Once upon a time, the world mostly behaved itself. Changes were gradual, with a few nasty exceptions, so businesses could generally plan on the basis of long-term economic stability. War here, war there, to mess up local stability for a while but overall, stability reigned.
“Stability” in the business world means that changes are slow enough for the typically sclerotic large company to follow. It means also that the changes are at least decently predictable (direction), if uncertain to some degree. Things in other words are largely “normal”. Old Normal.
In a normal business world, there are always lots of changes but these tend to reverse so as to maintain a visible and understandable trend. You can plan and manage your business quite effectively in this Old Normal world.
So, the “New Normal” must mean a timely return to stability. But, as they say in France, “Wanna bet”?
Today, you must be able to manage effectively in a fast changing, unstable, uncertain business world, for a period of unknown duration, in order to reach a hopefully more stable and extended New-New Normal.
Can you tell me what time the New Normal flight will arrive?
We can’t wait forever, or even for quite-a-while. Soon is not helpful. If arrival is assured in a relatively few months, say under a year at most, then we can probably bumble through the interim without making too many serious changes.
The real problem here is that we have no idea today about timing of a return to “stable” business conditions. In early 2020, we were told by experts of all types that the major disruption would last only a few months at most. As 2020 morphs much too quickly and incomprehensibly into 2021, this prognostication, or wild guess, seems to be so far off the mark that we must think about becoming our own experts. How could we possibly do worse than the official experts?
Wikipedia helpfully defines the “new normal” as a return to stability:
“A new normal is a state to which an economy, society, etc. settles following a crisis, when this differs from the situation that prevailed prior to the start of the crisis.”
Got that? “New normal” is different from the “old normal” but it is whatever we settle into – that is, stabilize into – after the crisis passes. Different + stable.
Different, yes, but stable? Maybe not for a long while.
The “New Normal” will be very different and not stable
What do we know for sure? Well, the year 2020 has certainly been an introduction to the real “new normal” – characterized by huge changes, fast changes, unpredictable changes, in almost everything. If there is a definition of anti-stability, this is it. And this does not feel at all like a “disruption” of any temporary nature.
Things may eventually stabilize in some unknown manner but you can’t manage a business – at least the old way – based on “eventually” and “unknown”.
I don’t know about you but my sense today is that:
- The near future is going to be very different from the recent past
- The time to reach some sort of stability is unknown but probably long
We seem to be looking at an extended period of change and instability before we can get back to a time of slower, smaller, more predictable changes. The first period is the immediate New Normal while the second period is some other kind of New Normal that we’ll eventually have to accommodate.
So what do we do now – in the first, current-phase, unstable New Normal?
Managing in an unstable abnormal of unknown duration
If a business is planning on some sort of “new normal” ‒ things getting back like they were in the distant past (pre-2020) and stabilizing, they are almost certainly in for a major, perhaps catastrophic, surprise.
Based on my experience with the “new normal” so far, it seems pretty clear to me that what we have entered is some extended period of fast change, unpredictability, and uncertainty. Anti-stability. Anti-normal. For who-knows how long. Have a nice day, yes?
V-shaped recovery fantasies are, well, just fantasies. Even “recovery” itself seems unlikely in any practical sense. We are destined to move on eventually to some sort of new, new situation – New Normal #2 – that cannot be reliably foreseen. Perhaps a black swan future but more likely just a painful adaptation to the situation – an unstable situation – that is evolving.
Management practices that worked more-or-less for decades are no longer effective. Dinosaur-ville. So, what are the new management practices? The immediate answer is: who knows?
Let’s form a team to study and report on this. A standard corporate response that worked fine in the old days. Timeframe today? How about next week.
The team idea may still be useful but it needs to operate very differently. Members should probably be your best managers. People who can make fast, solid decisions based on incomplete information. People with their feet on the ground who are deeply knowledgeable of changing customer needs and products/services that might apply to these needs.
A common misconception is that you will be able to identify the “new normal” (i.e., a state of stability) at some near-term point. Unless I am very mistaken, you will not be able to do so for quite some time. Again, the real and immediate new normal will be an extended period of constant, unpredictable change.
How can you manage effectively in such times?
Organizational agility is key in New Normal #1
Agility comes up frequently in these blogs. It is the ability to think fast, act fast, act effectively.
Decisions on direction need to be adapted weekly in many cases. Annual planning is so yesterday. You need action impact data weekly. What’s changing today that is critical to our business?
You need to have a working range of options that are updated frequently and that embody innovative approaches.
Consultant Bain & Company seems to nail it in a June 2020 article:
“Simplicity was not the only unexpected effect of the pandemic. In two short months, Covid-19 rammed through behavioral changes many executives had tried to coax from their companies for years. Rapid innovation. Decisions made fast. Bureaucracy bypassed. Urgent needs tackled. Unimportant tasks shelved. Small teams on the front lines, each experiencing different phases or different effects of the pandemic in their markets, typically led the way. Quick, stand-up meetings focused on the demands of the day and the immediate goals of the week. In other words, thousands of companies adopted Agile methods almost overnight.”
