10 Guidelines for Creating Opportunities in a Time of Crisis - Wharton
Every crisis, while deeply unsettling, also contains the seeds of opportunity. When we face the kind of dramatic crisis we do today, we need to remember three things:
How do we cope with this crisis now?
What opportunities does this crisis create?
What can be done to anticipate crises in the future and prepare for them?
While most people focus just on the first question, here are 10 guidelines to help organizations and individuals create opportunities in a time of crisis.
Change your mental model: Instead of viewing the present situation as a short-term necessary evil, ask how to use the current situation to speed up long overdue changes. Consider universities, for example. Many schools have been tinkering around the edges with online learning for several years. While some progress was made with massive open online courses (or MOOCs), the dominant pedagogical model remained unchanged. Movement towards online learning was not only very slow, it was also detached from the universities’ mainstream efforts. Educators knew that traditional teaching methods were ineffective, but it was almost impossible to get them to change before this crisis came along. Now universities have closed their campuses, students have been sent home, and faculty are being asked to conduct most classes online. At one stroke, almost in a baptism by fire, schools and universities have been pushed into offering online learning to some 90% of the world’s students, according to The New York Times. Hopefully these changes will continue after the crisis has passed and lead to long-term change. Faculty who offer online classes have unique opportunities in three areas: They can reinvent their teaching by finding new ways of engaging their students online, such as through the use of humor; they can increase the relevance of their research by challenging it in the light of the coronavirus crisis; and they can enhance their impact by offering their expertise to non-profit organizations, businesses and even governments. The most critical point is that after the crisis, faculty should consider developing innovative ways of incorporating online with classroom learning to develop the next generation of flipped classrooms. Institutions that view the crisis as an opportunity to innovate around online learning – including rethinking business and revenue models — will be better positioned to succeed in the post-pandemic world.
Step up your digital transformation and invest in infrastructure: The shutting down of the physical world and the shift to the digital world is transforming not just universities but also organizations in other fields. Think about what is happening at retail stores, museums, orchestras and theaters. All these require a strong digital infrastructure. The fact that brick-and-mortar channels are closed compels organizations to speed up their digital transformation.For example, the National Theatre in London, unable to perform plays in an auditorium during the lockdown, has announced that it will stream its performances for free on YouTube. The extension of its digital capabilities – along with the goodwill generated among a global rather than local audience – should continue to serve it well long after the crisis has passed. Organizations that use the shutdown to enhance their digital capabilities and capitalize on existing trends will be able to get closer to offering real-time experiences.
Identify new business opportunities generated by the crisis: One way to spot new opportunities is to creatively address people’s fears, uncertainties and lack of trust. For example, as demand has overwhelmed supply, enormous shortages of hospital beds, especially in intensive care units or ICUs, for COVID-19 treatment have emerged worldwide. In response, Italian architects Carlo Ratti and Italo Rota have designed “an intensive care pod within a shipping container” for hospitals. Named CURA, which stands for Connected Units for Respiratory Ailments, these pods are meant to help hospitals add to their ICU capacity. The first prototypes are being tested in Milan, Italy, a city that was devastated by the pandemic. Another example of a company seeing an opportunity even as it deals with the crisis is Zoom, the conferencing platform, which allows users to add a “virtual background” while they work at home.
Reexamine your talent strategy: Many companies have on their staff non-productive employees who do not have the competencies needed to succeed in the 21st century. It is possible to build a new talent strategy around a small core of full time-employees (mostly the designers of strategies and programs, the implementers who have to integrate the offerings, and the leaders) and augment it with the talent of open innovation. Such a fluid organizational structure, which combines the talent, capabilities and agility of employees with networks of independent contractors, can help spur open innovation. Research across more than 1,000 cases shows that open innovation can be more than four times faster and eight times cheaper than relying on internal talent alone.
Identify areas of opportunity through an idealized design process: Crises often offer opportunities at very reduced prices to acquire companies that may be in trouble or talent that has been laid off. While such opportunities are often tempting, it is smart to be selective and have a grand vision and master strategy that guides these acquisitions. When such moves are combined with an idealized design process, they can help move the organization towards mergers and alliances that are strategic and build long-term value.
Switch from a shareholder-focused organization to a stakeholder-focused one: Companies have been speaking for a long time about the importance of focusing on their customers. While this trend has been visible long before the coronavirus crisis arrived, it will intensify and become a necessity as a result of the crisis. Companies are becoming proactive about communicating with their customers, but they must do this in a sensitive fashion. As companies slim down and shed staff, paradoxically they will have to become even more highly focused on the employees that remain. Firms will need to deal with their employees as people, and not only in their narrow role as employees but as human beings. They will also have to shift their attention from serving just their shareholders to other stakeholders in society. Millennials and Gen Z employees want to work for companies that are changing the world. They prefer to buy products and services from companies that have a positive social impact. That is why switching to a stakeholder focus is increasingly important. We are at the beginning of a $2.2-trillion government rescue plan. We will see a rethinking of the relationship between the private and public sectors. Companies will have to learn to interact more effectively with the public sector and the not-for-profit sector as part of the broader stakeholder orientation.
