Written by Peter Ward, 22 March 2022
A thought-provoking cartoon published in Private Eye and reproduced here courtesy of its creator, Guy Venables:
No laughing matter but pretty evident that the world as we had come to know it has forever changed. ‘Oh it will come back, this is a temporary dip’. Much may lie in the definition of ‘temporary’. History would suggest that good times will return but I fear that we face challenging times for a while yet; the current situation has been brewing for a while:
Increased nationalism and populist leaders. Two aspects of the same thing as people, apprehensive of working together for the common good, seek refuge in a smaller community and vote for leaders that are prepared to blame ‘outsiders’ for a perceived threat to their established lifestyle. Feels to me that our beloved democracy is being abused by people expert in the manipulation of media rather than the promotion of a common good.
Mistrust in messaging. Despite the proliferation of news agencies and channels available in our ‘always on’ environment, there seems to be a growing scepticism about the veracity of key, mission-critical messages from country leaders. Look at the numbers of people who still claim that the US election was rigged, or the confusion surrounding the importance of vaccination in managing the pandemic. And with the Ukraine crisis, look at the competing tone of messaging in Russia versus Europe and the USA.
Growing pressure on the environment. The evidence of a deterioration in the quality of the natural environment is evident and measurable. We don’t need to pick our way through the different commentators to see that the incidence of floods, uncharacteristic weather patterns and threats of bush fires suggest that these pressures are real.
Stepping back from world affairs and taking a quick look at the United Kingdom (please, dear reader, if from another part of the world, feel free to insert your domestic woes!) where there are even further causes for concern:
The runaway cost of living. Partly fuel fuelled, but also reflecting the cost of additional bureaucracy post Brexit. And, it must be said, additional wage pressures through labour shortages across the economy.
The impact of poor investment in infrastructure and services and the focus on the short-term that prevents correction.
Dubious ethical standards in government, leaving much to be desired when looking for role models for leadership, or even managerial competence.
I have an overwhelming desire to call for the world to stop (echoes of an Antony Newley musical or Peter Sellars film way back in the sixties) but that is unlikely! But perhaps we, in the world of wealth creation, should stop and take stock. Suddenly all the buzzwords: resilience; agility; collaboration; innovation come into play but perhaps no longer something that we can leave on the agenda marked ‘for future consideration’. Now, mission-critical will be the resilient organisation that is nimble enough to respond and adapt to new conditions. And those new conditions are developing before our very eyes, both to deal with geopolitical challenges and the way that society is changing:
Sudden shifts in availability of markets. Graphically illustrated with the closure of Russian markets and the obvious downturn in demand from Ukraine.
Impact on global supply chains. Whether through ships getting stuck in the Suez canal, or the disruption from Brexit, or the interference from the pandemic, we have less confidence in the way we can assure a supply of essential components.
Impact of fuel costs. OK so we want to wean ourselves off petrochemicals, but for now, the influence on economic development of those with fuel reserves is significant and a useful bargaining chip for international attention.
And societal challenges:
The way we shop: not as simple as online or the high street, but a rich cocktail of options that will appeal to different individuals, or the same individuals at different times.
The way we work: not just office or working from home, but another rich cocktail of options.
The way we recruit: not just defining an organisational need and looking for candidates to fit, but more the creation of opportunities to inspire and attract talent that wants to learn and develop.
The way we reward: new models to suit highly mobile and impatient people who won’t fit into the historic model of loyalty induced by generous pension arrangements. It just won’t happen and it just doesn’t appeal.
The way we travel: electric vehicles may be approaching the tipping point where we are on the way to a majority seeing an EV as a logical choice. But have we even started to think about our relationship with air travel. It’s going to get expensive both in financial and environmental terms.
The way we invest: yes, there is a growing sense of investment in greener industries or industries stepping up to the environmental challenge, but have we yet embraced the need to invest in more reliable, more sustainable models with perhaps lower but more long-term returns based on sensible investment strategies in our portfolios?
I think I am scratching the surface when looking at the changes that we face, but I am sure you get the point. The degree and pace of change is such that we really do need to think about our capacity to cope. And can we?
My concern is that we will try to do this on the hoof. Day to day challenges will still take some attention and I wonder whether we will have the capacity to stand back and really think through how we are going to be successful tomorrow. Will we be able to spot new emerging trends? Will we be prepared for the changing moods of customers and employees? Will our supply chains be as robust as we need them to be in a world that is now wondering about the practicalities of globalisation? And will our societies, and indeed our pension and long-term savings plans expect more from us as wealth creators?
Seems to me that the risk factors are increasing and without carefully considering the potential returns, there may be a deficit in entrepreneurial energy that is required in any society if it is to progress.
What needs to be done?
For a start, let’s acknowledge that there is no ‘one size fits all’ solution. Each organisation will need to look at the specific external factors that are of concern. But identifying all of the factors might need an external eye to challenge and provoke a broader consideration. It is too easy to manage the knowns and even the known unknowns, but (thank you Donald Rumsfeld!) what about the unknown unknowns? If not an external eye, at least enlist a broader audience from within. This is when cognitive diversity delivers real value, so we need to make sure the broader audience brings with it the capacity to challenge.
In the early days of Telos Partners, we developed a simple step by step approach to help an organisation’s leadership to take stock. It’s been in use ever since and is deployed when a leadership team needs to take time out and check what they are doing well and what needs attention. The steps are simple, but the power comes from harnessing the collective energy of a senior team.
As with all of our interventions there is a mixture of hard and soft factors and this (affectionately known internally as ‘the whoosh’) helps to take stock of the underlying belief system (the why?) as well as the direction proposed (the what?) and then prompts questions around multiple stakeholders (or key audiences, if you prefer). It also focuses on behaviours for success before challenging the team with how they will lead, manage and measure performance.
From this simple framework, we can build out to examine, for example, key relationships and how they may change over time. Similarly, we can examine what success looks like now but also take account of changes over time as expectations change with customers, our people or society in total.
And where does the shareholder fit in all of this? Of course this is a key relationship and the whole purpose of the exercise is to anticipate threats to the wealth-generating model over time. I am not suggesting for one moment we could have anticipated the wholesale value destruction from a forced exit from Russia, but we would cause a broader debate on potential risks arising from geographically dispersed key players on which our very existence is dependant.
Our business communities are now emerging from, or still dealing with, a period of change of such significance as to threaten their very existence. We are seeing our existing business models and assumptions being challenged:
No it’s not high street or online, it’s a blend and this applies to a lot of our previously binary thinking.
After years of inventory reduction, stock levels are increasing to cope with delivery delays.
With fuel costs rising, there is an even more pressing business case to reduce fuel consumption.
Pay levels will always be a factor, but it’s not enough to attract and retain top talent.
Society will expect much more than the ESG section in the annual report, if it is to value its ongoing existence.
Customers are looking for much more than a survey to demonstrate real customer centricity.
This is not the first time that a business community has needed to deal with significant external forces. Any organisation that has survived for over 110 years has weathered two world wars and countless other more localised conflicts. But in today’s ‘always on’ world, the pace of change makes surviving and thriving more challenging.
Notwithstanding the general gloominess of this piece, I remain an optimist. Corporate endeavour needs to remain at the heart of wealth creation and healthy societies. So, it is vital that we acknowledge the complexity and pace of the change we are experiencing and set a course that will support our future prosperity. Threat lies in responding slowly or not at all. But opportunity lies in the discovery of new approaches and new needs.
Taking stock will help to create a unique response to the unique challenges for each business. The world is not going to stop, but we can. Just a pause for thought and a possible reset.
Image courtesy of www.istockphoto.com