Bain further notes that:
“Our research shows conclusively that the biggest shifts in company fortunes, for good or for ill, happen coming out of downturns … . They are moments of truth when management teams can transform and reset their companies. Never before, though, has a downturn forced such immediate transformation.”.
“Industry leaders in the next wave will use each advance to move toward a new future, not back to an old and outdated idea of “normal.” The lessons of the past few months are as valuable as they were painful.”
You need near-real-time information for New Normal #1
Monthly and quarterly reports are no longer effective. Fortunately, recent information technology advances have made near-real-time management and operational dashboards readily available. Most of these dashboards unfortunately are based on antique management practices that no longer work. But the vital information we need today is available to businesses of almost any size.
Your planning framework must be uncertainty-based for New Normal #1
Gone are the days when trend extrapolation and a few broad assumptions were adequate for most business planning purposes. The good old days.
Today, and for as long as our New Normal #1 lasts, unpredictability and uncertainty rule. Worry about New Normal #2 when (and if) it arrives.
Seeing ahead – reliably – for even a few months may be a stretch for many businesses. Situations and events that actually occur may be completely unforeseeable (black swans) or may be foreseen only in vague, uncertain terms – especially more than a couple of months out.
Scenario planning, developed for the military in the 1950’s by the RAND Corporation’s Herman Kahn and formalized for business use by Royal Dutch Shell, directly addresses planning in an uncertain world. It does not address black swan types of unpredictability but can deal with situations that can be at least roughly identified.
Scenarios are possible outcomes that together describe a range of uncertain futures, each defined by a relatively few, high-level situation attributes. Using a set of between three and five scenarios (we use four), the probabilities of each one occurring are then accurately guesstimated so that they total 100%. If the scenarios are well-chosen and do describe the range of actual, possible outcomes, then you can develop plans – options – for managing your business under each one.
Approaches such as the Delphi method can help make the guesstimates significantly more reliable in many cases.
Implementation and testing your action plans for New Normal #1
The scenario-based action plans you develop should generally be such that they will be effective under any of your scenarios. While not always possible, general applicability is an important goal. This involves structuring your scenario plans so that you can move fairly quickly from one to another as the real world unfolds. Scenario action plans must be switchable in practice. Otherwise, you may be betting the farm on the one you choose.
Scenario tracking is essential in New Normal #1
You must have some way to track what is actually happening against your set of scenario descriptors. Scenarios themselves can provide this ability. In essence, you plot actual values of scenario descriptors (such as weekly sales, store traffic, cash flows) against those for each of your scenario set to see which scenario seems to be closest to the actuals. That scenario, or the adjacent two, will tell you a good deal about what is happening in terms of impact on your business. Causes, drivers – who knows?
Where possible, just baby steps – no big bets
To remain agile, you will need to do a lot of small testing steps, each followed by an evaluation of results. Where you are forced to make a big bet at some point, it should have a set of practical escape plans if things don’t go as the bet requires.
Bain offers this confirmation:
“With customers’ needs shifting rapidly and employees in heightened learning mode, executives should move quickly to install closed feedback loops with both customers and employees, then use them to test, learn and adapt. Cement the new cadence as the norm—short, focused bursts of activity focused on moving forward today.”
No big bets unless absolutely unavoidable. Escape routes wherever possible, even for smaller steps. It is inevitable that many steps will require backtracking and redirection. This must be built routinely into actions. Each step should have a clear “what do we do if things don’t work out as expected?” understanding.
The Old Normal is gone and won’t be coming back. Ever. The New Normal likely consists of two phases – a very different and unstable phase followed, after some lengthy but unknown period of time, by a somewhat more stable second phase. These New Normals will be very different from today’s Normal and from each other, requiring management practices specifically suited to whatever each phase delivers. Today’s practices for the most part will not be effective in either.
Consultant Bain & Company goes into this topic in great detail in their excellent article “The “New Normal” Is a Myth. The Future Won’t Be Normal at All”. The article starts off with a COVID-19 lead but quickly gets into what every business should be doing to survive the current situation and to protect the business against future shocks.
Consultant McKinsey & Company addresses virtually the same topic but from a slightly different viewpoint in this article “From thinking about the next normal to making it work: What to stop, start, and accelerate“. Their lead:
“What’s next? That is the question everyone is asking. The future is not what we thought it would be only a few short months ago. In a previous article, we discussed seven broad ideas that we thought would shape the global economy as it struggled to define the next normal. In this one, we set out seven actions that have come up repeatedly in our discussions with business leaders around the world. In each case, we discuss which attitudes or practices businesses should stop, which they should start, and which they should accelerate.”