Leadership, Crisis & Long-Term Business Sustainability : Dr Anastassia Lauterbach Interview
In the midst of the covid-19 global pandemic, Dr Julia Zdrahal-Urbanek and Carolin Rofe-Woess, AltoPartners Austria, interviewed Dr. Anastassia Lauterbach on leadership during a time of crisis and the most successful measures put in place to ensure long-term business sustainability.
Since the beginning of the Coronavirus crisis, you have intensively researched how company bosses deal with the current situation and which measures are helpful. Do you also see positive things in your conversations?
Covid-19 puts every single company to the test in terms of competitiveness and long-term stability. Now it’s all about demonstrating digital agility, communication skills and adaptability, implementing innovations quickly, changing personnel planning and reducing supplier risks.
Remarkably, no one can claim that the global devastating pandemic has occurred completely unexpectedly. The SARS and MERS epidemics were the first warning shots. Bill Gates has been warning of a pandemic since 2010. At the TED Annual Conference 2015, he gave a lecture in the middle of the rampant Ebola epidemic entitled “The Next Outbreak? We’re Not Ready”. The world of politics and business, which meets annually in Davos or Munich, was not paying attention. Even with Covid-19 staring them in the face, some executives initially reacted ignorantly. But now everyone is thinking, thinking differently and starting to change.
In my conversations with colleagues in Europe, Great Britain and North America, I experience great determination in top management. Everyone knows that it would be fatal not to act in such a crisis.
Now we have to swiftly bring together what previously seemed impossible - the balancing act between short-term and long-term goals, between quarterly results and real sustainability. In the past, sustainability was cynically dismissed by many or cheered on by some - mostly after leaving active working life - as the real thing. Now we have to find answers in no time. How do we specifically ensure the success of our company in the long term?
What are your learnings?
It is essentially about the four key factors of finance, people, technology and China.
They are on every board and supervisory board agenda. Of course, finance has always been an issue. But now it’s about new topics. Many executives are now painfully aware that their companies have no good management system and no solid supplier risk management. Covid-19 could be a turning point to review supplier relationships. Dependency on third-party providers is the Achilles’ heel in cash flow. The operational stability and ability to upgrade information technology are also related to a well-organized, stable and flexible supply chain.
Covid-19 is not only a shock to human health, it also illustrates our technical vulnerability. Unfortunately, cybercriminals are currently particularly active and innovative. That requires great resilience. As a result, companies may now be required to upgrade their cyber policies and practices. A cyber-attack itself costs millions, but the reputational damage it causes can have a direct negative impact on financial indicators, and result in significant damage.
In these evolving times, while some are struggling to survive, others are looking for the vulnerable for cheap takeover opportunities. Companies with strong balance sheets are currently examining how they can expand the portfolio of their data providers, for example in order to improve their forecasting systems and thus critically examine the stability of the business.
That was just the coronavirus effect on the finance factor. What about the other three factors?
The human factor has come into focus. First of all, of course, because we realise how vulnerable mankind is in the Covid crisis, but also because we experience very impressively how adaptable people are to deal with extreme change. It is currently crucial to create a health-safe environment for employees, strategic suppliers, partners and freelancers. Due to the additional burdens - be it the additional need in the health care system, be it through the private approach to childcare or the care of relatives - additional resources have to be activated. Companies mobilize alumni networks or ask retired employees to step in. The more efficiently the technology-based social ecosystem of companies is structured, the faster and easier it is to access the talent pool.
You mean what used to be considered a gimmick, LinkedIn, Xing, Facebook, Twitter etc. is now a competitive advantage?
Exactly. The demands on management style are changing at a similar rate. During the crisis it becomes clear that knowledge is not power, but transparency is what holds the key. A weekly, in any case regular, timely update by the CEO and an AR chairperson currently builds the trust between the workforce and senior management and signals a close, consensual coordination between the management and the supervisory board. In this crisis of unknown proportions, every “I have everything under control” protector is quickly exposed as a myth.
