The Transformation Myth by Anh Nguyen Phillips, Rich Nanda, Jonathan R. Copulsky and Gerald C Kane

Leading Your Organization through Uncertain Times (Management on the Cutting Edge)

Recommendation

The COVID-19 pandemic demonstrated just how rapidly an unanticipated new context could radically disrupt organizations, necessitating leaders to step up and transform crises into opportunities. Gerald C. Kane, Rich Nanda, Anh Nguyen Phillips and Jonathan R. Copulsky draw from their backgrounds in consulting and academia, offering research-backed approaches to navigating uncertainty and scenario planning for a complex future. Their advice encompasses how to tackle disruption with a growth mindset and ways to harness the power of new technologies, such as cloud computing, AI and machine learning – empowering you to emerge from crises a better leader.

Take-Aways

• Thrive during a crisis by embracing a growth mindset and leveraging opportunities.
• Steer teams through crises by clarifying your organizational “why,” “how” and “what.”
• Scenario-plan all possible futures, while mitigating bias.
• Respond to challenges by building robust ecosystems and identifying unmet needs.
• Leverage the power of cloud computing, responding to challenges with agility and flexibility.
• Nurture a data-driven culture, positioning you to better respond to shifting contexts.
• Embrace continuous learning and development, building nimble data-driven teams.
• Crises can make you a better leader, boosting your empathy and understanding of consumers.

Summary

Thrive during a crisis by embracing a growth mindset and leveraging opportunities.

When facing disruptions of the size and scale of the COVID-19 pandemic, businesses must respond rapidly, gleaning crisis strategies from health care workers: Just as health care workers might embrace experimental solutions when dealing with acute medical conditions and discover more sustained solutions for patients whose conditions become chronic, business leaders must experiment with both short and long-term solutions when navigating acute and chronic disruptions. Similar to the way an acute crisis such as a heart attack may function as a “wake-up” call, initiating a sustainable health plan to ensure the condition doesn’t worsen, many leaders embraced new digital transformation strategies, such as “contactless” service, to better protect the long-term health and well-being of workers and clients alike. While companies with “fixed mindsets” view acute crises as something to endure before returning to “business as usual,” those that thrive embrace “growth mindsets,” knowing they can adapt by seizing opportunities.

“Leaders and organizations with a growth mindset will be better positioned to cope with disruption.”

Organizations that innovate amidst disruption tackle acute disruptions in the following three stages:

1. Respond – Leaders with growth mindsets reflect on how the external environment is impacting their business model and how best they can respond.
2. Regroup – The organization chooses a forward-thinking strategy to implement after taking initial steps to respond to its short-term crisis.
3. Thrive – The organization identifies digital opportunities to seize, becoming a “digitally resilient company.”

Steer teams through crises by clarifying your organizational “why,” “how” and “what.”

To effectively lead through disruption, leaders should leverage the following three tools:

1. Purpose – Engage teams by identifying and communicating your shared meaning, or your “why.” When you lead a purpose-driven organization, employees feel that their job role is aligned with something greater than simply making sales, and research shows that purpose-driven companies outperform competitors while seeing three times their growth rate.
2. Values – Ensure all team members behave with integrity and embody your organization’s standards by setting clear values. Your values embody your “how,” framing the belief systems reflected in the steps of each task. Your values are particularly important during disruptions, because abandoning them during a crisis suggests they weren’t values you held in any meaningful way.
3. Mission – Develop a compelling and distinctive voice, clearly defining your “what”: Specifically, what is your organization aiming to accomplish? Employees facing uncertainty and unexpected events will thus feel guided during rough times, gaining a sense of clarity around their mission.

Scenario-plan all possible futures, while mitigating bias.

To better plan for disruptions, reflect on the impact of all the trends that will chronically continue to disrupt your business and industry in the future. For example, an aging workforce and declining birth rate may tax underfunded private and public pension programs, while requiring employers to invest in reskilling or upskilling. Next, reflect on any uncertainties that may impact your business, mapping out all the possible likely outcomes of each, from least to most likely. While trends consist of more obvious disruptions, uncertainties reflect unknowns, such as talent availability and geopolitical factors. Avoid the following types of bias when reflecting on the future: “status quo bias,” the belief that what works in the future is the same as what’s worked in the past; “confirmation bias,” finding facts to support a belief or decision you’ve already made; “availability bias,” believing the information you have most easily available; and “bandwagon effect,” which refers to believing in a particular vision simply because others have.

