Article co-written by Seth Campbell, Head of Innovation, Etch Horizon
COVID is no longer unprecedented, it’s the precedent. And the ‘new normal’ is, well, now just normal. With the announcement from the Prime Minister that we will enter tighter restrictions to manage the second wave of the virus, for some it was a reality check.
There is no cure, yet. The past six months of lockdown and self-isolation have simply bought us time. For government, it was time to (try to) establish solutions and ways of managing this ongoing pandemic. For businesses, it was time to fast-track decisions and force through changes in commercial planning, governance and operations – it was time to mix things up.
But not everyone has. “When this is all over, we’ll go back to normal” The likelihood of this happening is slim. That’s not to say that things won’t resemble some sort of normality. We’ll still work, still socialise, still pursue hobbies and interests, still eat and still sleep. But consumer and business priorities have changed. And that means, your organisation needs to change too.
Here is one, very simple example. When restaurants and cafes reopened in July, many establishments had implemented table-service ordering and methods of obtaining customer details for track and trace. But others didn’t. Like a troop of guinea pigs testing new experimental improvements, many of us have now experienced the good, bad and ugly of post-lockdown hospitality. The establishments that did nothing to change their operations are now suffering. Ordering food and drink from the bar or till is now banned, and it’s now a legal requirement to collect customer details for track and trace [Source: Independent].
This specific example highlights realities that businesses simply can’t afford to ignore. According to Global Web Index, “In many cases, consumers found their adaptive behaviours delivered outcomes that were equal to, or better than, their pre-coronavirus habits. In places, their day-to-day lives were becoming more efficient, more budget-friendly, more sustainable, or more enjoyable.”
We knew this was going to happen though, right? We knew that as soon as we were forced to change our every-day lives, some of these habits would stick. According to the European Journal of Social Psychology, on average it takes 66 days for a new behaviour to become automatic. Well we’re 6 months in (180 days) from the first national lockdown, so many adaptive behaviours that have delivered material benefits are likely to stick.
Understanding changes in consumer behaviour along with the underlying motivations and perceived abilities that can cause them (or yield opportunities), is fundamental for adaptive businesses in all circumstances. But a global pandemic is an unusually universal trigger event. The important thing to consider now, is what second- and subsequent-order consequences may impact your business plans that you can address head on.
Systems-thinking can help us to spot trends before they happen, not to just diagnose them. It’s powerful, and can allow businesses to better locate root problems, pre-empt inflection points and identify potential for behaviour change and new business models. In addition, we can think of our external, and internal business environments as ecosystems, and adopt principles from ecology to help make sense of and find opportunities for creating and capturing value. For instance, the ecologist Garrett Hardin’s First Law of Human Ecology states that “We can never do merely one thing.”, which suggests that all solutions and interventions have a multitude of effects, and so we should try to consider them in their totality.
So, let’s take some examples of how businesses might plan for future uncertainties, by looking at an organisation from the perspective of ecosystems.
Looking externally, for example, we might look to simplify ecosystem risk by creating what Rita McGrath calls “Time Zero Events”. By mapping combinations of potential future uncertainties (e.g. there will be a second or third lockdown, combined with a potential but unknown impactful outcome X of Brexit or disruptive technology threat Y), we can start to identify leading indicators to monitor early signals, that could influence our resource allocation to different adaptive initiatives.
We can also look at the next-order consequences (“and then what?”) of how stakeholders might respond to new impactful events, for example considering customers, employees, competitors, suppliers, regulators and the environment.
A global pandemic is clearly a key external trigger at the moment. But that’s just one threat to any organisation. Consider all the other external threats: environmental, economic, political, technological, cultural etc. Step two is to consider how equipped you are internally to respond to change.
According to Credit Suisse and others, the average lifespan of an S&P 500 company is declining; in the 1950s it was almost 60 years, whereas now it is under 20 and forecast to shrink to just 12 years by 2027. The cause? Disruption and a failure to transform. In hindsight, it’s actually not that shocking. Huge advances in technology and globalisation almost certainly meant party time for some organisations that were able to adapt, and a nail in the coffin for others who couldn’t.
Whilst strategy consulting was booming as an industry during this time, the static 5-year plan clearly wasn’t working at a macro level. At the same time, innovation was a side-show or notoriously difficult to prove value from. But as this data shows, businesses need to reimagine themselves regularly in order to thrive. So, as a business owner, director or senior manager, ask yourself, how can you do that?
With an internal ecosystem lens, we might look to better understand how well integrated and mature our capabilities to adapt and innovate are in order to plan improvements. For example, across corporate structure, governance and sponsorship, investment strategy and results, culture and practice. By looking at commercial innovation as a core strategic priority, measuring current efforts from a holistic perspective and looking to adopt more adaptive practices organisations can create the best conditions for success.
“Businesses that performed best after the last crisis (from 2008 to 2019) relentlessly sought growth by being proactive, consistently creating and testing new business model concepts, and focused on reinvention over protection. They developed scenario planning functions to quickly assess threats and incorporate them into their initiatives. They looked at how they could actually redesign, rather than optimise, to adapt and build something better.” - Seth Campbell, Head of Innovation, Etch
It’s obviously not sustainable to reinvent yourself each and every time an external threat becomes a real danger to your business. But that’s not how this works. This is about nurturing new business model ideas, creating a machine to churn out new experiments in order to stay relevant. In The Invincible Company, the authors give a view from their experience:
“Success is unpredictable and depends on organisation and context. However, from experience, we recommend the 10x rule of thumb: invest 1 million into your portfolio to create 10 million in new revenue or cost savings. For example, invest $20,000 in 10 small teams. Make a $50,000 follow-up investment in the 5 teams that produce the best evidence. Finally, invest around $500 thousand, in the team with the best evidence.”
For leaders today, even relatively frugal investment in shaping parallel business models to capture value differently, could reap huge potential benefits.
We are just getting started in finding value propositions that address new realities, and that leverage a new wave of enabling technologies - that customers will invest in and benefit from. These realities will force transformative business change.
Our key advice is:
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