Some say strategy is vision, others say strategy is process and tactic. It’s one of those things everyone has a different take on. To pin down what strategy is, I started by looking at how today’s thought leaders — McKinsey, Harvard Business Review, and Monitor Deloitte — see strategy, and I’d like to share those insights with you.
McKinsey’s Take on Strategy
Strategy is… 1. An integrated set of actions to create a sustainable competitive advantage over competitors.
2. A way of thinking, not a procedural exercise or a set of frameworks.
The 4 Lenses Framework
McKinsey believes a firm should look at strategy from four lenses: financial, market, competitive advantage, operating model.
Through the financial lens, we benchmark our financial performance against peers. It’s an objective baseline for us to assess and prioritize new initiatives, and to understand what the future looks like if we follow our current trajectory.
Through the market lens, we consider:
Which market segments we can grow profitably in over time
Other attractive markets we should consider entering
Through the competitive advantage lens, we try to figure out what it takes to capture value and win in our current markets. We determine if we can win, win quick enough, and win sustainably.
Finally, through the operating model lens, we allocate and design our people, process, and technology resources to inform strategic objectives.
McKinsey’s 4 Lenses Strategy Framework
The Building Blocks of Strategy
Below are the core building blocks McKinsey identified.
If the I is not expanded, value is merely shifted from the firm’s margin to their customers, their suppliers, or their staff.
Monitor Deloitte’s Take on Strategy
Strategy is… An integrated set of choices that positions the firm in its industry, to create sustainable advantage relative to competition and superior financial returns.
The COVID-19 crisis has exacerbated the existing challenges facing businesses and exposed new risks that must be addressed. To better understand these challenges, Deloitte Global conducted a survey of 351 respondents from around the world in April and May 2020, at the height of the initial global COVID-19 lockdown.
Through this survey, we sought to better understand the value that c-suite, finance and audit committee executives, investors, shareholders, and board members place on audit as a result of COVID-19.
The results unveil some of the most pressing COVID-19 concerns, many of which are still relevant today, as well as executives’ changing perceptions about the role of auditors in approaching these challenges.
The importance of assessing risk
Deloitte’s survey reveals respondents were seeking insights that could help them assess the risk presented by COVID-19 or similar “black swan events.” In fact, 90% of executives in our survey felt that management could benefit by taking a page from the auditor’s playbook in assessing risks from such events. For example, adhering to sound internal controls principles and practices, employing robust systems of quality control, and entrenching a culture of ethics and integrity can go a long way to helping an organization remain resilient in times of crisis.
Businesses that seek to understand the long-term impacts of the crisis on their operating models are more likely to find new ways to quickly adapt to the post-COVID-19 world. To navigate this emerging environment, all participants in the financial reporting ecosystem from companies and boards to regulators, auditors, and investors, will need to continue to participate in regular and transparent engagement.
Successful businesses will find opportunities to learn from the COVID-19 crisis and use their experiences to prepare for future disruptive events. For example, some companies—Deloitte included—are leveraging their cloud infrastructure and investments in innovative collaboration tools as well as virtual learning.
Addressing resiliency concerns
While the pandemic has exposed weaknesses in the ways some businesses operate, it’s also ushered in a new reality of virtual working. Driving a reliance on digital technology and collaboration tools has left many executives concerned about the long-term efficacy of their pre-COVID-19 business strategies. When asked about the resilience of their companies during COVID-19, the two largest concerns for respondents were viability of their business models (e.g., impacts on infrastructure, logistics, technologies, ongoing operations, and go-to market strategies) (57%) and accounting and financial reporting issues (54%).
When viewed by geography, respondent concerns shifted somewhat. Brazil, France, India, and the US rated business model concerns the highest. European respondents in general showed greater concern for the health and well-being of their employees (49%), and Asia Pacific respondents’ had the greatest concern for customer relationships and future demand (49%).
The pandemic has impacted industries in different ways, and the results reflected these differences in executives’ concern by sector.
For example, consumer products companies cited financial resilience (capital stability and liquidity) and liquidity as their top concern (64%), while companies in the financial services industry were most concerned with the brand and reputation of their businesses (55%).
