LEADERSHIP INSIGHTS

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Political and economic turmoil prevailed in 2019 and looks likely to continue into 2020 as tensions in the Gulf and relations between the USA and China cause uncertainty. However, opportunities remain for resilient and committed businesses.
 
Members of the Criticaleye community give their thoughts on the year ahead.
 
 
Sino-US Conflict to Dominate
 
Guy Foster, Head of Research at Brewin Dolphin, sees a shift in the trade war as the US enters an election year
 
China is the biggest unknown when looking at global growth this year, it’s much more significant than it was 10 years ago. For a long time, every economic cycle was dominated by the US, but now its contribution to global growth is nearly matched by China.
 
I expect the China-US trade war to play a large part in how 2020 pans out. In the US, this is having some effect on manufacturing in the rust-belt states. If that causes a big increase in costs and potentially some reduction in corporate demand, that’s an additional factor that could cause recession. However, I think there will be some resolution as President Donald Trump seeks re-election, so I don’t really foresee anything triggering that this year.
 
I don’t expect to see super-fast growth in the Eurozone but something around the 1 to 1.5 percent mark – there are good signs of recovery throughout the region. Beyond that, geopolitical events surrounding the Persian Gulf have the power to impact the global economy via changes in the oil price which remains a key cost across industries and geographies. With this in mind the new year’s escalation of antagonism between the US and Iran is worrisome. The characters involved are inherently unpredictable so nobody can rule out further escalation and a damaging impact on global demand.
 
For the UK, negotiating the next stage of Brexit will be the big story of 2020.
 

Business as Usual in a Chaotic World
 
Mary Jo Jacobi, NED at Weir Group and a Board Mentor at Criticaleye, has confidence in business but warns about potential social unrest
 
In the developed world we’ve been in a largely chaotic state for a few years and business has just got on with it. Normally, consistency and continuity in public policy are conditions that businesses want, but today there are so many variables – Brexit or President Donald Trump, for example – that they have learnt to persevere and even thrive through the chaos.
 
Overall, the business climate is pretty good: inflation is low, as are mortgage rates, and there’s been a long period of inventory adjustment which is coming to an end that means companies are going to start buying again. The US is still experiencing its longest economic expansion and its longest bull market in history, and right now there is nothing forecast that’s going to stop that.
 
One area to watch is the emergence of what I would call ‘middle class uprisings’. These are where protests on a single issue, such as in Hong Kong, morph into wider discontent. We’re seeing it in France with the Gilets Jaunes, as well as a number of instances in South America, including Chile and Ecuador. There’s a lot of social discontent and social uncertainty, where the old norms are going or have gone, but because people don’t know what the new norms will be it frightens them.
 
 
Time for Leadership Rather Than Control
 
Matthew Blagg, CEO of Criticaleye, says business leaders will need to focus on purpose and stakeholders in 2020
 
I think that whether you’re a CEO running a single market company or a global conglomerate, 2020 is going to expose any fault lines that you have. Alignment on purpose with core stakeholders will increasingly become key to creating long-term value.
 
Leaders will continue to be brutally exposed as the pace of doing business will only increase. In such an environment, it’s vital leaders empower others rather than control and manage. With such change, you cannot just be internally focused – be curious and look for insight from the far corners of both your company and the market.
 
Finally, CEOs need to remember that they cast huge shadows. The decisions you take will affect a large number of people, so you must be brave, but most importantly make sure you think about the medium to long-term impact of any decision you make.
 
 
Vietnam Raising the Temperature in Asia
 
Richard Eu, Chair of Eu Yan Sang International Ltd and a Board Mentor at Criticaleye, sees new business opportunities emerging in South East Asia with China holding its own
 
In ASEAN, the hot country is Vietnam. There’s a lot of interest there and I think this will increase. The economy has been doing very well for at least a year, mainly through the fallout from the US-China trade dispute, with companies relocating from China for lower costs, and it is still going strong. I don’t see it slowing down. Thailand is benefitting from manufacturing companies relocating too, although with its thriving tourism sector, the currency is becoming too strong. That may be a deterrent for foreign investment. I see continuing growth in Indonesia and the Philippines as they have large domestic markets. Malaysia faces some political uncertainty whilst Singapore, being more dependent on external trade, has been facing a slowdown and the outlook there is still hazy.
 
