“Innovation is the ability to see change as an opportunity – not a threat.” – Steve Jobs
In January 2020, the World Economic Forum published a survey revealing the top five predicted major risks for economic disruption this year:
1. Extreme weather
2. Climate action failure
3. Major natural disasters
4. Biodiversity loss
5. Human made environmental damage
With the benefit of hindsight, it is now terribly obvious that they might have forgotten one!
We are just past the halfway mark of 2020, and have to acknowledge that a global pandemic can do an unbelievably effective job of disrupting pretty much everything and bringing the world to a near standstill. In just a few months, we’ve witnessed unprecedented challenges to our global supply chains, along with economic and social disruption across every industry.
Despite all this negativity, I’m beginning to think there might be something positive in it as well. For those leaders who are paying attention and willing to do some hard work, now is an excellent time to be thinking about how to innovate and transform your organization for the future.
In effect, disrupt your organization before someone (or something) does it for you.
Be the Fire and Wish For the Wind
Disrupting your organization is not an easy concept to embrace. It is a bit like cutting off the proverbial limb you are sitting on!
The opening section of the exceptional book, Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb, is titled “How to love the wind.” It begins by comparing our desire for stability to that of a candle. We want to protect the candle’s flame from the wind, to prevent it from being extinguished. Yet, a fire uses the same wind to fan its flames and grow stronger in the process.
“Wind extinguishes a candle and energizes fire.”
He then makes an analogy to VUCA forces, “Likewise with randomness, uncertainty, chaos; you want to use them, not hide from them. You want to be the fire and wish for the wind. This summarizes this author’s non-meek attitude to randomness and uncertainty.”
So what is the takeaway?
The immediate, pragmatic, and safe response to getting hit with a crisis like the global pandemic, is to protect the candle. Our natural inclination is to save ourselves, our loved ones, our organizations, from the overwhelming risk and danger.
However, the VUCA forces in the environment are not going away. Not today. Not ever. If anything, they are only going to become stronger. Therefore, it makes logical sense to embrace the uncertainty and volatility, to make it the new telescope that we view the world through, and use it to sharpen our strategic plans for the future of the organization.
Embracing Change
In the business world, change is the only constant.
Strategic leaders must be receptive to change. Look for it. Embrace it.
Whether it is AI and machine learning, or robotics, or the gig economy, or the pandemic…almost every organization in every industry faces severely disruptive, if not existential, threats every day.
The dynamic forces of free markets don’t grant immunity to any individual, or any organization. Therefore, the best solution is to embrace it.
Here is a great data point that demonstrate the level of market disruption, churning, and creative destruction in the global economy: Only 52 of the original Fortune 500 companies are still in existence today. Driven by technology, innovative new business models, and VUCA market forces nearly 9 out of every 10 Fortune 500 companies that were on the list in 1955 are gone, merged, or contracted.
If you need some extra motivation, here’s a great example from recent business history: Kodak.
Kodak was at one time the dominant global provider of camera film, photo paper, and cameras with over a 90% market share. Then complacency (and a healthy dose of corporate hubris) set it. Their leadership refused to acknowledge the existential threat of digital photography. After seeking bankruptcy protection in 2012, the company has had to go down a long and painful road of reinventing itself in the face of the digital revolution. Today it is a mere shell of its former self.
The kicker to this story? Kodak actually invented the digital camera in 1975 but did not commercialize it out of fear of cannibalizing their core business. Ouch!
Strategic Suggestions
Are you a leader of an organization facing disruption from marketplace competitors and contemplating the potential impact of VUCA forces in your business environment?
Here are a few strategic suggestions for how best to navigate through it:
- Focus on the customer. At the end of the day, if you don’t have a customer, then you don’t have a business. Therefore, it makes a lot of sense to listen to them. Understand their needs, wants, desires. Get to know customers so well that you can begin to anticipate the future and provide them what they don’t even know they need, want, or desire yet!
- Study the market. Markets for every industry are crowded and complex. Technology innovation is only making it more cloudy and confusing for buyers and sellers in the ecosystem. The solution is two-fold: Get crystal clarity on your ideal client, so that you truly understand their wants and needs. Then, you need to nail your positioning and value proposition so that your organization is so clearly differentiated that only you can provide the solution they need.
- Think like a startup. Startups usually begin with nothing but an idea. They have no clients or products to protect. No corporate hierarchy or political backstabbing to battle. Just a blank sheet of paper and a passion for developing something new or improved, and then bringing it to the market. This mindset, and way of working, is something that established organizations would benefit from.
