Dealing with uncertainty – 3 opportunities to capture

by 2020-08-06Strategy

The imperatives for change are obvious. There is a need to adapt and deal with the current state of uncertainty. Initially, many reacted and were able to adapt… in the meantime. However, the uncertainty remains, and the changes the pandemic brings, affect all organizations in different ways.

Organizational leaders may consider three specific responses to deal with these changes. These actions allow organizations to remain proactive in the face of the crisis while opening the door to new opportunities. 

These are:

  1. Adapting the service offering to changing customer habits;
  2. Developing organizational flexibility to deal with uncertainties;
  3. Capturing short-term savings while optimizing the supply chain in the medium-term.

1. Adapting the service offering (UVP)

Consumption habits are affected by the health crisis, and it is possible to assess how to adapt to it by evaluating the evolution of customer selection criteria. 

Review the differentiating factors

The mapping of the customers’ factors of importance that influence their purchasing decisions, allows to re-evaluate the service offer and, above all, to take a critical look at the activities that are necessary to be unique and remain the supplier of choice.

The interest of this reflection is to increase resources where activities make a difference, and to reduce them, where differentiation is difficult to achieve. In the current context, allocating resources to activities that contribute little to differentiation is hardly advisable.

It is, therefore, essential to be rigorous with the analysis of the current value proposition. There is an opportunity to take advantage of the available cash flow recovered from the strengthening and the optimization of the service offer.

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Developing new possibilities

Note that it is also possible to assess how current activities and resources can be redeployed to develop new offerings. A classic case of business model innovation, it is about exploring how to serve new markets by taking advantage of current key competencies. 

It is about exploring the possibilities offered by the different exploitation of key activities, facilities, resources, and reconfiguring a service offering for current customers or even new markets. This redeployment of activities can aim at short-term objectives or allow new market exploitation in the medium-term.

The cases of CAE (respirators) and PUR Vodka (disinfectants) are examples of this reflection.

2. Developing organizational flexibility

The search for efficiencies in recent years has led many companies to optimize their operations. In itself, this is good, but it exposes them to the risks of unexpected disruptions through a loss of flexibility.

The question for managers is, therefore, to rethink the balance between efficiency and flexibility. It is necessary to assess at which levels of the organization it is imperative to increase flexibility to better adapt to current (and future) risks.

Here are some areas where it is possible to rethink the need for increased flexibility.

Flexibility of competencies

Organizational competencies help develop competitive advantages. It is possible to encompass competencies (know-how) at the individual, and group levels. 

The current situation highlights the importance of collaboration between teams and the ability to work more organically as opposed to hierarchical approaches. A culture of exploration and learning is much more beneficial in the current context.

Flexibility of Processes and Operations

Operations can be configured differently according to efficiency and flexibility requirements. It is possible to identify specific components of the value chain where risks can have a significant impact. 

Consider the international supply chains that are being disrupted today. Many organizations are now rethinking their sourcing approaches to ensure and secure the flow of goods and materials. Obviously, this will affect direct costs but will allow for greater flexibility.

Also, in the context of social distancing, it is possible to reflect on the traditional model of workspaces. Firms that have already adopted a flexible working environment have clearly benefited in this respect. Hotelling and shared workspace strategies (Regus, WeWork) offer unique ways to quickly increase or decrease space requirements.

It is essential to focus on activities that are at risk and that are important to maintaining the differentiation mentioned above. The extent to which it is possible to rapidly increase or decrease the use of these resources will significantly impact the P/L statement.

System flexibility

These choices are facilitated through management systems. Proactive management involves quick access to valid and relevant information. This requires optimal use of management applications and dynamic data sharing. 

Both the management applications and productivity tools must be operated coherently to support the adaptability of the organization. Beyond information sharing and collaboration, it is essential to think in terms of the ability to increase or decrease the access needed to ensure this flexibility.

Organizations using SAAS applications like Microsoft 365 or GSuite and taking advantage of the Cloud are more able to share and collaborate easily than those that have adopted file storage on desktops. The same is true for other collaborative applications like project management, CRM, etc.

Multiple approaches exist to make data mobile and accessible. Coherent data strategies must include all three dimensions of DNA. Applications, Devices, and Networks.

As a result, many organizations have been able to make the leap into the world of teleworking and have been able to adopt applications like Teams, Zoom, and Google Meet, to name a few. However, it is the set of platforms that must be considered to ensure the flexibility required by the organization. Collaboration goes far beyond video conferencing.

3. Optimizing for Savings and the Supply Chain

The need to review the operations and flexibility of the supply chain has been mentioned above. In the context of a pandemic and the search for flexibility, spend optimization is more than necessary in the short and medium-term.

Optimizing Savings

Depending on decisions on which activities to maintain, increase, or eliminate in addition to the required levels of flexibility, it is important to adjust the following elements that influence costs:

  • Review the flexibility of commercial agreements;
  • Adjust the prices and volumes;
  • Channel resources where they will impact the value offered;
  • Think in terms of total cost and not just in terms of the price paid.

Supply chain

The current situation opens the door to reviewing the role of several suppliers. Some may have to play a greater role than others in the future. Some questions allow us to review the impact of collaboration and the impacts on potential opportunities:

  • Is it possible to create more value through increased data integration and information sharing? 
  • How is it possible to take advantage of suppliers’ innovation capabilities and increase collaboration? 

This type of reflection helps to review the nature of the relationships between supply chain partners and assess how to balance efficiency and flexibility.

Summary

The current crisis is a unique event that allows organizations’ business models to be questioned. For some, it is an adaptation taking advantage of previous decisions. For others, it’s about rethinking the activities, resources, and competencies necessary to achieve a unique strategy. 

The nature of the pivots that firms have begun to undertake expresses this fact. Today, it is more important than ever to integrate a dynamic vision of the environment and develop a strategic capacity for adaptation. 

The three dimensions discussed make it possible to modify organizations’ business models. They make it possible to rethink the value and costs of operations while remaining dynamic in the face of uncertainty.

Ask yourself the following questions:

  • Did you rethink your service offering? Does it allow you to remain unique?
  • Have you reviewed the need to increase or decrease certain activities?
  • Have you reconsidered how flexibility can increase your ability to bounce back or deal with future uncertainties?
  • How does optimizing your costs allow you to free up cash flow to support these transformations?
  • How does your supply chain’s alignment or operations allow you to better leverage the benefits of increased collaboration?

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