The post-pandemic landscape, disruption and transformation explained, and then the business case for continuous change with three areas to focus on for success.
All of us have lived through more change and disruption in the last 18 months than in the previous decade, since the millennium, or maybe even longer. A lot of technology and business strategy leaders and consultants have been talking about changes triggered by the fourth industrial revolution, probably since around 2014 when the term Digital Transformation came into regular use. I was one of them. But suddenly at the start of 2020 the COVID-19 pandemic came along and kicked all those ideas forward. Many organisations managed the kind of digital transformation of their business and business models that would take a year, or years in normal circumstances, but they did it in days and weeks, even in real time. We at Bloor have always contended that in today’s hyper-competitive World your business needs to think of itself as being in a permanent state of reinvention – we call that Mutable Business. The pandemic has “turned the volume up to 11” and amplified that need. We see the successful companies aren’t just adopting new platforms and technologies like hybrid cloud or AI; they’re spending just as much time changing their mindset about their business and their people. It’s about balancing change in tech, the business, and your people. The successful companies aren’t just thinking outside of the box, they’re thinking outside of the boundaries of their organisation. We want to make the business case for that change in thinking and give you some ideas and areas to focus on.
What’s this post-pandemic landscape we are dealing with?
Here in the UK we’ve got an economy that’s 5% smaller than 18 months ago. We’re seeing a shift from goods to services. The pandemic has accelerated changes in retail and the high street – we’ve seen a lot of major brands disappear (Debenhams, Arcadia Group, Gap), and a lot more focus on buying online and delivery to your door. What’s going to happen to all that empty high street real estate? We are just beginning to hit global supply chain issues in a lot of areas. We are seeing shortages because of reduced capacity in manufacturing from China. We have a shortage of HGV drivers to move goods around Europe, which triggered the petrol crisis. All of that means inflation is heading towards 4%. A lot of businesses are struggling, and some have gone under. Some types of spending are up because people have unexpected savings from doing less in lockdown. With the vaccines we’ve developed the pandemic itself is contained up to a point, but it’s not beaten and it’s not going away – how long will it be a health concern? Even without COVID we were living in a volatile and uncertain world. As humans we’ve been around on the planet for 200,000 years. It took us till 1804 to reach the first billion people. We hit 4 billion in 1972. We’re 7.9 billion now, and we’ll pass 8 billion in 2023. It’s a numbers game. If you think through that curve over time and how steeply it’s rising, it’s not surprising that the results of our effects on the climate change, and the ways we are damaging our planet are making the news on a weekly basis. We can see the amount of waste and plastic we are putting in our oceans, and how we need to be thinking about doing all that we do in a more sustainable way. What’s next? Another pandemic? A major climate event? Something we haven’t imagined?
What’s changed and changing?
The biggest change that most of us have experienced during the pandemic is the shift to working from home. It’s a testament to the resilience and scalability of the public cloud services that they stood up so well to massively increased demand with so few issues. Suddenly everybody got used to Zoom and Teams meetings. That was digital transformation that happened for many organisations in days and weeks, not months and years. For the C-Suite this has shattered previous notions of what is and what isn’t possible. We need to take a lesson from that and use it as a template for how we adapt and innovate going forwards.
Of course, a lot of us made mistakes, and learned from them, when others didn’t. Zoom fatigue came into the language as well as Zoom. Wall to wall web meetings don’t make sense for handling every type of problem or business issue or for keeping the team happy. We needed to learn new skills and different ways of doing things, and, very quickly, employee engagement and employee well-being started to be talked about and thought about much more prominently. Post-pandemic the HR department now has more influence and importance, and we’ve seen massive reinforcement of the reality that looking after the mental health, wellbeing and the skills of our teams and people is crucial to developing and keeping them. It’s another way the pandemic has changed our mindset and led to the need for a rethink of our “office” culture and practice.
It’s not just about a new meeting etiquette though. Smart organisations like Siemens announced publicly a change in their working culture. They made working from home two to three days a week a worldwide standard. Roland Busch, their Deputy CEO, said “These changes will also be associated with a different leadership style, one that focuses on outcomes rather than on time spent at the office.” This shift in focus from activities and our staff being present in the office, to business outcomes and getting things done is essential to move your organisation forward.
Now we are out of lockdown and coming to a new phase, what happens next for your organisation? A lot of us have realised converting commuting time to either work or family is better for us. Some companies think they can go back to business as usual, but most organisations are thinking in terms of a hybrid mix, but there is no pattern to how many days back to the office, although the 2-3 comes up most. Younger people and millennials are more likely to want to be part of the community around the office. Some people are realising they could do their job from anywhere. and that works both ways – for the individual, and for the company hiring a new resource. Many creative projects probably work better with a team in an office where we can all work around a whiteboard, post it notes and getter a better handle on what people feel. For relationship building a lot can be done online, but there’s no substitute for real face to face contact with all the visual cues and body language that comes along with it. All of this adds up to a hybrid model for most organisations, but a realisation that every organisation is different, and so there isn’t one “new normal” approach that works. That also poses questions over how the current office capacity will be used, and over the significant office construction that started pre-pandemic all over our cities, and particularly in London – how many cranes constructing office blocks can you see as you move around your closest city today?
How do you make a business case for post-pandemic change?