Speed up the switch to a network orchestrator model: Companies have been talking for a long time about shifting towards a network orchestrator model. It is obvious in today’s environment — and this was true before the crisis — that you cannot succeed by competing company-against-company. You must focus on network-against-network competition and leverage your networks. When Wind and his co-authors published their study on the network imperative, they found that companies that leveraged their networks had a market value that was eight times their revenues. In contrast, manufacturing companies had a multiple of one to two. These data are probably obsolete because of the crisis, but the reality is that the benefit of networks will be even more important now. We must speed up the shift towards network orientation and orchestration. Managing network communications in a thoughtful, respectful manner requires a different kind of leadership model. Many companies these days send messages about COVID-19 to customers with whom they have done business. Would it not be better for such companies to encourage their customers to share experiences, problems and solutions with one another, rather than flooding their customers with coronavirus emails and social media posts?
Assure your organization’s agility, adaptability and resilience by enhancing its culture and reinventing its architecture: Assuring that the organization is agile, adaptable and resilient means we must re-examine the organizational architecture. This includes organizational culture as well as competencies, performance measures, incentives and reward systems as well as infrastructure, processes, technology and facilities. All these must be re-examined to ensure that the organization is agile and adaptable. Only these organizations will be able to survive after the crisis. It is equally important to find creative and effective ways to bridge or eliminate organizational siloes. The reason is that consumers increasingly judge organizations based on their own customer experience – and this often requires seamless and consistent delivery of products and services across siloes. Companies that succeed in bridging siloes will operate more effectively during and after the crisis.
Re-examine your business model and operations. Challenge your revenue model to identify opportunities for increased efficiency and profitable growth: Companies will have to re-examine their business models as well as revenue models. In times of crisis, cash is always king. The question is, how can you generate cash? Traditionally, companies have tried to save on costs by firing or laying off people. Research conducted over the years makes it clear that companies must ask themselves, “Are we doing the right things right?” If they do that, they can save at least 20% of their budgets.Companies tend to do things that were important in the past, but then times change and there is no need for them, but they continue anyway. Very often, if you look across departments and business units, there is duplication of effort. There is a huge opportunity for cost savings by re-examining, and if needed reinventing, all aspects of operations, business models and revenue models. There may be new opportunities, especially in the B2B area, to start thinking about revenue sharing or equity participation in companies. A crisis represents a huge opportunity to rethink everything we do.
Innovate and adopt an adaptive experimentation approach: Experimentation and innovation are a must in today’s environment. We must innovate in everything we do, not only in our products but also with respect to areas such as organizational architecture. You cannot do everything at once. Given the uncertainties during a crisis, the only way you can learn is to continuously improve what you are doing. This can only be achieved through continuous experimentation. Our recommendation is to speed up the innovation process, and make sure that innovation is done by everyone and not just by a separate unit. Everyone should be thinking about how things can be done differently and better. Experiments should be designed to deal with short-term challenges as well as longer-term issues. Also think about where the next crisis could come from, and what you can do to prevent it from happening or to protect yourself if it occurs. Given the turbulent times we live in, let us also learn from the natural experiments that occur around us. When will we have the opportunity to understand consumer behavior under extreme conditions, when most retail stores and restaurants are closed, when most communication is done digitally, when you can buy and test drive a new car in your home, and so on.
Role of Leadership
In addition to these guidelines, one fundamental factor – leadership — will determine if you will be able to create opportunities in the current crisis. Implementing these 10 guidelines calls for courageous leadership. You need leaders who are comfortable with making decisions under uncertainty, who are willing to experiment with new ideas and — above all, realizing the urgency of the situation — can act decisively and rapidly. You need leaders who are compassionate about people. There are huge human implications if you have no choice but to fire a lot of people.
Compassion is especially important because as you move towards a network organization, you need much more collaboration. You need leaders who believe in a win-win approach as the model for their activities and who can inspire co-creation with everyone who is involved.
Leaders must recognize that transformations cannot come about through technology or tools alone. Leaders should also seize the opportunity this crisis offers to reinforce the primacy of verbal discussions and hands-on experience.
When we speak about leadership, we don’t mean just CEOs; we mean leaders of business units, departments or brands as well. Every president of a business unit or a brand is like a mini CEO. They are the ones who are likely to move quickly. We hope everyone has the courage to become a leader who can leverage these guidelines to find opportunities in the current crisis.
To read the full article from Wharton, please click here.