Preparing for and Responding to Disruption

Regardless of the nature of your business, you are either already dealing with disruptive forces operating within your industry or are preparing your company for change and disruption. Today’s business environment is different compared to what it was decades ago where everything was predictable and you would operate your business with greater certainty. Things have changed. Businesses across all sectors have to deal with a fast-paced changing environment and the message to current and future business leaders is “Disrupt or be Disrupted”.

Increased regulatory changes, advanced technological developments, a new breed of competitors, increased volatility and uncertainty, among other factors, are all changing the way companies operate and execute their strategies.

Companies that are failing or fail to adapt to this dynamic environment are digging an early grave for themselves. Sooner or later they will join the history books as the once regarded “Too Big To Fail” corporations.

In an era of constant change, uncertainty and increasing complexity, business leaders ought to challenge accepted ways of doing things and reappraise their business models to see if  they are still fit for purpose. Unfortunately, many people are reluctant to adapt and change. Fear of the unknown often causes people to resist change, and this at times, results in far-reaching consequences. What used to work, say five or ten years ago, might no longer work in the current environment.

As a result of this fast changing environment, companies have to adapt a highly disruptive approach to managing almost every aspect of their business. As Marshal Goldsmith nicely puts it – What Got You Here Won’t Get You There. This ever-changing environment requires a new style of leadership and thinking. There is need, on the part of companies, to completely abandon legacy ways of thinking and embrace disruptive solutions.

 

What can companies do to prepare themselves for change and disruption?

 

Acknowledge That Disruption is Inevitable

Although it is difficult to predict the future with greater certainty and confidence, it is critical for organizations to know and understand that they are operating in an environment that is very unpredictable. Surprises are everywhere and these can abound anytime. To make it worse, we now live and function in a globalized and very interconnected world. Just because you are located in certain jurisdiction does not mean that events in another jurisdiction or industry will not have any major implications on your business.

The forces driving disruption within one industry might not necessarily have a direct impact on your business, but rather, indirectly affect the operations and performance of your business. What cross-industry issues are likely to have an impact on your business now and in the future and at what magnitude?

Instead of focusing on the past alone, management and their teams should start looking at the future and anticipate those forces capable of transforming the company’s existence and its operating model. In other words, having sharp risk-sensing tools capable of identifying risks and opportunities. This includes asking tougher questions about issues affecting the future of the organization, and having the right capabilities to respond accordingly.

You must be able to quickly identify any sudden shifts in the business environment that are capable of rendering your company’s broader strategy less relevant than it was in the past. In today’s era of data and analytics, companies can take advantage of these new technologies and use them to help predict the future and make fact-based and confident decisions. The challenge for many companies is having that ability to rise above all the noise out there and obtain the right insights for effective future decision making.

Take social media technology as an example. It has changed and continues to change the relationship between brands and customers. Control of brands has shifted to consumers. Consumers are constantly talking to each other on various social media platforms about different brands – the good, the bad and the ugly. It is no longer a case of the marketing team pushing the company’s products and services to the consumers, but rather listening to them.

Unfortunately, many companies are still reliant on internal sources of data to make key strategic decisions. They have not yet embraced new systems to mine unstructured external sources of data and tap into consumer conversations to hear what is being discussed about their products and services. Companies need to be reminded that managing in this environment requires them to adapt to this transition, get a grip on social media and start holding profitable conversations with consumers.

Given the massive proliferation of data, focusing on the right information is therefore a must.

 

Challenge Current Strategic Thinking

It is one thing acknowledging that forces of disruption are inevitable, and another thing to challenge current strategic thinking. What do you do when you have identified the various forces threatening to disrupt your business? Do you sit down, relax and allow nature to take its course?

Unfortunately, in today’s hyper-competitive and complex business environment, once an organization has identified potential disruption forces, it is critical to review the organization’s strategic choices and find ways of responding to the threats or opportunities presented on the table. This might require you to review your market and product portfolios and select the best candidates for investment. Some of the questions that you might ask yourself are:

  • Given the finite resources at our disposal, what are the strategic choices that  we should focus on and invest in?
  • Which markets, customers and segments should we invest in now to position ourselves for the future?
  • Who are our important stakeholders and how do we plan to satisfy their multiple sets of demands?
  • How best can we realign our value chain in order to optimize our business performance and competitive advantage?

For many companies, their market share is under pressure from intense competition by current and new competitors. In order to survive and not disappear into the thin air, these companies must adapt and transform their business models. Strategies that might have worked for them in the past are now deemed unreliable. As a result, these companies have to respond faster and differently compared to their competition.

What is key is getting everyone within the company on the same journey. For people at the bottom to shed legacy ways of thinking, the tone of message from the top must be right. Leaders have the duty to provide a clear framework and steps required to move the organization from one position to the next. They must clearly communicate the plan to everyone, from top to bottom, and ensure the response plan is aligned with the overall company strategy and easily understood organization-wide.

When there is full buy-in and accountability from the top, there is a higher probability of buy-in from the lower level employees. A command-and-control approach cannot keep pace with a dynamic business environment.

