party, responsible-sourcing organizations: nongovernmental organizations, membership organizations, category-focused responsible-sourcing groups and technology vendors. [184] Hershey threatens to suspend non-compliant suppliers in effort to cut deforestation. [185] FedEx to convert parcel fleet to EVs by 2040, and is eyeing a carbon neutral future. UPS committed to alternative fuels supplying 40% of its ground needs by 2025. [186] Mondelez has pledged to reduce its use of virgin plastic in rigid plastic packaging by at least 25%, or by 5% in its overall plastic packaging portfolio by 2025. [187]

See December Category Summary

References

[76] McKinsey & Company Featured Insights, “Five Fifty: Is it safe? – Desktop”. (accessed April 15, 2021)
[126] N. Sonnenberg, “How to Remove Emotion From Your Decision-Making”, Inc.com, May 19, 2020. (accessed May 16, 2021)
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[155] “Fluor revenue fell 9% in 2020”, Construction Dive. (accessed April 15, 2021)
[158] “Digital roles top the list of jobs on the rise in 2021”, World Economic Forum. (accessed May 16, 2021)
[159] Arianna Huffington, “The S.E.C. Makes History With a Major New Rule on Human Capital”, On My Mind. (accessed April 29, 2021)
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Monthly Summary: 
AEC and Pandemic: Response and Impact - March 2021 Update