Two and a half years isn’t a long time, but it’s no understatement to say the world is dramatically different from January 2020. Gone are the days of less than 2% inflation, affordable gas and supply chains that hummed along. In their place, we’ve seen pandemic lockdowns and reopenings, a surge in remote work, labor shortages, erratic real estate markets, a war in Eastern Europe, snarled supply chains and runaway inflation impacting almost every part of the economy. In short, volatility and uncertainty reign.
The pandemic forced business leaders — who are often judged on their long-term results — to take each crisis day by day. As they managed immediate challenges, executives had little time to consider their company’s overall trajectory, cultivate new leaders or think about transforming their revenue streams.
When uncertainty hits, it’s natural to pause and take a breath — to get a better lay of the land before acting. Investing in new regions, hiring the next class, building up inventories, starting a new business … all these moves feel riskier. And many companies halt transformation efforts as they focus on the short term.
That’s the wrong move. Implementing transformation doesn’t have to hinder your ability to address today’s issues. But pausing it can compound tomorrow’s problems. Let’s examine how companies can address today’s pains while keeping an eye on the future during these uncertain times.
Where you are vs. where you’re going
An Italian health system, APSS Trento, illustrates how transformation empowers companies to meet the next uncertainty. Faced with a dearth of doctors and an aging population with increased chronic conditions, APSS Trento undertook a CRM transformation to improve patient journeys. While a CRM solution in healthcare may seem odd, APSS Trento’s CIO Ettore Turra had a different perspective, recognizing the growing need for at-home care, remote appointments, outpatient clinics and other types of medical services.
“The needs of a healthcare company aren’t so different from the needs of service companies,” Turra said. “They provide services to their clients and require an integrated view of those customers. We need to do the same with our patients.”
That’s a big picture, cross-industry mindset that led to true transformation. And when the pandemic spread in Italy, APSS Trento was ready. The organization adapted in a matter of days instead of months, quickly transitioning to more at-home monitoring. Being able to better track and analyze patient information allowed APSS Trento to enhance care and save more lives.
The nonprofit space offers another example of meaningful transformation. Like other organizations, the YMCA of Greater New York was rocked by the pandemic, seeing its revenue cut in half. To survive, the YMCA had to reimagine its revenue and service delivery models and take chances it ordinarily wouldn’t.
The organization analyzed customer sentiment and repositioned its core experience, including providing emergency childcare, establishing food pantries, increasing homeless services and expanding virtual offerings. In addition to serving the community in new ways, the YMCA now has an operating model that can respond and adapt to change at any given time.
These organizations didn’t rest when uncertainty hit. They focused on what is most strategic and implemented transformations that not only helped them survive but left them better prepared for the next crisis. Those actions — instead of pausing — helped them achieve a fundamental advantage over competitors.
Embracing ecosystems and partnerships
Just as the natural reaction to uncertainty is to pause, many businesses also pull back from partnerships. Amid roiling markets, companies take a defensive posture, hoping to protect their advantages and hold on to market share.
For a long time, we’ve heard that every business will eventually become a digital business. The pandemic accelerated that, but many have regressed to building economic moats in the face of today’s uncertainty. Still, every business will soon be an ecosystem business, market uncertainty or not. The next step of that evolution is that non-participants will either die off, be acquired by an ecosystem participant or convert their model to one that benefits from a powerful ecosystem.
The reason? The alternatives simply aren’t economically viable. Competitors will surpass non-participants and win those customers. Organizations with digital ecosystems as their main business model experienced revenue growth approximately 27 percentage points higher than the average for their industries and had profit margins 20 percentage points above average, according to MIT Sloan. It’s not a matter of if non-participants in ecosystems cease to exist, but when.
We see this in the C-suite, too. As we’ve faced tremendous market headwinds over the past several years, ecosystem executives are better equipped to handle this turbulence. One study found that 70% of ecosystem leaders have flexible and adaptable supply chains, compared to just 40% of other executives.
Much like transformation, the shrewdest approach to overcoming uncertainty isn’t to withdraw from digital ecosystems. It’s to lean into them.
Facilitate bold leadership
Too often in business, inaction may appear to be the safest route. If revenue is strong, why risk trying to improve it? There’s apparent safety in the status quo: Businesses often don’t punish small but consistent losses or failures. In challenging times, employees mirror their companies. They look to protect themselves and withdraw from collaboration and innovation. With budget cuts looming, they look for their own differentiators and try to hold onto them. This can create silos within an organization, and silos crush value. “Bosses” instill fear and foster silos. “Leaders” facilitate collaboration and create conviction.
Today’s leaders must be able to navigate a complex web of uncertainties, both in the short and long term. They must be able to evaluate themselves as well as their teams, taking a critical eye to where they can improve and help the company. They must self-disrupt where needed, even though it can feel unnatural.
If you think that what you’ve done in the past has gotten you where you are today, remember that past results rarely predict future performance. Blockbuster reported more than $5 billion in revenue in 2004. Six years later, it filed for bankruptcy protection. The best companies already realize this. By 2023, according to IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, 60% of Forbes Global 2000 companies will build their own platforms to support innovation and growth in our brave new world.
As we’ve learned since January 2020, a lot can change in a brief period. The best leaders embrace uncertainty and focus on bigger bets, knowing that transformational action today will give them the best chance to win tomorrow.
Courtesy PwC by Thomas Puthiyamadam
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