It’s been said that 2020 is a lost year – when the pandemic drove the global economy into recession, when many countries locked down their communities, and when companies did some rethinking on how to conduct their businesses. The year 2020 was practically written off. But we observed that companies in 2020 responded differently to the global crisis and took any of the four organizational responses to the global crisis.
First was denial, where companies did nothing and got stuck with organizational paralysis. We saw this with several organizations that had false optimism that the pandemic will somehow wane towards the end of the year. They held on to their traditional ay of operating, such as those in traditional brick-and-mortar retail and hospitality industries. Many of these companies sustained huge losses and forced to close operations in 2020.
The second was adaptation. This was where companies did some minor adjustments for efficiency gains. They pursued small-scale retrenchment as a knee-jerk reaction to the crisis. Their actions were limited to operating within their existing business models, while cautiously investing in adapting not the current environment, such as investing in technologies to enable work-from-home. We observed these behaviors across various industries primarily evident among medium-sized organizations.
The third was adaptation to the crisis while fundamentally rethinking of the companies’ business models. These organizations pursued incremental changes, such as reorganizations and investing in Internet technologies, while fundamentally rethinking their business models. We saw a vast majority of the small and medium enterprises (SMEs) as well as larger companies in this category. Business model innovation was a staple vocabulary among business owners and executives among these organizations. They engaged in a different form of strategic planning that involved changes in how they create, deliver, and capture value to their customers.
The fourth and the last was strategic action. These companies, mainly seen among large organizations and conglomerates, did not only rethink their business models in 2020, but also swiftly implemented strategic actions. Examples are how Philippine fast-food giant Jollibee Foods Corp. invested P7 billion ($138 million) to build discreet ‘cloud kitchens’ and a stronger delivery service as part of a global restructuring plan” to offset the impact of the pandemic.; and how Philippine conglomerates San Miguel and Emperador reconfigured their liquor manufacturing lines to produce disinfectant alcohol. Large retailers shifted to ecommerce and large banks pivoted to digital banking.
These were the organizational behaviors observed last year. Strategies were formulated as a linear response to the environment. How should companies respond this year? To answer this, we need to look at different scenarios in order to guide our organizations on what strategic direction to pursue. The rate of the global economic recovery relies heavily on the course of the COVID-19 pandemic, where the vaccine rollout is one crucial factor.
According to the World Economic Forum, “depending on the spread or containment of COVID-19, the pace of vaccine dissemination over the next two years, and the level of global financial stress, three alternative outcomes to the baseline forecast in the January 2021 Global Economic Prospects are possible”.
One is “a baseline scenario, global economic activity would recover to 4% in 2021 and 3.8% in 2022”. Another is a downside scenario, where “the global economy could face another year of below-potential growth, before a rebound in 2022”. Then there is the optimistic scenario where accelerated growth will happen starting second quarter of 2021.
But there’s another scenario, one which is probably the worst-case. The World Health Organization and other organizations have warned it could take up to 5 years or more before the coronavirus pandemic is under control. This would mean longer economic decline.
Notwithstanding the different scenarios, organizations should take a long-term view of the crisis and adapt their strategic actions. This is where strategic agility comes into play. It’s the organizational capability to acutely scan the nuances in environmental shifts. Strategies are formulated and prioritized based on the environmental changes and reviewed periodically, e.g., monthly, taking into account the long-term vision. It’s the ability to strategically understand, learn, think, act, and move quickly and easily. Companies should raise its capabilities to develop strategic agility in four levels – individual agility, team agility, organizational agility, and leadership agility.
Individual strategic agility enables an individual employee to unlearn and learn, explore, expose, adapt to changing situations, and work on mission-critical projects. When agile individual employees work together for a common goal, they become agile teams. A team is agile when team members execute strategiestoresponsive and adaptive to the changing demands of the company. Business leaders ultimately need to develop strategic agility to steer the employees, teams, and the whole organizations to be agile.
Apart from agility to adapt to the changing environment in a strategic way, one practice is equally important today, and that is discipline.Discipline is the practice of self-restraint and learning to follow the best course of action which is based on standards. It is practiced on the individual, team, and organizational levels, like agility. It entails practicing and following methodologies in planning, working, learning, operating, and serving customers in order to eliminate wastage and inefficiencies.
Strategic agility is an important capability that business leaders as well as employees need to develop and acquire nowadays. It will spell the difference among surviving, thriving, and succeeding amid the different scenarios in the years ahead.
The author is CEO of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is the Chairman of the Information and Communications Technology Committee of the Financial executives Institute of the Philippines (FINEX.) He is Fellow at the US-based Institute for Digital Transformation.He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at firstname.lastname@example.org