The business world is vying for a stable footing while navigating the shaky grounds of the current pandemic. There is widespread acknowledgment that markets are evolving to a “new normal” and are not likely to revert back to pre-pandemic norms. As customer preferences and behaviors change and the workplace evolves, business models, out of necessity, must align with new market realities. At the onset of the global pandemic in the first quarter of last year, few people, if any, thought that an airborne virus bringing markets to a near-complete cessation was plausible as an “extreme” scenario. Now we are almost conditioned to the point that nothing surprises us anymore. So, where do businesses go from here as we face a new decade?
Protiviti and NC State University’s Enterprise Risk Management (ERM) Initiative surveyed over 1,000 global board directors and executives to assess their views on the top business risks for the upcoming year — as well as through 2030.
The results are enlightening — and the survey unveiled a number of notable themes, or megatrends, that hint at what businesses will need to focus on today to become future-ready.
Shedding Obsolete Approaches Is Key
The eventual occurrence of a pandemic was predictable and has always been a matter of when, not if. In fact, pandemic risk has loomed on the horizon, given previous flare-ups of infectious viruses combined with overpopulated cities, global travel and innumerable events that attract huge crowds. Yet, the pandemic caught many companies unprepared — particularly those that had not adopted technology that could easily be leveraged to substitute for in-person interactions.
Interestingly, the businesses that swiftly moved to remote workplaces during the pandemic, continued to serve customers, and had effective practices in place to address cyber and data privacy were able to adjust to the turmoil. The only challenge that they faced was an inability to cope with overwhelming demand and to manage accelerated growth.
But there was nothing about the virtual ways of working, buying and selling they deployed that were actually new. Remote and flexible working, click and collect, online channels, 24/7 video health care, online shopping, home delivery, digitization and automation — born-digital companies have been doing all of these things for many years and, in some cases, while largely ignored by laggards. The companies that were not embracing these practices to the same extent but were agile were able to compress innovation cycle time enough to meet new customer demands and minimize the pandemic’s impact, as long as their business model was not dependent on the crowding of people.
History teaches that businesses tend to avoid preparing for low-probability, high-impact events. But as the pandemic has shown us, this mindset is risky in disruptive times. Businesses need to recognize the megatrends that are shaping the disruptions of tomorrow and plan for them today — as they may arrive sooner than we think. Unfortunately, the traditional risk/benefit approach can lead to rationalizing away low-probability, high-impact events, resulting in deficient response plans. Becoming and staying future-ready requires investments in preparation for extreme but plausible events, which may impact the ability to operate in the short term.
Pivoting for the Future
As noted earlier, the pandemic altered consumer behavior, and reversion to pre-pandemic norms is unlikely. Likewise, supply chains, logistics and employee skills needed in the evolving workplace have been challenged and need to be reevaluated. The key to remaining relevant is to recognize the new expectations and pivot quickly to embrace them. An innovative culture is key to thriving and surviving in a disruptive environment. But this is easier said than done. Many businesses find it hard to change in good times. The focus is always on the larger, more profitable traditional business, and the practices and capabilities underpinning alternative business models are often seen as unimportant.
Digital leaders pivoted swiftly and deployed technology and people resources to address the new pandemic realities with little or no ramping up. They engaged customers in new ways, innovated new products and services, obtained better market intelligence for decision-making and maximized operational efficiencies. These are the organizations that are not surviving the pandemic but, thriving through it — often at the expense of their less digitally savvy competitors. Digitally mature companies will likely continue to maintain their edge going forward to the next “new normal,” as it is in their DNA to innovate continuously.
What Does Future-Readiness Look Like?
Positioning a company for future-readiness entails more than technological savvy. Organizations must home in on other key areas, including:
- Talent – Adoption of artificial intelligence, automation, natural language processing, visual recognition software, virtual reality simulations and other digital advances are expected to displace, as well as create, millions of jobs. This demands a talent base that is agile, creative and flexible. Such formidable transformation will require significant efforts to upskill and reskill existing employees. According to our survey results, while this risk is in the top five for 2021, it is the top risk for 2030, making it one of the defining business challenges for the next decade.
- Innovation – Organizational cultures that support innovation with a tone at the top have an advantage over those that cling to the status quo. The ability to source good ideas from everyone in an organization, experiment and “fail fast” leads to productive advancements in core operations, including meeting customer demand, product innovation and new business models.
- Agility and Resilience – Our survey results reflect that there is risk in not taking risks. In other words, there is risk in remaining comfortable in a legacy environment when current trends demand change. Future-readiness necessitates that organizations recognize the vital signs externally and internally, adjust quickly and act on those signs to be successful. Operating strategies must be robust while remaining agile and flexible.
- Trust – From a cultural perspective, one of the top risks for 2021 is organizational resistance to change in business models. Organizations naturally like what they know — but they must move forward, and that requires embracing change. Trust is fundamental to driving change. It is important to understand the extent to which an organization’s culture truly supports innovation and a willingness to be creative and, if necessary, align the organization’s core values with a tone at the top that reflects leaders’ authenticity, empathy and humility. These qualities go a long way toward building the trust that is conducive to creating a forward-thinking business culture that has a strong customer focus, effectively uses data analytics, leverages top talent with a high digital intelligence, and is agile and flexible.
Get Comfortable Being Uncomfortable
Every aspect of our survey results reflects that businesses must get comfortable being uncomfortable, for the “Disruptive Twenties” are underway. To be future-ready and respond rapidly to the challenges brought forth by megatrends driving change, organizations must build business models that accommodate a willingness to take calculated risks.
Being future-ready must also allow room for failure. Today’s business mantra is “Try new things, but if you’re going to fail, fail fast.” Businesses that are not willing to fail, stick to the familiar. Unfortunately, the familiar can also make them obsolete in an environment beset with disruptive change.