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Building a customer-centric B2B organization

Customer experience (CX) is an increasingly important strategic topic in the boardrooms of B2B companies in China and throughout the world. Despite the rapid development of the previous decades, the “growth first” principle of Chinese enterprises sometimes implies customer experience can be sacrificed. But CX leaders, globally and within China, drive higher growth, lower cost, and superior customer satisfaction. In times of crisis, they achieve three-times-higher shareholder returns 1 than laggards.

Start with a vision

A successful transformation starts from the top. Cases within and outside China confirm that the CEO must be in charge to continuously push and unify the organization.

The Chinese steel industry has taken an upturn amid the country’s overcapacity-reduction program, and companies have been enjoying robust price and volume increases. In this article, we consider one Chinese steel manufacturer whose CEO set a clear vision to build a customer-centric organization in order to gain a competitive edge and to keep the organization healthy through future downturns. The company took a series of steps to systematically and holistically shift the entire organization toward customer-centricity.

More: https://www.mckinsey.com/business-functions/

By Hai Ye and Will Enger, Open interactive popup; Case study: Building a customer-centric B2B organization; Open interactive popup, A Chinese steel manufacturer systematically transformed its operations to be customer-centric—and in the process, improved its bottom line.

About the authors: Hai Ye and Will Enger are partners in McKinsey’s Hong Kong office.

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Three actions CEOs can take to get value from cloud computing

Leaders need to accelerate their journey to the cloud in order to digitize quickly and effectively in the wake of COVID-19.

If you are a CEO, you already know what the cloud can do for your business in a post-COVID-19 world. You’ve probably even told your organization to get you there already. So why is your move to the cloud 1 coming along so slowly, even though you may have been talking about it for years? It might be because you and your management team have yet to take a sufficiently active role, or provide the air cover your chief information officer (CIO) and chief technology officer (CTO) need.

CIOs and CTOs are on the front foot right now thanks to their crucial role during the COVID-19 pandemic. That makes this a good moment to further elevate top-team support for the cloud enablement needed to accelerate digital strategy, the digitization of the company, its channels of distribution, and its supply chains—all of which already needed to be moving more quickly than they were.

The CEO’s role is crucial because no one else can broker across the multiple parties involved, which include the CIO, CTO, CFO, chief human-resources officer (CHRO), chief information security officer (CISO), and business-unit leads. As we explain in this article, the transition to cloud computing represents a collective-action problem—one that requires a coordinated effort across the team at the top of an organization. It’s a matter of orchestration, in other words, and only CEOs can wield the baton.

To get to cloud more quickly, CEOs should ask their CIO and CTO what support they need to lead the organization on the journey. Chances are good that three interventions will emerge:

  1. establishing a sustainable funding model to support the investments required to get business value from the cloud
  2. developing a new business-technology operating model that exploits cloud for speed, agility, and efficient scalability
  3. putting in place the HR, compensation, and location policies required to attract and retain the specialized engineering talent required to operate in the cloud

By Chhavi Arora, Tanguy Catlin, Will Forrest, James Kaplan, and Lars Vinter

More: mckinsey-digital

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BCG’s Center for Climate Action: Climate Should Not Be the Virus’s Next Victim

The COVID-19 pandemic swept the world in just a few months, with immediate and catastrophic consequences: hundreds of thousands of deaths and a global economic standstill. The climsate problem has unfolded over decades but, if left unchecked, will likewise have profound and permanent consequences for lives and economies on the planet.

As countries globally are feeling the strain on their economies, climate is at risk of becoming the pandemic’s next victim. This must not happen. As they  mobilize massive resources to tackle COVID-19 governments, businesses, and investors have a once-in-a-lifetime opportunity to rebuild in ways that support a carbon-neutral future and usher in a new economy. By focusing on the climate agenda, even in the midst of this pandemic, leaders can direct investments toward sustainable infrastructure, green jobs, and environmental resilience. This isn’t just a moral imperative—it’s also an economic one.

