Leading in Turbulent Times
On April 22, IMD organized a business forum in Copenhagen, Denmark. The title of the even was “Leading in Turbulent times” and the headline speaker was Bettina Büchel, Professor of Strategy and Organization. What are the global issues that are affecting individuals and companies today? And how can companies’ best clarify the immediate challenges and explore long term solutions? Where among the questions to be answered.
Niels Henrik Jensen, CEO of The East Asiatic Company (EAC), welcomed the 120 attendees with a relevant and motivating speech. As CEO of a company that throughout its history has made it a specialty to operate in areas and countries that are generally recognized as different and very likely to – from time to time – present turbulent challenges, he was able to share some valuable insights.
For example, we learned how EAC has worked to create a culture that lives with and thrives on constant change and that therefore is fairly resilient to turbulence. To achieve this internal culture the company have tried to ensure that its people:Understand the long term trends in their market, the company’s strategy and can see alignment of strategy and trends. That they understand the risks faced in each market. That they are used to imagine, whether through formal scenario planning or experience, the necessary countermeasures to emerging risk – in the context of customer needs and without impending the long term strategies. And of course, have the ability to execute with a sense of urgency.
How EAC was able to instill this culture could best be described as a long and arduous process, heavily affected by world events. The Asian crisis was a big influencer in the company’s business environment and it was clear that the choices and decisions made by EAC in this perfect storm were detrimental to its current structure and focus.
Professor Bettina Büchel began her presentation by taking us back to how things were before the current crisis: When we were cruising along happily through the 90s and the early part of this century in the “happy economy” where continuous growth and record profits were nothing to raise an eyebrow about. So how did it happen? How did we end up stranded like this? And why so fast? What are the consequences?
“One driver was of course the “subprime situation” but more importantly the house market as a whole and more broadly the imbalances in the financial system. With a situation that worsened even further during 2008 we now live in a world characterized by greater volatility, uncertainty, fear and doubt,” Professor Büchel explained.
“So, when will the finance crisis end?” One of the event attendees asked. “The question is not about when things will be go back to where they were before but rather what our new reality will look like,” Professor Büchel replied. Greater risk is part of this new reality and scenario planning is a necessary tool for leaders to utilize. For example, the predictions for the global financial system can go in number different directions. How much protectionism will be adapted and in what way? And now that the finance crisis has reached the real economy, what will the future look like? Which recovery scenario is the most realistic - U-shaped, V-shaped or L-shaped?In the second part of her presentation, Professor Büchel shared highlights from the IMD Global trends framework: Which industry structures are changing, how generosity and sharing are becoming more prominent, how the “eco trend” is influencing our purchasing patterns were trends that were highlighted. (For more details about the IMD global trends framework see articles and videos posted to the right) Professor Büchel, also asked the audience to reflect upon the topic: What do these global trends mean for your business? For you as a leader? What strategic initiatives could you get started to reap the benefits of these turbulent times?
Gregers Kudsk, Vice President and Chief Technology Officer at Maersk Drilling shared his reflections:
“Being aware of how global trends affect our business is important. At our company we did a future scenario workshop a while ago and after seeing the global trends presentation here today I think it would be beneficial to schedule another session.”
Reflecting and understanding that the world is changing is however only the beginning according to Professor Büchel. And bringing understanding into action is not always easy. Traps are many and include:The Complacency trap: “Everyone keeps talking about the world is changing, but in reality it is not affecting me and my business today. I will get around to it later.” First movers take risks, and it can seem much easier to be a fast follower. “We’ll get around to it someday” is a frequent attitude.The Doing vs Thinking trap: “We are so busy “doing” that we don’t take time to think and reflect on yet another theoretical strategy.” Executives are often much more comfortable in “action” mode, making decisions.The Alice in Wonderland trap: As the Cheshire Cat said to Alice: “If you don’t know where you are going, any road will take you there.” Moving from a mindset of “What can we do?” to “What must we do?”The sunk cost trap: Short-term targets, impacted by yesterday’s decisions and investments, get in the way of preparing for an uncertain future.The information myopia trap: Hard-pressed executives are overloaded with information and don’t have time to translate it into “so what?”
Though it is easy to emphasize the danger in a crisis it is also important to see the opportunities that it brings. Leaders today have to find a way to zigzag between potential traps and threats in order to take advantage of opportunities and translate trends into strategic initiatives. It is not always easy; research even shows that only one out of three strategic initiatives deliver on its promises. It can however be done, just look at the great wall of china, the Ipod or easyjet ...
During the standing buffet at the end of the program, designed for networking, Sandeep Sander, Chairman of Copenhagen Towers and panel speaker at the event said:
“Many executives really need to look at what the implications of the present situation are. One obvious opportunity is to join the Orchestrating Winning Performance (OWP) event 20-25 June at IMD. I will join and I know several teams who plan to join. In addition to reflection and learning this might be an opportunity for networking – and this could also lead to new business opportunities”