China itself will be ok this year. There are issues with the trade war with the US, of course, but I think the uncertainty with that rests more on the US side. The economic course being chartered by President Xi Jinping depends a lot on the domestic economy, not on foreign investment. He is a smart and strong leader and there won’t be many changes at the top, so China will be relatively steady.
 
From a macro point of view, business leaders are looking for benign conditions for trade to continue. They don’t want a lot of conflict or regional disputes so it’s only really Hong Kong where there are concerns. However, the business community there is fairly certain that the unrest will eventually subside.
 
Generally, I think we’re going to see some reasonable growth, so CEOs don’t have too much to worry about as far as the region is concerned.
 
 
Urgency on Sustainability
 
Samantha Barber, NED at electric utility company Iberdrola SA and a Board Mentor at Criticaleye, hopes for quicker action around sustainability issues
 
There is a greater sense of urgency around sustainability and the key driver for corporate agendas is being more efficient and effective. It’s about using energy differently within your business, looking at how you’re using natural resources in an alternative way or it’s about developing innovation to do things differently.
 
To make progressive changes in the short term, sectors need to identify any quick wins that can be accelerated. Electrification of fleet vehicles for companies is an example – it’s a change for the better that can be done relatively quickly.
 
I am quite optimistic for 2020. In my part of the corporate world there is definitely no shortage of commitment, enthusiasm and understanding of the urgency around sustainability and climate change, but the political environment in which we are operating has not helped. We’ve had a good number of years of political uncertainty, where business as usual has not been there in government which makes it quite challenging.
 
There should be greater collaboration and combining of efforts and an understanding that it’s going to take a huge collective effort to stop the level at which carbon, in particular, is damaging the environment.
 
 
Testing Times for Technology
 
Mark Palmer, CEO at Gobeyond Partners, believes that a combination of better use of technology while keeping the human touch will bring success for businesses in 2020
 
Our research on the topic of customer experience and digital transformation found that 62 percent of respondents expressed concern about the impact of technological change on their business.  
 
Structurally, many businesses we see are still not set up to take full advantage of new technologies. Leaders need to reimagine how their businesses are organised, rather than simply add another layer to the challenges.
 
It’s not just about technology. I think that the most successful organisations in 2020 will be those looking at their business through a more human lens: taking an end-to-end view of the customer journey; thinking about how digital technologies can augment – rather than replace – human interactions; and, importantly, engaging colleagues on their change journeys.
 
 
Driving Growth in a Competitive Sector
 
Naomi Gillies, Partner & Director of Central Retail at Waitrose, believes retailers need to be clear about what sets them apart for their customers
 
The starting point to driving growth is around differentiation against your competitor set, so be crystal clear about your overall strategy, your target customers and where you’re gaining value.
 
Retailers will need to identify their most valuable customers and work out what’s most important to them – whether it’s value or quality of products or service differentiation – and really understand where those customers are prepared to pay for that. Once you know how you’re going to differentiate, you can work out where you’re going to offer unique value.
 
There is an interesting debate being had about customer loyalty in the market and we’re definitely having that conversation around how you drive loyalty to a brand in a commodity sector, and what do customers most value moving forward? Are you better off investing in quality and ethics or investing in loyalty? And where are your customers going to give you more return?
 
For us, the value placed on choice of range and choice of products is probably more important to them than receiving a free coffee when they come into our shops.


David Hobbs, Senior Editor, Criticaleye

Next week’s Community Update will review the results of Criticaleye’s NED Research for 2020.







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