My Opinion: Strategic Thinking of Scorched Earth in the Age of Covid-19
“Destroy yourself first” was the case five years ago. The new motto is “burn your business, then rebuild it”.
Covid-19 has quickly distorted, if not shattered, virtually every certainty about doing business – from the reliability of global supply chains, to the need for colleagues to inhabit the same physical space, to the separation between the public and private sectors. in liberal democracies.
We don’t know how long the crisis will last, but even the most optimistic projections say that we are still many months away from battling the virus. And the wider ramifications are likely to be with us for much longer, as waves of externalities spill over into economies around the world.
The usual corporate line of defense against disruptive technologies and adverse events – which were already showing their age before the pandemic – is clearly inadequate to manage this new world order. Incremental thinking due to blinders from the past cannot create a future-ready organization in today’s world.
We have designed a paradigm to help businesses meet the terrible challenges of these times. At the heart of it is a simple idea: The essence of disruption-ready leadership is being able to ruthlessly identify current weaknesses, envision the destruction of the current business model, and then be reborn, like a phoenix, from its ashes with a vision of renewal. Hence the title of the method: The Phoenix Encounter.
Over the past several years, we have successfully conducted field trials of the Phoenix Encounter involving more than 1,500 senior C suite executives from companies around the world and from a wide range of industries. Many of these trials resulted in a fundamental overhaul of the strategies of organizations such as banks, agricultural conglomerates, retail chains, engineering equipment manufacturers, healthcare providers, services public and insurers.
The method has been extended in a book of the same name (co-authored with management author Ram Charan) so that companies around the world can learn how the Phoenix Encounter Method works in practice. Below are some basic principles and a more in depth presentation can be found in our book.
A journey in three stages
Developing the muscle memory needed for truly disruptive innovation cannot happen all at once. Therefore, we presented a three-stage journey, centered around a dramatic war game Encounter Battlefield, in which leaders are forced to actively participate in the devastation of their organization, business unit, government agency and others.
The exercise is designed to be done in groups of four to seven people, with a facilitator leading the action. The composition of these Phoenix Encounter Groups (PEG) is essential. In classroom exercises, attended by leaders of various organizations, we strive to maximize diversity within each team, rather than bringing together people representing similar industries or sectors. The idea is to reach the widest possible range of perspectives.
When building a PEG in your business, you should follow the same principle. Choose people from very different silos or business units, perhaps even from different levels of management, so that disparate points of view can be presented. For best results, consider adding external stakeholders such as customers, suppliers, investors, and regulators.
The first step: the preparatory work
Before setting the status quo on fire in the second stage, participants should thoroughly assess the organization as it currently stands – the good, the bad, and the ugly.
Along the way, leaders are encouraged to keep a journal to record questions, ideas and advances as they occur. The key journal entries of the first step should include an initial reflection on the status and a briefing for the organization (current vision, mission and strategic priorities, business models for creating and capturing value, etc.). A standard SWOT analysis (strengths, weaknesses, opportunities and threats) should be part of it. When organizational assessments are shared and compared within the group, a detailed and comprehensive portrait of the company emerges.
Each participant should also make a more introspective assessment of their own state of mind and attitudes towards disturbances. A useful task may be to ask participants what leaders they admire, which should lead smoothly to a discussion of what attributes allow some leaders to thrive on disruption while others flounder, and what might. be the implications for their own leadership agenda.
Finally, participants can prepare to enter the Encounter battlefield by proactively analyzing the external landscape of emerging technologies and other trends. The goal is not to conduct standard intelligence gathering, but to cast a much larger net encompassing current and evolving forces of disruption that could eventually destroy their organization or be used in its defense. A Phoenix-like leader is looking far beyond its industry and geography.
The second stage: Battlefield
Now the conflagration begins. First, each team is given an ignition scenario (for example, they are poached by a competitor, maybe even a new outfit, aimed at destroying their organization or even wiping out the entire industry. ). In this step, the teams proceed to the development and deployment of an arsenal combining contemporary and innovative firepower (emerging technologies, business model innovations, digitization, platforms, ecosystems, societal changes, etc.)
