Catalysts: How to Build an Adaptable Organization that Thrives During Uncertainty
Prophet’s 2023 Catalyst research highlights how companies can thrive despite disruption, stay on course for long-term transformation and turn change into a strategic advantage.
The turbulence and upheaval of the last few years have become routine. That’s good since many believe this era of volatility, uncertainty, complexity and ambiguity is here to stay. Business leaders should pay close attention to the post-pandemic twist on Darwin’s law.
It is not the most intellectual of the species that survives; but the species that is best to adapt and adjust to the changing environment which it finds itself.Charles Darwin
Recent disruptions have proved that while some companies are already impressively agile, many aren’t. Many larger businesses have spent the last few years lurching from one crisis to another, relying on limited moves torn from old playbooks.
This article – the first in a series – is based on interviews with senior leaders and is focused on how enterprises can tap into variety, building organizational flexibility.
Our respondents detailed their successes and setbacks, and ultimately illuminated five critical principles for creating adaptability at multiple speeds during this critical moment in time.
Defining Adaptability in a Post-Pandemic World
At Prophet, we define “adaptability” as the ability to anticipate and respond to opportunities created by a shifting market. And we define “at multiple speeds” across three horizons.
Something that separates humans from other animals is the ability to plan ahead and imagine multiple potential futures. In modern life, we do this quite naturally:
- What’s for dinner tonight?
- Where might we take the family on vacation this year?
- When can I retire, and how much must I save?
Here are just a few ways our respondents are anticipating and responding to uncertainty across these three key horizons.
Optimizing for Today
Our respondents are evolving operating models to deliver the current portfolio of products and services to the same customers. They are organizing resources to increase customer satisfaction and profitability. And they are hunting for efficiencies, like centralizing or outsourcing back-office functions for greater scale or lower costs.
Innovating for Tomorrow
Planning within medium-range windows includes expanding product and service portfolios or reaching out to adjacent target customers. And while many of our respondents may be leveraging brand relevance to expand into new categories and integrate new capabilities, it’s still happening within the boundaries of the existing business model.
Building the Future
To build for the future, our respondents are transforming their business models and fundamentally changing how the business makes money and creates value for customers. It’s a seismic shift, like Netflix’s move from mail-order DVD business to a content studio.
Five Ways to Build Adaptive Organizations
Our research led to five key strategies to enhance adaptability and create future-ready, resilient organizations.
1. Put Purpose to Work
Purpose-driven branding has been part of the corporate playbook for over a decade. Yet the definition and expression of that purpose keep gaining importance. Customers increasingly demand that companies stand for something, and people insist employers care about more than money. They won’t settle for a slogan on a wall or some fluffy catchphrase dreamed up at an executive retreat. It must mean something.
Like human DNA, an organization’s purpose is fixed. “To operate in an environment filled with uncertainty, you have to create stability in other ways,” says Kris Ahrend, chief executive officer of the Mechanical Licensing Collective, a nonprofit focused on streaming royalty distribution. “Our culture is what gives us stability.”
But while purpose may be steadfast, it can still be leveraged differently and more effectively, filtering throughout an organization’s activities. That way, it can provide renewed focus, guiding decisions and strategies.
“Our purpose is always at the root of our decisions for what to do next and why,” says an executive at a large banking company. “We never take our eyes off why we’re here as an organization.”
2. Gain Control by Letting Go
Decentralizing governance can feel counterintuitive in these turbulent times. “We’re all moving forward wishing we had a crystal ball,” one human resources executive says. “Between the war in Europe, pandemic recovery, economic instability, and return to office policy, everything feels more uncertain.”
But respondents feel strongly that this uncertainty is what makes pushing decision rights down even more important. Many wish they’d worked harder for this change in the past.
Decentralization lets those closest to customers and operating problems make better and faster decisions. “It’s not just about tactical changes,” says Danielle Clark, a talent executive at eBay. “We have to address the underlying behaviors that enable leaders to step back and lead differently. It requires trust and a greater appetite for thinking boldly.”
3. Lower the Cost of Experimentation
Adaptability requires innovation. And innovation, by definition, involves failure. Organizations must have realistic conversations and processes about what that means and what those failures might cost, especially in an uncertain economy. It’s easy to invest in experimentation when business is good. But experimentation is too often a prime target for budget cuts when revenue gets tight.
“To be truly resilient, your organization must practice failing,” says one tech executive. “This is supported by a culture that encourages fast and safe failure with risk mitigation measures in place, so resiliency is exercised regularly.”
4. Reinvest to Realign
Aligning new strategies with existing structures is often challenging, especially for big companies that typically overinvest in growth areas during prosperous times and overcorrect in culling these growth areas during times of economic uncertainty.
Over the last year, we’ve seen this pattern emerge within the technology industry, resulting in a hemorrhage of talent, confusing investors and disappointed customers. These massive gaps between their current structure and new strategy inhibit growth.
The companies that overcome this risk and protect their business from boom-and-bust cycles are the ones creating agile operating models and continuously aligning structure with strategy.
It is critical that business leaders get crystal clear about what the organization will not do going forward. “We have a strong understanding of who we are at our core,” says eBay’s Clark. “The work over the past few years has been to innovate boldly to maintain relevance while delivering with impact. This has led to our focused category strategy.”
5. Embrace the Next Wave of Digital Transformation
Digital transformation continues to reshape how industries operate and deliver value to customers. The recent explosion in AI makes automation more accessible than ever before and will usher in the next generation of digital transformation.
Best-in-class organizations embrace new technology to innovate the customer experience and streamline operations. They are using it to redefine systems, making work and life better. Rather than fearing it, they’re upskilling employees to work with these innovations, finding ways to drive a better business outcome.
“We are asking questions about the business and people benefits,” says Jane Jin, a vice president at Takeda, a multinational pharmaceutical company. “What productivity might we gain when using these technologies? How might we develop our people so they continue to bring value to the company if technologies automate some of their tasks? How do we innovate responsibly and remove bias? How do our values translate in this digital age?”
With a leadership team determined to decide when and how to adopt new technologies proactively, companies can guarantee decisions that boost productivity and encourage growth while staying true to their DNA.
If history is any guide, these companies will grow faster and have an outsized advantage in attracting talent. Those that don’t will fall further behind.
As leaders grow increasingly comfortable with uncertainty, they’re hungry for strategies to build resilience and flexibility. In this series, we’ll explore why your company’s purpose needs to play a different role and how the most adaptive companies use their purpose to carve out compelling new business strategies.