As technology-enabled behaviour changes turn markets on their heads, is it inevitable that organisations, companies and institutions rapidly fall behind?
Organisations are run by smart people with plenty of experience in strategy and access to sophisticated planning and risk management systems. Yet most organisations evolve logarithmically, their ability to change tending to plateau, even as the technological environment in which they operate evolves exponentially.
Most business planning and financial management systems build this damper into the organisation. Financial professionals have a naïve faith that the world changes in iterations of a year at a time, and then only by a few percentage points. If our control systems are backward looking, we invariably look at the future as a smoothed extrapolation of the past. And if the most recent data does not fit expectations, we disregard it as anomalous — instead of accepting it as a harbinger of doom.
Just as with global warming, where for years we denied the data because it did not conform to how history told us it should look, digital disruption triggers a sense of disbelief. We do not want to give credence to the data in our planning, because to do so then obliges us to implement changes so radical that the risk-alarms go off all through the organisation.
Disruption by definition doesn’t happen gradually enough for us to become aware of it, believe in it, and start taking action. Responding to disruption, or owning it, requires a leap of faith which large organisations usually cannot bring themselves to take. We hope that the change is not enduring, that perhaps if we hang on to our existing business models for another couple of years everything will settle back to how it was.
Then there is a loud sucking sound and we wake up to find a bunch of little businesses we have never heard of eating our breakfast, and our customer base is gone.
This is the Red Queen Effect — an organisation’s ability to change diminishes as it grows in size, which is fine till it finds itself at the Edge of Chaos, where slow, predictable market change is overtaken by rapid radical change. At that point, it’s usually game over.
The average age of a company listed on the S&P 500 has fallen from almost 60 years in the 1950s to less than 20 years currently. Digital technologies and automation are the prime disruptive forces, and as AI and robotics become commonplace, company life expectancies will plummet. Since the turn of the century, every large organisation has found itself having to deal with the Edge of Chaos, and many have foundered.
What can you do to avoid being a victim of disruption? How can you take control of your future? I am shocked that eighteen years into the 21st century, and twenty five years after the birth of the World Wide Web, I still encounter senior business leaders who take some kind of pride in labelling themselves techno-dinosaurs, as if understanding even the basics of digital is beneath them. In South Africa, in my experience, these are the norm, not the exception.
Business leaders need to understand at a visceral level how technology is changing the behaviours of their customers. They need to appreciate that disruption is not a marketing problem or an IT issue, but a systemic problem — or opportunity — at the heart of their business model. The buck for a disrupted business stops with the CEO and the Board. Yes, other stakeholders, particularly shareholders, may take the blame for not encouraging change or investment, but it is top management who should take responsibility for leadership in times of chaos.
The solution to disruption does not lie in once-off re-branding or promotion, but in continuously re-inventing the customer experience. This has implications across all of the discipline silos in the organisation, and may even impact organisational design. Becoming flexible, agile and dynamic, delivering personalised customer experiences, and being willing and able to let go of legacy business assets are all painful and risky, but they don’t have to be expensive.
But before you can implement any of this, you need to understand where your market is evolving to, where you are letting your customers down, and where you can add meaningful value to CX which your competitors will never be able to echo.
This goes beyond “brainstorming” which often merely reinforces groupthink. There are methodologies and frameworks which help leadership teams to escape from a blinkered worldview, re-calibrate the value they add to customer experience, and ideate new approaches to the business model which make competitors irrelevant.
It takes commitment at the highest level in company leadership to identify and implement the often marginal changes which lead to radical performance improvements. Without that commitment, management teams can become jaded and complacent. Owning the future requires leadership. It requires acceptance of risk. It requires willingness to experiment, fail and learn. And it requires a burning ambition to disrupt rather than be disrupted. Get it wrong, and the Edge of Chaos will be your worst nightmare. Get it right, and your longevity and prosperity is assured.
Britefire facilitates Own the Future workshops for leadership teams throughout South Africa. Contact Malinda at 021 794 7838 to arrange a workshop for your team
Originally published in Medium