 

Execute the Plan More Effectively

Various research findings have concluded that most companies, irrespective of industry, are good at planning but poor at effectively executing these plans. A lot of work and resources goes into these planning processes, unfortunately, these yield unsatisfactory results.

The difference between success and failure frequently comes down to how the organization implements its strategic plan. So often, there is a misalignment between strategy and implementation, resulting in poor performance. Preparing and responding to disruption requires business leaders to craft a simple to understand, but effective strategy, that is communicated consistently across the organization.

Clear communication of strategy throughout the company is key to creating alignment. Additionally, clear communication  helps establish common goals for the different business unit managers to work collectively toward. On the contrary, poor communication creates barriers to effective execution. Getting everyone to work towards the same objectives improves cohesion.

In order to make sure that you are moving in the right direction, you must design and implement KPIs that measure progress towards achieving strategic goals. This helps set expectations and help identify any problems regarding execution.

Executing the plan effectively also demands the organization to have the right talent in place to implement the strategic choices that have been made. In most cases, lack of talent in key strategic positions has been proved to inhibit business growth. It is therefore imperative for leaders to know and understand that the capabilities required for success today are quite different from those that were needed in the past.

For example, the finance function of the past had chartered accountants as the team members. Today, the function has people with diverse backgrounds. This is because, as the role of the finance function evolves from being a bean counter to a bean grower, managing the function requires very different capabilities.

The onus is therefore on the company to develop and implement an effective talent sourcing strategy that attracts and optimizes talent and resources, and ultimately improve business performance.

Now or later, every business will experience some form of disruption. Business leaders must understand that disruptions will happen, and with each disruption comes risk and opportunity.

Are you prepared for the change and ready to respond?

 

 

 

 

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

  • Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
    • Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
  • When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
    • Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
  • The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
    • Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
  • It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
  • Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
    • Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
  • Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
    • Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
  • Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
    • Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

  • It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
  • Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
  • Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
  • Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
  • Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
  • New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

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Preparing for Geopolitical Shocks

Geopolitical instability has steadily increased over the past years, and uncertainty in the global economy is at an all-time high. Thanks to globalization and advances in technologies, we now live and work in a tightly interconnected world, one in which the boundaries that previously separated domestic from global issues have disappeared.

Threats are no longer confined to traditional political borders, social structures, and geographic boundaries. Geopolitical shifts have dramatically altered the global economic landscape and brought politics and business together.

The rise of China as an economic and politically influential power has threatened the dominance of the United States as the world’s largest economy. Although the opening of China and a market of 1.4 billion people have benefited both countries, it has also intensified competition and sparked U.S. economic and technological espionage accusations against China, leading to strained relations between the two giants.

U.S. companies operating from China have felt the impact of this tense relationship. The opposite is true for Chinese companies in the U.S.

Across Europe, national populism is on the rise and now a serious force. In 2016, the United Kingdom shocked the world when it voted to leave the European Union, generating reverberating effects across markets.

Banks and financial services companies that once benefited from the EU passporting system have had their cross-border banking and investment services to customers and counterparties in the many EU Member States impacted, causing them to reimagine their value proposition models.

The recent invasion of Ukraine by Russia is another example of a geopolitical event that has had devastating effects on human livelihood and businesses. Although the conflict between the two countries has risen over the years, I think it’s fair to say that few political analysts, governments, and businesses predicted a war to happen.

The war has created a humanitarian crisis, rattled global commodity and energy markets, caused prices to soar, and forced many international companies to temporarily suspend their Russian activities or completely cut ties with the country.

Global supply chains which are already fragile and sensitive due to the COVID-19 pandemic are now facing new challenges in the aftermath of the Russia-Ukraine crisis. Multilateral economic sanctions have been imposed on Russia. A state of affairs that was unthinkable months ago and is now threatening to derail the nascent global economic recovery from the COVID-19 pandemic.

Given the global domino effect of geopolitical events and the shrinking of the distance between markets and politics, the need to better understand and more effectively mitigate geopolitical risk has become more urgent. The business impacts, whether direct or indirect, vary by company type and industry sector.

Your company may not be able to prevent wars between nations, but you can anticipate and better prepare for geopolitical shocks:

  • Integrate strategy, risk, and performance decision-making. Consideration of risks to business success is an important part of the strategy selection and execution process, not an afterthought.
  • Develop a better understanding of geopolitical trends and how they are changing. For example, what are the megatrends in business, politics, and technology that are making geopolitical risks more diverse, prevalent, and consequential?
  • Assess the links between these geopolitical events and business performance. What are the events that matter most to your business? For example, how might current global political trends pose physical, business, and reputational risks to your parent organization?
  • Anticipate how these trends are likely to play out in the short, medium, and long terms, and develop mitigation strategies for each geopolitical scenario. Proactively anticipate and plan for radically different worlds, instead of reacting to problems as they arise
  • Review your mitigation strategies as the world changes. Are they effective enough in case of a major shock?
  • Develop capabilities for continuous learning to anticipate, address, and recover from geopolitical crises.

What do you think?

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