Increasingly unpredictable times demand a new approach
This article was originally published in the June 2016 print edition of Training Journal.
How can leaders manage change, make crucial strategic decisions, and lead the business when the speed of change is so unpredictable?
Are the change management processes equipped to future-proof organisations for the ‘tsunami’ that is about to strike and in many cases has already destroyed entire industries?
In January 2016, Klaus Schwab, founder of the World Economic Forum, commented that the world is unprepared to deal with the Fourth Industrial Revolution, which “comes on us like a tsunami. The speed is not to be compared with last revolutions and the speed of this revolution is so fast that it makes it difficult or even impossible for the policy makers to follow up with the necessary regulatory and legislative frameworks…
My concern, however, is that decision makers are too often caught in traditional, linear (and non-disruptive) thinking or too absorbed by immediate concerns to think strategically about the forces of disruption and innovation shaping our future.”
‘Managing’ change in a predictable market, with linear growth trajectories, incremental changes, core competencies models, and rational consumer behaviours are no longer applicable in most industries.
This article focuses on aspects of change management from within highly volatile markets, where tried-and-tested processes and methods seemingly do not exist. There are organisations that are not just surviving this tsunami, but have become stronger and capitalised on the unpredictable.
This will be the predominant theme of this article, understanding fringe organisations, not generally on the Western market’s radar that have extensive experience in leveraging radical changes to their competitive advantage.
The definitions and the questions we ask, determine what we will measure. Thus, the contextual framing and underpinning mindset that informs our definitions, if misinformed, due to significant market changes, can ultimately lead us to measuring the wrong things and hence see no impact. We will begin with a definition of ‘change management,’ then consider the benefit of a simple change management formula, and finally explore some radical outsiders’ responses to ‘wicked problems’.
Defining ‘change management’ is an extensive endeavour, and out of the scope of this article, but a thin slice definition, based on Kennedy Consulting & Research Advisory, define change management consulting as providing “clients with a structured approach using tools, processes, skills, technologies, and principles to transition individuals, teams, and organisations from a current state to a desired future state. It draws on capabilities across strategy, operations, and technology.”
The change management value chain touches on an organisation’s entire ecosystem from strategy, engagement, assessment, communications, implementation, measurement, and enablement.
In Margaret Heffernan’s masterful book Willful Blindness: why we ignore the obvious at our own peril she argues that by building organisations so large and so complex we often end up being unable to see how they really work. The challenge this poses is that it often removes the leaders from the reality of what they have built. As complexity increases, the importance of clearly communicating and defining what things mean becomes vital. The challenge is that with today’s rapid speed of change, definitions need to move quickly from theory to tangible, pragmatic and easy to understand terms.
Heffernan says, “we don’t see things that are too far away, that are too distant from our own experience … or simply too complicated to assemble. But we also don’t see things that are too far away in time … we build labyrinths of such cunning complexity that we cannot find our way out (p.239).”
With any formula, theory or process the true test is the application within the local context, with all the unique details and complexities. In the words of Mike Tyson, former world heavyweight champion, “everyone has a plan until they get punched in the mouth.”
So how do you keep in touch with reality, not succumbing to the natural human drive toward cognitive bias, ignoring crucial signals because of your personal agenda?
To lead a change process within intensely uncertain market conditions requires discerning problem solving and decision-making (this is an entire discussion).
To arrive at the end of this change process and be told by everyone around you “how did you not see the most obvious problems at hand?” This is the advantage to having diverse thought partners to provide reality checks, questioning your assumptions.
David Kidder, successful Silicon Valley entrepreneur and author of the Startup Playbook, coined the term ‘radical outsider’ which is someone with expertise from a different industry to you that has not been brain-washed by your industry’s assumptions and business models. Astro Teller, head of GoogleX, further qualifies this term by saying “the chance of breaking that industry and remaking it in a productive way are very low” if you are continuously surrounded by homogenous, like-minded advisers or consultants.
He continues to say that the advantage of radical outsiders is that they are the “underdogs,” not overly attached to a particular process or theory, but rather “more bold and creative,” quick to learn and test new models, in uncharted and uncertain markets.
The markets that will be explored are facing ‘wicked problems’, which are problems that are highly complex, with multiple challenges, and no single solution. These markets live on the edge of chaos, seen by most main- stream investors as unpredictable and unsuitable investment opportunities.
Yet within these highly fragmented and complex markets, there are leaders who have become comfortable with the unknown, ever-changing and unpredictable conditions and most importantly have somehow worked out ways of using the forces of chaos to their strategic advantage. These radical outsiders, creatively solve highly complex problems with extremely limited resources. Out of necessity they have discovered some seemingly counter intuitive approaches to managing change.
High Delta Markets
Jeremy Kirshbaum, from the Institute for the Future defines ‘high delta markets’, also known as ‘frontier markets’, as constantly shifting and changing economically, politically, socially, and technologically. The term ‘delta’ refers to the mathematical symbol for change over time, hence a ‘high change market.’
Many West African countries are classified as frontier markets. The so-called ‘informal sector’ of their economy often dwarfs the so-called ‘formal’ sector. Large companies rely on small-scale entrepreneurs to distribute their product. Low delta markets, are the various developed countries, that have until recently experienced low incidents of market changes. The Institute for the Future, suggests that the high delta markets provide an “important glimpse into understanding the future of low-delta markets.”1
Successful organisations in high delta markets are built to benefit from volatility and diversity. Nassim Taleb’s book Antifragile: things that gain from disorder, would be applicable to these high delta markets.
