Laging handa

Yup, like many of us, I was a Boy Scout in my youth.

One lesson I took to heart from that episode in my life is that organization’s motto, “Laging handa” (Be prepared), whose corollary is that lack of preparation courts the risk of failure.

It is an adage that gains special significance in times like today.

Intensifying, escalating, and/or expanding geopolitical conflicts have alarmed not a few folks, with some wondering if we are on the brink of another world war.

It is easy to see where they are coming from, with wars plaguing eastern Europe, the Middle East (involving the three superpowers either directly or indirectly), and parts of Africa (particularly Congo, Somalia, and Sudan), and China ramping up aggression in the South China Sea and staging massive mock aerial attacks on Taiwan. That means there is some form/level of conflict now raging in almost every corner of the world (except the Americas, Oceania, as well as the North and the South poles).

The brief direct armed exchange between the United States and Iran (which has threatened to block the strategic Strait of Hormuz which, in turn, would disrupt a fifth of the world’s oil shipments) — followed by a shaky Israel-Iran truce — has suddenly added risks to inflation, interest rate, and economic growth outlooks worldwide.

All these conflicts are on top of the jarring disruption caused by tariff turbulence from the US that has been reconfiguring global supply chains and forcing countries to fix exposed vulnerabilities by rethinking policies and rebalancing economic partnerships.

“How does one prepare for these kinds of eventualities?” a clearly worried friend messaged me a few days ago, to which I replied (with an internal shrug): “Normal preps lang.”

“Normal,” of course, in the sense that it should be routine for us by now — after a once-in-a-century pandemic, Russia’s invasion of Ukraine in February 2022, and amid the escalating and expanding Mideast crisis, etc. — to prepare for the unexpected. Very few people now use the term “black swan,” which was mainstreamed at the start of the pandemic, perhaps because almost everyone now braces for shocks.

At this point, allow me to credit BusinessWorld for affording me a valuable first-hand look at how an organization can enhance contingency planning, response, and resilience. Within a month of the declaration of the pandemic in mid-March 2020, a small group in the company sprang to action to maximize digital platforms to repackage and distribute content (with the expected initial resistance to change here and there, as can be expected in any organization), while the president, Miguel G. Belmonte, met employees regularly in order to give updates, field questions, and boost morale, without masking or sugarcoating hard facts. That was one fine example of agility and transparency for a mid-sized company amid a crisis.

Conditions and situations have changed for us all since then, but if there is anything that has remained constant all this time, it is that the only thing permanent is change (Heraclitus, 535-475 BC).

How does one position one’s business/organization on shifting sands?

Perhaps, now is a good time as any to check prescriptions that have been percolating out there. Here’s a glimpse:

AVOID PARALYSIS
In their June 23 MIT Sloan Management Review article, titled: “When Wait and See is Smart Strategy,” authors Adam Job, Nikolaus S. Lang, Ulrich Pidun, and Martin Reeves distinguished “wisely waiting” from “merely drifting” among corporate leaders.1

Noting that amid current uncertainty brought about by the tariff turmoil, “[c]ompanies are deferring investments… postponing sales… [and] delaying decisions…,” the authors recalled that an official of the International Chamber of Commerce said that these actions show “that companies are ‘kicking decisions down the road’ on supply chain restructuring as they watch how trade policies and relations develop.”

“Wait and see can be a dysfunctional response to change or uncertainty if it leads to missed opportunities or an increase in the eventual cost or risks related to actions,” they wrote.

At the same time, they added: “wait and see can also be a smart strategy for delaying commitments while observing an evolving situation.”

A decision to “wait and see” would make sense:

1.) amid temporarily elevated uncertainty, in a way that such a position can be reversed quickly when uncertainty lifts (hence, avoid hard-to-unwind commitments);

2.) when planned actions may spark a backlash, e.g., from the government, that may aggravate uncertainty;

3.) until target key information comes to light.

“Wait and see” is not advisable in the face of:

1.) an existential threat to one’s business;

2.) protracted uncertainty that could lead to a variety of potential operating conditions/environments (in which case, adopting modular/scalable, flexible responses to these possibilities would be the better choice).

In this period of uncertainty that can spike in blink of an eye, the authors counseled corporate leaders to ask five questions:

1.) Are we just drifting, or actively waiting as a strategic choice to avoid being locked into commitments that could eventually prove unviable/untenable?

2.) Do we understand which decisions may lead to such lock-in risks or political pushback?

3.) Are we able to detect signals from policy moves and competitors shifts?

4.) What precise triggers will prompt a shift from “pause” to “go” mode?

5.) Do we have playbooks ready for reengagement, and have we practiced deploying them?

THE RIGHT FRAMEWORK
Here’s another: a June 18 McKinsey Quarterly piece, titled: “A New Operating Model for a New World” — by authors Alexis Krivkovich, Amadeo Di Lodovico, Brooke Weddle, Dana Maor, Deepack Mahavedan, and Richard Steele — cautioned that “even the best strategy does not magically yield a strong performance.”2

They cited the need for an effective, flexible operating model that “can turn strategic potential into market-beating results.”

“Two-thirds of the organizations we surveyed have redesigned their operating models in the past two years, and half of the organizations say they plan to embark on a redesign in the next two years,” they wrote.

Citing studies by McKinsey & Co. showing that even high-performing firms suffer a 30% gap between their strategies’ full potential and what they actually deliver, the authors blamed flawed operating models for this shortcoming.

