OUR BEST IDEAS, QUICK AND CURATED | OCTOBER 28, 2022

This week, how Europe’s business leaders can place smart bets on the future. Plus, e-scooters get a leg up with investors, and Tech for Execs on the importance of creating a cloud “sandbox” for developers. 

Continental drift. Inflation is rising, business signs are weakening, war is continuing, winter is coming: Europe at the tail end of 2022 is facing headwinds that make the future more difficult to imagine than usual. An energy crisis, born of the Ukraine conflict, threatens to derail the net-zero transition. Semiconductor shortages and labor shortages remain. The latest McKinsey scenarios, undertaken in partnership with Oxford Economics, suggest that European GDP will most likely contract overall in 2023.

Growth mindset. Today’s European business leaders are accustomed to crisis, given the era’s myriad monetary and political tests (not to mention a global pandemic). In an article on this defining moment, senior partners Hemant Ahlawat, Homayoun Hatami, María del Mar Martinez and their colleagues write that to flourish, European organizations have to understand that playing defense in a volatile environment isn’t enough. Businesses must anticipate and respond to crises and opportunities, placing smart bets on the future—even a murky one.

Gaming out scenarios. One concrete way to augment organizational resilience is by scenario planning rather than forecasting, which has failed to capture recent events such as supply chain problems. Scenario narratives can be developed and stress-tested in analytics-based simulations and connected to early-warning systems based on key indicators. For instance, a leading automotive company created two hypothetical scenarios—a technological disruption and a market breakdown—then assessed the potential impact of each scenario on the business. The analysis suggested that up to 60 percent of sales losses could be mitigated, leading to a decision to diversify geographically, among other solutions.

Fluid analysis. Analytics and data are key to this approach, as we saw during the 2008–09 crisis, when financial institutions responded to stress-test requirements. Like then, companies can widen the scope of their scenario planning by creating triggers and regularly revisiting and adjusting their goals as the environment changes. A one-time analysis won’t be enough.

Betting on future growth. European business leaders face a deeply unsettled economy, with potentially existential risks for those companies with weaknesses in their balance sheets and business models. We see this in the technology arena, where Europe is vulnerable across all sectors on growth and competitiveness, hindering long-term resilience and jeopardizing future growth and strategic autonomy. Reacting swiftly during a downturn can position companies to grow more over the long term. Given seismic events within its own continent, a robust Europe is needed now more than ever.

Off the charts

Investors get a kick out of e-scooters

Since the start of the COVID-19 pandemic, micromobility companies (those providing bicycles, mopeds, and e-kickscooters) in Asia, Europe, and North America have captured nearly $4 billion in investments. The share of those investments going specifically to e-kickscooters jumped 50 percentage points from 2018 to 2022, McKinsey analysis shows.

INTERVIEW

Toxic no more: How to finally address employee burnout

A recent McKinsey Health Institute report on employee burnout finds that one out of four employees around the globe experiences toxic behavior in the workplace. Some suffer through it in silence; some lash out; some just leave. In a recent interview with McKinsey, Tessa West, New York University psychology professor and author of Jerks at Work: Toxic Coworkers and What to Do About Them, discusses the cognitive, emotional, and physiological effects that workplace toxicity can have on individuals and their coworkers, and how stress can “cascade” through the organizational levels. She also talks about strategies for identifying and tackling toxic behaviors and related stress on personal and systemic levels.

More on McKinsey.com

Winners take all in global apparel, fashion, and luxury | Luxury and sportswear have delivered consistently high returns to retailers through turbulent years. But outliers from other categories offer insights into how companies can outperform in a volatile global apparel market.

Managing software cybersecurity risks | As software-related vulnerabilities continue to grow, companies need new programs and management techniques to innovate faster and to create safer, more secure digital products.

Embedded finance: Who will lead the next payments revolution? | Customer loyalty apps, digital wallets, accounting software, shopping-cart platforms: the possibilities for embedded finance keep growing. Here’s how incumbents and new entrants can claim a share of the market.

TecH for execs

Ready to play in your sandbox?

Our experts serve up a periodic look at the technology concepts leaders need to understand to help their organizations grow and thrive in the digital age.

What it is. A cloud development environment, or “sandbox,” is a dedicated area where software developers can develop code to be deployed to users quickly. It can be created in minutes via infrastructure as code (IaC) automation.

Why it’s important. Companies are looking to increase the clock speed of their organizations. How quickly developers can create and deploy code is a critical component in enabling the business’s overall speed.

In the past, developers would develop directly on their laptops. While that approach can work in isolated cases with a small number of teams, it does not scale. Problems include nonstandardized tooling, underpowered laptops unable to process and run big data, and bug-ridden code that worked locally on a developer’s laptop but not when deployed more broadly.

Development environments, or sandboxes, solve these issues by being a self-service model. Development teams (sometimes called agile pods or squads) can set one up within a broader cloud environment, with standardized tools (used to develop, store code, test, package, and deploy code), dedicated memory, and compute capabilities, as well as access to data.

What you can do about it. Developing an effective self-service sandbox capability can be daunting for some engineers, given its complexity. Talk to your chief information officer about internal developer platforms (IDPs), a capability that simplifies the process of provisioning infrastructure, security, and tooling through a user-friendly interface. And ask whether the platform engineering team can provide a set of standardized common tools that all sandboxes can take advantage of, such as asset repositories, testing tools, or even standardized monitoring tools.

What technology concepts would you like us to help explain next? Let us know.

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