ecosystems play an important part in any business structure.
How adapting your business model has paid off in 2020
Earlier this year, the New York Times reported that the virtual fitness giant Peloton’s stock had risen by 95% this year. As more and more people remain cooped up at home, the demand for streaming fitness classes remains at an all-time high. Americans needed to pivot when it came to fitness, and Peloton helped them do that. As quarantine became mandatory for nearly everyone, so too did finding ways to stay fit for those stuck at home. Peloton took advantage of this uncertainty by offering a great product that met a widespread need.
Peloton isn’t the only company profiting from the challenging nature of the pandemic, either. The communications industry (i.e. Netflix and Facebook) has a captive audience for its many platforms. Information technology (i.e. online gaming, Zoom, Microsoft Teams) has solved problems for people looking for ways to entertain themselves and/or work virtually. The consumer goods industry is also booming, as companies like Amazon, Home Depot, and pop-up innovations like hand-sanitizing kiosks fill important demands.
Numerous companies are using the pandemic to adapt their business model to pursue e-commerce while offering customer-friendly deals. These include customized offerings and bulk packaging to remain competitive in the marketplace. A great example is Airbnb. Their past model would have been much weaker due to ongoing lockdowns. That’s why they adjusted their business model. Now they’re offering fun and engaging online experiences such as diverse classes in art, cooking, travel, dance, and other areas.
The best companies have already looked toward a digital future to embrace online platforms, AI, and automation. The question is how these same companies can then close the skill gap within their base of employees as they require these new skillsets. From an organizational perspective, they need to foster a culture of modern skillsets, diverse perspectives, readily-available mentoring, and to give employees plenty of room to both learn and grow.
What about businesses that aren’t recovering?
Unfortunately for many businesses in some sectors, the road to recovery is not as clear a path. While some industries have had more opportunities to innovate than others, some businesses face major challenges such as decreasing foot traffic, low spending, and rising competition.
The Economist recently reported that a “wave of bankruptcies” are hitting many companies across the U.S. This is due to the various risks many businesses face in this difficult new economic climate, risks such as increased liability. These challenges can lead to bankruptcies and may force some companies to engage in aggressive restructuring as a last resort. Some companies see financial instability because of high yield bonds (aka junk bonds) ownership or from having an elevated amount of “distressed-debt ratio.”
According to the Economist article, the following sectors have a distressed ratio higher than 35%: restaurants, transportation, automobiles, utilities, retail, and mining. These types of industries, which require “high touch” and highly personal customer services will need to rethink the way they operate. They’ll be forced to adopt new business models that account for the recent sweeping changes in the market.
Three actions your organization should take
The pieces referenced above reveal the reality that the only organizations that are going to succeed going forward will be the ones that are most flexible. That said, there are actions your business can take to not just survive, but also thrive. There are three major actions your organization should take to navigate the coming uncertainty:
Conduct a scenario planning analysis
First, you have to establish a baseline of where your company is in order to understand where it’s going. You also have to accurately assess the overall market itself. You can do this by conducting a scenario planning analysis. This analysis will have three main components:
- Explore the future business environment.
- Stretch the decision-making process to make important choices during uncertainty.
- Be aware of your biases of our current experiences. Ask “what if?” questions.
How is your management structure aligned? Is your operation set up in a way that you are flexible enough to implement inventive solutions? Can you hold workshops to foster creativity while establishing unique problem-solving methods?
A scenario planning analysis helps you understand how well-equipped you are to react to the current landscape. It can also contribute to a gap analysis in which you identify the weakest areas of your organization and the ones that will hold you back as you attempt to adapt. This will help you address any misalignment within your business that you can then correct.
Find your “Innovation IQ”
In all likelihood, your company didn’t wait for a pandemic to start thinking of and implementing great ideas. Perhaps there have been times in the past when you’ve applied a unique solution to a complex problem.
You can do this by hosting ideation workshops to foster brainstorming and collaboration. Knowing what areas of your company produce the best ideas and results will help you focus on developing solutions in the future. You can also find repeatable processes used by these groups and apply them to other departments. You can easily collect and rate ideas on an ideation tool.
Your organization possesses a high Innovation IQ when your overall strategy is aligned with leadership, core capabilities, and culture. It means you are well-prepared to manage innovation across your entire organization, actively working to align your innovative action with your organization’s key initiatives and capabilities.
Strengthen your cross-function collaboration
To effectively plan for most scenarios, you’ll want to look outside your organization as well for answers. There’s no question that your internal employees can provide you with plenty of solutions and great ideas. But why limit yourself to just those within your organization? The touchstone of a winning company is that they welcome great ideas from any source, no matter where it comes from. That’s why sometimes it helps to move outward.
Moving outward strengthens your cross-function collaboration. You can do this by developing strong partnerships with the following groups and individuals:
- Your employees within your various departments
- Suppliers, vendors, and contractors
- Other thought leaders and visionaries within your industry
Think creatively about who you’ll integrate into this process. You may have an inclination to only look within for your problem-solving. This is short-sighted; great ideas can come from anyone and anywhere. If you have solid partnerships built up, why not leverage them to help grow your business or tackle uncertainty head-on?
Look at this group of people as your extended network of collaborators. Of course you’ll want to tap into their expertise and knowledge, if they’re willing to share it! It will help you build a talent base that’s ready for a diverse set of challenges in a new era. By widening the group of voices you bring to your table, you increase your options for dealing with problems.
The bottom line on planning for uncertainty
The only thing that’s certain for businesses in the coming weeks and months is that nothing is certain. To respond effectively to your customers, your business will need to be sensitive to any alterations in customer behavior. You’ll need to continually monitor customer needs, and respond to them by creating an emotional bond and a strong connection. You can do this by providing them with security, safety, encouragement, and support. Make sure you have a team of people in place who understand your customers and also how to serve them.
Your business is going to face a multitude of scenarios in both the short- and long-term future. As a leader, you’ll need to prepare for all of these scenarios by evaluating how your company engages in long-term decision making and strategic planning. Who is at the table for these discussions? Are you getting enough diversity of opinion? What are your options for responding to uncertainty?
Answering these questions isn’t easy. Manage crisis by first examining how you engage in scenario planning and then align your company’s strategy with you leadership, core capabilities, and culture. And don’t forget to lean on a wide base fo supporters both inside and outside your organization!