Rethinking Growth Through the Pandemic and Beyond

Whether you are looking at it from an individual, social or economic point of view, there is no doubt this calendar year 2020 is an aberration. As we partied and celebrated into the New Year with our loved ones, families, friends, work and business colleagues, the ambience was positive.

Fast forward a couple of months ahead, the outlook is grim. COVID-19 has changed the structure of just about every experience: how and what we buy, how and where we work, how we interact with other people.

Either because we suffer from micro and macro-economics myopia or we have a natural tendency to exhibit overconfidence bias even when its not necessary, many of us, including experts, failed to infer the implications and gravity of the proliferation of the novel coronavirus in China.

We assumed COVID-19 was transient thus we acted indifferently and continued with our old normal.

Then suddenly, the number of cases reported globally mushroomed. And to stymie the outbreak, governments in greater parts of the world enforced economic lockdowns except for essential businesses and service providers.

Economic activity came to a screeching halt and global supply chains got interrupted. Businesses, that over the years, have moved at a snail’s pace to digitally transform their operating models found it arduous to swiftly transition to online product and service delivery channels.

Many businesses went bankrupt, laying off millions of employees during the process. Overnight, livelihoods were turned upside-down.

Social gatherings have become a distant memory, and as social beings who are accustomed to physical interaction, we have progressively adapted in this new world and somehow learned how to lead a reclusive existence.

Are we there yet?

As of this writing, the vaccine for the novel coronavirus is yet to be discovered. The economic consequences of the pandemic thus far are significantly severe and provided a catalyst for the COVID-19 recession.

Although governments have started to relax lockdown restrictions, and are slowly reopening their economies so that they can start to grow again, what the recovery might look like is unclear.

Economic expert views on the nature of recovery are divergent. There is no consensus on whether COVID-19 economic downturn will ultimately play out to be a V, U, W or L-shaped recession.

Thus, the challenge for the business today is deciding how to effectively and efficiently commit the organization’s stretched resources to service existing and future customers, and also markets that will emerge in a distant and inherently unpredictable future.

Do you plan and prepare for a:

  • Sharp economic shock followed by a quick recovery in growth?
  • A longer period of slow trading before a rebound, which takes many months or even years for the economy to recover?
  • Double-dip recession, in which the economy begins to recover rapidly, but then falls into a second period of decline? or
  • An extended downturn, in which growth falls and does not recover for years, creating the long shape of the L?

That volatility, uncertainty, complexity and ambiguity is the norm today is an axiom. Therefore plan and prepare for a future that will be notably different from the one you may have imagined at the beginning of this year. A future that consists of different scenarios panning out.

Sketch scenarios and their outcomes, opportunities, and breakthroughs and consider what they would mean to your business. The exact scenario does not have to materialize for the process to pay off.

However, the process stimulates new thinking, expands imagination, and helps connect various insights and formulate action plans that should be taken today to protect the business’ future.

Don’t focus too narrowly on costs at the expense of innovation

In times of crisis, it’s often easier to focus on the short term future of the business and park long term strategic ambitions. The reason being that organizations find themselves defaulting into the survival mode.

Due to a decline in economic activity, working capital management and cost reduction become top priorities. Although these are necessary, you need to understand that dealing with this crisis is not an either/or question, but rather a case of managing the crisis and managing for the future.

The coronavirus pandemic has changed the experience of being a customer, an employee and a citizen. Hazy is how people’s behavior and underlying values will change for the long term, but what is crystal clear is that your business has to adapt and become agile.

Despite how successful they have made you, your old business model, past competencies and experiences won’t guarantee you success in this new world.

You have probably heard the old adage “Never waste a good crisis.” Use this pandemic as an opportunity to rethink the basics, explore and learn. In other words, revisit the company’s direction in light of external changes.

Look at your business from the outside in and discuss what is changing not only in the competition but also anywhere in the value chain, and in the global geopolitical climate.

The coronavirus pandemic has exposed the frailties of the traditional planning processes and necessitated a paradigm shift in how leaders should prepare and steer the organization to adapt in tune with sudden changes in the environment.

Leaders often miss signals that could be harbingers of change because they are immersed in the daily operating details of the business. Instead, think creatively, and see the bigger picture beyond the transactional details of day-to-day operations in the short term.

Change doesn’t wait for your annual planning cycle, hence it’s vital to regularly go through the process of trying to identify and comprehend various seeds and catalysts for change.

Create change not just learn to live with it

Rather than wait for the COVID-19 tide to turn, a number of companies have pivoted on their existing capabilities to make quick strategic changes.

For example, distilleries started producing hand sanitizer, automotive companies produced ventilators, and a shoe manufacturing company started making stylish face masks.

One key thing the above companies have in common is they were all able to conceive a new need, or redefine an existing need and business model.

Legacy companies often make the grave mistake of ignoring the risk of not embracing a new and dynamic business model and sticking too long with a business that is ripe for transformation.

The mere fact that the change does not fit your core concept of the business including your core capabilities doesn’t mean you should play ignorant.

Track companies that are using new technologies to transform their business, even if they are outside your industry and begin to imagine how some of them might decimate your industry and reshape your market place. For instance:

  • Has your business model changed and how are you adapting to that change?
  • How are your competitors adapting and re-purposing their businesses into new operating models?
  • How are you reorienting your business in a socially distanced operating environment?
  • How can you harness the power of technology to create value, at the same time achieve efficiencies that were unimaginable pre-pandemic?

You need to build new capabilities and structurally adjust your business operational model, not only to navigate this crisis effectively and efficiently, but also to reach the new future in a position of strength and more resilience.

Reassess the organization’s process and cultural anchors that are hindering progress to make smart growth bets. Any business transformation requires people to alter their methods of working in big ways and small.

As you navigate through this pandemic, always remember that each crisis reveals a future growth trajectory that your business could explore and exploit as long you widen the lens through which you see the world without being hamstrung by an existing core competency.

Identify the obstacles you need to overcome and the obstructions that are currently standing in your way, develop a growth mindset and get offensive.

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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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