The COVID-19 Crisis Is a Threat to the Climate

In the wake of the pandemic, global carbon emissions are expected to decline by 5% to 10% in 2020. This is the largest drop since World War II. (See Exhibit 1.) But instead of offering relief for the climate, it actually veils a significant threat.

In theory, this year’s projected drop in greenhouse gas emissions puts the world on a trajectory to limit global temperature rise to 1.5°C by 2050. (According to the UN’s Intergovernmental Panel on Climate Change, the world requires a 5% reduction of global net emissions every year to reach the 1.5°C goal by 2050.) But a crippling economic shutdown cannot be a first step toward this path. Instead, preventing the climate crisis will require fundamental economic transformation.

On the one hand, COVID-19 will almost certainly trigger a few helpful structural shifts—including more remote working, less frequent and shorter-distance business travel, and abbreviated supply chains—as companies seek to derisk their operations. On the other hand, the risk of a significant rebound in emissions—and worse, a delay in the needed transformation of global economies—currently seem much more likely, for several reasons:

  • The asset base is carbon dependent. In many sectors, dependence on fossil fuels is hardwired into production and business models. Without active moves by governments and businesses, countries will gradually revert to combusting high levels of coal, oil, and gas as the economy rebounds.
  • Fossil fuels are cheap. Much of the energy transition so far has been driven by the growth of wind and solar, with electric mobility gaining momentum. Now a perfect storm of COVID-19-induced demand shock and oil-producer-induced oversupply has hit the oil market—briefly turning US prices negative for the first time in history. As gas and coal prices fall, the economic case for lower-carbon energy sources diminishes.
  • Funding capacity has eroded. The pandemic has eroded trillions of dollars of global GDP, and while many decarbonization levers can benefit GDP, delivering on the Paris agreement will require a total of $75 trillion in investments. Funding these investments will become more challenging, especially in emerging economies that are already struggling to pay off their existing foreign-currency debt as a result of capital flight.
  • Focus may shift. With jobs, health, and economic well-being on the line, governments and the public are more focused on addressing this urgent and very visible crisis than on longer-term challenges such as climate. As a result, the needed economic transformation could well be put on hold.

Despite the decline in this year’s emissions, we will still be adding more than 47 gigatonnes of CO2 equivalent into the atmosphere (down from approximately 53 gigatonnes last year). The next few years are decisive for bringing this figure down further, and our actions will shape the planet for generations to come. Unless we manage to fundamentally transform global energy systems and lay the foundation for a green economy now, the pandemic-induced drop in global emissions will not be the beginning of a turnaround, but a one-off effect for climate.

By Patrick HerholdVeronica ChauMichel FrédeauEsben HegnsholtJoerg HildebrandtCornelius Pieper, and Jens Burchardt

More: BCG

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Oil and gas after COVID-19: The day of reckoning or a new age of opportunity?

he oil and gas industry is experiencing its third price collapse in 12 years. After the first two shocks, the industry rebounded, and business as usual continued. This time is different. The current context combines a supply shock with an unprecedented demand drop and a global humanitarian crisis. Additionally, the sector’s financial and structural health is worse than in previous crises. The advent of shale, excessive supply, and generous financial markets that overlooked the limited capital discipline have all contributed to poor returns. Today, with prices touching 30-year lows, and accelerating societal pressure, executives sense that change is inevitable. The COVID-19 crisis accelerates what was already shaping up to be one of the industry’s most transformative moments.

While the depth and duration of this crisis are uncertain, our research suggests that without fundamental change, it will be difficult to return to the attractive industry performance that has historically prevailed. On its current course and speed, the industry could now be entering an era defined by intense competition, technology-led rapid supply response, flat to declining demand, investor scepticism, and increasing public and government pressure regarding impact on climate and the environment. However, under most scenarios, oil and gas will remain a multi-trillion-dollar market for decades. Given its role in supplying affordable energy, it is too important to fail. The question of how to create value in the next normal is therefore fundamental.

