Planning for Disruption
4 Actions CEOs must take to stay ahead of disruption
This post was co-written by Karl Moore and Mary Larson for Forbes.com in October 2016.
It took a little while to become ubiquitous, but now “disruption” is on everyone’s minds. We recall reading Clayton Christensen’s The Innovator’s Dilemma and being captivated by the idea of “disruptive innovation.” Now there are conferences on the topic, McKinsey came out with a book on the “four global forces of disruption,” and the University of Southern California has launched a new degree program in Disruption. One of the newest books on disruption, The Road to Reinvention, by Josh Linkner, raises major alarm bells: “Panic like you’ve never panicked before.” In this post, we will suggest four actions that CEOs should take to effectively deal with disruptive forces.
Of course, there is a huge risk in blithe unawareness and standing still while the world rolls over you and your business. But we have never thought that panic was a very useful response to a crisis. We all know that a crisis is a terrible thing to waste. But you don’t want to end up having to force change because your organization is in deep trouble, when any fool could have seen the need to change already. If you wait till then, you have very much dropped the ball. Hopefully you can catch a disruptive innovation before it overwhelms your industry, as Uber has done with taxis in many global cities. Disruption has been talked about now for a number of years, and it is no longer a new idea. Our experience suggests that more executives and, indeed, many more of your employees, are seeing the need to change sooner than in the past. This gives you more wiggle room to respond in a timelier fashion than even a few years ago – room that you may well need.
When external forces are threatening a crisis, one of the biggest challenges lies in how to dispassionately and creatively translate these forces into the precise strategies and tactics that will produce organizational change. It’s not enough to know that Millennials want a different work environment. It’s not enough to say that climate change will have an impact on the cost of inputs. It’s insufficiently robust to talk about channel disruption in general. It’s way too obvious to note that digital multicultural leadership will be important in the future.
But that’s what a lot of the gurus do. Their messages may be more complex and sophisticated than Faith Popcorn’s plucking out trends such as “cocooning,” “clanning” and “atmosfear,” but the conversation about these issues all too often isn’t tied back into truly important discussions of business strategy or critical policy decisions.
What to do in the face of disruption
Boards and management must get out ahead of critical business opportunities and threats. But a recent McKinsey study notes: “Seventy percent of board time is spent on quarterly reports, audit reviews, budgets, and compliance, rather than on matters crucial to the future prosperity and direction of the business.” A good friend who has sat on multiple boards of major North American companies recently shared: “We don’t deal with strategy anymore; we tackle compliance and try to avoid risk.” Executive teams are all to often caught up in the same rat race, dealing with the demands of the Street, their boards, compliance, and tactical responses.
But where will that crucial blend of rear-view-vision, experience-based knowledge and prophetic insight come from? It must be the CEO.
From Karl’s CEO class at McGill’s Desautels School of Management, where 23 CEOs come to class every fall semester, the message has been clear the last few years. CEOs and their top teams are responsible for developing the strategy but boards must increasingly push back on those strategies, help improve them and make them more in alignment with the quickly evolving external environment. A good set of diverse board members can be very helpful in bringing a bigger view of the world than that which is typical of many executives within the firm who have day-to-day responsibility to deliver results. This is the theory and some boards do it well, not enough though. An excellent CEO should work with their Chair of the Board to help nudge the board in this direction.
To prepare for that Board Chair discussion, here are some top priorities a CEO and her team must focus on to stay ahead of disruption:
- Set aside some focused time: it probably doesn’t take a lot of time to identify the critical issues that could very well create – or erode – significant value. Being aware of the early indicators of disruption is something you can do by talking to customers, going to industry conferences, reading trade journals and reaching out to talk to your young tech savvy front-line Millennial troops.
- Find the right people: Find the very best expertise in the world to talk to so that you can become sufficiently conversant with the issues. You probably don’t want to launch a huge consulting project, because that will take a lot of time and you will only get one point of view. Trust yourself to think through the issues with the help of great minds. (By the way, these people probably aren’t just business people; they may be anthropologists, scientists, philosophers or futurists from far off countries). In our experience, they are not too hard to locate.
- Fully expose the right people in the company to the challenges and risks: Get them working on the challenges and risks to your business now, and in cross-functional teams. Hold them accountable and give them the resources they need to move ahead. Cross-functional teams are key as you need the diversity of marketing, manufacturing, supply chain, customer service, etc. to come up with more interesting takes on how to beat a disrupter.
- Engage with your staff, board and other stakeholders about strategy: Facilitate structured strategic conversations at all levels. Your board is responsible for making sure that you have a coherent strategy for the business, but it’s your responsibility to create it with your team. These days, boards are unlikely to raise the right questions at the right time.
Disruption is out there, waiting to trip you up. You don’t have the luxury of time.
But by getting out in front, daring to ask different experts new questions, getting your people thinking differently and using new processes and forums (think real scenario planning), you can define pathways that will lead to longer-term success.