Braving the new world
Diego Barreto’s career journey is an eclectic one. Despite graduating with a law degree from The Pontifical Catholic University of São Paulo in 2007, he spent most of his career working in finance and investor relations in Brazil.
In 2014, after taking up an MBA program at IMD, his career took an unexpected turn – the stint eventually helped him to find his voice as an author and business thinker and culminated in the publication of the bestseller The Brazilian New Economy: Why entrepreneurs are overrunning Brazilian traditional businesspeople.
Published in 2022, the book examines the rapid transformation of Brazil’s economy and how digital technologies are changing the way companies organize themselves. It also explores how businesses can navigate uncertainty and generate new business opportunities in a digital age defined by disruptive innovation and tough global competition.
Currently CFO and VP of Strategy at iFood, the largest online food ordering and delivery platform in Latin America, Barreto acknowledged the pivotal role that the Swiss business school played in his career.
“My MBA at IMD coincided with the rise of tech tycoons such as Facebook, WhatsApp, and Instagram and how they reshaped the way we communicate, network, and sell products and services,” he said. “It also made me see the importance of understanding the next wave.”
Steering the way
Barreto’s journey as an author began after he observed how traditional businesses in Brazil were losing their competitive edge in recent decades. He saw how they were often ill-equipped to tackle the challenges of the digital revolution. “Many traditional companies have been doing the same thing for the past 20 to 30 years,” he said. “They’ve lost the momentum to change, and at some point they got disrupted. They bet on keeping barriers to entry instead of understanding the new forms to build competitive advantage.”
Nevertheless, he believes these businesses could seize opportunities to create new value in the changing business landscape. “As opposed to the traditional businessman, new economy entrepreneurs are constantly searching for new pathways of growth. They understand the power, flexibility, and scalability of building digital processes, experiences, and solutions.” he said.
“Change the profile of the top executive and you’ll see how quickly a company can innovate and be more agile.”
From his research, Barreto drew an important distinction between the traditional businessperson and the new economy entrepreneur. “A traditional businessperson simply focuses on the current business performance and impact while an entrepreneur is searching for the next ‘wave’ to make his business more competitive,” he explained. “A businessperson also tends to build a company based on a particular work process as opposed to an entrepreneur, whose company is largely built on culture.”
He argues that leadership has a direct impact on the organizational agility of a company as well as its ability to grow and compete. “The more you grow a company based on process, the more linear its growth. On the other hand, the more you build a company based on culture, the more likely you’ll have an army of employees who know how to communicate, make the right decisions, and align those decisions with your overall objectives. This makes the organization more agile and helps position it to compete better in the market,” he explained. “Change the profile of the top executive and you’ll see how quickly a company can innovate and be more agile.”
Creating competitive advantage
According to Barreto, organizations must be prepared to relinquish “old economy” tactics to succeed in the new business landscape. To illustrate his point, he highlighted how new economy startups are not simply focused on making short-term profits but achieving strategic objectives through less transactional relationships with customers, and more recurring ones. He cited an example of how companies with “new economy DNA” such as iFood, Amazon, and Netflix develop customer engagement strategies to help them build a competitive advantage in the long run based on high recurrency and very low churn.
“Such relationships can be built digitally, for instance, through e-commerce, a marketplace, WhatsApp, or a super app. They not only allow you to better engage with your customers but also measure your engagement with them,” he said. “When this happens, there’s a higher chance that your customer will stay with you in this ‘long-term relationship’.”
Another way that organizations can sharpen their competitive edge and drive long-term growth in the new economy is by leveraging proprietary technology as a business tool, but this comes with a caveat: “You must build your own codes and algorithms,” he insists. “You can consider acquiring software, but your competition can do as well. That doesn’t differentiate your company from market competition. And I’m not talking about simply creating an app, Instagram page, or website. I’m talking about real levers. Each time you purchase and use a third-party technology, you are being ‘commoditized’.”
To keep pace with the digital disruptions of the new paradigm, Barreto added, businesses will also need to foster a culture of continuous learning. “You have to understand what is going on in the market to be ready for the next wave. This is why it’s important to learn new concepts and tools to keep up with market trends,” he said. “For instance, if you’re only starting to think about AI today, you’re already at a huge disadvantage because other firms in the new economy have already done so much earlier.”
E-globalization and data management
Barreto believes that the digital transformation taking place in the new economy has not only radically changed business models, but the way business is done around the world. While some believe that globalization may be in retreat in the wake of COVID-19 and renewed geopolitical tensions, Barreto has a different take on the subject.
“You can put up barriers and try to slow it down. But generally speaking it’s almost impossible,” he said. “Look at Bitcoin. How can you stop someone from trading Bitcoin? You can make more expensive or make it illegal but there is always a way to continue to use it.”
In his opinion, the world is now witnessing a new form of globalization, one characterized by the surge in cross-border data flow. And in this era of “e-globalization”, fueled by faster and greater connectivity across national borders, data management has become a strategic business imperative, including data privacy management. Of course there are setbacks due to geopolitics, but again, it is difficult to isolate one country from another.
“Look at Bitcoin. How can you stop someone from trading Bitcoin? You can make more expensive or make it illegal but there is always a way to continue to use it.”
“The possibility of data theft means business organizations may have to treat data as a liability,” he said. “At the same time, it is important to have a discussion of privacy concerns at the local level. For instance, a Chinese person would view privacy differently from a Brazilian, who would view it differently from an American.”
In the new economy where there is an increasing overlap between the workplace and the digital space, he predicts organizations will also have to take on brutally honest discussions about ethics.
He cited the example of autonomous vehicles. “If someone were to be injured or killed during an accident involving a driverless car, who should be held responsible?”