Business leaders need to ‘man up’ and re-ignite their imaginations to succeed in a world of accelerating change and financial uncertainty.
Companies that do go on to produce the commercial sorcery that we are convinced is necessary to achieve superior performance are those that change how they think about what it is their organisations can do and what’s possible.
Managers everywhere these days might easily be mistaken for frightened meerkats as they are seen scurrying to their cubicles, offices and company meeting rooms in search of reassurances that the world will soon return to 'business as usual', and that maybe the escalating series of stagnant and, in many cases, imploding economies have simply been a bad dream. These same managers would apparently prefer to believe that the unprecedented disorder that characterises today’s changing business environment will somehow return to something akin to the 'good old days' when, if nothing else, stability was the norm.
Regretfully, at the end of 2011, the most optimistic outlook for the Euro zone, for example, was that its 17 member states could perhaps grow their way out of a financial crisis that showed no sign of abating. To what extent, many began to ask, are our corporate and government leaders themselves prepared to change, fundamentally, quickly and radically? It’s clearly a tough call when the very economic and socio-political contexts within which decision-makers are expected to fulfil their roles have changed beyond all recognition from those of only a decade earlier. Nevertheless, globally, we would argue, there is no alternative to change.
Managers would also like to believe, in much the same way that children believe in the imminent arrival of Father Christmas on Christmas Eve, that consumers are quietly priming themselves for a return to their spending sprees – funded mainly by debt – of the early 2000s. They would like to think that despite western Europe and the US’s crippling budget deficits, lack of prospects for real economic growth and the absence of anything resembling strong political leadership, these countries will reassert themselves as powerful economic engines poised to fuel a recovery in global commerce. The managers pray for a return to bull markets in London and on Wall Street. Most of these managers are numbed by, and therefore at risk of, ignoring the relentless streams of daily news bulletins – which typically seem more like reports from the front lines of combat zones – concerning the worsening financial dilemmas of Greece, Italy, Spain and elsewhere. But, more than anything else, managers want to make sense of it all. Unfortunately, it’s not easy planning for the future when, as McKinsey & Company observed in a report in 1997, the future represents true ambiguity where “multiple dimensions of uncertainty interact to create an environment that is virtually impossible to predict”.
What managers and consumers alike are apparently not prepared to do is to examine seriously, for example, the question posed by a recent cover-page headline in The Economist about the looming collapse of the euro: “Is this really the end?” Maybe it is. But we’ve recovered from equally complex challenges in the past. As painful as it was, the world endured, and ultimately climbed (some say fought) its way out of the Great Depression – which in most countries started in 1929 and lasted for approximately a decade. It wasn’t easy, but at the time it did spur radical and much-needed change in our financial perspectives and institutions.
The irony now is that while top corporate leaders, in desperate knee-jerk responses to today’s market discontinuities, are exhorting their ’troops’ to change (in countless ways), they nevertheless fail to recognise that their companies – and thus the very managers upon whose shoulders their prosperity rests – have fallen victim to change itself. As a result, many managers have become indecisive, indeed passive, as they struggle to emerge from the unfamiliar fog of uncertainty and instability caused by the many new and intensifying transnational threats. Even in the best of times, as director of the Centre for the Study of Force and Diplomacy, Dr Richard Immerman, wrote in a recent article in Intelligence and National Security: “Change is hard. We know that. We also know that organisational change is particularly hard, especially if an organisation is large and its culture entrenched. This is true even when the organisation is dynamic and successful. In such cases changes are normatively incremental and take years to produce the desired effect, or its approximation.”
So how easy is it to even contemplate change when the world is no longer a familiar place? Where’s the starting point for a corporate CEO? Strategy? Human resources? Finance? Marketing? Research and development? The company’s very purpose and values, or perhaps its overarching business model? Consider the way potential investment decisions have traditionally been made. How does one calculate the net present value, or time value of money, for a project today, when quantifying future cash flows is little more than a narcissistic exercise in self-deception? Does it matter, for example, what the coupon rate is for a government bond when the big rating agencies are throwing up their hands in frustration as they downgrade the creditworthiness of country after country? Unfortunately, there is little evidence to suggest that many firms have what it takes to replicate the performance and success of Apple, Amazon.com, Google or Facebook. It appears that their ambitions and imaginations don’t stretch that far. Or do they?
Gloom and doom makes for good press, but not for good business. Like front-row forwards in a rugby scrum, we advise managers to engage head-on with the array of economic and geopolitical forces that threaten their organisational strategies and their collective morale. We are convinced that if business leaders would 'man up' and re-ignite their imaginations, they might well find that in confusion and chaos lie the seeds of whole new categories of business opportunities with undreamed of profit potential. We believe, similar to business scholars such as Gary Hamel, W Chan Kim, Renée Mauborgne and Clayton M Christensen, that incremental change is at best a waste of energy and time, and at worst makes as much sense as rearranging the proverbial deckchairs on RMS Titanic 100 years ago during its final tragic moments afloat. Companies that do go on to produce the commercial sorcery that we are convinced is necessary to achieve superior performance – not merely ‘acceptable’ returns – are those that change how they think about what it is their organisations can do, and what’s possible. They consider and act on what they should be doing to escape from the financial vortex now swallowing up both businesses and nations in a relentless geopolitical whirlpool of accelerating change.
While we need a revolution in strategic thinking and action, the big question for managers is: are you ready to join the ranks of business revolutionaries who advocate a virtual insurrection in existing business paradigms, practices and offerings? US management expert, Gary Hamel, recently referred to The Morning Star Company, a California-based tomato ingredient processor, as “the world’s most creatively managed company”. Does this sound like how you or others might describe your firm? Or have you and your company already atrophied to the point of no return? McKinsey & Company reminds us that, whereas the overall reason for transformation is usually obvious, an organisation’s leadership must first address four critical questions:
- Why change?
- What to change?
- Who to change?
- How to change?
The answers are often hard to accept and difficult to implement, but they provide the underpinning of any meaningful change effort.
We recently ran an MBA elective at WBS that involved students imagining what their companies – most of them large household names in South Africa and internationally – could do to spark revolutionary change in everything from organisational structure, to management style, to new product and service offerings. Their responses were refreshingly innovative and, at times, a source of real excitement. Not a single student was content with the way their employers were coping with or managing the changing competitive environment. They amplified new ideas about future possibilities, not tedious explanations of the last year’s performance or dry annual reports.
Hamel asks: “Where are you likely to find people with the least diversity of experience, the largest investment in the past, and the greatest reverence for industry dogma?” At the top, of course – not, as our consulting and teaching experience indicates, in an MBA cohort. As Ghandi put it, are you ready to “be the change you want to see in the world”? Or have you elected to hunker down in the belief that ignoring the inevitable change now occurring in your nation, your industry and your markets is your best option for survival and possible, albeit improbable, success?
Douglas Bernhardt is a visiting lecturer at Wits Business School, where he teaches the MBA electives Strategy as Revolution, Competitive Intelligence and Industry and Competitor Analysis. He is the author of two books and numerous articles on the subject of competitive intelligence.