Prelude: The IMF: “A higher-than-usual degree of uncertainty…”
In its June 2020 Update, the IMF is forecasting negative 4.9% global economic growth in 2020, 38% lower than its forecast of April. And in a fine burst of understatement, it then added, “there is a higher-than-usual degree of uncertainty around this forecast,” and went on to enumerate the reasons, all of which relate the vast uncertainties regarding the pandemic.
These are indeed times of exceptional uncertainty, which of course presents huge challenges for leaders and strategists who must chart a course in this era of massive unknowns and tremendous ambiguity.
The purpose of this blog, as with the previous four, is to help you think about what’s happening, and what you should do about it for yourself and your organization. Here we examine today’s challenges, offer a new framework for strategy development, and make six specific recommendations for what you could or perhaps ought to do. This blog post is an extract from a larger white paper, which you may download here.
Topics Covered in this White Paper
Strategy in a Time of Fundamental Change
Strategy as a Learning System
Hidden and Unspoken Meanings
A Speculation on Black Lives Matter and its Relation with Covid
The Key Questions
>> Six Essential Action Items
Change Brings New Terminology and New Data Points
Conclusions: The Next Economy May Be the “Accordion Era”
Appendix: Succeeding at Virtual Teaming
Strategy in a Time of Fundamental Change
The world was already deep in flux when Covid arrived, and thus the pandemic has accelerated the changes, but it has also altered them qualitatively. It’s clear that even if you had a well-defined organizational strategy in January, you probably need to toss it out and start all over again now, because our situation has definitively changed. But furthermore, as we simply don’t know what’s coming next, what does the strategy change to?
And at the day to day level, have you noticed how many companies and governments have announced plans, actions, and decisions, only to reverse course the following day when subsequent events or public blowback revealed the flaws in their thinking? Public sporting events are on, then off, then on again. India shuts its economy and its transport systems, forcing millions to begin a long walk back to their home villages, which the government then realized would undo the intent of the shutdown, and the millions were then stopped half way.
Masks are optional, then mandatory (“AMC Theaters reverses course on masks after backlash”); Black Lives Matter masks are barred, then allowed (“Starbucks reverses its policy”); restaurants open, then reclose, and no one knows what’s going to happen next. Protests arise and turn into riots, or they don’t; police beat protesters, or join beside them; and all of this reveals how day to day uncertainty requires that our thinking evolve continually during the crisis.
Both of these vital factors – strategic uncertainty and day to day uncertainty – create a challenging new set of conditions for strategists and leaders.
So while it used to be the case that leaders would plan strategy every six months or once a year, now we’ve got to shift to a process of strategic thinking that’s a regular, even a constant process, not just a once-in-a-while thing you do at the annual offsite.
Consequently, the results, the plans, will not be written up in a binder for occasional reference, and the communications will not be the annual triumphant memo to the rest of the organization. They will be an ongoing strategic dialog among the leadership, and also involving everyone else.
The reasons for this ought to be crystal clear: the future – near, medium, and long term – holds such vast uncertainties, change is so pervasive, and the magnitude of what’s happening is so great, that whatever you come up with as the best plan as of today may be valid only for weeks or months, but it will almost certainly not be valid for much longer than that. This requires a shift in perception, and a shift in practice as well.
Old Way to New Way
Please take a look at the table below and see if you agree or disagree with any individual line, and with the overall “net result” message.
Do any of these shifts seem incorrectly labeled or misconceived to you? We would be very interested to have your feedback either way, agree or not.
But assuming that some, much, or all of the shifts noted on the table do make sense, then the practice of strategy-making must shift to adopting these new ways of thinking and working as described in the right-hand column.
We’ve previously referred to the new ways as “Agile Innovation” (the title of our 2014 book), and in this white paper we’ll examine them in some new dimensions, and make some specific recommendations.
The new way to play the game requires that strategy development shifts from being an intermittent (once a year) event, to an ongoing process. This is “Strategy as a Learning System,” for as change never stops, learning never stops.
As a quite timely example, The Economist reports (June 13, 2020) that, “Every Thursday at 5 pm three dozen of Germany’s most prominent economists brush their hair, clear their throats and Zoom into the finance ministry for 90 minutes of debate on whatever is on its officials’ minds. The sessions, which emerged from an informal discussion about the covid-19 crisis in March (2020), have inspired several policy measures.”
