On the 28th of April, we got together for a webinar with our friends at Oslo Business Forum and Admincontrol to figure out how to navigate business strategy in this turbulent environment. At the session, the economist and author Kjell A Nordström outlined the emerging risks leaders should be aware of and gave his insights on how to work strategically going forward.
If you missed the session, you can listen to Kjell’s keynote on Spotify or watch the full recording:
Operational Environment for Businesses Has Drastically Changed
“Maybe it was all an exception?”
Kjell began his keynote by throwing a question in the air that whether the international growth and globalization of the past 70 years was actually an exception; something we can’t get back to. This prosperous period of time, according to Kjell, has been possible mainly because of trust. “Economic development in the end boils down to trust; no trust, no business.”
Since Russia initiated the war against Ukraine, trust has taken a hit and political risk has come back into the picture when thinking about business strategy. “This is a subject area that basically disappeared after the implosion of the Soviet Union in the 90s.”
Kjell then reminded us that especially in business schools, we are all taught to work on strategy according to industries and businesses. “That’s all fine given that the phase of development in the surrounding world is within the frame.”
According to Kjell, there is another layer of strategic thinking: basic supply and demand conditions. This, for example, requires leaders to consider the appearing general-purpose technologies—the technologies that can affect an entire economy. “Every 100-200 we’ve seen the birth of a new general-purpose technology. Today, it has been argued that there are actually 25-30 different general-purpose technologies at work at the same time.”
In addition to those massive new technologies and the changes they bring, we have been experiencing a pandemic for the past two years and we also have a war in the middle of Europe. This obviously requires new strategic thinking and ways of working.
The Three Levels of Consequences
The rising speed of new general-purpose technologies, the pandemic, and the war have naturally enormous consequences. Kjell explored these on three different levels.
Increase in the Use of Technology
This is pretty self-explanatory. Since the pandemic, we’ve seen the development of remote everything pick up and the use of different digital technologies has massively increased.
“The Donut City”
“The donut city” is basically a city with a hole in the middle. Kjell explained that we are still seeing the growth continue in cities but at the same time the central areas of the major cities are decreasing in attractiveness.
Kjell implied that we can guess this is due to phenomena such as less office space and increasing living costs. However, most likely in the next 1-3 years we will get some more information about what is happening in the cities. This development is immensely important for business to follow as 65% of all the people in the world are already living in cities.
New World Order
“There’s no reason today to believe that we will ever go back to what we had two years ago. A decent hypothesis is that we are moving into multipolarity: a world where the empires come back.”
Kjell explained that an empire could be thought of as an ideological umbrella under which the empires gather friends that have the same ideological position as themselves. “It’s a loosely defined network of partners.”
According to Kjell, Russia and its friends are in the process of becoming an empire, China is a draft to an empire, and Europe and its friends are also becoming empires. “We will probably do business under our own umbrella. Of course we will interact with other parts of the world but less intensively.”
Reorganization of Work
All of these three consequences; the increase in the use of technology, our changing cities, and the new world order, position us to reinvent the way we organize work. “I would like to underline how unusual and unique this is that we actually create new organizational forms.”
Kjell explained that until now we have basically had three different ways of organizing human work: the functional organization with one boss, the multidivisional organization with several divisions within a larger organization, and the matrix structure where teams report to multiple leaders.
Now, according to Kjell, we see the emergence of a fourth model: heterarchy. A heterarchy is an organizational system where the elements are unranked or where they possess the potential to be ranked in different ways. Kjell further explained that in heterarchy everything is temporary. It basically consists of a mix of long, short, big, and small projects. Also, in a heterarchy people don’t necessarily work together in the same room.
However, the most crucial factor that determines how we reorganize our work going forward is climate change. According to Kjell, it took us about 200 years to create most of the wealth and welfare we see today. Now, we need to redo all of it in 20-25 years in order to survive. “This means that whether we like it or not, we probably have the greatest industrial tsunami in human history ahead of us.”
Kjell highlighted that some industries and countries have taken a lead in this transformation—which is smart. “Sustainability is the competitive advantage of the future.”
Who Will Thrive in the Future?
In terms of companies as a whole, Kjell explained that during the pandemic we saw that the Nordic countries outperformed many of their European counterparts. The five Nordic countries only lost less than 3% of the GDP, while the other EU countries lost 12%. “We can conclude that the businesses here in the Nordics were able to manouver and adapt to this new uncertainty better than most other countries in this part of the world.” Why? Kjell argues that one of the reasons is that we are a high-trust environment with a huge installed technological base. “High trust and high technology enables you to move very fast.”
When talking about what type of leaders thrive in the future, Kjell first explained that looking back, we can clearly see a certain emphasis in the backgrounds of different waves of industrial leaders. First there was a generation of leaders with a military or a legal background. The second generation of industrial leaders was almost without exception all engineers. And about 30-40 years ago, we saw the first generation of people with a business background emerge as the ultimate leaders of big organizations.
Going forward, Kjell believes that successful leaders need to be above all, great communicators and storytellers. “You have to be a master of the words. Explain, put things into context, communicate, and be able to understand. And this time, it’s two-way communication, not one-way communication.”
As we no longer work in the same space, people do not self-coordinate. “This requires bodyless leadership characterized by an articulated leadership. Articulated in the sense that we can not take anything for granted. We have to be explicit.”
These great communicators will not necessarily emerge from business schools but rather from different, maybe also a bit surprising backgrounds. “I think we see a little bit of that playing out in the unfortunate case of Ukraine. Think about it: President Zelensky is an actor.”
Visualization of Kjell’s keynote by Linda Saukko-Rauta