“While disruption can fundamentally threaten a company’s business model and practices, it can also present opportunities for unexpected pivots and adaptations.”

Engage in scenario planning, investing time, talent and a budget to analyzing the unseen, emerging and any difficult-to-understand marketplace opportunities and trends. Identify some external partners from other industries, such as consultants, academics or those working at cloud and software companies, to attend futures-oriented learning sessions and forums with your entire management team. View these sessions as exploratory in nature, as you attempt to make decisions while grappling with the uncertainty and complexity of an unknown future. Aim to identify three types of strategic moves: “no regrets moves,” or strategic actions you can apply in several possible future scenarios; option-creating moves, making small investments into new opportunities (for example, switching to a work-from-home model); and “big bets,” or high-risk, high-reward moves that have the potential to fundamentally transform your organization’s future.

Respond to challenges by building robust ecosystems and identifying unmet needs.

It’s crucial that you embrace the right technological tools, as they help you develop capabilities, such as scalability, optionality (collaborating with new organizations to acquire new capabilities), nimbleness and stability. However, it is people – not your tech tools – that are your most valuable resource when embarking upon your digital transformation journey, as you must strive to fulfill their unmet needs. Clarify the ecosystem you hope to create by identifying the following: the ecosystem’s objective (ideally to solve a human need via numerous players); the needs you’re solving and any gaps you’ve yet to address; the capabilities you’ll need to develop to meet these unmet needs; and the capabilities you’ll need to partner with another organization to deliver.

“The real question that managers should concern themselves with is what problems do the digital tools help your organization solve?”

Many companies struggle with a fear of the unknown when faced with uncertainty, and have difficulties identifying the ecosystem they hope to nurture. You may fail to reach your full potential in building a robust ecosystem if you do any of the following: define your ecosystem too narrowly, rather than expansively engage a wide network of participants, solutions and ideas; define it too “selfishly,” focusing only on solving your business problems, rather than real customer problems; control it too tightly, limiting information flow and value creation; and/or turn it into a value chain, limiting organizations to roles of distributors and suppliers, rather than allowing each to play multiple roles.

Leverage the power of cloud computing, responding to challenges with agility and flexibility.

Cloud computing entails renting storage space, computing power and various other digital resources from an external company, as opposed to relying solely on your own servers, computers and network. Three different types of cloud computing exist: infrastructure-as-a-service (IaaS), which refers to renting computing power and data centers for your basic computing resources; software-as-as-service (SaaS), which mostly refers to mixing and matching ready-to-use cloud-based applications to meet your organization’s needs; and business-process-as-a-service (BPaaS), which refers to cloud-powered tools that provide business services, such as the restaurant reservation-management system OpenTable. Think of cloud computing as a big Lego set: You’ll be able to more easily expand your services and offerings by mixing and matching functionalities, much as you might put different Lego blocks together.

“When companies can get past the daunting ‘how’ of transitioning to cloud computing, it begins to open up the ‘what’ – the new opportunities that the cloud enables them to do business differently.”

When facing acute disruptions, cloud computing can help you rapidly expand and contract, providing scalability. For instance, a business with a virtual cloud infrastructure could switch to a remote work model more quickly when dealing with COVID-19. Cloud computing also helps businesses rapidly increase or decrease bookings with ease – something the airline sector experienced during the pandemic, when reservations plummeted. Shifting your IT cost structure from fixed to variable with cloud computing enables your organization to respond to events more nimbly and flexibly. Small companies benefit from the fact that cloud computing gives them access to some of the world’s best technology, without burdening them with the large fixed costs up-front that building their own proprietary IT infrastructure would trigger. It’s now possible for organizations to respond to a crisis with agility, without hiring a single programmer, due to cloud computing.

Nurture a data-driven culture, positioning you to better respond to shifting contexts.