Value creation is all about increasing revenue or reducing costs or both. It’s about increasing sales volume, increasing the average sale, reducing churn, reducing operating costs – but it’s measurable, and so any business transformation can and should be supported by an ROI. It’s supported by your business model and your operating model, and you should be looking at both in the context of continuous improvement.
The other shift in thinking accelerated by the pandemic is a shift from purely shareholder focus to stakeholder focus. What is the impact of our organisation on the people in it, our partners, and suppliers we work with, and the societal impact of what we do? Are we doing good? We need to look at those values as well as the balance sheet.
One of the early books on turning technology into business transformation was “Leading Digital” by George Westerman, Didier Bonnet and Andrew McAfee. They analysed a range of businesses in terms of their digital capabilities and leadership capabilities and categorised them as beginners, fashionistas, conservatives, and digital masters. The digital masters had strong digital vision, excellent governance across silos, many digital initiatives generating business value in measurable ways, and a strong digital culture – exactly the ingredients we need post pandemic. They found these companies generate 9% more revenue, create 26% more profit, and have a 12% higher market valuation.
Does business model innovation work? BCG tracked the 50 most innovative companies of 2020, during the pandemic, and showed they outperformed the MSCI World index by a staggering 17 percentage points in the past year.
How about Design? It’s our recommendation that every company should adopt Design Thinking as a key component of their strategic approach. The Design Management Institute tracked 15 publicly held companies committed to design as an integral part of their business strategy and found they have outperformed the S&P 500 over the past 10 years by an extraordinary 219%.
Post-pandemic you need to be thinking in terms of adapt or die. Survival of the fittest, most differentiated, most customer-centric. Your business model is at risk from some smarter, faster, more agile competitor with a better use of technology or process whether you like it or not, but the business case for change is supported by thinking continuous improvement of both your business model and your operating model. Change should be seen as an ongoing opportunity, not a threat or a liability. This causes us a problem. As humans, we like certainty. Without it we think fight or flight. We need to build a new mindset to roll with change and think differently.
Here are three areas of focus to change your thinking:
The companies making a success post-pandemic have a different mindset to leadership compared to business as usual and command and control. They use exponential thinking in place of linear thinking, a different kind of approach, and a different kind of culture. Today’s successful leaders have a different set of characteristics and values that they encourage at all levels of their organisation:
- Unlimited mindset
- Strong team cohesion
- Unbounded culture
- Inspirational leadership
- Strong sense of purpose
- Passion in what they are doing
This approach turns the hierarchy in to a network, and means that leadership can come from every level, and goes hand in hand with empowering the team to get closer to the customer and keeps the focus on outcomes.
Efficiency to Effectiveness
As we’ve advanced through three industrial revolutions to this fourth one, our business world has steadily moved through levels of complicated, but now it’s complex. What’s the difference? Complicated can be controlled. Complicated might be difficult, but there are a set of rules to be to be understood – instructions, recipes, and algorithms all ripe for the application of machine learning and AI. There are linear pathways that allow us to identify individual causes for observed effects. Complicated can be controlled with a mindset of efficiency. Complex is different. Complex problems involve too many unknowns, and too many variables and interrelated factors to be reduced to a set of rules and processes. Complex means patterns that don’t repeat themselves regularly. Complex defies forecasting and brings in the unexpected – like what we are living through right now.
With complicated shifting to complex, the planning horizon is dramatically reduced and predicting the future is impossible. If where we are heading’s uncharted, that means you can only map it when you get there. In Darwin’s terms, the species that survives is the one that’s most adaptable to the new conditions. In this uncharted future, what are the characteristics that will help us? We need to:
- Expect the unexpected and prepare for many possibilities
- Think in a “team of teams” way, forming partnerships, building coalitions, looking for ecosystems that can help, both inside and outside the organisation
- Use our imagination – it is combining new ideas, fostering innovation, and finding the right new things to do that are much more important than efficiency and doing the old things right
- Allow experimentation, allow our people to fail and learn from the process
- Be brave and stand for something.
All of this is summarised in a great book we recommend called Team of Teams by Stanley McChristal, Chris Fussell, et al. It suggests a mindset change from efficiency – doing things right, to effectiveness – do the right things.
Develop everyone’s Digital Capability
The pandemic has reinforced how important our teams and team members are, and how we need to worry about their engagement with the company, their understanding of our purpose, and their mental health and wellbeing. We need to shift to an outcome based, project-oriented way of working in place of doing activities in the office. As well as empowering our people to contribute, we need to develop their:
- Ability to work collaboratively with others, with strong interpersonal and team-related skills
- Understanding of the digital tools, systems and processes that are available to them
- Creativity, thinking skills and problem-solving capabilities
- Communications skills across all channels
- Emotional Intelligence to help them empathise with others, overcome challenges, and defuse conflict
- Leadership capabilities to help build and grow the organisation
These are just some of our ideas on how organisations should be thinking differently and reflecting this thinking in business and investment cases. Our Mutable Framework can help you to apply this thinking to your own organisation Every organisation is different, and at a different stage of its evolution, so there are no “one size fits all solutions”, but we have a lot of experience, research, tools, and techniques that can help, and we’d love to have the conversation with you (or your customers).
Click here to arrange a free 30-minute consultation with one of the Bloor Navigator team to walk through our Mutable Self-Assessment.