“The Chinese use two brush strokes to write the word ‘crisis. ‘ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.”— John F. Kennedy
We’ve all heard so much about the truly massive deterioration in business and living conditions occurring in recent months. No need to repeat nearly endless bad news that is causing deep angst for so many. A major talk radio personality even stated that “… The despair is real. The despair is genuine.”.
As long-time New York City resident and entrepreneur James Altucher recently observed:
“But the question now is: what happens next? And, given the uncertainty (since there is no known answer), and given the fact that people, cities, economies, loathe uncertainty, we simply don’t know the answer and that’s a bad thing for New York City.”
He just moved to South Florida, apparently deciding that he would be unable to adapt to the new situation in New York City. Will this move be successful for him? It depends on what comes next in Florida. Do you have any idea about what this might be? I’ll bet that he doesn’t either.
As Altucher wisely states, “… we simply don’t know.” If we truly don’t know, then how is a move to Florida or anywhere going to turn out better than just hanging in where you are?
For most businesses, pulling up stakes and moving somewhere else is neither feasible nor logical. It may well be that your present location is just fine for whatever is coming next. But how can you tell?
In mid-2020, there was still a decent hope that something close to a “full recovery” (back to “normal”) was possible. Today, not a chance.
What we know is coming is big change
Things are going to be different. Very different. For sure. The problem is that we have no idea what “different” means for us and our businesses. Knowing that big changes are coming doesn’t really help much.
This is for most of us a pretty frustrating situation. How – exactly – do you deal with an emerging situation that cannot be reliably foreseen?
A common response is simply to continue doing what we have always done and just hope for the best. But hoping is rarely a sound management practice. Worse yet, what we have done in past may well become increasingly ineffective in the context of whatever is coming.
So, what can we do?
Change happens, forever. Some changes are “bad” in that they affect us adversely. But many changes are “good” in that they open up a vast number of opportunities for those who are agile and adaptable.
Great changes from wars, plagues, floods, and the like drive mass migrations. Today, technology is facilitating migrations away from past population centers to smaller cities where costs are much lower and disruption, at least for now, remains somewhat distant. The flow of big-city refugees into smaller cities is going to create new local demand for many of what these folks left behind. Opportunity here.
Social interactions that have become nearly impossible in big cities have a better chance to adapt to conditions elsewhere. Humanity is heavily based on social interactions so these aren’t going away under anything but an apocalyptic scenario. Opportunity here.
Displaced people are going to need entertainment and diversions like sports. If major league sports continues to self-destruct, viewers and attendees will find alternatives very quickly. Opportunity here.
Big changes create big opportunities. But only for the agile and adaptable.
Despair won’t work. Wishing won’t work.
Again, Altucher gets it:
“This is not to say what should have been done or should not have been done. That part is over. Now we have to deal with what IS.”
Now we have to deal with what is
Way too many people are stuck in trying to assign blame or to expect “accountability”. Let them waste their precious time on such rearward-looking activities. We have much more important things to do.
How many of you have thought about the many opportunities that all of this change has generated and have flagged the ones that you might pursue?
Whatever happens today is “what is”. We do have to deal with it in various ways but how often does this involve looking specifically for opportunities?
Being agile means being closely and immediately aware of what is going on that directly affects your business. It means being able to think and act quickly. The pace of change does not favor leisurely approaches.
Being adaptable means that you have great flexibility in how you respond to – or take advantage of – significant changes. This means a management process dedicated to looking for change-driven opportunity routinely and then developing innovative ways to act on these.
Notice that there is no mention here of trying to figure out why things are happening or who may be responsible. It is simply about dealing with what comes along as it comes along – but constructively.
Black swan days
You all know that a “black swan” is an event or situation that was not and could not be foreseen. Unpredictable, extremely rare, severe impact. When all bets are off, as they say. Times of great change seem to attract black swans. We are in black swan days today.
So how can you adapt to something that cannot be foreseen, may never happen until it (whatever it is) does happen, which then makes an incredible mess of things?
The answer seems to be that you need to maintain a high degree of flexibility and diversity, especially during such times. You have to build this capability set into your business before you get ambushed by a black swan. But, since we have already experienced our black swan day, we really don’t have to be concerned about more black swans, do we? You wish.
Days of fear
Our current black swan is widespread and deeply-felt fear. Who knew even six months ago that the country would be largely locked down over fear of a poorly understood virus in the common cold family? Fear is an enormously powerful driver in that it easily overcomes facts, perspective, and reason. It opens the door to all kinds of nasty behavior from many of those currently in power and tends to prevent truly effective responses.
New York City and its peers nationwide are prime examples of fear-based black swan impacts. No matter who or what is responsible, assuming that this can ever be known, we are left with the absolute necessity of dealing productively and quickly with this fast-growing black swan catastrophe.
But it gets worse. Swans typically travel in flocks. What happens if the current black swan’s mate (or flock-mates) comes along? Civil war? Foreign war? No, these aren’t really black swans but events that have happened continually forever. New virus maybe? Black plague deadly? No, we have had such plagues with us for millennia. Any better ideas? That’s the trouble with black swans: they cannot be foreseen. We just have to know that more are on the way.
