Blair Sheppard, PwC’s Global Leader for Strategy and Leadership, joins our GCCR co-leaders Dave and Bobbie to discuss how his research and perspectives on macro global shifts highlight the importance of developing resilience and being ready for continued - and increasingly more complex - disruption.
Blair Sheppard, PwC’s Global Leader for Strategy and Leadership, joins our GCCR co-leaders Dave and Bobbie to discuss how his research and perspectives on macro global shifts highlight the importance of developing resilience and being ready for continued - and increasingly more complex - disruption.
David Stainback: [00:00:00] Hello, everyone. And thanks so much for joining us today for this episode of Emerge Stronger Through Disruption. I'm Dave Stainback, co leader of PwC's Global Center for Crisis and Resilience, or GCCR for short, and I'm coming to you today from Atlanta, Georgia. In our podcast series, my GCCR co-leader Bobbie Ramsden-Knowles and I aim to tackle the challenges facing businesses in this environment of constant crisis and change, and discuss how successful business leaders can emerge stronger through disruption.
We're very excited today to be joined by Blair Sheppard, our Global Leader for Strategy and Leadership at PwC, to discuss how his research and perspectives on macro global shifts highlight the importance of developing resilience, and being ready for continued and increasingly more complex disruption. Hi, Blair.
Great to have you here today. Could you please introduce yourself and maybe give us a quick overview of your role?
Blair Sheppard: Hi, Dave. Hi, Bobbie. Yeah, I'm responsible. I'm global leader of strategy and leadership for the network, [00:01:00] which means I'm responsible for kind of our internal strategy and making sure we have the leaders who can fulfill it.
Bobbie Ramsden-Knowles: Great. Brilliant. Thank you so much as well for me, Blair. I'm really excited to have you on the podcast today and to hear some of your insights. I think particularly what we're seeing is that interconnectedness between crisis and the Megatrends. And actually the importance that resilience plays in that context.
Blair Sheppard: And I'm really looking forward to developing that with you, Bobbie.
David Stainback: That's great. So let's jump right in. So, as we all know, we're living in this state of what we call permacrisis, constant disruptions every day, everywhere. Given that reality, can we start perhaps hearing a little bit about your own view on crises, Blair?
Especially, I know you often refer to about five categories of crises in a lot of your research.
Blair Sheppard: Yeah, so Dave, the issue is, and I'm sort of willing to put my bank account against this, right? That essentially every country in the world is going to experience some version of five categories in a more extreme form every year, year on year.
Now, what they look [00:02:00] like will vary from country to country, but you'll still have the same categories of category, which is why we thought about categories of crisis. So one of them is economic, right? So in some countries you're seeing increased inflation or untractable inflation, right? So UK, we're seeing that.
The US, it just seems like it won't go away. In other countries, you're seeing actually what looks like deflationary cycles. In either case, it's a crisis. And other countries are actually seeing currency risks. And so pick your country, but we have some economic issue going on in every single country.
Second one is sort of a conflict issue, right? And I mean, both internal and external. So in Europe, we're preoccupied with some conflicts in... The Pacific where we're talking about with other conflicts, but they're different ones and they're growing in importance scale. It just feels like, you know, boats are bumping each other more.
People are attacking other's territory more all over the world. And so external conflicts are growing, but also conflicts within a society are growing that we're polarizing between countries. And so it's harder and harder to get people to agree with each other. And [00:03:00] then those create many crises in a series of circumstances, you know, maybe you can't get a national budget passed, for example, right.
A third one is actually institutional, which is essentially institutions either stop functioning effectively or fail. In some countries, it would be the health system that's not working anymore. In other countries, it could be the banking system that's not working anymore. In other countries, it could be the university system that's not working anymore.
And so, You know, in the U. S. we had a mid sized banking crisis, and in the U. K. the NHS is having trouble functioning effectively, the service is having trouble, right, and in other cases you have circumstances that just are difficult and the institution's not working. The fourth one is actually kind of a health issue, which is things evolve or they linger.
And so we have segment diabetes in some places in the world. We have a growing advent of infectious disease in other places in the world. And we have kind of infection for youth in other places in the world. Depends on which country you get different versions of them. So the final one is actually resource shortages, right?
So [00:04:00] in some countries it would be a chip shortage. So we can't actually advance new technology or advance the creation of new automobiles or whatever it is because we don't have enough chips. And in other countries it's actually raw material shortages. In other countries it's food shortages, right? And so.