Harness the power of data to glean valuable insights when facing disruption. Your data can position you to better understand rapidly changing contexts, whether you’re analyzing shifting patterns in consumer demand or assessing the impact remote work will have on productivity. Data can also provide trend insights: For example, clothing company Zara monitors what its shoppers are searching for that it doesn’t carry, then produces goods to meet unmet demands. Gain value from your data by shifting to a data-driven culture, investing in education to ensure team members develop data literacy. Despite the growing significance of data at organizations, between 60% and 85% of big data projects are failing to execute organizations’ desired results. This happens because they build data infrastructure, without properly reflecting on whether the questions they hope to answer are actually worth investing in.

“It is the thoughtful use of data that allows the organization to identify and drive actionable insights.”

There are three categories of machine learning (ML) and data that you can harness: Automation enables ML systems to execute routine actions, shifting the roles and value of human workers within your company; augmentation enables ML systems to partner with humans, giving them insights to help them make better decisions; and organizations can use AI and data to help develop new services and products. Wired magazine writer Kevin Kelley imagines that future start-ups will operate by simply taking existing problems and applying ML to them to generate solutions. Treat a future data breach as an inevitable acute disruption, invest in your cybersecurity response plan and regularly review reports on cyber threats.

Embrace continuous learning and development, building nimble data-driven teams.

Nimble companies are adaptive organizations that embrace an experimental “test-and-learn” approach to decision-making. At nimble organizations, leaders identify their desired outcomes and the team required to execute them, forming teams during new missions and disbanding them upon completion. Ensure you’ve built effective, high-performing teams by doing the following: clarifying customer-centric goals and making them measurable; setting clear feedback mechanisms to enable self-correction processes; keeping decision-making as data-driven and objective as possible; ensuring members are equally influencing outcomes (as opposed to allowing certain personalities to dominate); building trust and psychological safety between members and leadership; creating accountability for outcomes; and putting mechanisms in place to drive engagement.

“The acute COVID disruption has let the genie out of the bottle with respect to new ways of working, and we see work changing for the future no matter how the pandemic plays out.”

Leaders must start focusing on fostering environments in which high-performing teams can thrive. Remote work gives you an opportunity to design and shape your work culture with more intentionality, while improving employee well-being and boosting innovation. Take time to reflect on the way advances in technologies such as AI and robotics are impacting the roles of human workers, identifying how you plan to respond to employee concerns, while creating a culture of continuous learning and development.

Crises can make you a better leader, boosting your empathy and understanding of consumers.

People’s lives are influenced most by habitual automatic behavior which they don’t even notice. According to James Clear, the writer of Atomic Habits, between about 40% and 50% of your decisions and actions are habit-driven. Rebuild disrupted relationships when crises shift habitual consumer behavior by focusing first on expressing humanity, showing that you genuinely care about your customers’ well-being, safety and their experience. Customers often experience negative emotions, such as fear, during acute disruption, so customer-facing workers should focus on relationship building and demonstrating that they’re listening. Win trust by exemplifying a commitment to the greater good, embracing transparency, and showcasing your capability and reliability in handling the crisis.

“Crises have a way of bringing people together, and we have witnessed leaders stepping up and making positive impacts across diverse industries.”

Your competitors may fail to seize the opportunities that changing consumer habits create, opening opportunities for you to better serve consumers. Leaders during the COVID-19 pandemic stepped up during the crisis, advocating for their customers, employees and communities, navigating the crisis with a mix of authenticity, empathy, boldness and experimentation. Aspire to emerge from crises as a better leader and person, while bolstering organizational nimbleness and resilience.

About the Authors

Rich Nanda leads the strategy practice at Deloitte Consulting, LLP, where he is a principal. Anh Nguyen Phillips serves as the research director of Deloitte’s Global CEO Program. Jonathan R. Copulsky is a senior marketing lecturer at Northwestern University. Gerald C. Kane is the University of Georgia’s Terry College of Business C. Herman and Mary Virginia Terry Chair in Business Administration. Kane, Nguyen Phillips and Copulsky co-authored (with Garth R. Andrus) The Technology Fallacy: How People are the Key to Digital Transformation.