
– Upgrading organisational maturity to thrive in disruption
In one of our previous articles, ‘eye-to-eye with corporate mortality,’ we established that the average life-expectancy for organisations are down by an astonishing 80%, from 90 years in 1935 to only 18 years today, and is expected to drop to 12 years, by 2027 (Foster, 2018). However, this is not necessarily overly surprising when considering the unprecedented rate of change and high levels of disruption that organisations have to manage in today’s environment.
There are several underlying factors for this exponential development such as globalisation, technology innovation, increased access to capital, policy changes, etc. However, the main catalyst is, without a doubt, digital disruption. Since 2000, 52% of the S&P500 companies have either gone bankrupt, been acquired, or ceased to exist as a result of digital disruption (HBR, 2017).
This dynamic is continuously rewriting the rules of engagement and the competitive landscape of most industries, and no one is no longer immune to disruption. Take Nokia as an example; in 2006 they were seen as the hallmark of Telecommunication and also the economic engine of a whole nation. With 60% market share in some markets, 9B in free cash flow, and a market cap that peaked at $95B (12/2007) they appeared to be unstoppable. Meanwhile, Steve Jobs and Apple had for several years been working on reimagining the potential of our handheld devices, and on the 29th of June 2007, they released the first version of the iPhone. With that, Apple completely redefined the mobile industry, forever. Exactly five years after the launch of the iPhone, Nokia was faced with bankruptcy and a market cap of just 5.1B, representing an astonishing 94.6% decline from the peak in 2017 (Macrotrends, 2019).
While disruption often seams sudden and unexpected for its corporate victims, in most cases it actually develops over a period of time until it reaches a tipping point (point of disruption) and the only reason it appears as sudden is either because of;
- an inability to identify the changing context (technology changes, changing customer preferences, etc.) or;
- an unwillingness to respond as this usually involves having to take on more risk, and/or cannibalise part of the existing core business or;
- an inability to effectively adapt to the changing conditions (often due to a combination of cultural-, structural- and capability factors).
Given the current speed of change, combined with the volatile, uncertain, complex and ambiguous (VUCA) nature of today business environment, organisations are in desperate need of finding new ways of working to create the right conditions for sustainable, repeatable and powerful execution. Add to this the current organisational challenges that we explored in ‘eye-to-eye with corporate mortality’ including; the amount of value lost through poor execution; eroding public trust; collaboration ineffectiveness; and high levels of employee disengagement.
At the same time, people expect organisations to play a more critical role in our communities which require organisations to build social capital and to transform from a business enterprise to a social enterprise (Deloitte Global Human Capital Trends, 2018). As a result, organisations need a new level of maturity and leadership that is capable of managing a much more complex world-view, one that expands beyond profit and shareholder returns.
For organisations to be sustainable in a highly disruptive VUCA environment, a strong foundation of integrity and adaptability is required. Similar to the way engineers design a building in an area exposed to earthquakes, the construction requires both strength and flexibility for it to withstand a potential shock (disruption). If it’s too rigid, the structure will crack, and if it’s too flexible and not strong enough, it will lose its integrity and potentially come down. The requirements depend on; the magnitude of a potential earthquake (level of disruption in the industry); and the size of the building (scale of organisation).
We will explore this concept of organisational maturity and adaptability in much more depth in a series of future articles so stay tuned!