What you can kind of guarantee is you can get some version of each of those five things in every country. They're going to grow every year in significance and they're going to roll over each other more. And so, God bless the poor leader today.
Bobbie Ramsden-Knowles: I think that's really interesting, Blair. The two things that sort of jump out at me from that summary is just the amount of different types of crises and also the pace of disruption that leaders are having to face at the moment.
We recently ran a survey, the Global Crisis and Resilience Survey, and what we've seen is that business leaders have confirmed, you know, not a surprise, but disruptions are on the rise. I just think the statistics around it are really interesting. So in 2019, we saw 69 percent of organizations, I think it is said, they experienced a disruption in the last five years.
But when we ran the [00:05:00] survey in 2023, that jumped to 96 of organisations that had experienced disruption and 91 percent had experienced at least one disruption other than the pandemic, which I thought was, you know, it just reflects, actually reinforces those points you've made there. What's triggering this?
Why do you think we're seeing more and more crises and different types of disruptions every day? And also, do you have any insights into Why they're becoming more serious and the types of impacts we're seeing are becoming so much more complex for organizations.
Blair Sheppard: Yeah, Bobbie, you know, the problem is you use the word disruption to describe what the crises are doing to us and unfortunately there's just far deeper thing going on.
So unfortunately the crises are almost a sideshow, right? There's symptoms of something much deeper. Now the important point about a crisis is if you don't deal with it, you're in trouble. I mean, it turns out many of the things I just described, so if you're a bank and short term money is selling for a much higher rate than long term money, it's hard to [00:06:00] make money as a bank, right?
And if you're in a country that has massive inflation, people's livelihoods don't work and so you lose your political office and so it turns out you gotta solve the crisis. The thing to recognize is their symptoms, they're either being caused by or made more extreme by something much more profound that's going on, right?
And essentially we identified these about 10 years ago and thought we had a lot of leisure when we identified them, right? So the thing to think about is that the reason crises are getting more extreme and they're happening with greater frequency is that these five trends have hit the shore at exactly the same time.
And the way to think about the trend is that each of the trends, which we label as megatrends, and everyone else in the world label megatrends, is that when they're in the ocean, a tidal wave is three to four feet high and doesn't look very big. When it hits the shore, everything breaks loose and it destroys anything in its path, right?
So we're at a point where these trends are hitting the shore. Ten years ago, they looked easy to deal with, and now they're just hitting at the same time. So what are they? So the first one that's actually causing these is [00:07:00] climate. And you say, okay, so why climate? Well, it turns out that actually, take inflation, right?
That inflation's being accelerated by climate consequences, right? You actually see that disparities are growing because of climate crises. New diseases are occurring because of climate crisis, right? And you can sort of say, well, but is that going to get worse? Yeah, we thought we might hit one and a half degrees centigrade, was our guess.
Actually, we're pretty close to being on track for three to three and a half. We can change it, but if we don't change it, a few things occur. A lot of crops fail on a significantly greater basis. A whole bunch of land mass now above the oceans is underwater, and actually in many parts of the world we hit the wet bulb effect, which is when the temperature and humidity are such that sweat no longer functions.
Now, the problem with that is that when that occurs, you just can't live there without actually putting huge amounts of air conditioning in place, which actually just accelerates the climate crisis. So it feeds itself, right? So that's one. Second one is technology. And the thing to think about with [00:08:00] technology is that we have two technologies that are of a different kind than we've ever seen before, right?
They are general purpose. So once I've modeled the internet, I kind of know everything. So then I layer on top of that a particular data set, and I can apply AI to virtually any intellectual question you want to give me. Pass an NCAT test, draw a painting, make a poem, teach someone how to create a nuclear bomb.
You name it, I can teach it. Right? And I can make it work. Synthetic biology works the same way, which is that once I can model a protein or I can model a cell or I can model a gene and I can bake that, then I can actually create hold any species you want. And so in a biological fear, synthetic biology's general purpose and in the IT sphere, AI's general purpose.
They get smarter every single day and they get cheaper and faster every day. You think about what gets touched by those technologies and then layer on top of that material science and robots and a bunch of other technologies, and what you're [00:09:00] seeing is the system's not designed to handle the pace of change that those things are going to create for us.
And so it creates massive consequences of that. So why do institutions fail? Because they can't adapt to the speed at which those technologies are driving. To take the third one, which is demography. What we're seeing is the whole world's getting older, but in two different ways. In Europe, Japan, China, most of North America, we're getting older into retirement.
