The Covid pandemic has undoubtedly been one of the most disruptive periods in most organizations’ history. For instance, during 2020, GDP in advanced economies plummeted, with many businesses having to shut for prolonged periods, and nearly all having to rapidly adapt to the changing conditions.
Indeed, McKinsey recently argued that one of the few plus points from the pandemic was it reinforced the importance of building change capabilities within our organizations. As we begin to see some kind of normality returning to life, there has been an understandable desire to examine how we can better prepare ourselves for the future.
Becoming future-ready
About 90% of firms globally are considered small- and medium-sized enterprises, with such firms representing around 70% of all jobs. A recent report from the World Economic Forum conducted an analysis of hundreds of studies and interviewed 300 leaders and founders of small businesses to better understand what is required to future-proof a business.
The analysis found that the biggest challenge faced by SMEs was around talent acquisition, with over half citing this as a major concern. The existential difficulties posed by Covid were also reflected, with 43.8% of respondents citing survival as a key challenge. There was then a gap to access to finance and a non-supportive policy environment.
“Our global assessment showed no significant differences of future readiness of SMEs at the regional or the industry level,” the authors say. “The key takeaway from these results is that SMEs are neither disadvantaged by their geographical location nor industry space in moving towards future-readiness. What can set them apart is their ability to influence their internal processes (orientation and business model) and immediate external environment (networks) to ensure they remain future-ready.”
The authors were not able to identify any significant differences between firm performance at either industry or regional level, suggesting that their challenges are fairly universal. What’s more, this suggests that there are no real regional or geographical disadvantages to becoming “future-ready”, with one’s managerial approach and external network more likely influencers.
The report suggests that while the pandemic has undoubtedly been difficult for many, it also provides an opportunity to transform and become stronger, better businesses. Indeed, they argue that factors that might previously have disadvantaged SMEs can now help them to pivot towards new opportunities.
“It is hoped this will inspire and encourage SMEs and mid-sized companies to harness their potential in becoming a major driver of sustainable and inclusive economic growth and innovation by focusing on several core dimensions of future readiness: sustainable growth, societal impact and adaptive capacity,” the authors conclude.
Organizational agility
The importance of organizational agility was reaffirmed in a second report, from the Institute for Management Development’s (IMD) Future Readiness Centre. The researchers examined the performance and behavior of publicly listed companies over the past 11 years to try and understand the various behaviors that have helped organizations during the pandemic.
Across retail, automotive, financial services, and technology a number of common factors emerged that underpinned the ability of companies to weather the Covid storm. For instance, the most successful companies were able to move more decisively when both exploring and exploiting new opportunities. They were also more effective at capitalizing on digital technologies when doing so, which continues a long trend of successful companies being much more digitally savvy than the rest of the pack.
What is perhaps most interesting, however, is that successful and resilient companies were able to enter into mutually beneficial collaborations, even with competitors.
“It’s really noticeable how the most digitized brands are underpinned by a real culture of learning,” Professor Howard Yu, author of the Future Readiness Indicator at IMD says. “If a company is willing to learn from other sectors then that is really powerful.”
A recent paper from Cambridge Judge Business School highlights the value of such collaborations in the context of the UK government’s VentilatorChallenge (VCUK) to try and ensure an adequate supply of ventilators to hospitals.
The consortium assembled for the challenge consisted of around 100 firms from a wide range of different sectors, and they were able to repurpose everything from design to production technologies from industries such as aerospace and motorsports.
“The success of the VCUK consortium reflects how innovation can be accelerated through multiple non-traditional strategies,” the researchers explain. “The consortium had an open-innovation mindset that welcomed contributions from scores of partners; exaptation was much faster than mere adaptation in developing a new ventilator design; and there was a sound ecosystem strategy through leadership that welcomed knowledge sharing and coordination among partners rather than command and control.”
Cultural similarities
The successful companies in the IMD paper were able to engage in these kinds of fruitful partnerships in large part because the culture and management models of successful companies were sufficiently similar to allow cross-fertilization of ideas to naturally occur. It brings to mind the groundbreaking work of Dutch sociologist Geert Hofstede.
His work analyzing the values within and across nations identified striking similarities between residents of large cities across nations, such that Londoners and Parisians have more in common than Londoners do with residents of Rochdale.
Yu believes that such cultural homogeneity is equally present between leading companies, which enables the kind of knowledge transfer that was evident in the VCUK to occur across a wide range of scenarios, whether it’s Toyota taking lessons from the tech sector to weather the microchip supply chain challenge or Tesla learning from luxury retail brands when marketing their vehicles.
“Absolutely, this ability to absorb knowledge from outside is greatly supported when organizations think and behave in a similar way, and many of these companies have executives that are honed in the same schools, so there is definitely a shared sense of purpose across market leaders,” Yu says.
Of course, this has implications for competitiveness and the inequalities that exist across our economy, with leading companies getting further and further ahead of laggards. The impact of the pandemic on economic inequality at an individual level has been well documented, and just as there is a clear desire to address that challenge, there is perhaps an equal need to tackle the divide that is opening up between companies at the leading edge and those lagging far behind.