Douglas Brew, from Unilever Africa, notes that “volatility will remain. Handling that volatility will require a change in mind-set in terms of how to manage investors’ expectations as the continent becomes a bigger share of global revenue.”
According to a recent study by Euromonitor International, emerging markets account for 90 per cent of the global population aged under 30 years. Heffernan warned, “we don’t see things that are too far away,” but these facts are only geographically ‘far away.’
Fan Milk supplies milk, yoghurt and ice-cream to seven countries in West Africa, generating revenues of over US $170 million. They scaled their business by using trusted networks of people, today they have over 25,000 agents and vendors. Long before Uber provided a curated network, with the request checks-and-balances to verify, Fan Milk was already established in the 1960s. Kirshbaum describes Fan Milk’s network as “flexible and mobile – as demographics and transport shift, the network can adapt nearly instantly without any central co-ordination by Fan Milk”.
They have developed a trusted network of employees, which they call on for on-demand labour, also known today as the “freelance economy.” Another example of this trusted network is the partnership between DHL using Uber cars in Lagos to deliver packages.
Freelance economy, or on-demand labour, Forbes estimates will contribute toward 50 per cent of the US workforce. Crowd-sharing technologies are taking unused resources and providing them with opportunities. Kirshbaum explains that this freelance economy model has been a standard modus operandi in high delta markets for decades, noting that the freelance economy “business model (was) created to cope with volatile and uncertain employment environments.
That plat- form-based work is now out competing centralised models in Europe and the United States (especially as) these markets are becoming more uncertain and complex.” Uber, Airbnb, and other quickly emerging competitors are provoking the low delta organisations to respond to these changes.
Safaricom are the leading telecommunications company in Kenya. They have managed to leapfrog ahead of the global, mobile banking world’s challenges with regulation constraints, by entering a number of years ago into an unconventional partnership with both their local government and the leading local bank. The regulators allowed the initial formation of this mobile banking platform on an experimental basis, without any formal approval. Today they have over 20 million customers, with the most successful mobile banking services in Africa.
Simplify the Complexity
Safaricom’s mobile banking was developed around their customers’ need for a simple process that allows Kenyans to transfer money via basic technology, SMS. Their services have evolved and include: loans, savings products, salary disbursements and payment of bills.
They are able to gain data analytics from previously unknown populations.
The revenue generated through their mobile banking is valued at almost half the value of Kenya’s GDP. They have managed to bank the ‘unbankable’ – a huge portion of the population, low income earners, that do not have the sufficient Western standard credit rating scores to receive loans, are now included in Safaricom’s client base. They have revenues of over US $1 billion.
What works in one country cannot necessarily be duplicated in another. Global best practices, without local context, can be compared to driving a car at night on a busy highway without lights – the chances of crashing are high.
Tarun Khanna, in Harvard Business Review, in his article ‘Contextual Intelligence’ explored this theme. He defined ‘contextual intelligence’ as “the ability to understand the limits of our knowledge and to adapt that knowledge to an environment different from the one in which it was developed…until we apply this intelligence the failure rate for cross-border businesses will remain high … even billion-dollar corporations need to think like entrepreneurs (namely) – test assumptions, and to experiment in order to learn, cheaply and quickly, what doesn’t work … companies shouldn’t analyze experimental results to the point of exhaustion but instead to develop the capacity to act speedily on results … accept up front that you know less than you think you do, and that your operating model will have to change.”
He says that developing countries “lack the data sources” of developed countries. The processes, methods and measurements that work in developed countries may not work in developing countries. “Instead of relying on conventional market research, such as hiring outsiders to do market research, (local) managers should conduct their own experiments to learn about the local context”.
Kirshbaum said, “High delta markets are very fragmented…and they are going to stay that way. The people who will succeed will build for fragmentation and complexity. Low-delta markets are going to become much more fragmented. There are lessons from low delta markets on how to structure things in the second curve of low delta markets.”
As volatility increases and the speed of change impacts the global market, some practices to consider when responding to these ‘wicked problems’ include developing trusted networks, developing a freelance economy model and an experimental mindset. Finally try to simplify complexity and look at change in context – what works in one environment may not in another.
Call to Action
There are some questions to ask that will determine where you focus:
- What are the problems you could help your customer solve, which they are not even dis- cussing with you at present?
- How could you strengthen the relationship with your target audience and build a stronger partnership with them? How can you make their lives easier?
Spend time developing razor-sharp clarity on the problem. The project team often too quickly jumps into problem-solving, without fully grasping the extent of the problem that needs to be solved.
- What problem is your change process addressing?
- What if your past success is actually your biggest constraint, holding you back and possibly sabotaging your future growth? How will you know?
- Who is your radical outsider that you will listen to?
Leaders around the globe are facing wicked problems, many get lost in uncertainties and cognitive biases; while others have a clear vision, shaping the future today.
This article was originally published in the June 2016 print edition of Training Journal.
1 Jeremy Kirshbaum, ‘What High Delta Markets tell us About the Platform Economy’, Institute for the Future, April 2016