And the problem with that is that society's work when about four and a half people pay into the system for every person drawing on the system. We're getting to places where some countries are almost one and a half to one. So the poor people working today, right, you think about a kid entering a working population in Japan or Europe or China or the United States and Canada, they're going to be carrying this huge burden on their shoulders that they have virtually no control over where they're just funding my retirement and my living my life.
And that's kind of unfair, right? Where we have other circumstances in parts of Central [00:10:00] Africa, in particular in Southeast Asia, where actually the people earning the need for education and workforce, you know, have the schools and the jobs. And so that puts huge pressure on. So demography, then we have the challenge of the world in conflict with each other and falling apart.
And it creates whole new strains. So supply chains don't work. I dependent upon a material, I can't get it. And just the sheer harm of the conflict itself, right? The polarization of the world itself. And our institutions were designed with one set of assumptions in mind. We now have to figure out how to manage a whole set of assumptions.
And then the final one is the social consequence of that. Think about the sheer mobility that will happen as parts of Africa just become unlivable or parts of India become unlivable or where I live in the United States, the Southeast becomes unlivable. We'll have huge migration, poor Canada, right? And so those together are driving the crises and what's really important about them is they accelerate one another and any single crisis gets doubly hard because of all five things working on that [00:11:00] crisis.
David Stainback: Yeah, that makes total sense, Blair, and really cannot agree more. And from our perspective, right, when we're helping companies and corporations to think through this, it's really the reason why we recommend that they build enterprise resilience holistically. And that should be the goal for today, rather than trying to prepare themselves for a single risk or a threat, because I think as you just walked through, you know, there's so many conflating factors and as a result, it's just not reality that a single risk or threat is what they need to prepare for.
They need to prepare for a multitude. You know, I know you shared a couple of higher level examples as we walked through there, but is there any that you'd like to deep dive on for our listeners here?
Blair Sheppard: Yeah, let me, because what I didn't do was talk about how interdependence works. So I gave the examples, but let's take two, right?
Let's take inflation. And it's important to recognize the elements of this that we ought to understand. And so one of them is... We have a way of dealing with inflation as a crisis. It's been around a long time and it works, right? And so it basically is the following. So when an economy is doing badly, we stoke it.
And how do we do [00:12:00] that? Central banks actually buy paper in a reduced rates and typically parliamentary or congressional systems or political systems actually do something to stimulate the economy. So, what happens is we grow as a result. It overshoots the mark and it becomes too high and we get inflation as a consequence.
So what do you do to fix it? You actually reverse that cycle. Um, now usually the parliamentary or congressional or other systems don't make the change as fast as they should because it's politically attractive to stoke an economy. It's unattractive to slow the brakes. So we depend on the central banks to put paper back in the market and actually reduce and grow interest rates.
The challenge is that's managing the cyclical elements of inflation. What if inflation is secular? And how could that be? Well, first of all, take the five things I just described. So, if the world's getting older and fewer people are working, then actually we have more people trying to buy than people producing.
Classic [00:13:00] supply demand problem. That's not a cyclical issue. That's actually a linear trend that's going to continue and make matters worse. So, assume that actually factories fail, and crops fail, and supply chains fail, and people can't get to work because of climate. We just increase the price of goods.
Imagine we actually have significant social conflict, and it disrupts availability of certain critical supplies, or it affects the cost of goods, and then go up. Now, technology at some level should make it cheaper, but not in the first sense. It's got to invest it in the first place, right? And so at least until you get the hockey stick, it costs you more money, right?
And because the world's essentially harder to do business in, you can't depend upon having the lowest source of supply stably in a world that's increasingly at conflict with itself. And so you have to create more localized or more friendly supply chains. All of those raise the cost of goods. The challenge is none of those can be fixed through the tools we use to fix the problem [00:14:00] historically.
So the second point you're saying, David, is not just that we actually have to be able to address a whole host of problems. We actually have to be able to address them in a wholly new way. And so resilience is about adaptiveness to a whole host of new things. And then I'm going to give you a second category, which is just think about sort of the two technologies that I described earlier that are sort of general purpose, right?
As we have technologies that can do the very creative and multiplicity of things they can do. So I think about synthetic biology where actually we now can fold proteins, which is essentially all cells are composed of proteins that have a long, long string associated with it, and it gets folded in a particular way, and that string and its folding determines its function.
We actually now know the function of those things, we know how to create them. We know the functions of DNA, and we know how to recreate it, right? We know the functions of organs, we know how to recreate them, and so the consequence is we can actually... Creates some pretty amazing things from healthcare solutions to new [00:15:00] materials to new plants and whole new ways to live.