Black swan immunity
You can protect yourself and your business against many foreseen events and situations but you can’t do this with anything unpredictable. What you need is an approach that works acceptably in either case.
The key to the best immunity you can manage in this situation is provided by a combination of flexibility and diversity.
These probably won’t make you immune in any real sense but they should help insulate you for enough time to regroup and adapt.
This means that you are both open to new ideas and approaches and have the ability to accommodate a wide range of changes. You will be constantly looking for and evaluating new ways of doing business. Some will be so far out that they can easily and quickly be dismissed but others may contain vital information.
Do you have in your business a group of highly creative thinkers who can help sort through, as well as come up with, a steady flow of new ideas? If not, then this might be a good time to develop one.
This is the very old caution that you should never put all of your eggs in one basket. High customer concentration, product concentration, location concentration – all are low in essential diversity. My favorite way of asking about this is to get sales-ranked lists of customer segments, product categories, and locations and ask what the impact might be if the top one or two in each list gets taken out. Fire, flood, hurricane, pandemic, …
A survival-threatening impact being a likely outcome means that your business is not sufficiently diversified.
Diversification takes time in most cases so you really have to begin this effort yesterday. New York City was such a great business location until, what, a few months ago? Today, not so much, and getting worse rapidly. You have 90% of your sales in restaurant supplies? Great while it lasted. Do you have a Plan B in motion? Or maybe you have a bunch of great office buildings in LA, SF, Chicago, and NYC. That’s a lot of expensive, empty space to fill when so many employees in these formerly great cities are relocating for good or remote-working.
But, you may say, who knew that such a thing could possibly happen? Nobody, of course. That is exactly the point. You need to be ready when the black swan arrives, unannounced. Being ready takes time and some careful planning.
Timing of next black swan visit is …?
The only thing we know for sure is that a black swan of some kind is heading in our direction from somewhere. Timing unknown. Nature unknown. Likelihood 100% over any significant timeframe.
Is your business truly prepared?
Agility means that you are able to think, decide, and act fast. Adaptability means that you have the ability to make substantial changes in your business with little lead time. Flexibility addresses the range of these and the internal willingness to make such changes. And diversity means that your business has many different income streams. How does your business rate today on these critical dimensions?
Consultant McKinsey & Company focuses on agility but with a stable backbone in a pre-COVID article: “The keys to organizational agility”:
“Agility is the ability of an organization to renew itself, adapt, change quickly, and succeed in a rapidly changing, ambiguous, turbulent environment. Agility is not incompatible with stability—quite the contrary. Agility requires stability for most companies. Agility needs two things. One is a dynamic capability, the ability to move fast—speed, nimbleness, responsiveness. And agility requires stability, a stable foundation—a platform, if you will—of things that don’t change. It’s this stable backbone that becomes a springboard for the company, an anchor point that doesn’t change while a whole bunch of other things are changing constantly.”
Entrepreneur magazine addresses the importance of agility for business success in this timeless article: “The Key to Every Successful Business is Agility”:
“Most entrepreneurs start with a culture of agility and a commitment to be responsive to the changing needs of the clients/customers. But as organizations grow and evolve, much of that entrepreneurial daring is replaced with a dogged fixation on “The Plan” — or, in the other extreme, thrashing around in the face of crisis and trying to adapt with urgent, costly and often ineffective crisis management and organization restructuring.”
“An examination of hundreds of businesses over 20 years of operations has shown us that rather than digging in their heels, successful companies do a better job at four things: establishing a climate for revising strategies, perceiving and interpreting environmental (external) trends and disruptions, testing potential responses, and implementing the most promising changes. They have a culture of continuous agility. In essence, they have “agility routines.”
“With recent research suggesting that the expected life of a new American company is about six years, entrepreneurs who have enjoyed some success, but want to take their business to the next level, must adopt a culture of agility to survive.”
Wikipedia also weighs in on this important topic:
“Business agility refers to rapid, continuous, and systematic evolutionary adaptation and entrepreneurial innovation directed at gaining and maintaining competitive advantage. Business agility can be sustained by maintaining and adapting the goods and services offered to meet with customer demands, adjusting to the marketplace changes in a business environment, and taking advantage of available human resources.”
“In a business context, agility is the ability of an organization to rapidly adapt to market and environmental changes in productive and cost-effective ways. An extension of this concept is the agile enterprise, which refers to an organization that uses key principles of complex adaptive systems and complexity science to achieve success. Business agility is the outcome of organizational intelligence.”
“Businesses which lack adaptability may be left paralyzed when faced with changing markets and environments. To counter this, business agility can be developed in the enterprise, making change a routine part of organizational life. An agile enterprise may be able to nimbly adjust to and take advantage of emerging opportunities in a perpetually changing environment. The agile enterprise can be viewed as an integral component of a larger system whose activities produce a ripple effect of change within both the enterprise itself and the broader system.”