Evolving the financial reporting ecosystem
The economic and health crisis resulting from the pandemic has also caused the process of financial reporting to be far more challenging than before. Professionals must now deal with travel restrictions which prevent routine in- person meetings and activities, market volatility that impacts estimates and valuations, challenges of cross-border data sharing, and complex tax implications of work-from-home mandates.
It is therefore unsurprising that 54% of executives shared that navigating accounting and financial reporting issues was a top concern—this was an especially common concern among investors. They are seeking objective insight about systems of control and quality that informs guidance in difficult decisions relating to forecasts, estimates, and other judgments related to valuations and complex accounting treatments.
Deloitte Global
When asked what actions their businesses were planning to take to respond to COVID-19 challenges, 63% of executives said they were focusing on communications with investors and stakeholders on business challenges and impacts. This response amplifies the positive potential impact that constructive engagement throughout the financial reporting ecosystem could have on markets.
Many regulators have acknowledged the uncertainties created by COVID-19 and emphasized the need for high-quality reporting that includes the transparent disclosure of new risks and assumptions made. These comments have provided some assurance for reporters and users of financial statements alike, and more regulator input will go a long way in reinforcing trust and reliability.
Access to timely, transparent, meaningful data and insights to inform financial reporting and associated disclosures remains critical. It enables stakeholders— investors, employees, suppliers, governments, and regulators—to identify which companies have so-far mitigated the disruptive effects of the pandemic.
Looking forward
As businesses continue to adjust to the new normal, understanding the long-term effects of the pandemic and what actions we all need to take is critical. COVID-19 has revealed just how disruptive events can be on “business as usual” and emphasized the need for future planning. With threats like climate change ramping up there is a lot to be considered and planned for. Further, the pandemic has brought into sharper focus the need for transparent and reliable information beyond historical financial statements.
Doing business has been forever changed, including how auditors operate. It is clear that the auditing profession has an important role to play in advancing economic recovery. This is why the conversation around the future of audit is so critical at this moment in time.
Jean-Marc Mickeler is the Deloitte Global Audit & Assurance Business Leader. He started his career at Deloitte in 1994, overseeing the audit of several major international banks. Jean-Marc holds an MSc in Management from Amiens Business School. He is a registered Statutory Auditor and an ACPR registered auditor. Jean-Marc has also served as the Chairman of the Professional Club Control Commission of the DNCG (Professional Football League) since 2017.
Around the world, COVID-19 continues to spread and concern continues to grow. With much still unknown about the virus, authorities are urging those in higher-risk areas to stay home, even forcibly locking down some countries.
For businesses, this poses some unique challenges: How do we support the health and safety of our people, continue to serve customers and clients, and do what’s in the best interest of our communities? How do we foster continuity in times of crisis?
Since the outbreak of COVID-19, Deloitte has been encouraging our people to work remotely so they can safely continue serving clients with minimal interruption. Flexible work is nothing new for us. Deloitte first began implementing formal and informal flex work arrangements with an eye toward talent retention decades ago.
What exactly is flexible working? For Deloitte, it means working remotely, predominantly from home; adjusting schedules to accommodate team, home, and client situations; adopting technology solutions to enable seamless collaboration; and teaming and flexing to meet fluctuating business needs. It also may encompass other approaches, such as abbreviated or flexible work hours; working longer, but fewer days each week; and job sharing.
When Deloitte began to roll-out its flexible work programs, we were not thinking about potential pandemics or other global crises. We were looking to provide our people with better work/life balance in today’s “always on” and “always reachable” work environment.
What we’ve learned along the way is that flexible work arrangements can, indeed, be effective alternatives to office-based work—but only as long as the individual, organization, and client are aligned on expectations and rules of the road. That means fostering a workplace culture that recognizes and rewards productivity and performance, not presenteeism. It means ongoing efforts to combat the misconception that flex work is gender-driven. And it means encouraging transparency at all levels so employees can establish work schedules that enable them to prioritize their work and their well-being.
Another valuable lesson learned after years of leveraging flex work is that it can have some unintended, but very welcome, benefits. The use of flex work in mitigating fallout from COVID-19 is a powerful example of that. But there is more.
