The Most Important Question Facing CEOs and Boards

"The best scientists and explorers have the attributes of kids! They ask questions and have a sense of wonder. They have curiosity. 'Who, what, where, why, when, and how!' They never stop asking questions, and I never stop asking questions, just like a five-year-old." Sylvia Earle

So, this week, I am asking a lot of questions

The Markets

Another strong week in the US and Canada is hanging on. As I mentioned last week, Canada's economy is different from that of the US, and you can see it in this next image by way of how and what we invest in.

What will it take to make Canada's stock market and economy be as strong as the US? From this, you can tell where the money is going. We can also see that Canada's economy isn't as diversified and is heavily dependent on natural resources and the financial sector. In addition, consumer discretionary and staples in the US are about 17.2%, whereas Canada is at 7.6% less than half of the US, which speaks to the robust consumer market south of us. It is the information technology and the consumer sector that we are missing out on. Is Canada vulnerable? Well, maybe that's what's driving some political agendas to dismiss climate change and EVs. However, given the difference between us and our largest trading partner, it's time we begin to rethink Canada, shift our economy, and pursue a different future.

Personal Log: Why is Canadian Business Different?

There are several factors contributing to the challenges faced by our economy compared to others, like the US. These include the concentration of our competitive landscape in the hands of a few large organizations, limited consumer choices, skewed wealth distribution towards the upper 10%, higher costs for goods and services, and obstacles in leading initiatives against climate change. These issues also contribute to why some children go hungry and families live on the edge of financial stability.

Pointing fingers at the current Canadian government alone may not be the most productive approach. Over the past five decades, various political parties have struggled to significantly enhance our nation's local and global competitiveness, a critical issue that remains unaddressed.

Canada enjoys a unique position, with few competitors entering our market due to the dominance of Canadian conglomerates across several sectors such as pharmacies, grocery, telecom, insurance, financial services, banking, and media. This insulation, coupled with stringent regulations, though beneficial in some respects, also limits market dynamics.

Our regulatory framework and market structure are quite distinct from those in the US and the EU, where competition is more vigorously encouraged. The ownership structure of our major companies, often controlled by families or trusts, presents a barrier to new entrants, stifling competition and innovation.

Despite these challenges, our economy has demonstrated resilience over time. However, the landscape is changing, especially with the advent of new technologies. The emergence of robotics and AI in the marketplace will reshape job opportunities, consumer choices, and cost structures. With a significant portion of our GDP derived from service industries, where many tasks are repetitive, the impact of technological advancement is profound.

The adoption of robotics in sectors like warehousing and manufacturing is a case in point, with significant job reductions in companies like UPS (12,000 jobs) as they seek efficiency gains through automation.

This scenario raises questions about the sustainability of current business models that rely heavily on immigration and price increases for growth without fostering significant competition. It prompts a reflection on the kind of change we need and the willingness to pursue it despite potential challenges in achieving political consensus. To retain our economic growth, we need to accelerate business growth with new businesses and industries. And with that, we will need far more stringent approvals for mergers that can cause loss in competition and jobs.

I share these thoughts as someone who believes in the principles of capitalism and the immense benefits of fostering a more competitive and innovative economic environment in Canada. It's about envisioning a future where our economy thrives on both domestic and international fronts, offering more choices to consumers, creating job opportunities, and ensuring a more equitable distribution of wealth.

Technology: The Most Important Question Facing CEOs and Boards

Yesterday, I posted this on linkedin post with a question on what the most important business decisions CEOs need to make. First, it is a question that should have been addressed about ten years ago. Unfortunately, the hype of the day sent many in the wrong direction. We have been living and operating businesses in an analog state, even with the internet, smartphones, the cloud, and data. You don't have to believe me. Just look at all the failed retailers. It was their indecisions on the necessities of business survival that many have failed. It isn't possible to win in the retail landscape with just a customer experience and some intermittent level of omnichannel activity. By the way, the number of businesses with a sophisticated omnichannel strategy is under 15%.

Of course, all the panacea today is about AI. Sure, embracing GPT technologies to enhance your thinking is okay, but a generic platform like ChatGPT is not predictive; it is an encyclopedia on steroids, and even with your data to pull from, it will be flawed. That's why human intelligence remains so important. However, the AI architecture you use can make all the difference in a brand's ability to predict.

The most important decision CEOs need to make is simply this. And it will be a difficult one because it isn't just transformational; it is revolutionary. It comes with risks and fast-paced change. What decision? Whether or not they have the courage to turn their companies into technology companies first.