Humility towards the unknown is not only honest, it also seems to be the better communication strategy during these times. The greatest possible objectivity is required, coupled with adequate empathy. That means you have to provide data and facts to demonstrate that the situation is managed and not just endured; and at the same time signals understanding for the difficulties of all those affected. This is the only way to reduce fears. Last but not least, this means that management must show solidarity with the weakest. Salary cuts are imperative to ensure liquidity. But the discussion in Germany shows that a board of directors cannot on the one hand apply for short-time employment status, but on the other hand pay itself a bonus. In the discussions that I have at international level, it is clear: First, the salaries of the board are cut, then the negotiations with unions and employees begin.
How affected are the supervisory boards themselves by the virus? Presumably the majority belong to the risk group of the mature generation?
In the minds of most people, corporate overseers are well fed grey-haired men with high blood pressure. The reality has changed in recent years. More and more supervisory boards are active managers between 40 and 50. They are technology-experienced and have proven themselves operationally in regional CEO or COO tasks. These “youngsters” know the pressure to deliver numbers. One thing is clear to them: without innovation, growth has no chance. At the same time, they wonder whether their companies operate in such a way, that their children can also work there in the future.
I am a member of a NASDAQ group of such supervisory boards, which meets two to three times a year. We discuss governance trends and real challenges and publish our findings so that others can benefit from them. For us, “Growth post Covid” is not a headline on PowerPoint, but a topic of survival for companies.
China already sees itself in the post-Covid era. What role does the country play in the current strategy considerations?
The Covid 19 crisis holds up a mirror to the face of the Western Countries: where does globalization really stand? How stable is the world order? Which partners are reliable? The virus can accelerate the “de-westernization” of the world, but it can also slow it down. The crisis becomes a litmus test of loyalties. When no European country responded to Italy’s urgent appeal for medical equipment, China jumped in and promised to send 1,000 ventilators, two million masks, 100,000 respirators, 20,000 protective suits and 50,000 test kits. Alibaba co-founder Jack Ma pledged to ship large quantities of test kits and masks to the United States and 20,000 test kits and 100,000 masks to each of the 54 African countries. Beijing’s lead in material support is reinforced by the simple fact that much of what the world relies on to fight the corona virus is made in China. In the meantime, antibiotics are critical to combating emerging secondary infections stemming from Covid-19, and China produces the vast majority of the pharmaceutical ingredients required for it.
Isn‘t that just clever PR?
Indeed, that is often said. China is certainly taking the opportunity to present itself as a responsible global market leader. The country not only ships doctors, more or less finished AI solutions and process know-how to help fight the virus, but the Communist Party also exports its propaganda.
However, that doesn’t really serve to sell the Chinese worldview to the West. It’s less about ideology than about tangible interests. In the past two years, trade and technology conflicts with China have intensified. Chinese companies are no longer allowed to install US technologies such as semiconductors or operating systems for mobile devices. Europe’s economy is divided. Should we still rely on US technologies? Can we develop it our self? How risky is it to work with Huawei and ZTE? How vulnerable is a corporation that produces and stores data in China?
China wants to build bridges and trust here. And in western companies, managers with good knowledge of China are extremely in demand. Given the long-term big decisions, experts are required who are well versed in the Chinese culture of leadership, business development, international cooperation and data handling.
You are frequently writing about making up lost time in digitalisation, which can and must develop rapidly under high pressure. What is your observation?
The IT world has grown out of its infancy worldwide, even if digitalisation in Germany is still laughed at as “new territory”. Covid-19 forces the world into a certain technological “adolescence”. Only thanks to digitalisation has it been possible to trigger the pandemic alarm globally so swiftly. If you look at the big picture and leave aside questions about which information might have been suppressed at an early stage, it is impressive that within a few weeks a disease somewhere in the middle of China was so closely monitored by the global community - with the aim of understanding its virality and finding pre-emptive solutions at an early stage . This is the only reason why the pandemic dealt with questions that the world was reluctant to answer quickly. If Germany had not reacted so quickly, the number of casualties would have been very different. The frightening reports from Italy and then England show that every day really made a difference between life and death. In the less globalized world a hundred years ago, the Spanish flu expanded just as quickly as the corona virus today, but at that time there was a lack of rapid information transfer. To put it bluntly: the modern Internet saves lives!