And actually what's interesting about them, done right, we could potentially find a seed that naturally takes nitrogen from the air so you don't have to fertilize. It's actually resilient to any climate consequence you want that actually grows way faster than it does and has way higher protein content.
So they're pretty... Cool things they can do for us. But here's the thing. Because they're getting cheaper every day, imagine you have some disaffected couple of people who are pretty smart and have a crisper in their garage. They can literally cook a virus that we don't know how to respond to. Or a fungus that's actually adaptive to a higher temperature because the body's natural defense against fungus is actually our, our body temperature.
So they cook one that actually can actually attack us and retain its existence in internal body temperature. We have no natural defense to fungi. [00:16:00] And so the risks... Of both AI as a technology and synthetic biology as a technology grow dramatically and we don't know how to address those. And so our whole notion of managing risk and managing crisis in those circumstances is just not up to the task, right?
So I want to highlight two things in that. The nature of the problem is changing and the nature of the solution is changing. We're going to have more of them as you described earlier, Dave. So, you know, welcome to crisis management 21st century.
Bobbie Ramsden-Knowles: And I guess on that point then it actually, how do we get ahead of that, right?
How do we ensure we're not going into crisis as a result of those changes that you talked about? As Dave said already, talking about enterprise resilience is critical, but I also think scenario planning and scenario modeling and really understanding where these different decisions might take us becomes really important.
And we're certainly seeing organizations start to do that more, trying to use the data they hold to inform those decisions so that they can anticipate where those impacts might go [00:17:00] that you talked about.
Blair Sheppard: Yeah and Bobbie, I think there's some other pieces related to crisis, and then there's just sort of how that fits with the trends, right, that we're talking about.
But if you think about the crisis itself, one thing is we have to move from believing we can stop it to understanding we need to contain it in many circumstances, right? So you're not going to stop a cyber attack. You have to contain it. From a really smart machine, it's going to be hard, so you have to learn to contain it.
In a viral thing, we have to learn to contain. And so our notions of control need to change and our notion of how you manage the risk needs to change, right? And I think the other piece is, while we can do all we can to stop it in advance, no matter what you do, it's going to come. So be ready for it. And be ready for it in two ways, and you said something really important, which is the reason you do scenarios isn't because any one of those scenarios is right, it's because it allows you to adapt to novel circumstances with whatever scenario occurs, right?
And so we just have to build our ability to be resilient in interesting and adaptive ways. Now, to [00:18:00] me, you know, you can sort of say, God bless the poor leader today, but that's actually kind of a cool problem to have, actually. How do we teach ourselves to be more resilient? And I think that it's a really important part of any organization and kind of an interesting job to have and way more important than it ever was.
David Stainback: Yeah, I couldn't agree more with that, Blair. I think we're starting to see leaders and boards really begin to recognize that and boards especially pressing the C-suite of organizations on how resilient they are. And, you know, I think from a practical standpoint... Because we don't know what's going to hit us and even if we're doing scenario plans, et cetera, like you said, it's for the purpose of just having an example to see how resilient we are.
You know, one of the key goals of any resilience program is trying to practically understand impact tolerance, right? So if we have core things that we deliver on, let's identify what type of impact can we sustain and then build the right amount of resilience to be able to... Try to keep it under that maximum tolerable impact.
And so that's what we spend a lot of time working on with companies and [00:19:00] I think is more important now than ever. But one of the things that we, we always like to do and everything that you've shared here has just been fascinating, is try to give our podcast listeners some actionable insights to take away.
So besides that, maybe you can talk about a few other key actions that you think business leaders can take as they're now facing this complex web of dueling challenges that you've talked about.
Blair Sheppard: Yeah, I think there's one really important one and then a couple of other ones. So the most important one is actually understand the transformation or reconfiguration or reinvention, whatever your favorite phrase is to describe it, that your organization and the ecosystem it's embedded in have to go through to respond to the deeper trends I described.
Because it turns out, more likely than not, the answer to addressing the crisis sits in that transformation. So the first order of work, and this is why I said that actually crises are kind of the symptom or the sideshow. The first order of work is actually deeply understand [00:20:00] the impact of the trend, systemically, at four levels of analysis there, right?
Actually at the level of what does it mean for the ecosystem I participate in? What are the new sources of value in the ecosystem? How's it going to move? Who are the players? How do I have to coordinate with them? What does it mean for my own business? What does it mean for the teams I surround myself in with the individuals I need to have work with me, right?
