Published

1

May

2020

Commentary

The End of the Beginning

Everyone underestimated the threat. Organizations were becoming more adaptive, but they had also designed fragility into their systems and processes, through efficiency, cost-cutting, poor M&A decisions and accidental ecosystems. Most organizations are now working to three timescales:

  • Manage the shock
  • Adapt the organization
  • Transform the organization

Many organizations are already managing the shock and stabilizing – they have switched to remote working, upgraded and secured their IT infrastructure. They are now starting to think ahead, about adapting to the aftershocks and longer-term transformation.

Figure 1 – The smart CXO plans for aftershocks & creates options for the future

Figure 1 – The smart CXO plans for aftershocks & creates options for the future

As Churchill said, “Now this is not the end. It is not even the beginning of the end, but it is, perhaps, the end of the beginning.” We are coming to the end of managing the shock – we have reached the end of the beginning.

Figure 2 – While managing the shock, smart organizations create options that generate civic progress & competitive advantage

Figure 2 – While managing the shock, smart organizations create options that generate civic progress & competitive advantage

We know that the COVID-19 pandemic will have aftershocks, so we need to adapt our organizations to be resilient. In past crises, organizations that slashed and burned performed worse in the medium and long term than those that trimmed and invested smartly. Organizations that cut down their options while stabilizing could perish; those that increase them will adapt and transform best. Investors, foreseeing the aftershocks, are already devising ways to incorporate options more systematically into their valuations.

But those aftershocks also bring us many (and rare) civic and market opportunities. While managing the shock, smart organizations can create options that generate civic progress and competitive advantage. There are already extraordinary (and perhaps double-edged) civic and commercial trends and opportunities emerging from pandemic responses and our forced experimentations and accelerations. For example:

Speed trialling of drugs
National digital twins
Pop-up manufacturing/supply chains
Civic stakeholder data trusts
Public sector venture capitalism
Wicked social problem hackathons
Public Policy experimentation as routine
Ethical digital conglomerates
Platform companies as relief agencies
Cottage industry revivals
Telehealth/telecare as the front line
Digital frontier justice
Haptic home training/schooling/examining
Platforms as the Department of Work
Stakeholder capitalism experiments
Shared workforces
Antifragile supply chains
Games as real-world shock models
Community self-organization
Social policing

David Moschella’s recent commentary and webinar A glimpse of the post-corona world introduced LEF’s ongoing research into various scenarios of what life may be like after the pandemic.

But how do we, public and private organizations, pursue these purpose-driven innovations when we are trying to survive and stabilize, with aftershocks approaching? We can become more like antifragile Amazon – we can use options to win more than lose when hit by shocks, volatility and stressors.

Figure 3 – Antifragility is a real phenomenon

Figure 3 – Antifragility is a real phenomenon

Antifragility (which some call strategic resiliency) is a real phenomenon – a fragile system quickly deteriorates, a brittle system holds out longer, a resilient system bends but doesn’t break and ultimately comes back, and an antifragile system adjusts and ultimately comes backs stronger, as we described in our 2017 paper Rethink Risk through the Lens of Antifragility.

We identified nine stratagems to increase antifragility by giving you options, and they have been borne out by companies that made strategic, structural and operational decisions that improved their ability to perform in volatility.

Figure 4 – Antifragility stratagems that can create options

Figure 4 – Antifragility stratagems that can create options

Antifragile Amazon deploys many of these – sensing and learning through R&D in every business; systematically ‘wandering’ away from the core business; implementing barbell investment strategies; decentralizing decision making and studying bad actors in Amazon Marketplace. Toyota has also shown antifragility – it adapted its supply chains for shocks after its catastrophic 2009 car recall; it then outperformed its competitors during the subsequent Fukushima shock to post record results. This displays most of the ‘experimentation’ and ‘decentralize/diversify/duplicate’ categories of stratagems. Germany’s response to the COVID-19 shock is antifragile (and a gold-standard pandemic response) – the government-supported early experimentation when the virus was confined to China then engaged a wide network of laboratories to conduct infection testing across a distributed, devolved federal health system. It is now improving its performance post-shock, exporting people, processes, equipment, materials and lessons learned to the rest of the world. This example demonstrates the ‘sense and understand’ stratagem plus all of the ‘decentralize/diversify/duplicate’ category.

These stratagems are not new. In the pursuit of resilience, technology organizations and IT departments have pioneered antifragility (often unknowingly), creating options through the deployment of cloud, chaos engineering, agile, DevOps, decentralized architectures and microservices. In IT, antifragility = elasticity + resilience + machine learning. That equation moved into technology businesses over five years ago as the hyperscalers built their data flywheels or learning engines. Critically, they deliver antifragile responses because these flywheels tightly drive operational systems (as we explored in our reports The Science of Digital Platforms, and Liberating Platform Organizations). To data flywheel-driven platforms and businesses, volatility drives learning that quickly drives new and improved products and services. The hyperscalers and other advanced organizations such as Haier naturally sense and understand, wander, operate barbell investment strategies, devolve where they can, diversify, create pop-up internal and external markets, and engage with the dark side.

The smart CXO’s pandemic workbook

Figure 5 – While managing the shock, smart CXOs should create options for civic progress & competitive advantage

Figure 5 – While managing the shock, smart CXOs should create options for civic progress & competitive advantage

Most of us are not so advanced, but we can apply these patterns to create options, even while still in the first phase. LEF is creating a CXO workbook that identifies activities to manage the shock – it will be released as part of the imminent position paper on Shock Treatment. These are table stakes; everyone is doing them, but our workbook highlights areas where public and private sector organizations can also create options for adapting and transforming themselves in the later stages.

Right now, while managing the shock, the smart CXO is also helping the organization plan for the aftershocks, creating options, and triggering them when value appears – they will help the organization be the best learner and the best adaptor. If ever there was a time for digital business leadership, it is now.

What you can do

  1. Look for examples of antifragile organizations improving in the pandemic and the aftershocks
  2. Work through the Smart CXO Pandemic Workbook:
    • Have you considered all the suggested activities?
    • Have you considered where you have options?
  3. Run/accelerate your post-pandemic scenario planning to include these options

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