How can strategy help companies prepare or be more resilient in the face of inevitable disruptions?

The looming anniversary of 9/11, reminds us all that unthinkable actions and events do happen. This past Labor day, on the anniversary  of hurricane Katrina , a reminder arrived in the form of  Hurricane Isaac to test the city, residents and officials learning in the aftermath  widespread devastation resulting from inadequate or incomplete planning. After several days of pelting rain, Isaac quieted into a storm system and moved north and New Orleans welcomed back tourists and a convention. New Orleans Mayor Mitch Landrieu reflected on his City’s Post-Isaac response and  how quickly the region was able to bounce back, crediting the many lessons put into action and systems working according to design.   (see http://www.huffingtonpost.com/karen-daltonbeninato/exclusive-new-orleans-may_b_1861685.html)

After several years of a lingering recession and the rapid loss of faith by investors in companies once considered darlings, what prevents once successful growth  companies from staying on their A game? The monthly discussion tackled these questions and a lively conversation ensued.

The ever approaching Cliff

In part, NOLA’s  success combined responses to feedback and prior experience as well as awareness and attention to changing weather.  Hurricane Katrina was a category 5. Experience with  less powerful hurricanes may have lulled many  into complacency, resulting in  a series of  failures, crippling recovery efforts while zapping the resiliency of the wider network.  As the first of three referenced articles* suggests, many companies suffer from  similar competency failures.

Warning treatises of the ever approaching threat complete with  foresight and clear predictions,similar to  the increasing accuracy of  hurricane tracking and timely issuance of early warnings  from NOAA systems, failed to align corporate resources  to respond adequately and in time once the prediction became a reality. Today, the mounting buzz around Business Intelligence, Big Data Analytics  likewise offers more organizations the promise of foresight similar to these early warning systems. Yet,  in spite of their popularity, planning and internal resiliency appears  uncommon a  practice.

 

Like Howard Dresner, I too was surprised by findings from his wisdom of the crowds BI status survey  this Spring.

“[BI ] penetration remains relatively low. We’ve seen improvement over the last years, but it’s not happening as quickly as we expected. Only 20 percent or fewer users within most organizations have access to BI tools.”

Information and trend tracking opportunities may be growing; but data’s impact extends only as far as  its availability to those who need it.  Is it the organization or the individuals that fail to act?  Is the information inadequate or the failure of priorities that pit short-term performance against long-term planning and development?

Prediction vs. Action

Peter Schwartz, the author of not only books but numerous scenario planning models advises organizations in resiliency and suggests, that many surprises are predictable.  More models can be used in concert to help uncover missing information or create the likelihood of a wider range of events.  Consistently,  few organizations do anything to prepare or adequately incorporate this information into their planning.

It’s not the inability to predict  a disruption that trips them up.  Kodak, for example, created the original digital camera technology and  RIM cornered the market on business cellular phones but neither found it possible to shift their culture, and temper expectations and performance permitted them to redirect resources.

At any level within an organization, the consistent imperative demands performance improvements.  Faced with a choice of trying something new,  using untested abilities to enter an unproven market and pursuing the path in which you excel and know really works, naturally we choose the latter and minimize  risk.  By insuring the organization higher performance near term, we sacrifice the opportunity to develop the next thing and ensure performance in the long-term.   Scenario planning activities might cue leadership into the inevitable performance peak, but only the accuracy of its estimation of impact and arrival window lends the necessary credibility and urgency to impact planning or resource redistribution.   Do you have to be small?  If your existence began as a disruptor once you make the shift to deliver at scale, do you lose your ability to adapt?

Leadership and Vision

Apple,  GE  and  IBM , all of whom operate at incredible scale,  manage to avert this problem and seem to consistently reinvent themselves, how?

Failures to adapt occur for many reasons, from incomplete or missing information to a situation missing clear visionary leaders and visions. Few organizations capably  invent and manage  simultaneously, each require different skills and sensibilities that often need a skunk works separating  innovation functions from business as usual.

Making the decision and committing to a course of ongoing development or innovation doesn’t happen without leadership capable of inspiring, communicating and insuring the flow of external rewards to incent the behaviors necessary to make the shift.  Pharma and Aerospace industries famous for devouring cash at a rapid rate, historically funded r&d separately .  The central business role differs fundamentally, and picks up the  innovation created offsite and then works to make it profitable, and efficient.

A culture focused on production also capable of innovation culture may co-exist but rarely, are they coincident, as both 3M and Google demonstrate.  Managing the two can be very challenging and attaining flawless, profitable execution can energize the entire company.  Consultants often used to help bubble out the great ideas and then bubble back in the means to realize the innovation effectively, integration based on critical mass.

In spite of an innovation culture, management and intention, the decision to find/see the value in the innovation may still remain elusive.  Few leaders combine visionary skills  and  the proper balance to identify the point between risk and reward that works.  Steve Jobs clearly did.

Without this combination, strong, capable leaders may not easily articulate their vision.  They may however  be good at pivoting or adapting the organization’s direction based on understanding the future interests of your customers or the values of your future customers.