For example, Amy, one of the PEG participants, was soon CEO of a large UK private hospital and retirement care company that we will call Horcomp plc. Although Horcomp has grown by 30% over the previous five years, the Battlefield phase has shed light on the company’s hidden vulnerabilities.
Playing the role of a disruptive competitor, Amy discovered that a tightly integrated digital healthcare ecosystem could eventually supplant Horcomp’s physical facilities. Its hypothetical disruptor would also provide lifestyle wellness services, social media for the elderly, convenience-enhancing technologies such as drone drug delivery and various leisure activities through strategic partnerships and regulators. pressure to break up health care conglomerates. With its all-digital agility, this imaginary but quite possible start-up would make Horcomp, bound to the earth, appear ripe for extinction.
Once the organization as it currently stands has been reduced to smoldering ashes, teams must come up with a proportionate rebuilding plan. It requires a shift in thinking that we call “turning the wheel,” a shift in mindset from destruction to rebirth.
Amy’s short and medium-term defense for Horcomp consisted of bringing together a transversal team with a triple mission: sharing knowledge and identifying partners in the digital, technological and health spheres; launching a pilot project to explore whole new service ideas with input from consumers; and identifying promising young employees with digital literacy for leadership opportunities. “We have to assess our talent against our future needs, not our past,” she concluded.
Amy also acknowledged that Horcomp’s marketing failed to highlight the brand’s key benefits, such as its level of personalized care, which a digital newbie would be very unlikely to match. Finally, she planned to put pressure on the British government for stricter regulatory oversight of companies without dedicated healthcare facilities.
The third step: the breakthrough
Immediately after finalizing their defense plan, teams are advised to prepare an action plan for the future covering both the big picture (via an updated futuristic SWOT for the transformed business model) and them. essential details that will make or break the change initiative. This encompasses new strategic leadership and organizational priorities, actions to be taken to execute short, medium and long term plans, etc.
Once the master plan is complete, it is time to reintroduce the analytical frameworks or methods adopted by the organization, such as the Blue Ocean Strategy or quantitative analysis. These can help generate additional insights and test the plan as it takes shape.
Based on their new experiences on the battlefield, participants may want to change everything at once. But it’s a recipe for burnout. Instead, they should focus on the first 100 days post-dating, identifying three action steps that can be taken in that time frame. Immediate and short-term actions can include stakeholder engagement, resource allocation, launching pilot projects, and conducting in-depth analysis.
In the medium and long term, they can rely on more decisive actions such as the acquisition of new partners or skills, the monitoring of progress and the overhaul of the organizational culture.
To use Horcomp’s example, imagine Amy’s surprise when, just weeks after returning from her meeting with Phoenix, her president informed her that an activist investor was pushing a program of radical change within the a business that strangely echoed the extreme attack she had just suffered. by. His confident response: “We need to talk. I have a lot of ideas to share.
Amy knew she would have to step up the pace of her long-term action plan. She convened an internal PEG within the management team and wisely convinced the outgoing CEO not to participate. Within a year, Horcomp built a pilot ecosystem to provide lifelong care, with the help of a digital partner.
Taken together, the pilots produced service improvements that reduced costs by 10%. Other positive developments in this first year included an AI-based patient monitoring system, a partnership with Apple to build healthcare apps, and increased retention of talent at all levels. Horcomp has also started talks with governments and insurers to advocate for stricter industry regulations focused on trust and safety in healthcare and life.
Amid the Covid-19 pandemic, many organizations are trying to get back to “normal” – whatever that means. Instead, we would recommend that they look at the large-scale disruption that the coronavirus has triggered. The Phoenix Encounter Method is an example of the kind of unprecedented thinking companies will need to embrace if they are aiming to weather the storms on the horizon and win.
Sameer Hasija is Dean of Executive Education and Professor of Technology and Operations Management, V Padmanabhan (Paddy) is Professor of Marketing and Unilever Chaired Professor of Marketing and Ian C Woodward is Professor of Management Practice in Organizational Behavior at the INSEAD. This article was first published in INSEAD Knowledge.