When life gives you lemons, launch a new lemonade division
Adversity happens. A competitor leapfrogs you. An emerging market leaves you in the dust. A global pandemic catches you off guard. Suddenly, your organization is in a struggle to survive.
Many companies flounder and fail when faced with such adversity. But a select few invariably manage to rise up, reinvent themselves, and emerge even stronger. We know the names. Apple's Steve Jobs. Amazon's Jeff Bezos. T-Mobile's John Legere. Nintendo's Hiroshi Yamauchi. Lego's Jorgen Vig Knudstorp.
What do these comebacks have in common? What made them special? Were these executives simply in the right place at the right time, or did they apply some strategic alchemy to recover. With COVID-19 and its economic fallout endangering thousands of companies around the globe, many top executives are looking to follow in the footsteps of these turnaround specialists.
Getting there, though, requires the vision, resilience, and fortitude to shake off immediate pressures and, instead, focus on leading, listening, and learning, as well as digitally transforming for long-term gain.
Martin Reeves, chairman of the Boston Consulting Group (BCG) Henderson Institute, notes organizations can become more introverted and defensive when threatened or challenged. But those with the right leaders typically stay focused on the bigger picture and are better able to address challenges.
Of course, the ability to look beyond one's immediate issues can be situational and vary by market, he says. For instance, restaurateurs may be able to quickly shift to takeout, delivery, and parking lot dining to offset lost revenues. But executives for airlines, hotels, and hair salon chains might not have as many options to offset lost revenues when people fear patronizing their businesses.
Still, Reeves has been able to put together some general research on what makes successful leaders tick in times of crisis. He identified three types of individuals: those who can think in "multiple time scales," those with an "abundance mentality," and those able to apply "strategic ambidexterity."
By thinking in multiple time scales, he means some executives have the uncanny ability to keep their eyes on urgent needs, such as maintaining revenues and pleasing shareholders. But they can also look one, five, or 10 years down the road and guide their company in the right direction.
Reeves says some great leaders also possess what business guru Stephen Covey called an abundance mentality. This is the idea that there is plenty of opportunity out there and enough to spare for everyone. Those who adhere to this idea recognize there is opportunity in every challenge to grow and outflank the competition. But these "flourishers" are a rare breed who recognize that, while competitors are often distracted with survival, it's often the ideal time to get aggressive in the market, Reeves says.
"It is remarkable the degree to which smart leaders cannot always do that and become short-term oriented at precisely the wrong times," he says. "Those that overcome adversity, however, often embrace that abundance mentality. They understand what it means to keep one's 'nose to the grindstone and eyes on the horizon,' as former American Express CEO Ken Chenault put it when leading the company through the 2008 financial crisis."
Reeves defines the third executive trait, strategic ambidexterity, as the ability to be extremely tactical and strategic at the same time. Only about 3 percent of leaders are able to do this effectively, according to his research, in large part because it can be exceptionally difficult to operate this way.
"The reason it's hard is it involves a contradiction," Reeves says. "Look at tactical statements like 'follow the plan,' 'execute with 100 percent fidelity,' and 'squeeze every last cent out of the current business model.' Then compare them to aspirational desires to 'take risks,' 'explore new possibilities,' and 'try new things.' Those are contradictory ideas involving different skill sets. But leaders whose companies have done well in recessions and other crises were able to accomplish both, ambidextrously."
Continual listening and learning
Successful leaders are also particularly attentive to the constantly shifting needs of customers, especially in times of crisis. They listen. They try to learn how and why requirements may be shifting. They put themselves in the shoes of the people they serve—and lead with empathy.
"You see that all the time now with COVID, which has been the ultimate change agent," says Lara Caimi, chief customer and partner officer at ServiceNow, a cloud-based enterprise software company. "Speaking the language of the customer always matters. But now more than ever, really investing in understanding their unique situation goes a long way toward building trust and a deeper partnership with them. And showing up with empathy amidst it all when dealing with adversity is also super important."
Caimi says companies that face adversity head on with courage, conviction, and creativity sometimes set the benchmark for modern business and become enduringly successful. They get in the trenches with their customers, evaluate how their portfolios can deliver on their most pressing needs, and do whatever it takes to bring the right products and services to market.
This often requires leaders to question and adjust their company assumptions, practices, and policies, something that may not come naturally to most of them.
"You may have to completely rethink your business model, cost position, and how you interact with customers and employees," Caimi says. "It's even more important to do that in times of adversity because that's when fundamental principles of work are the most in flux and there is a higher capacity for organizations to absorb change."
Thomas Lawton, a visiting professor at Dartmouth University's Tuck School of Business, agrees, noting many companies flounder when their leaders do not learn and adjust to meet customer needs.
"When strategies go wrong, more often than not, it's due to human error. It's customer detachment, which leads to strategic decline and failure," he says. "You must have confidence in your strategy. You need to be courageous. I'm not saying you should bet the house on black and take a massive leap into the unknown. But at the same time, innovation has to be key to everything you do."
Lawton says one way to garner higher levels of innovation is to ensure executives and employees keep current with learning and development programs aligned to markets their companies serve. In times of crisis, though, those efforts often fall by the wayside, which is shortsighted, he notes.
"Faced with adversity, companies should be asking, 'What is it we need to learn more about to get through all of this and come out strong?'" he says. "But unfortunately, most just start battening down the hatches and one of the first budgets to be cut is learning and development. This is when smart executives should be pushing back and explaining why these programs are so vital to the company's survival and success."
Delivering on digital transformation
In addition to listening and learning, experts recommend tackling adversity with increased investment in digital transformation.
Leaders of most midsize to large companies were already on this track before COVID-19 reached epidemic levels in March. But many say that when companies were forced to send employees home to work almost overnight, it exposed how behind the curve many of them were with their progress.
Now, forced to ensure workers can do their jobs remotely at any given moment, companies have jumped five years ahead in consumer and business digital adoption in a matter of around eight weeks, McKinsey Digital data indicates. According to McKinsey:
"The COVID-19 crisis seemingly provides a sudden glimpse into a future world … in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight. A world in which digital channels become the primary (and, in some cases, sole) customer engagement model, and automated processes become a primary driver of productivity—and the basis of flexible, transparent, and stable supply chains. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior."
More than all that, though, digital transformation provides an opportunity for business leaders to minimize the risk of being caught off guard by some future crisis. What's more, the experience of having to go almost entirely digital on a moment's notice taught many of them this technology can work. It showed them that it can help connect the business with employees, partners, and customers faster and more efficiently than they might have otherwise thought possible (if done right), and that it could help substantially reduce commercial real estate, supply, and operating costs.
"What has been a discretionary, self-paced digital transformation for many companies has now become an urgent priority," says BCG's Reeves. "Most large enterprises now have evolving digital strategies that include platforms, ecosystems, operating models, and offerings with artificial intelligence footings."
For some savvier companies, digital transformation can also help create or widen paths to more sustainable and potentially lucrative business models and markets.
HonorHealth took this as an opportunity to extend the ServiceNow platform to build a digital framework for symptom checking on its website using a customer workflow virtual agent. The system, built in just four days, allowed the healthcare provider to channel 90 percent of the coronavirus hotline calls it was receiving to virtual agents for quicker response. Patients could still talk to live agents if the situation called for it.
"When faced with crisis or adversity, the key is to really think about how you operationalize differently and more quickly," says ServiceNow's Caimi. "It's situations like the one we're in now, with COVID-19, that prove the digital transformation imperative couldn't be any greater."
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Adversity brings out three types of individuals: those who can think in "multiple time scales," those with an "abundance mentality," and those able to apply "strategic ambidexterity."
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.