The dilemma is how long can retailers and other industries deny themselves the future? Yes, the physical still matters, as do Omni channels and every other panacea. This week H&M said that SHEIN concerned them as a competitor. And if you’re in retail Temu Inc should worry you as well as Amazon. Why? Well, 沃尔玛 recognized it about ten years ago and made every effort to ensure its resilience and business longevity against up-and-coming technology companies. At a recent trade show, they told the world they had arrived. They are now technology companies first. A brand's dilemma is like Shakespeare's connotation: "to be or not to be"; does this brand live, or do we let it die? The question everyone will face in this technology-driven world is the existential threat of battling a competitor and their unknown super technology. Brands will fail faster in the future, and innovations will have shorter lifespans.

Some company leaders have told me that they will not pursue AI. How come? It's not that they are brave or know something you don't. It's because they are afraid to hear the answers to the question. Human and artificial intelligence must be allowed to work together. Only those consultants tethered to the past will tell you it's premature or unnecessary. Those wishing to have resilient brands know otherwise; technology must be at the forefront of conducting business to compete with resilience. My message today is to ignore presentations about fantasy retailing. It’s about the importance and power of leading with technology and lush data. Nothing will be more powerful. And then, you enhance all of that with a strong value proposition and customer experience. We are seeing technology companies emerge in retailing. Soon, it will be more so in healthcare and education. This revolution has just begun; it’s not too late. It’s still early in the game, but businesses must have the foundation within the next five years and be ready for 2030.

A business can be in one of two places on this: dismiss it and be prepared to experience more challenges than past predecessors did with the internet and e-commerce. Or embrace it and give your brand a flight path.

AI This Week

Are companies competition ready for AI? It isn't just a question about an organization's readiness. It's about the level of competition that is coming our way. In this article, we highlight just a few of the challenges. One of them is to turn browsers into buyers, and it will get tougher. Read more... Inception Retail Group

In The Economist, there is a long story about how one person at a call center views the potential of AI replacing them.

How to protect your business from bankruptcies?

The heart of the economy and many jobs are small businesses, which are also a risk to this economy. It is a global issue. Nevertheless, that doesn't make it easier—small business bankruptcies are rising. A report from Reuters says it is. Now, some blame is placed on the debt businesses owe the government for helping them through COVID-19.

Small businesses have been struggling to compete. And it has been going on well before the pandemic. At the same time, larger retailers, for example, were failing in droves (the retail apocalypse) prior to 2020. Many of the issues went into hibernation, and between 2022 and 2023, they began to resurface. The inability to compete effectively continues. Let's add in additional debt taken on to survive the shutdowns. Paying it back is not the only reason businesses face failure.

The retail sector represents 5.6% of Canada's GDP and is the largest employer with 12% of the workforce. They cannot compete against the conglomerates; they can't match costs or pricing.

So how do we protect them?

It is my view that the strategies and tactics small business owners pursue are usually watered-down versions that larger companies are able to deploy. The only difference is that the larger companies have the financial, technological, and human resources to execute.

The best strategy for survival is to define your brand's strengths and develop those attributes that change the lives of your customers for the better. If you look at who has led in different consumer-based businesses, these brands lead today because they did just that—they added real value. In 2024, while retailers need hope, they shouldn't place any value on fantasy strategies. Quite simply, I live in a town of over one hundred thousand people. One store, by all retail and academic standards, is a merchandising nightmare. And yet consumers shop there like they are on a scavenger hunt looking for their product and a deal. If you are going to win today, you also have to be unconventional.

Consumer economy and pricing

A few months back, Walmart told us that we were likely to see deflationary pricing pressures. A few days ago, 宜家 announced that they would cut prices. But they are also seeing lower material costs. Should that surprise you? Not really. China's economy is in a deflationary slump, and its manufacturing sector has also declined (Financial Times), meaning that to gain demand, they have to lower prices. Of course, that may not help them entirely, as Chinese consumers are hoarding savings. Nevertheless, if this continues, prices globally will decline, and at the same time, consumers under pressure from higher interest rates will likely stay home.

At The End Of The Day

What would you do if you had superpowers to protect democracy? Let's pretend one of your powers would allow you to see beyond the smoke and mirrors and the political rhetoric on social media. One nation failed. They had no superheroes. They lost control of their media, newspapers, and networks. They were told what to think. The messages were filled with misinformation, propaganda, and hate. Racial biases were disguised as care and love for all humans. Their country went through challenging economic times; there was political fragmentation, and parties were divided; elected officials jumped to other parties; extremist groups and extreme views were on the rise, with guest speakers traveling the nation to brainwash society; they targeted minorities and alienated any voters that disagreed with them. Angry mobs of lunatics would take over cities under an illusion of peace. Does it all sound familiar? Well, I am referring to Nazi Germany. Never lose sight of your superpowers to see through the lies.

Thank you for reading this week's issue of the business brief—a busy week ahead, presenting at two private company kickoffs for 2024.

I am available for speaking engagements and as an advisor to senior executives and boards. As a former senior executive and current for-profit board director, I bring real-world experience to important conversations. Strategy - Change Leadership - Artificial Intelligence - Brand Development

You can contact me here: [email protected]