Tobias Rooney of ?What If! explains how companies should predict the unpredictable and be flexible in order to mitigate risks fuelled by market changes
By Tobias Rooney
The prospect of unforeseen earth-shifting market changes can be a frightening risk for businesses to face up to. However, by experimenting and testing an organisation’s ability to adapt, leaders can prepare for the unprecedented and ride the waves of uncertainty to emerge ahead of competitors.
When planning for the future, many companies naturally look to the past – studying how change has come about before to predict what might happen next.
The problem with this approach is technology keeps changing the rules of the game, making past data increasingly irrelevant. This fact in itself is hugely important to businesses. Data is historically driven and as such is an unreliable companion when looking into the future.
Another common danger is the inability or unwillingness to let go of the current business model, made famous by the sad demise of Kodak. Linked to this is the failure to put disruptive metrics in place.
Successful businesses quickly shift into operational efficiency mode and build a set of metrics to ensure efficiency. Unfortunately efficiency requires a relatively steady environment and so when change happens, the metrics don’t tell you because you are looking at the wrong things.
Expecting the unexpected
One way to prepare for uncertainty is to explore potential futures and concoct patterns of response so that the business can understand how it would react were these events to happen. In reality, the future won't turn out like this, but it will enable the organisation to hone its antennae to the triggers of uncertainty.
Explore several different futures and think through some of the probable patterns – essentially build your instinctive muscles for the unexpected. Shell notably did this having walked through some scenarios, including the oil crisis. Of all the majors, they were the only ones who saw it for what it was.
Constantly keep in mind that what is held to be a business truth creates blind spots and filter these out. You need to live in a world of assumed uncertainty and be open to questioning the basic tenants of what drives your success.
Build up your business logic and understand your model as if building it again. Make sure you have a number of small-scale innovations that could totally disrupt your existing business.
To test how well your business is currently innovating, measure the frequency of experiments and failures. In this context, failing is a positive indicator of getting to the edges of what you can do. If you don’t know where the edges are, go and find them.
Designed for instability
Inbuilt flexibility is also key. A good analogy is in aircraft. Historically planes were designed for stability to keep them in the air. Today advanced fighters are designed for instability, using computer processing to keep readjusting the instability to give a sense of stability.
The inherent instability means they can respond much more quickly to changes, creating opportunity rather than risk. Given the volatility of international market forces, businesses could benefit from a similar approach.
Looking into what will accelerate the clock-speed of a business can help to overcome uncertain times successfully. This could involve anything from reduced supply chain times, to faster concept to launch processes.
Businesses that on the face of it look less efficient in the current market are usually less tightly coupled. When the world starts to change they are able to stretch and adapt, whereas a tightly coupled business has nowhere to go. The whole thing needs to change so all the cogs still mesh.
When IBM recognised that the mainframe business just wasn’t going to last, it turned itself very successfully into a services business.
Zero-based strategy is about being able to reconfigure your business operating system to re-anchor it on some new area of competitive advantage. But first you have to let go of the first one.
Looking further afield
Another way to prepare for changes you can’t foresee is to stay in touch with other industries. Exploring other worlds and looking at your own sector through their eyes offers a way of recognising the signs of upcoming and unexpected changes and allows you to put into motion a plan for how to face these, whatever they may be.
Most of the answers to commercial challenges already exist somewhere in the world, you just have to look for them in unlikely corners.
And finally, leaders need to be experimental. Look at all scenarios and embrace the risk of inherent instability to further facilitate innovation that, if it made good, could completely switch the business and keep it well ahead of future challenges.
Businesses that are unable to sufficiently quantify risk are left open to failure. Doing the same thing is considered as zero risk, but in reality, doing the same thing is the biggest risk of all.
Tobias Rooney is Director at strategic innovation consultancy ?What If!
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