In recent years, we have found that flex work arrangements can help with Deloitte’s aspirational goals to achieve gender parity. In particular, flex work provides working parents the flexibility that a traditional office can’t, while allowing them to continue pursuing their professional aspirations. It has been reported that companies that enable flexible working have almost three times as many female leaders as traditional companies.
We also learned that flex work can help advance progress toward Deloitte’s environmental sustainability ambitions at a very critical time. When employees work from home rather than commute—by car, train, or plane—they help, in small but meaningful ways, reduce the organization’s carbon footprint. Meanwhile, those would-be commuters get to pocket the money they would have spent on travel, and can even live in lower-cost areas that are farther from urban centers. Organizations can save on real estate and other overhead costs, as well.
The data proves it: Among those who work remotely, both part- and full-time, productivity levels skyrocket—77% feel more productive when working remotely, and 30% feel they’ve accomplished more in less time. Flex workers also take shorter breaks, fewer sick days, and less vacation time. Clearly, flexible work works.
It is hard to know exactly how the COVID-19 situation will unfold. But what we do know is that flex work is putting businesses in a powerful position to help mitigate the impact. My hope is that we continue to leverage that influence long after the threat of COVID-19 has passed. Because when businesses begin to see flexible working less as a back-up option and more as a frontline solution, we can deliver on far more than just the bottom line.
Michele Parmelee is the global Chief People and Purpose Officer at Deloitte. In this role, Michele works to build the firm’s reputation, create a differentiated talent experience, develop insights, and promote and protect the Deloitte brand. In addition, she leads the Office of the Deloitte Global CEO and Deloitte Global Programs. She is a member of the Deloitte Global Executive Committee. As a consulting principal in the United States, Michele has 18 years of experience at Deloitte working with Financial Services clients in the areas of strategy and operations.
Tax and legal professionals today face increasing complexity, risk, and ambiguity as technology, regulatory and business transformation converge. It’s easy to feel overwhelmed by the change and the infinite number of strategic options. But embracing this change is manageable with the right tools and the right partner.
Deloitte is helping clients navigate this increasingly complex, digital world by leveraging the combined strength of our technology capabilities from our Consulting and Tax & Legal practices, and by placing a continued emphasis on technology investment and skills development to prepare talent to meet the evolving needs of the business.
Harnessing Technology to Adapt to Change
Businesses in all sectors and regions are experiencing the opportunities and challenges that come with the immense changes of the Fourth Industrial Revolution. Even the most traditional business areas, such as tax and legal, are not immune. Technologies are disrupting business as we know it and in response, global tax and legal systems must transform and adapt to keep pace with these new business concepts and models. And organizations need to invest in their tax and legal departments to ensure they can operate confidently and effectively while minimizing risk.
Tax departments are tasked with executing flawlessly at a fundamental level: Ensure compliance, know the regulations and their implications, be precise, account for all the data, stay ahead of risk, and predict outcomes. And they are asked to do it all in an environment of exponential increases in data, added responsibility within the business, and new mandates from regulators.
As a result, tax professionals are moving to automate and apply analytics to help account for more data and to achieve greater precision. Technologies such as robotic process automation (RPA), natural language processing (NLP) and artificial intelligence (AI) give tax professionals the ability to work with all the information available in massive data sets.
To not only see what has happened, but to more confidently predict what will happen. To be insightful and focus on implications and outcomes rather than being consumed by ensuring the accuracy of the numbers and on-time filing. And to do all this while meeting the increased transparency demands of regulators – who themselves are likely to use robotics and AI to collect and analyze companies’ tax data.
Likewise, technology has become a critical tool to help legal departments support rapidly evolving demands from the business and manage regulatory change.
Using Deloitte Tax and Legal professionals as an example, when the European Union’s General Data Protection Regulation (“GDPR”) came into force in 2018 along with the UK Data Protection Act, Deloitte UK’s Tax group engaged Deloitte Legal to assess the scope, and remediate where necessary, approximately 45,000 engagement contracts.
In the past this would have required a very lengthy manual assessment which would have been inefficient and prone to error as contract negotiations are typically buried in emails and hard to track. Instead Deloitte exercised a combined approach using dTrax, a proprietary artificial intelligence-enabled contract lifecycle management technology, with the support of skilled Deloitte Legal resources to simplify, automate, and streamline the contracting process.