In Germany, economic policy debate and policy making has thus, quite appropriately, shifted to become a real time endeavor.
Perhaps you’ve already adopted some of these new practices; now you should consider doing all of them (although not necessarily with 36 German economists…).
A bit further down in this white paper we’ll describe six recommended actions to implement this new approach.
Hidden and Unspoken Meanings
Are you familiar with the iceberg model? It was developed by anthropologist Edward T. Hall, who suggested in his 1976 book Beyond Culture that while the overt actions are visible above the surface, what’s more important is what’s hidden below.
The purpose of the German economic debates is precisely to discern what’s going on in the deeper layers, and to identify the consequences for the German government and the German central bank. (And due to Germany’s importance as the strongest economy in Europe, these consequences will significantly impact the entire EU.) Events, it turns out, impact on mental models, and so there is a loop of social change.
Now that change is accelerating, and now that we’ve reached the fork in the road labeled “Covid-19,” mental models are shifting, and the sooner you figure out what the new models are going to be, the better off you are.
By “fork in the road” we mean that prior to January we seemed as a society to be headed in a particular direction, but Covid has forced us onto a much different path, a sharp change in direction. This is amply illustrated by the recent wave of support for Black Lives Matter.
A Speculation on Black Lives Matter and its Relation with Covid
BLM is an example of the power and relevance of changing mental models: Have you wondered why the Black Lives Matter movement reignited with so much force in the last month?
Here’s an interesting hypothesis as to why: The broad social response to Covid brought people throughout their communities to new levels of engagement with one another. Covid caused us all to discover a new dimension of caring for self and caring for neighbors, wearing masks for protection, and staying home to protect ourselves, our neighbors, and health care workers, thereby sacrificing our economic situation because of a health crisis.
Business closed, but also gave away many tons of food, restaurants offered free meals for “essential workers,” food banks expanded rapidly, companies donated protective equipment to clinics and hospitals, all at a scale that was unimaginable just a few months before.
And so the key point is that we all became much more highly sensitized to the importance of, and the meaning of, mutual care, and mutual respect.
And when black people in multiple cities were murdered by police, and these events were captured on video and displayed universally, instead of resigned acceptance of still more police brutality, the sensitized public suddenly experienced it as an unacceptable breach of the new normal of caring, and the outrage was not only immediate, it was universal. Marches occurred spontaneously in conservative Midwestern towns as well as in Europe and Asia.
I am thus suggesting an underlying hypothesis that Mental Models all across society had shifted, and that the response to Covid was a significant contributing factor in that shift.
Our understanding of the meaning of “society” and our roles in it had shifted over the course of just a few months, and so up the iceberg the repercussions ran, from Mental Models to Underlying Structures, and then to Patterns, and then the stunning Events: Huge protests everywhere, statues destroyed, defund movements, names of schools changed, etc.
Or in the words of Ford Foundation President Darren Walker, “Everyone is riveted… the murder of George Floyd has gripped the psyche of white Americans like nothing I’ve seen in my lifetime.” (He’s 60 years old, so he’s seen a fair amount.)
He makes an important point, that it’s level of the engagement of white Americans in BLM that’s particularly different now. Indeed, a year ago, no one would have even considered painting “Black Lives Matter” on the street in front of the White House; this year it seems entirely fitting to use this method to communicate an important message to a president who seems intent on a different message.
In this view, the outpouring of Black Lives Matter protests during Covid is thus in part a consequence of our experience of and response to Covid, not merely a coincidence.
It will take some time to know if this interpretation holds up to deeper scrutiny, but it does seem cogent as of now.
But assuming the connections between Covid, BLM, and our mental models of society are real, then these are key questions which the leader or strategist must now ask:
The Key Questions
- Is this a temporary or permanent change in our mental models?
(We believe it is likely permanent.) - If it’s permanent, what does it mean? (It will have enduring consequences. We think that Covid is a fork in the road, and we will now begin down a new path. See below for more on this…)
- And what else is going to change? (Yes, there will be further changes.)
- What does this mean to our organization? (See below also…)
Six Essential Action Items
A fantastic way to find the answer to question 4 is the engage in an ecosystem-wide learning process. Specific learning efforts should take many forms; here are six we highly recommend:
Knowledge to Action
Set up an organization-wide knowledge capture system to enable many, many people to jointly build shared awareness, and to stimulate even more people to participate as well, and to take action also. This is of course exactly what you want – people learning actively and transforming learning into action: this is organizational adaptation.
