Some Businesses Are Going to Emerge from this Crisis Better Prepared for the Future than Ever… Why Not Yours?
Our latest crisis…the Coronavirus… is first and foremost a devastating human health crisis and we hope it passes quickly with minimal impact to health and wellbeing.
But this crisis is about more than health. Like other crises, it also deeply impacts people who work and the companies where they work.
Depending on how you respond, a societal and business crisis can be seen as a terrible destroyer only or it can also be seen as a new opportunity for resilience and regeneration. With the right mindset, any crisis can be viewed as an invitation to make our businesses and our world better.
Some of our biggest and best companies from the past were birthed in times of crisis — Recessions, Global Depressions, War. Here are just a few — Disney, HP, General Electric, General Motors, FedEx, Microsoft.
And in times of great challenges, resilient existing companies reinvent, redesign and regenerate their business to come back stronger than ever. Under the guidance of CEO Alan Mullaly, Ford used the Great Recession to rethink and innovate the company. Thanks to its creative refinancing and business model change, it was the only car company that didn’t need a bail-out.
This kind of creative, regenerative thinking can even happen in a division within a company experiencing its own internal crisis.
In the 90’s when Apple as a whole was suffering from its own internal crisis of leadership and underperformance (prior to Steve Jobs return), we worked with a new division of Apple to innovate and market the development of their first portable computer product (people at the time were thinking of them as “shrunken desktops”). This became the Apple Powerbook, the first computer seen as a personalized extension that had style and a cool factor. It was their first product to ever become a billion-dollar brand in less than a year. Later, of course, it evolved into the phenomenally successful Mac Pro series.
All of these examples of success in the face of big challenges and crisis, have one thing in common — the leaders saw opportunity in difficult times, showed their people how to be resilient and together they designed and regenerated their business for the future.
A New Kind of Business Crisis
Of course, our crisis today is more than a business crisis. It is also a people and planet crisis.
The crisis we are all facing is multi-layered, interrelated, and continuous:
- Continuing Pandemics — It was SARS and EBOLA, now the Coronavirus…what is next?
- Economic — Stock market collapse, Global Recession, Extractive-Predatory Business Models
- Socio-Political Disruption — Wars, Authoritarian leaders, Threats to Democracy,
- Climate Change — THE Existential Threat to all creatures and future generations
- Mass Migrations — People driven to desperation from all of the above
To balance this picture of Breakdown we can make lists of many Breakthroughs such as… a new high in the literacy rate (90%) world-wide, elimination of Malaria deaths, infant mortality decline, and countless Bio and Tech advances. While these are all positive, they also require adjustment in how we think, plan and do our work in the future. Technological breakthroughs are disruptive and require a new level of resiliency…get on board or get left behind.
In our current and future world of Breakdown-Breakthrough, we have no choice but to get damn good at regenerating our enterprises in times of big change and being resilient in between. But being resilient in the new environment isn’t just about “get knocked down and get back up”.
To emerge stronger than ever, we have to change our thinking about volatility, take a new approach to resilience, and learn how to anticipate change. In other words, we have to continually innovate our businesses, as well as our products and services, to best fit the changing landscape of the New Era. Our enterprises have to become highly adaptive creatures.
We all know that Darwin didn’t say the toughest or most dominant will survive, he said:
“It is not the strongest of species that survive, nor the most intelligent, but the one most responsive to change.”
— Charles Darwin
Given our business and society’s imperative to be adaptive and resilient in the face of great change, let’s look at two models for resilience and see what they mean to enterprise innovation.
Think of a big, triggering event, the kind that creates a major threat to the status quo, knocks us back, maybe even knocks us down.
- Type I Resilience (R1) struggles to rebuild and get back to the previous comfort of the status quo.
- Type 2 Resilience (R2) reinvents, regenerates and comes back better than ever.
Type 1 Resilience
This model is the way many enterprises still look at business but it is a holdover from post WWII business patterns, focused on maximizing profits through optimizing predictability and minimizing volatility. Over the last few decades, many business initiatives and programs have helped improve product quality and business efficiency, such as Total Quality Management, Reengineering, Six Sigma, and others. However, these systems have also helped reinforce a culture of security- seeking predictability.
You can see in the R1 model there are always little waves prior to a triggering event, and in the R1 frame of mind the enterprise is continuously trying to damp down this variability, keeping the waves small. While it may seem reasonable at the time, this suppression actually makes the organization more vulnerable to the bigger triggering events.
A couple of examples of Type 1 Resilience:
Years ago, I was a young Air Force officer stationed in Phoenix and I watched, with incredulity, the cycle of home building there. They built homes in known flood plains and then every few years a huge rain would hit the desert, creating a raging flash flood. They would always say “no one saw that coming!” and many houses would be destroyed. Then they would collect insurance money and rebuild…in the same flood plain. This happened over and over. (Did you know there are over 3.8 million homes in the U.S. currently built in mapped flood plains… “Oh, what could go wrong?”). This is Type 1 Resilience. The struggle to return to the status quo.
After an airplane accident, a plane is inspected and sometimes design changes are made that improve flight safety. This is fine, good, and important. This saves lives. What they don’t do, however, is use the opportunity to ask the more systemic question; how can we redesign our part of this system to improve health and wellbeing?
Avoiding crashes is essential to saving lives, but air travel currently contributes significantly to environmental degradation and adds to the health and well-being crisis for their customers who live on the ground. Who knows…if they responded to a need to change (like an accident) by also fundamentally rethinking what they build and how they build it, they could address the specific and system issues together — create an environmentally positive innovation and improve flight safety and comfort in the air.
