Few firms were prepared for Covid-19. The ferocity of the attack of this virus surprised even the most vigilant of organizations. But some firms will emerge stronger as the shock waves ebb and the extreme uncertainty from lockdowns, economic slumps, and frozen markets abates. Successful firms avoid the pitfalls of wishful thinking, willful blindness, paralysis, or myopia when catastrophe surrounds them. Vigilant leaders can manage the current coronavirus chaos by following three navigation principles drawn from best practice.
1. Fight the Current Fire and Probe for the Next One
Strategic leaders pay attention to multiple unfolding horizons of turbulence. While they are firefighting in the present by looking after their people, suppliers, customers, and cash, they are also looking ahead. This demands an organizational culture that is agile and curious. The digital transformation of industries will continue to accelerate during the crisis. The pandemic is already giving a big boost to digital mitigation in health care, while nearly all organizations try to operate virtually as much as possible. Here are some general questions that vigilant leaders should ask to get beyond the immediate crisis.
- What are the biggest uncertainties across the horizon? What scenarios should management develop to capture them in combination?
- What strategic moves can the firm make to emerge as an industry leader? How robust are these moves across the possible scenarios?
- Are there opportunistic moves we can make now -- takeovers, market entries or exits? And which ones should we approach flexibly, as options?
- Should we shift the allocation of our innovation resources? Where should we scan for emerging opportunities, and how can we seize the best ones ahead of rivals?
- What new leadership talent and organizational capabilities will be needed to prepare the enterprise for the longer term?
2. Turbulence = Opportunity
Vigilant organizations will systematically nurture dynamic capabilities that foster agility and preparedness. Familiar environments can usually be navigated with ordinary capabilities focused on the proficient execution of current processes, such as supply chain management, routine transactions, and reliable performance. If you have to navigate deep uncertainty, however, firms will need a much more vigilant toolkit customized around three dynamic capabilities: sensing change sooner than rivals, seizing opportunities early on, and transforming the organization to stay ahead.
With the right set of dynamic capabilities, an organization can remain agile when turbulence is high. Agility means being able to move quickly and shift resources to higher-value activities sooner than rivals. For example, Intuit formed a small team, a scrum, to explore why its new online payments system Mint attracted unexpected customers. The scrum quickly realized that workers in the gig economy, like Uber or Lyft drivers, found their product convenient, and so the company tailored a version specially for them. Scrums function as self-managing teams, follow a transparent process, use design thinking methods to test prototype solutions, and learn quickly. These features are the antithesis of cumbersome, top-down processes with repetitive meetings, rigid command structures, and other impediments to action.
3. Speed Is Essential
Vigilant organizations develop a different perspective about speed than typical firms, namely, being ready when the time is right. Especially in the maelstrom of the coronavirus, speed will remain an especially useful creed. Delays tend to narrow the range of strategic options available because someone else may get to them earlier. Seeing sooner also gives vigilant firms more time to create flexible options to be exercised later.
But because the clock of business is whirring faster doesn't mean that leaders must operate in haste. Acting faster than rivals is about being ready for action when needed, and this starts with early detection and learning through probing questions by the C-suite, followed up with exploratory market forays. The aim of superior foresight is to have more degrees of freedom when quick or bold actions are called for, without being boxed in by rivals' moves.
Get Ready for the Long Game
Vigilant organizations employ many eyes and ears to scan the whole of the ecosystem, and are therefore better prepared to absorb mega shocks like the coronavirus. Companies such as Agilent, Intuit, Sysco, and Amazon have cultivated the right leadership orientation, economic resources, managerial talent, and organizational capabilities to seize emerging opportunities ahead of their more vulnerable rivals. Organizational vigilance is a collective capability characterized by curiosity, candor, and openness to diverse inputs. It is the antithesis of myopia, siloed thinking, and being held captive by outdated conventional wisdom. Our own research shows that the resilience of vigilant organizations in turbulent times derives from four strategic drivers:
- Leadership's commitment to vigilance is demonstrated by an openness to weak signals from diverse sources, encouraging everyone to explore issues outside their purview -- thinking outside the box. The leadership team focuses externally and nurtures curiosity throughout the entire organization, which allows the company to reconfigure its internal systems and external partnerships on short notice.
- Investments in foresight are made systematically, often through centralized foresight units, that scan the periphery while also collecting internal signals. For example, the supply chain function would have dashboards that flash early warnings when external events threaten timely deliveries. Rather than wait to see how key uncertainties might resolve over time, a vigilant organization proactively develops a flexible portfolio of options so it can probe and act fast when needed.
- Strategy making processes are flexible and adaptive by adopting both an "outside-in" and a "future-back" approach. Outside-in thinking allows leaders to gain deeper insights into the changing circumstances of their strategic partners. By feeling their pain, they can make wiser choices for joint gain later. Future-back thinking is about envisioning what kind of organizational transformations will be needed once Covid-19 subsides. Leaders can use future scenarios to decide what plants to seed now, while also relieving some of the near-term pain of their people, customers and suppliers.
- Coordination and accountability mechanisms in well-run enterprises are properly moored in place, such that information is shared readily with those who need it. By flagging and redressing uncoordinated activities and haphazard initiatives, the leadership team reduces decision-making ambiguity and creates the right conditions for continued vigilance. As soon as early warning signals about the pandemic were detected, for example, truly vigilant firms created "plan ahead' teams to think about the future and evaluate promising initiatives from across the firm.
In the extraordinary times of Covid-19, when a small, vicious virus pulls everyone down, vigilance is also very much about reinvention and orchestrating greater resilience for the next time around. This is not "resilience" in the usual sense of simply bouncing back and returning to normal. Instead, vigilant organizations ask: wWhat should we be ready to do when we return to a new normal, since the world post-Covid-19 will be different in many ways.
Individual leaders and the C-suite in unison can stimulate this kind of thinking by asking such questions as: What can we learn from the ongoing tumult and chaos? What must we do now to gain a competitive edge in the future? What are the organizational impediments to upgrading our vigilance capabilities? What strategic actions and change initiatives should we launch to put us in a stronger position for the future?
Vigilant leaders will create sufficient mental space to get everyone prepared for the next shock. And there will be one.
Co-authored with Wharton professor George S. Day, drawing on our new book See Sooner - Act Faster (MIT Press, 2019