You can gamify this to make it fun as well as meaningful. Bring forth interesting and surprising discoveries, and share them widely. Connect people together who observe similar or related events, and encourage them to explore the deeper levels of meaning. Engage people in collaborative discussions to anticipate what’s next, and to create innovations in anticipation of these emerging needs and opportunities. (See “Active Experimentation,” below.)
And even better than capturing knowledge from within the organization is to capture it from the broader ecosystem of partners, customers, and suppliers, thus becoming an ecosystem-wide knowledge-to-action base.
The lesson: The more and faster you learn, the better your responses will be. 1000 people learning is better than 10 or 100 people learning.
Explore Alternative Futures
The purpose of the scenario planning technique is to open our eyes to new possibilities, to get us out of our mental ruts, and to face the unpredictabilities and uncertainties of the future with fresh and attentive eyes.
Scenario planning, or really any type of futures-oriented thought experiment, should yield early warning signs, items of interest for renewed study, topics to follow in detail, and imperatives that your organization must address immediately.
As we saw with the first and third of our recent white papers (see the Appendix for a summary, or download them here), if you haven’t done scenario planning you may find it quite worthwhile to do so. Especially now.
Other techniques to consider include Backcasting (the subject of the recent book “Lead from the Future” by Mark Johnson of Innosight), Trend Safaris, and Collaborative Future-Making.
The lesson: Find ways to look at the world through different eyes.
Active Experimentation
In our rapidly changing environment, it’s mandatory to constantly test to discover what’s working now and what’s not working any more. Tests have to take place at many levels – services design, product design, business model design, brand identity, market channels, customer communication, operating model …
Throughout your organization, people should be constantly testing, exploring, probing, trying new things. Many of these will be minor or incremental tweaks, but some will be major initiatives, big ideas, bold moves.
To facilitate this you should consider setting up a new brand or two that you can use as “experimentation brands,” where you can try new ideas without taking risk with your core brand. (This is a big topic, for sure, and worthy of its own white paper; we’ll discuss it in more depth later this year.)
And as noted in the prior white paper, be particularly alert to threats to existing business models, and opportunities for business model innovations. While breakthrough technologies can take years to develop, business model transformations can be achieved in mere months, and can transform irrelevant business forms into renewed successes.
The lesson: Experiment constantly to discover the boundaries of possibility, and the spaces in which there are new risks and new opportunities.
Data Collection & Analysis
Some of your new knowledge will be conceptual and topical, but you should also collect quantitative findings, data, and then analyze that data extensively.
Massive amounts of data are now readily available, and AI systems can comb through these giant data sets to yield important insights.
Such data analytics tools should be available and in use quite broadly throughout your organization, and so should the skill to use them well. It may be that widespread training in analytic methods is necessary.
The lesson: Invest in data collection and analysis to get early warnings on market shifts.
Core and Edge Exploration
“Core” refers to existing markets and customer sets; “Edges” are the places where you have no presence, and probably weak knowledge. But as markets are changing, and quickly, core customers often desert you, and you’re left scrambling.
Hence, it’s necessary to always be alert to what’s happening on the edge, as that’s where your new customers will come from, and that’s also where a lot of new ideas come from. (Steven Johnson’s 2010 book “Where Good Ideas Come From” addresses this quite well.)
In our diagram below, the core is the heart of the bell curve distribution, and this has been your target market. But new ideas and behaviors are usually evident on the edge long before they reach the core, so by engaging with the edges you can learn important lessons early on.
The lesson: Don’t just focus on your core, look to the edges as well.
And New Initiatives
These five learning techniques empower you to succeed at the sixth:
Do new things!
Big and bold things.
•••
The white paper goes on to provide a list of new terms that the crisis has introduced into our language, and to suggest that paying attention to evolving language is very worthwhile, as it sensitizes us to change.
And the conclusion proposes a name for the economic era into which we are arriving: “The Accordion Era,” and explains why.
In the Appendix we offer 7 suggestions for effective virtual teaming.
Please download the full white paper here.
•••
Stay well!
As always, we welcome your feedback, comments, and questions.
Please let us know if you’ve been successful implementing any of these action items, and any others that have worked for you as well.