When we operate from an R1 mindset, we might respond to a triggering event or threat by building a new product, modifying our distribution channel, editing our marketing message, or something similar. Overall, we are changing just a little bit, really trying to return to our previous business model, striving to get things back to the predictable, familiar pattern for success, the status quo. In other words, we may have innovated things or processes, but we have not rethought what we are doing. We have avoided innovating the enterprise itself. As a result, we missed a big opportunity to innovate for the future and are even more vulnerable to a Breakdown-Breakthrough world.
Type 2 Resilience
“In times of great winds, some build bunkers, others build windmills” — Chinese Proverb
This may sound strange, but in a volatile world, you want to welcome volatility into your enterprise, as long as you also welcome innovative responses. If you do that, you become anti-fragile.
“Innovation is precisely something that gains from uncertainty” — Nassim Nickolas Taleb, author of Black Swan and Anti-fragile.
If you compare the two models of Resilience (R1 vs. R2) you will see several important differences. Follow along the graphic lines of the two models to see the comparison:
- Volatility — The R1 has smaller wavy lines (damping down change and volatility to make things more predictable) leading up to the Event, while R2 has bigger spikes of volatility. R2 enterprises focus on volatility factors, seek them out and experiment with them, build scenarios and prototype innovations (trial and error doing) to deal with them. While R1 organizations are busy reading their Lagging Indicators (past performance data, analysis of the known business landscape) and developing fixes to minimize disruption, R2 enterprises are reading the zeitgeist and their Leading Indicators (relevance to future customers and the broader landscape of the future) and developing internally disruptive innovations (doing not just conceptualizing) that better prepare them for a triggering event.
- Triggering Event, the Drop and the Resurgence — A triggering event is an event that can be big and can knock us back, down or even out. When an R1 “predictable” organization gets hit by such an event (usually from some external force they hadn’t anticipated or misjudged…think of Blockbuster hit by Netflix) it triggers a deep drop and tough struggle to climb back to the comfort of their status quo (if they even can). They view the deep trough of the curve as a time of lost cost.
An R2 enterprise may get hit by a triggering event, like a new technology, but their drop is less steep. They will have been reading their leading indicators, anticipating the change, experimenting with the disruptive possibilities (volatile jagged lines) and planning for an innovative regeneration of their business. They may be speeded into a change by a fast competitor or they may have leaped ahead of the game and actually triggered the change event themselves.
The R2 enterprise views the Triggering Event as an opportunity (not a setback) to reinvent themselves better than ever. They see more upside than downside. They don’t try to go back to status quo (remember Kodak’s attempt to go back to maximizing film sales and were pushed to bankruptcy by the very digital technology they helped invent…they didn’t want to risk their “predictable” business). The R2 enterprise rises from the regenerative change stronger than ever, producing higher value and often making better positive impact in the world. They view the trough and regeneration process not as a cost but as an investment in the future.
Examples of how business, government and communities work together, after a Climate Crisis, in an R2 Resilience way to regenerate and create a better world:
- New Orleans — After Hurricane Katrina hit, the region didn’t just rebuild levies and houses, they developed the Gentilly Drainage Project, a system of underground water storage, new rain gardens and new parks for people. They bounced back better than before.
- New York City — After the devastation of Hurricane Sandy, they developed the NYC 2015 Resilience Strategy. This was a whole systems approach that addressed climate change, flooding, infra-structure, ways of handling hurricanes, power outages and coastal erosion. They also strengthened social structures to address poverty, affordable housing, health and education. They still have a long way to go but they didn’t pass up the opportunity the volatile crisis gave them.
- Philadelphia — To address continuing threats of climate disruption, the City changed their control over sewer overflow, improved air quality, and started using less energy. In just six years, they not only controlled water run-off, they greened over 1,000 acres of land. Again, this shows we can learn to shift our thinking and innovate new ways of renewing and regenerating.
Notice that these resilient responses to crisis were the result of coordinated, collaborative work. We have found that nobody is resilient alone. We need each other. Businesses that expect to respond well to a crisis or significant challenge always do so in concert with others, often bringing in new thinking and new skills from the outside to make the leap to a higher level of flourishing.
More about the role Regeneration plays in Resilience and Flourishing
You can get hit by a big change events OR you can initiate the change yourself, focusing your innovations on regeneration ahead of time. You might still get knocked back, but you are less likely to get knocked out. Again, this means not only innovating products and services, it means innovating and regenerating the enterprise itself.
In the New Regeneration Era we are entering, we are being challenged not only to regenerate our business models/brands/products, we are also challenged to design them to help the world regenerate. Our businesses should be about the Naringsliv (the Swedish word for business that means “nourishment for life”), creating value while enriching life.
That may seem like a tall order — “Regenerate my business and help the world regenerate?” — but it actually works better to do it together. It’s not an “either, or” or a “first, second”, it’s an interconnected system.
When a resilient R2 organization encounters a triggering event, caused either by internal or external forces, it enters its “investment curve” (vs. cost curve) that begins its journey to Regeneration. That investment is focused on innovative rethinking, redesigning and redeveloping the enterprise for its next era of success. This is reflected in what we call the Regenerative Transformation portion of R2.
To Regenerate after a crisis, you have to actively Screw Up the Status Quo, Change the Mindset, and create a surge of Regeneration to propel the enterprise to a higher level of success. At each stage of this “Regeneration Loop”, there are new challenges and requirements
It takes dedicated focus and energy to effectively Regenerate but, if it does, the enterprise will emerge stronger and better than ever. And if the enterprise does it right, they will make a better, more positive impact on the world.
In our next blog, we will explore specific ways you can Screw-up the Status Quo and Regenerate your Enterprise for Future Flourishing.
Remember…Never waste a crisis or a good opportunity — When a big change hits, it is your signal you have a great opportunity to become more resilient, regenerate your business and expand your impact on the world.