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Renewal, Not Return: The COVID-19 leadership challenge (By Jim Hagemann Snabe)

By Jim Hagemann Snabe, Co-Founder Dreams and Details Academy

After months of crisis management and country-specific efforts to save lives, it is time to ask ourselves: How does the COVID-19 crisis change the way our world functions? Now is the time to decide how we want to shape the future of globalization, digitalization, and our planet. #RenewalNotReturn

The year 1989 plays a pivotal role in my understanding of the present. In many ways, 1989 was an inflection point – a critical moment that shaped our modern world. But why?

1989 was the year that the Berlin Wall fell. As the Cold War came to a close, borders were opening, and as a consequence globalization and global trade accelerated.

1989 was also the year that Tim Berners-Lee, a researcher at the famous CERN lab in Geneva, formulated his ideas for a “World Wide Web” of information and outlined the technologies that would be necessary to realize it. This marked the birth of the Internet as we know it.

Finally, 1989 was the year when a young U.S. Senator from Tennessee gave his first lecture about “global warming,” as it was called at the time. The young senator’s name was Al Gore Jr., and his lecture would one day become world-famous under the title “An Inconvenient Truth.”

In summary, one can say that 1989 marked the beginning of globalization, digitalization, and climate action. These three fundamental forces have shaped the world we know. They’ve defined the environment that all leaders – in business as well as in politics – must relate to today and transform.

Enter the Coronavirus

30 years after the inflection point of 1989, we’ve come to face one of the biggest pandemics in a century. Everything seemed to change overnight. From nation to nation, hospitals were overcrowding, borders were closing, social distancing became a way of living, and supply chains were being put under strain.

Business and political leaders everywhere switched to fire-fighting mode. My personal experiences in Davos illustrates the change pretty well: At the World Economic Forum in January 2020, climate action had finally arrived where it belongs: at the top of the international agenda, right there alongside geopolitics and digitalization. Nothing symbolized this more than Greta Thunberg’s prominent speech at the meeting. There was a strong consensus in the global community around the urgency of climate action.

Within a few weeks after my return from the meeting, however, the COVID-19 pandemic eclipsed climate change (as well as all other Davos topics) as humanity’s top agenda item. Public health, social distancing and the reopening of the economy became top questions of international debate. 

This shift raises big questions: Does the pandemic mark the beginning of a new era in political and economic history? Has COVID-19 superseded globalization, digitalization, and climate action as the fundamental force of our time? Are business and economic leaders confronting a completely changed environment and set of priorities going forward?

Setbacks and progress

Looking at the pandemic more closely, it already has impacted globalization, digitalization, and climate action in not just one, but in many ways.

On the negative side, the pandemic has brought on a quite drastic contraction of the global economy. Leading experts at the World Economic Forum estimate that every month of lockdown diminished the global growth rate by approximately 2 percentage points. Overall, the growth expectation for 2020 has fallen from roughly +3 percent to -5 percent and unemployment rates have spiked around the world. In many places, for example in the U.S., jobs disappeared faster than at any other time in modern history.

If we look at COVID-19’s impact on global trade, the IMF expects an even sharper slump of about -12 percent compared to 2019. A worrisome development, given that trade has been lifting millions of people in developing nations out of poverty and has been increasing living standards in the wealthier nations for decades.

However, there have also been some hopeful moments throughout the pandemic. For one, it didn’t take the world’s governments long to understand the economic implications of COVID-19 and to take countermeasures. Only weeks into the crisis, countries around the globe had made a broad range of stimulus commitments – from government spending and loan guarantees to tax breaks and money creation by central banks. By the end of March 2020, these commitments totaled $7 trillion – that’s a “7” with twelve zeros! The message was clear: We’re ready to do whatever it takes to stabilize and recover the economy.

Another glimpse of hope: Global carbon emissions have been falling as a consequence of the global lockdown. For the year 2020, CO2 emissions are estimated to come in 8 percent lower than in 2019. Only a few months ago, few would have thought that such a drastic decrease was even possible.

To be sure, shutting down our economies is not a viable way to save the climate. But the sharp drop in emissions in 2020 has certainly opened our eyes: If we want to meet the key target of the Paris Agreement – limiting the global temperature increase to 1.5°C above pre-industrial levels – the world will have to decrease carbon emissions by 7.6% every year from now until 2030. It’s a gigantic task that requires bold action – there’s no time to waste!

Finally, COVID-19 has also helped us better understand the tremendous benefits we’re reaping from digitalization – and the even greater potential digitalization offers us going forward. In April 2020, tens of millions of white-collar employees worldwide were working from home, while the number of commercial flights had dropped 75 percent compared to January.  “Business as usual” was now happening in a virtual setting.

A decade ago – when Cloud solutions and computing were less developed, bandwidth more limited, and mobile devices less ubiquitous – the lockdown would have brought business life to a near halt. In 2020, however, this didn’t happen: As social distancing became the norm, virtual collaboration thrived. In mid-March, virtual meetings held on “Microsoft Teams” alone reached a record level of over 900 million minutes per day. Two weeks later, that record had already tripled – with 2.7 billion minutes of Teams meetings on March 31.

When we look at the blue-collar work environment, digitalization proved its great value, too. During the lockdown, many factories had to reduce output or even shut down altogether to protect the health of workers. However, production sites with a strong digital backbone proved much more resilient. Siemens’ state-of-the-art digital factory in Amberg, Germany, for instance, continued production throughout the crisis – with zero downtime.