To change the current paradigm, the industry will need to dig deep and tap its proud history of bold structural moves, innovation, and safe and profitable operations in the toughest conditions. The winners will be those that use this crisis to boldly reposition their portfolios and transform their operating models. Companies that don’t will restructure or inevitably atrophy.

A troubled industry enters the crisis

The industry operates through long megacycles of shifting supply and demand, accompanied by shocks along the way. These megacycles have seen wide swings in value creation.

After the restructurings of the early 1980s, the industry created exceptional shareholder value. From 1990 to 2005, total returns to shareholders (TRS) in all segments of the industry, except refining and marketing companies, exceeded the TRS of the S&P 500 index. Oil and gas demand grew, and OPEC helped to maintain stable prices. Companies kept costs low, as memories from the 1980s of oil at $10 per barrel (bbl) were still acute. A new class of supermajor emerged from megamergers; these companies created value for decades. Similarly, the “big three” oil-field service equipment (OFSE) companies emerged. Political openings and new technologies created opportunity for all.

From 2005 to January 2020, even as macro tailwinds such as strong demand growth and effective supply access continued, the global industry failed to keep pace with the broader market. In this period, the average of the oil and gas industry generated annual TRS growth about seven percentage points lower than the S&P 500 (Exhibit 1). Every subsegment similarly underperformed the market, and independent upstream and OFSE companies delivered zero or negative TRS. The analysis excludes companies that were not listed through this period (including some structurally advantaged national oil companies, and private companies).

Exhibit 1

In the early years of this period, the industry’s profit structure was favorable. Demand expanded at more than 1 percent annually for oil and 3 to 5 percent for liquefied natural gas (LNG). The industry’s “cost curves”—its production assets, ranked from lowest to highest cost—were steep. With considerable high-cost production necessary to meet demand, the market-clearing price rose. The same was true for both gas and LNG, whose prices were often tightly linked to oil. Even in downstream, a steep cost curve of the world’s refining capacity supported high margins.

Encouraged by this highly favorable industry structure and supported by an easy supply of capital seeking returns as interest rates fell, companies invested heavily. The race to bring more barrels onstream from more complex resources, more quickly, drove dramatic cost inflation, particularly in engineering and construction. These investments brought on massive proved-up reserves, moving world supplies from slightly short to long.

Significant investment went into shale oil and gas, with several profound implications. To begin with, shale reshaped the upstream industry’s structure. As shale oil and gas came onstream, it flattened the production-cost curve (that is, moderate-cost shale oil displaced much higher-cost production such as oil sands and coal gas), effectively lowering both the marginal cost of supply and the market-clearing price (Exhibit 2).

More: https://www.mckinsey.com

About the authors: Filipe Barbosa is a senior partner, Scott Nyquist is a senior adviser, and Kassia Yanosek is a partner, all in McKinsey’s Houston office. Giorgio Bresciani is a senior partner in the London office, where Pat Graham is a partner.

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ANTI-COVID-19 – Cluster anti-crisis shield

The Baltic Sea and Space Cluster has launched the BSSC ANTI-COVID-19 anti-crisis shield. This is a special website on the Cluster’s website www.bssc.pl, where members of the Cluster inform about their activity during the pandemic and offer for other maritime business participants. The portal is also available to other companies and institutions related to maritime economy, education and research of the sea.

Many institutions and enterprises operating in the maritime economy have not slowed their activity despite the pandemic. It changed the forms of operation, implemented security procedures, switched to remote work or activities in smaller teams. Ports and shipyards are still active on the international market. Additional requirements arise, as the clients of these enterprises are often people from outside Poland. The initiative works under the slogan: BSSC Anti-crisis Shield.

The main mission of the BSSC Cluster is to integrate maritime business, science, administration and the community. Cluster BSSC promotes cooperation, commercialization and positioning of our members on international markets. Therefore, the information is in both Polish and English. Members operate under the slogan: We help people and Maritime Business. Photo: Marek Grzybowski

More info: https://glosgdyni.eu/klaster-na-pandemie-anty-covid-19-klastrowa-tarcza-antykryzysowa/