The theme of the August 2020 Forum was Strategic Resilience. The forum was hosted in partnership with IBM, ING, KPHG, Marsh, NN, Spencer Stuart, and Stibbe. The keynote speaker was Julian Birkinshaw, Professor of Strategy & Entrepreneurship at London Business School.
The past six months have shown just how volatile – and unpredictable – the business world can be. As well as “sudden death threats”, golden opportunities can arise out of nowhere. Business planning needs to reflect a new reality: the potential for the unforeseen. Agility alone is no longer enough to survive a crisis; resilience is more important than ever. This includes the ability to manage and overcome downside threats. Of the different types of resilience, strategic resilience is perhaps the most vital requirement for business continuity, surpassing behavioral and operational resilience, for example.
Even before the current crisis, digital disruption has emerged as a key challenge for many businesses. But some industries have proved more resilient to wide-scale change than others. On the one hand, sectors such as retail banking the incumbents continue as normal; in others, such as photography, the traditional players are wiped out.
In general, the degree of creative destruction among traditional, longstanding corporations has been lower than might be expected. Of the current (2019) Fortune 500 companies, only 16 were established after 1994. Furthermore, contrary to popular belief, disruption happens slowly; disciplines such as digital imaging, have taken decades to develop. Another myth is that established firms struggle to adapt. Many larger companies are getting smarter, creating their own digital offerings, merging with competitors, or building flexible partnerships.
Rather than developing and executing a detailed strategic plan, strategy-making is now about coping with the “fog of the future” – having the agility and flexibility to cope with changing circumstances. Good strategy-making involves a combination of the following disciplines:
The important thing is to be prepared – so that panic does not set in when the worst-case scenario happens. It is important to have a strong (crisis) team in place that can overcome difficulties and keep the company running. This could mean managing supply chain issues, for example, or facilitating the transition to home-based working.
Many companies are changing their core planning processes due to the current crisis. Some have introduced a more agile (and lean) financial planning approach. These may include rolling forecasting – a more flexible, frequent approach that takes place on a higher level than previously. Robust risk analysis is also crucial; the mentality should be to prepare for the possibility that anything could happen, however unlikely.
Companies should not leave themselves vulnerable by banking on a single idea or product. Instead, they should give themselves ‘options’ by building a portfolio of small ventures and activities that can be scaled up if need be.
But a real options strategy will only succeed if pursued the right way. Companies need to be clear on what the criteria are for evaluating new opportunities and ruthless on which ones to pursue or discard. It is important to maintain separate systems, with people are working on different projects, avoiding cross-over (and confusion).
Strong governance is also key: stakeholders must be aligned on what the important options are and a have clear vision on what to do. Decisiveness doesn’t necessarily have to be quick; it’s about having a process in place to make the right decisions when needed.
Active waiting works best when the company has good governance and a strong CEO or owner in place. He or she must be able to explain to employees why waiting is important. This approach is more likely to work in a family-owned than a stock-listed company, which may be more action-orientated. Likewise, companies based on professional partnerships may struggle to may fast and effective decisions.
In organizations with multiple stakeholders, there needs to be clear alignment on an active waiting strategy up front before the crisis that can be easily maintained. In all situations, timing is everything: it is essential not to move too early; but equally, to move quickly and decisively when the time is right.