What conclusions should leaders draw from COVID-19’s diverse set of impacts? In my eyes, the crisis driven by the virus outbreak is a catalyst. Much faster than we may have thought, it’s taking us to a new inflection point in globalization, digitalization, and climate action. The decisions we make today matter. They matter because they can put us on the right – or the wrong – path for many years to come. 

The Future of Globalization

Regarding globalization, COVID-19 has brought questions to a head that have already accompanied us for quite some time: Shall we respond to the tide of nationalism, protectionism, trade wars, and now also COVID-19 with a reversal of globalization? Or shall we respond with a new version of globalization that emphasizes resilience?

If anything, COVID-19 has demonstrated that a reversal of globalization would come at huge economic costs for all countries – lost growth, lost jobs, lower living standards. As I like to joke, my home country Denmark will never become a competitive supplier of high-quality bananas. This kind of product is better imported from elsewhere, and the same applies for millions of other commodities.

In other words, our response to COVID-19 should not be a reversal of globalization and global trade. Instead we need to develop global supply chains with greater resilience.

To achieve that, global supply chains will have to become more diverse. This means: Multi-sourcing instead of single sourcing. In addition to having suppliers far away overseas, companies will have to cultivate relationships with suppliers closer to home and in neighboring countries. Supply chains and economies will become more crisis-proof this way, while still remaining competitive. There’s a positive secondary effect to this: As diversification increases, more countries – not just a few preferred hubs – will be able to participate in global trade and reap its benefits.

The Future of Climate Action

Regarding the climate, COVID-19 has put us on the spot as well. Will the world’s leaders postpone climate action and focus on restoring the economy the way it was before the crisis? Or will we accelerate climate action in the wake of COVID-19?

At the Davos meeting in January, the consensus was clearly moving toward acceleration. The unsolved challenge was how to secure the tremendous investments necessary for accelerating the decarbonization of our economies.

COVID-19 is now showing us the way out of this dilemma. The money is there – trillions of it, in fact! Here I’m referring to the stimulus and recovery funds. We now have to make sure that those funds are actually used in ways that make our economies, companies, and organizations more sustainable – and accelerate a decarbonized future in all supply chains.

The Future of Digitalization

Lastly, COVID-19 has had a pretty clear effect with regard to digitalization. Within a matter of months, the Fourth Industrial Revolution has jumped ahead by what normally would have taken another two to five years.

But this acceleration also means we have to address the key dilemma of the digital revolution without further delay: Will responsible technologies propel digitalization’s future? Or will we further accelerate down the path of irresponsible uses of technology?

Responsible use means that technology should make a positive contribution to society’s larger goals, enhance the lives of its users, safeguard privacy, create equal opportunities for all, and respect and enhance human rights. It’s about keeping technology’s benefit for humans at the center at all times.

The worldwide debate about coronavirus warning apps is a good example here. Some coronavirus warning apps rely on centralized data storage. They allow deep insights into users’ private lives and their mechanisms and results are untransparent.

Other coronavirus apps, by contrast, rely on decentralized, privatized data that is stored only locally, and their mechanisms are open for review. Such apps show that it’s possible to do both: leverage technology to contain the pandemic while safeguarding privacy.

Since COVID-19 has accelerated so many aspects of digitalization, we’ll have to take many more far-reaching decisions regarding our use of digital technologies. Now is the right time to agree on and implement responsible principles. If we miss this moment, it will be much more difficult to turn things around later.

Tech leaders can’t wait for governments to provide all the answers and regulations; the speed of change is just too high! But we can act every day on the idea of responsible use of technology within our own areas of work. This is also the idea at the heart of the “Tech for Life” movement, which I co-founded with Lars Thinggaard.

A generational opportunity, calling for a new type of leadership

If we add all of this up, the conclusion is rather clear. Like in 1989, we are once again at a dramatic inflection point in three significant dimensions: globalization, digitalization, and climate. And we are asked to lead the transformation in all three dimensions in a responsible way.

How does this impact our understanding of leadership?

Even before COVID-19, I argued that traditional leadership models have become thoroughly inadequate. These models focus on developing detailed business plans and executing them. In a world where change was linear and rather slow, this may have worked.

Today, however, we’re in a world where change is exponential and where the future is less and less predictable. Execution on plans won’t be enough to shape successful organizations and build a better future. COVID-19 is the perfect example: No plan in the world was able to precisely forecast the pandemic, let alone map out its long-term course and consequences.

The companies that will come out of COVID-19 stronger are the companies that sense the changes underway and respond faster than competition. They dare to deviate from the plan and turn a crisis into an opportunity.

The pandemic thus drives home my point that we need a more modern and flexible understanding of leadership. Mikael Trolle and I call this leadership model “Dreams & Details.”

Dreams & Details means: Leaders need to articulate a meaningful and motivating dream to inspire people. And they need to pay attention to the details that matter the most for realizing the dream. These details are typically areas where the biggest changes are needed – the areas where new capabilities are essential in order to unlock an organization’s future success.

To build companies that sense and respond faster, we have to empower the people we work with. If we dare to do this, we will unleash human potential and enable our colleagues to find the best path to realizing the dream.

Rather than glorifying the ability to plan continuous improvements, we should start celebrating our ability to reinvent organizations for a better future – a sustainable future where digital tools enhance human capacity and create opportunities for all.

If we take one step back from the daily news cycle, we may realize that COVID-19 is not just some crisis we have to overcome – it’s, as UN Secretary-General António Guterres says so aptly, a generational opportunity to build a more equal and sustainable world.” 

As a businessman, I would add: It’s also a great opportunity to reinvent our organizations and prepare them for success in a new age. Rather than rebuilding the companies and economies we had before COVID-19, we should leap ahead into a better future. The motto is: Renewal, not Return.