“Because executives today must address so many fast-moving geopolitical, technological, and societal trends, their operating model needs to anticipate and react to change just as rapidly,” the authors said.

“Our research shows that the operating model is one of the most significant enablers of performance within a CEO’s direct control.”

So, what are some of the best practices for operating model design? The authors identified 12 elements on which corporate leaders should focus their attention:

1.) purpose — an organization’s core reason for being (clear purpose helps employees and stakeholders navigate uncertainty);

2.) value agenda — how an organization creates value (a clear value agenda enables optimal resource allocation);

3.) structure — how accountable units and mission teams are designed (this facilitates and enhances prioritization and accountability);

4.) ecosystem — how an organization works with partners to create value (external partnerships create and share value beyond an organization’s boundaries and capabilities);

5.) leadership — how leaders make decisions and drive action (consistent, decisive leadership ensures clarity and speed of decision-making);

6.) governance — how to set priorities, allocate resources, and manage business performance (ensures that resource management is consistent and integrated with strategy);

7.) processes — how workflows are designed (clearly reflecting value creation at each step and across the organization);

8.) technology — how digital, data, and artificial intelligence (AI) are used to increase productivity and drive new sources of value;

9.) behaviors — how performance-based culture is nurtured across the organization (the “secret sauce” to quickly and effectively engaging the work force);

10.) rewards — how people are credited for performance, thus supporting desired behaviors and practices that increase value;

11.) talent — how an organization attracts and develops skills (the right capabilities are available to meet value-creation goals); and,

12.) footprint — how an organization deploys talent (resources and teams spread throughout an organization clearly reflect strategic priorities).

The resulting fit-to-purpose model enables leaders to achieve four measurable outcomes, namely: clarity (resources and accountabilities are aligned to strategy), speed (workflows are fast, tech-enabled, and smooth), skills (a future-ready workforce equipped to deliver the highest value), and commitment (establishing a performance-oriented culture).

And even after the adoption of a well-designed operating model, the organization may need tweaks or even an overhaul in a few years. Leaders faced with this prospect need to:

1.) Assess current strategic plans, identify areas where the group has not achieved goals fully, and identify potential root causes for such gaps;

2.) Define desired future performance across the four outcomes, with clear accountabilities and performance metrics;

3.) Spot inconsistencies across the 12 operating model elements cited earlier, and areas of poor execution;

4.) Evaluate trade-offs between refining a current operating model and adopting an entirely new design;

5.) Take stock of how leaders (including mid-level managers) can demonstrate the mindset and behavior shifts needed for a new model to succeed.

TRANSFORMATION
For the Boston Consulting Group, organizations may not only thrive amid economic uncertainty, they can seize the opportunity to transform themselves in order to sustain growth.

That statement struck a chord in me, since the economic lockdown amid the pandemic forced BusinessWorld to embrace digital platforms — a move that opened new revenue streams that fueled better revenue performance.

In an April 16 piece, titled: “The Transformation Paradox: How to Grow When the Growing Gets Tough,” authors Tuukka Seppä, Kristy Ellmer, Andreas Holmbom, Dominic C. Klemmer, Paul Catchlove, Martin Reeves, Ulrich Pidun, Gabe Boulsov and Adam Job cited 10 success factors for organizational transformation for sustained growth.3

The task of building capabilities covers:

1.) fostering a creative culture;

2.) adopting a long-term mindset;

3.) looking beyond the boundaries of one’s firm, i.e., industry, geopolitical, macroeconomic, and other factors affecting one’s peers;

4.) investing in innovation;

5.) building transformation experience to provide a stepping stone for future similar initiatives.

Meanwhile, executing change requires:

1.) setting up a formal program on improving processes and governance;

2.) appointing a chief transformation officer;

3.) crafting a compelling narrative to secure support from investors and other stakeholders;

4.) achieving higher cost efficiency than peers, reflecting a better operating model; and,

5.) transforming from a position of strength, preempting the next potential downturn.

NOT A PANACEA
And, of course, this discussion cannot ignore the compelling benefits of using emerging technologies that can speed up processes, boost quality, etc.

In a March 11 article, “The CEO’s Guide to Delivering Despite Uncertainty,” Boston Consulting said that “[h]ow companies integrate” AI “and rethink the way they work will make all the difference.”4

Companies that integrate AI into operations increase productivity, reduce costs, and improve customer and employee experience, the piece read.

At the same time, it cautioned that firms that “successfully implement and scale AI initiatives often fail to root out old behaviors and legacy infrastructure that the new technologies were designed to replace, so they were unable to realize savings.”

“Start by reshaping core functions, not just automating processes,” Boston Consulting said.

“Go beyond streamlining existing workflows and, instead, pursue efficiency and new business capabilities,” it added.

“Align AI initiatives with business priorities, focusing on two to four transformation areas that will have the greatest impact.”

Finally, it is crucial to set clear key performance metrics that measure cost savings, and new value creation, particularly in terms of revenue impact, customer experience, and product or service innovation.

Boston Consulting then advised businesses to invest in talent and organizational change by dedicating 70% of AI transformation efforts to upskilling workers and embedding the technology into daily decision making.

And so, there you have them folks: more ingredients for your ever-evolving business playbooks.

1  https://tinyurl.com/237kdeyl

2  https://tinyurl.com/23ygqqfo

3  https://tinyurl.com/28dfmdj5

4  https://tinyurl.com/2595t67z

Wilfredo G. Reyes was editor-in-chief of BusinessWorld from 2020 through 2023.