Process vs opportunity

How  many disruptive innovators don’t make it up from the floor? Is their vision in sync with the market?  choosing between keeping your existing customers requires that you talk to the wider market as well.

General Electric’s internal growth targets depended on 5% being organic and 3% from acquisition.  The idea that if you build it and they will come is not a winning strategy.  Looking for opportunities to be helpful to your customers will take you farther.  Did Steve Jobs when creating the ipod, ipad and  iPhone from the perspective of championing his vision, or more honestly creating products that consistently are appealing because they prove helpful, easy to use, reliable and enjoyable.

The bigger challenge for business is  finding out who is their customer, not merely looking to who they think they know.  Again, a strategy that pivots the firm toward the future, help the customer explore can serve this purpose.

Internal disruptions, create  distance from the norm, the routine and can also create new space.  To succeed at this, the organization must dedicate sacred space (white space) and establish new rules of  play.

Emotion/experience and analytics  all filter information present in the environment.  When mixed signals arrive or separate information conflicts, our emotion/past experience become the default and  explain why too few companies take notice of the shifting sands beneath their feet.  Thanks to Bill Hass for sharing this reference and corresponding link on how to heed warning signals.

NOAA Betty Morrow summarizes some of these findings in a paper that should prove interesting and relevant —Risk Behavior and Risk Communication: Synthesis and Expert Interviews by Betty Morrow.  includes a series of  Best Practices in WARNING!

 People do not respond to warnings for a number of reasons:

– personal risk preferences

– other priorities

– contradictory signals

– aversion to authority or outside experts

– lack of a physical or mental capability to respond…

LESSONS LEARNED–the Takeaways.

Most prudent to outsource innovation as few organizations capably  manage both business as usual and maintain freedoms of space and spirit that make it possible for organic innovation to bubble up and coordinate resources necessary to its success.

Looking at things differently is essential, the management team needs to keep asking at every turn how can this work differently.

Few companies seem to know their customers as well as they believe they do, or as well as successful disruptors actually do.

Given dedicated space and time, encourages people to find the market that suits their company and furthers its growth.

Organizations need to find ways to create space and time for innovation, maybe best to do it beyond the 9-5 or discipline of the normal routine.  To succeed the space and time needs to take people to different mindset a different place emotionally if not physically.

True disruptors are rare,  as is a combination of vision and innovation committed to creating things that delight customers  by exceeding their needs.

Outsider perspectives can validate internal evaluation more objectively and thus help an organization and its leadership avert insular thinking.

Don’t ask where your customers will be, focus on where your company will be in the future to assure your plans and choices make sense .

Disruptors are good at putting the horse before the cart, charge away at the hard problems; however large organizations the challenge is getting the disruption IN, finding a way to integrate the new thinking, innovation etc into the 9-5 routine.  In other words, the bubbling out or successfully disseminating and gaining acceptance for the change internally  harder than the origination and prototype of the disruptive idea.

If you can see the emergent needs, successive small bets may be a wise strategy to help an organization make the proper shifts and survive.

There is a natural aversion to follow disruptors who lack authority and  so organizations internally fail to create the mental and physical response capabilities.  Even when warned, organizations’ risk averse nature stops them from adequately responding especially when the early signs are rarely perfectly clear or direction determined to impact them.

Organizations who lack agility and ability to meet the challenges as they arise externally,  and a sense of urgency can help them  build in more adaptability.  No urgency, little or no adaptation.

Risk Reward, resiliency is often a balancing game, with strategic imperatives.  Maybe  boards of directors should press  harder for this capability.

  The problem of bubbling innovation IN, requires organizations to keep an open mind, even if the organizational readiness for disruption may be missing.  Maybe embedded in any undertaking is the rule for a profitable sunset?

Defining a vision not equal to managing it, refining or carrying it over time.

Clearly a focus on the future matters more than ever, especially when it appears that the average lifespan of organizations keeps shrinking.

 

I’m sure there are some points I missed.  In 75 minutes it’s hard to cover such an important set of questions and come up with some clear suggestions.  Obviously there’s no such thing as a silver bullet and one size will never fit all but I hope you will still add in your own thoughts or reactions,  Perhaps you have an anecdote or lesson you’d like to share?    We’d love for you to post them below.

Note, if you are local and free on Thursday 9/13 we will be reprising the conversation over cocktails –check the Chicagoboothalumniclub.org calendar for details….we are NOT going to be at Pegasus as earlier announced.

*Articles reviewed in advance of the discussion

 

a)      Help! We’re being disrupted!

http://www.technologyreview.com/business/39221/#.TvN-bxiB4FE.email

b) VRM–   Let’s fix the car rental business, a case in vendor relationship management

http://blogs.law.harvard.edu/vrm/2012/04/15/lets-fix-the-car-rental-business/

c)      Capability maturity and organizational effectiveness

http://www.drmika.com/download/Aho_-_A_Capability_Maturity_Model_for_Corporate_Performance_Management.pdf

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