- Question everything. This suggestion is closely related to the previous bullet on thinking like a startup. Many organizations are not willing to revisit their business models, operating assumptions, or other “sacred cows.” This myopic thinking creates huge strategic blind spots. The answer? Be inquisitive. Question everything. Don’t assume history will repeat, or that you know all the answers. Most big companies are often good at fostering “sustaining” innovations – ones that incrementally improve their positions in established markets – yet they are incapable of dealing with innovations that completely disrupt those very same markets. Why? They are too focused on protecting what they have today, instead of building something new for tomorrow. A bird in the hand is worth two in the bush!
- Open communication channels. To enable the suggestions listed above you need to make sure you have open, honest, and collaborative communications channels across your organization. This is not only vital for establishing robust Situational Awareness, but also for making sure you have a diverse set of ideas and experiences to consider in your strategic decision-making.Don’t stop with just listening to your customers. Listen to your prospects. Listen to your employees. Listen to your partners. Listen to your critics. Not everything they say will be accurate, or strategically relevant, but the truth is always in the middle – some of it will be useful!
- Build resilience. I’ve written before that I think many organizations are guilty of “swimming naked”, or over-optimizing their businesses, thereby reducing their ability to quickly pivot and change direction when confronted with adversity. The pandemic crisis has exposed just how fragile many supply chains and manufacturing processes are, and the vulnerability of huge global industries like airlines, retail, and hospitality to VUCA shocks. Leaders should seek to build more resilience into their organizations, which could manifest itself in many ways: flexible workforce, more technology, redundancy, better analytics, extra inventory, etc.
- Become more agile. This global crisis should inspire more leaders to re-think the balance between efficiency and the need for resilience. Those leaders, and organizations, who embrace the VUCA Strategic planning process, will gain agility. By thinking through and planning for alternative scenarios, and taking a portfolio approach to managing the organization, they will be able to act quickly, and decisively, when confronted with new disruptions.
The Time to Act is Now
This is a perilous and uncertain time for business leaders. We are truly in uncharted waters. We know that most industries are likely going to experience significant fundamental changes as we emerge from the initial tactical responses to the pandemic. We also know that organizations will need to change their strategies to prepare for the new environment.
However, most won’t act. Why?
Most organizations don’t innovate very well or attempt to disrupt their own business. Driven by the desire to show the public markets consistent quarterly growth they are trapped in the historical way of doing business and searching for “safe” incremental gains.
There are a few notable exceptions to this type of thinking: Amazon, Alphabet (Google), and Tesla come to mind. They have mastered a delicate balance to optimize for maximizing short-term gains, while also building strength and resiliency, and innovating to capture long-term growth and profit from new markets.
In times past, leaders would be very reluctant to shift their direction or strategy out of fear of alienating the market, or shareholders, or employees. Ironically, the unprecedented current level of VUCA uncertainty and fear in the global economy has given leaders a huge and rare gift. It is not quite a clean slate, but it is a once-in-a-lifetime opportunity to make transformational changes with less risk.
Most organizations, regardless of their industry or current strategy, will likely find themselves in a new industry structure and competitive landscape post-pandemic. If they don’t make significant adjustments today, they will likely lose market share to more agile competitors. They will also find themselves with even fewer strategic options in the future as shareholders seek to recoup losses and workers move on to organizations with better growth opportunities.
Strategic leaders should consider that the best use of their limited time and organizational resources might not be in fixing the current business, but rather inventing the future one. By leveraging some of the suggestions above, strategic leaders will listen carefully to the market, build resiliency and agility, and develop new strategies.
Even though now is the perfect time to disrupt your organization and begin a transformation, most leaders won’t dare to do it.
That’s a huge missed opportunity. Perhaps a fatal one…
Conclusion
Although the timing is still uncertain, I have confidence that the public/private partnership will be successful, and that we will find successful treatments and a vaccine for COVID-19. When this pandemic crisis is over, I believe we will witness one of the greatest periods of innovation and business acceleration in the history of humankind.
This means that right now, today, is a once-in-a-lifetime opportunity for progressive leaders to take a step backwards, pause, and think about how their organization should transform in order to be better positioned in the future.
Seek out the opportunities to disrupt and disintermediate your organization in the market. When you find them, embrace them, and figure out how to make them part of your VUCA Strategic Plan.
If you don’t take these steps and act with some urgency, then some other company likely will. In fact, they are probably already making plans to do so…
-Onward