The rescue measures are rather medieval: Social distancing is just another word for house arrest, is it not?
Even during the Spanish flu, the heads of state knew how important social distancing is. Many cities shut down schools, churches and restaurants to stop the virus from spreading. Business hours were shortened, workers wore masks. But the level of social distancing that we are introducing was historically not feasible. Today, this is possible on a much larger scale because our cities and companies operate with a significantly lower physical presence. We have highly efficient food supply chains that cover thousands of kilometres and a robust infrastructure - directly from the field to the kitchen in a span of a few days. These are great new high-tech tools that can be used to “flatten the curve” without starving our society. Apart from the fact that thanks to the telephone, internet and countless media channels, social interaction almost works better than in times of literary salons and stagecoaches.
But the economy comes to a complete standstill …
The lockdown is politically wanted. Within a few weeks we realize that much more is possible than many think. Companies that built stable online channels and communities before Covid-19 have an advantage - especially if they have products such as payment services or financing loans. Many people find the current remote economy so attractive, that they want to keep it even after the crisis.
In future pandemics, which are guaranteed to occur because viruses are constantly renewed, we will be able to maintain much more comprehensive quarantines thanks to automated production and logistics, thanks to self-driving cars and delivery robots - without us seeing this as a negative occurrence.
For some people, especially academic focused workers, home office is neither unusual nor uncomfortable. For others it means job loss and fear of existence.
It is indeed the sad truth. At the moment, privileged people have an easier time doing their business from home. The German welfare state proves to be extremely resilient: short-time work, emergency aid for the self-employed and small businesses and many other measures stabilize social peace in the country and ensure great solidarity among the people. It is very impressive. In the United States, 9.9 million Americans have lost their jobs due to Covid-19 and are left with nothing, with no health insurance. This is shocking and scary for many people. This tragedy does not make up for the fact that companies like Amazon and Instacart are looking for hundreds of thousands of new employees. Technological evolution has brought us to an economically remarkable point: Today, companies have the organizational ability to react extremely quickly to changing environments, to hire and fire employees, and to shift cost structures faster than ever before, as required. This results in many new social questions. It is certainly no coincidence that the idea of unconditional basic income is being discussed more intensely in the USA, but also in European countries such as Spain and Italy.
At the same time, we should not forget that today’s flexibility in labour administration and the associated cost structure also has positive social consequences. In the past, such stress would certainly have brought more companies to the brink of bankruptcy. Many may survive the Covid 19 shock today and be successful again in the future. In general, business flexibility is a major strength of our economy today. Thanks to cloud use, for example, companies can quickly regulate technical services. In an “on-demand world”, companies can adjust their cost structures as required - whether with or without a virus.
Do you see any industry-specific differences?
The challenges in medical care are currently the most striking. We notice: digitalisation is a must. I’m not only thinking about AI applications that support diagnostics, but also about smooth data flows between specialist practices, hospitals and medical laboratories. If the important data of a patient does not arrive complete and promptly, there can be a variety of treatment damages, important secondary diseases or intolerances are overlooked, treatment options are not recognized, financing is not possible.
Currently, months after the initial diagnosis of Covid 19, our estimates of the transmission and mortality rate are still extremely rough. The challenges are data integrity, testing and tracking disease processes, and modelling different population groups. These are topics that could be better solved with appropriate technology. But we lack the digital methods. This is all the more regrettable, since more specific answers would not only be medically valuable, but could also give the financial markets a clearer picture of reality. Data helps, it saves lives and economies. So, we stab in the fog of different systems. Of course, a good infrastructure for data collection and processing must not be created at the expense of privacy and data protection. But that should inspire us to develop a European response to non-democratic digital structures as quickly as possible.
We also see enormous potential and gaps in education. Due to the comprehensive closure of schools, universities and all educational institutions, we are embracing distance learning in no time at all, worldwide. Remote learning follows a similar pattern to working from home. If Covid-19 had happened decades ago, our entire educational system would have been shut down. A pandemic in 2040 may have no effect at all - except perhaps in the care of young children. However, the challenge for the digitalisation of the educational branch lies outside the industry itself. The companies recognize that their employees are directly affected by a lack of digitalisation of the schools. Unlike private schools, state educational institutions will rarely resort to support from companies. Politically, the course has to be set here and considerable investments have to be made. The longer we wait, the more expensive it will be to catch up with the others.