The tool allowed Deloitte Tax client relationship owners to provide details about their engagements, which were then assessed by dTrax to determine whether the corresponding engagement contract required remediation. Where remediation was required, dTrax automatically generated a letter varying the Data Protection clause, which was sent directly to the client.
If negotiation of the Data Protection clause wording was required, Deloitte Legal resources were able to negotiate by reference to playbooks built into dTrax. This approach drove consistency while keeping contract negotiations managed and recorded within a single platform.
By combining technology with skilled resources, Deloitte UK’s Tax team was able to alter the business model, allowing for up to a 50 percent reduction in the number of required legal resources, a 40 percent reduction in the delivery turnaround time per variation letter, and an up to 60 percent reduction in the overall costs. Ultimately, the team gained greater visibility and insights into their contract terms and conditions, which increased their overall compliance and reduced risk.
Fueling Talent with Technology
While digital transformation is a tech-enabled shift, it requires a collaborative effort to change mindsets and embrace and advance transformation. A successful digital transformation demands a cultural change with a focus on continuous learning and embedding technology into the way we work.
Tax professionals have traditionally been tied up with compliance and the technical side of tax. Yet in this digital age, a robot can now do the data checking and digital tools can classify line items. So, today’s, and tomorrow’s, tax professional needs to understand the processes behind tax, be able to code, interpret data and make decisions. They have the opportunity to provide far more valuable and strategic input to their organizations, but they must be more adaptable to work with technology to enhance and reinforce their advice.
From the legal perspective, lawyers will need to have a broader range of skills to be ready for the legal landscape of tomorrow. Tomorrow’s digital lawyers will need to think and operate in a different way and they will need significant management, business strategy, technology and consulting capabilities to be able to deliver real value to clients. Adoption of the right tools, such as AI and data analytics, will enable legal teams to maximize efficiencies across multiple functions, standardize and adopt best practices, and help gather insights to support better decision making for the business.
Inspiring Confidence Today and Into Tomorrow with Technology
Deloitte has invested heavily in technology and we are accelerating our efforts in order to help both our own professionals and clients stay ahead. With more than 200 technology solutions in place, including robotics, AI, and machine learning capabilities, Deloitte Tax & Legal is helping clients manage compliance, bridge gaps between countries’ accounting principles, and manage research and development incentives claims. As we navigate the Fourth Industrial Revolution, having a tech-savvy foundation in our people and our processes will help set ourselves and our clients up for success and ensure our ability to work confidently now and far into the future.
Based in London, Philip Mills is the Global Tax & Legal leader at Deloitte. Prior to this, he led the Global Business Tax practice for two years and the UK Business Tax practice for seven years, amongst other roles. Philip also leads the Global Tax & Legal Executive and is a member of the Global Executive Committee. He has a Physics Bachelor of Science degree from Liverpool University, is a member of the Institute of Chartered Accountants in England and Wales and is a member of the Institute of Tax.
For nearly 20 years, Philip focused on M&A tax, particularly on Private Equity, Real Estate and Hedge Funds. He has worked on some of the more significant, large and complex European transactions in recent years as well as supporting the Fund advisers. Most recently, he took on advisory roles to some of Deloitte’s largest multinational corporate clients.
In business, disruption can promote innovation, growth, and agility. But, what impact is continuous change and instability having on people, especially younger generations? Deloitte’s 2019 Millennial Survey takes a look at the human side of disruption and its effects on millennials and Gen Zs. Learn more about the survey’s key findings in the infographic below. For more information and the full report, click here.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Deloitte provides audit, consulting, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries bringing world-class capabilities, insights, and high-quality service to address clients’ most complex business challenges.
Despite current global economic growth, expansion and opportunity, millennials and Generation Z are expressing uneasiness and pessimism—about their careers, their lives and the world around them, according to Deloitte’s eighth annual Millennial Survey. In the past two years especially, we’ve seen steep declines in respondents’ views on the economy, their countries’ social/political situations, and institutions like government, the media and business. Organizations that can make the future brighter for millennials and Gen Zs stand to have the brightest futures themselves. Learn more: https://deloi.tt/2Jt17HF
Photography by Maarten van den Heuvel on Unsplash