And understand that and create that. And then use crisis as an opportunity to accelerate the progress on that transformation, but reciprocally use the transformation to address the crisis, right? Now the poster child for that, if I go back to synthetic biology, was mRNA and COVID. So it turned out there were some companies who actually were pretty far along on this issue of actually modeling the gene of a virus or a bacteria and thinking about how we attack it, right, either through teaching our body how to attack it or attack it directly.
They're pretty far along. And they said, well, actually, I ought to use that approach [00:21:00] for addressing COVID for two reasons. First, it's actually more responsive to the particular crisis we're dealing with. And it'll be way faster in getting it approved because I actually have the theory that proves it will work, right?
Because I know it's going to work. I can actually build the manufacturing capacity in advance of approval. So you ended up accelerating the development cycle by a huge amount, kind of knowing you were going to be right and then bringing it on and actually finally creating the solution to a crisis we weren't addressing very effectively in any other way.
What's also interesting about that is not to name the companies, but you'd love to own the stock of the companies that actually came up with that idea because they accelerated transformation to the new model. And so if you think about that generally, that the more you can understand how you have to transform to the forces that are driving the crisis, the more likely that the answer to addressing the crisis sits in that transformation.
That's the first point. I think the second point is you kind of [00:22:00] have to build a functional capability to detect early and respond fast. Right, which is one of the things you talk a lot about actually, right, which is what you don't want to do is be a couple days late. Because a couple of days late, it's over in a way, right?
And so if you think about the organizations going back to COVID again, who saw COVID early and got ahead of it quickly, actually adapted much faster and were much more successful through the process, right? And so early detection and quick response matters. And then I think a third one is acknowledge you actually don't know what you're talking about and get people who do.
So what was really impressive in all of the stages of the COVID response were the people who admitted they didn't know and sought lots of input, but then were decisive on that input. So there's this interesting paradox in the answer today, which is you've got to seek input from a lot of people, but it's probably the case that the answer for [00:23:00] what you should do is not clear anyway, because it's new, right?
We don't really know what we should do with this thing, right? And so you've got to be willing to take a bet. On the best approach you can, at the moment it happens, learn quickly and adapt. So engage decisive, engage decisive, engage decisive, and detect all along the way. Essentially, it's like being an entrepreneur in response to crisis circumstances, which is, which is why I think it's kind of fun actually, right?
Because you're going to discover something new, but then I think the last point I would make is use the insight from that to do an even better job of the transformation. So don't lose the opportunity of the crisis because three things happen in a crisis that helps transformation. First is we throw our assumptions away.
Second is we come together. And the third is we do things fast. Those are exactly the circumstances you want to drive transformation. So don't let a good crisis go to waste, but don't let a good transformation go to waste either. [00:24:00]
Bobbie Ramsden-Knowles: Yeah, I think I've seen too many organizations actually, you know, they get through the crisis understandably huge amount of pressure that they've been under and they, they want to get their post incident review done as quickly as possible and move on and actually potentially lose that opportunity, as you say, to transform.
And I think the other thing is that point around that we're speaking to a lot of companies about at the moment is being resilient creates value for organizations as well, can create competitive advantage. And that is as important a lens on it as actually protecting the organization as well. So. It's certainly a common conversation Dave and I are having with companies right now.
Blair Sheppard: It's absolutely true Bobbie. So the interesting thing is if I have to choose a partner in evolving my organization and ecosystem, I want a partner I know is going to be effectively responding to the crises that come their way. So I'm going to trust an organization that does a better job of being resilient in response to crisis and learning from it is humble enough to learn from it and therefore accelerate their own because you have my back, you know, if you're going to be my [00:25:00] partner working through this thing, I want you to be pretty darn resilient as a partner. So it's a great piece of advice, Bobbie.
David Stainback: Wonderful. And fully agree, Blair. And thank you so much. I think this is a great place to wrap up. Really appreciate the time, Blair. Thank you for joining us today.
Blair Sheppard: Happy to do so. And I hope it was helpful for the people that are listening. And thanks for inviting me. It was a fun conversation.
Bobbie Ramsden-Knowles: Brilliant. Thank you as well for me, Blair, really, really great conversation today. In our upcoming episodes of Emerge Stronger Through Disruption, we'll continue to tackle the topics that keep business leaders up at night. As always, we'd love to hear ideas from our listeners about topics that you'd like us to address.
So please get in touch with both Dave and me via LinkedIn. And in the meantime, remember to subscribe to Emerge Stronger wherever you get your podcasts. Thanks for listening. We'll see you next time.