In the discussion among economic experts, it is undisputed that the world will not be the same after the crisis. How important do you think artificial intelligence will be after Coronavirus and what other major challenges are, we facing?
Crises are often a form of catharsis. The excesses of medical experiments on humans during World War II shook the principles of ethics. Today’s sewage systems emerged from the cholera epidemic in the mid-19th century. Crises are turning points in complex systems where changes can take place quickly and unexpectedly. The size and importance of the coronavirus pandemic is a crisis that we have not seen in nearly a century. The changes to the existing systems will accordingly be seismic: the global financial system, national health systems, mobility and migration will be fundamentally changed by this pandemic.
On top of that, Covid-19 is the first pandemic of the algorithmic age. Complex data analysis, algorithmic systems and machine learning are used in diagnosis, treatment and prevention. As a side effect of this high-tech cure, the coronavirus thereby reveals shortcomings in the data governance ecosystem of the past two decades: in the open, completely unregulated markets, big tech has played a pioneering role in the commercialization, storage and storage of data and thereby building huge digital infrastructures that recognize, collect and control large-scale personal data. As a result, private companies have both the majority of the world’s data and the means to profit from it. The American economist Shoshanna Zuboff called this “surveillance capitalism”.
Due to their long-term investments in the data economy of public health systems, technology companies have been able to establish a dominance in the healthcare market: Google, Facebook, Apple, Amazon, Tencent, Baidu and Alibaba are now all active in the healthcare sector. The crisis makes it clear what that means - and well beyond the first high point of the pandemic: who will pay for and benefit from data-driven innovations such as vaccines and diagnostic tools? Will public investment bring public goods? How can we build data infrastructures that recognize the role of data as a public good? Can we foresee a better and fairer data management system that rebalances power in the ecosystem?
We are at a crucial fork in the road: States are tempted by the immense power that big tech has accumulated through the extensive surveillance of people on the Internet. For this reason, some will strive to “platformize” the state. It certainly makes sense to tap the source of surveillance capitalism to deal with the acute crisis. It may also be justified to provide limited, well-regulated public access to private sector data for the purpose of virus control. However, we must be careful not to misuse the coronavirus pandemic to justify the expansion of government surveillance methods that are maintained on a permanent basis and for no specific reason. A health dictatorship would also be a dictatorship.
That is why I think it is imperative that we need quick, yet well-considered rules on digital identities for people and companies. These regulations must be formulated by people who have extensive and up-to-date technological expertise but are independent of data monopolists such as Facebook or Alphabet. To do this, we urgently need to change some of the Internet architecture, so that local data markets - with the help of new blockchain-based protocols - can emerge, on which data owners (be they municipalities or companies, be they NGOs and citizens) with AI experts, software suppliers, Research institutions and - in the case of illnesses and pandemics - with app developers for the benefit of the entire nation - meet and conclude fair, transparent and rule-of-law contracts based on European ideas.
Does there have to be a “new manager type” and what should this type look like?
One single person cannot save the world; the time of the tsars is over. We need good teams that combine versatility, internationality, interdisciplinarity, technological affinity and a solid understanding of finance. Diversity is the big sister of digitalisation.
About Dr. Anastassia Lauterbach
Dr. Anastassia Lauterbach is Technology Entrepreneur with focus on Artificial Intelligence and Cybersecurity and an international Non-Executive Director, serving on boards of public companies in the UK, Germany, and USA. She currently serves on boards of easyJet PLC and Wirecard AG, and on the advisory boards of NASDAQ, Diligent Corporation, and Salzburg Global Seminar. She is former SVP Qualcomm and EVP T-Mobile, and former Non-Executive Director of Dun & Bradstreet and Censhare. She worked for global brands such as Munich Re, Daimler, and McKinsey. Moreover, she is an author of several publications, including her book “The Artificial Intelligence Imperative. A Practical Roadmap for Business”. Anastassia is fluent in six languages and lives in Germany.