The great reset

11 Jun 2020

The great reset

Will leaders reimagine their business models, post-pandemic? Doug Morrison asks whether the COVID-19 pandemic will instigate changes in organisations’ business models and leadership styles around the world.

Leading the organization through the crisis has been hard enough, but for many, the toughest leadership challenge lies ahead – how to steer a business back towards profitable and sustainable growth when economies worldwide are still reeling from the effects of the pandemic. 

Yet, “this big structural break in the marketplace” may well turn out to be an opportunity in disguise, according to Elizabeth Stewart, who leads Odgers Berndtson’s Executive Assessment & Development Practice in the UK

For some companies, Stewart argues, the financial fallout from the pandemic might be significant enough to require a complete pivot to alternative operating models or markets that can succeed at the start of a new economic cycle – in other words, a fundamental reset of the business. “There will never be another time when the more progressive and visionary business leaders can take a blank piece of paper and really decide what their organizations are going to be in the future without feeling hampered by the past,” she says. 

Time for a new approach  

In times of disruption, such “transformational leaders” are “unafraid” of setting a new path for their organization, based on emerging economic, market, and consumer trends. In relation to the current crisis, Stewart adds, they are “doing this now, not in four or six weeks’ time”. 

As Richard Wilding, professor of supply chain strategy at the UK’s Cranfield School of Management, puts it, the crisis offers “a burning platform-type situation” for business leaders to effect a radical change to their strategy. 

“Innovation is about taking ideas – which are new to you – and creating economic, social or environmental value,” says Wilding.

“Before the crisis, organizations often seemed to limit the way that ideas came through and were implemented unless they could create a burning platform and generate some urgency behind those ideas. Those organizations that could do that were then able to adapt to change and move forward much more aggressively. I think we’re actually finding that urgency for real now.”  

The last time there was anything like the same sense of urgency was the global financial crisis (GFC) of 2008. Though obviously different in origin, the GFC remains the main reference point for many business leaders, not least because it marked the start of a prolonged global economic growth cycle that only came to a shuddering halt with the outbreak of COVID-19. But the GFC also represented something of a missed opportunity for change, says Professor Kris Vander Velpen, who specializes in innovation and entrepreneurship at Flanders Business School in Antwerp.  

Lessons from the past  

Vander Velpen argues that many companies in mature industries “didn’t learn any lessons” from the GFC and simply reverted to the way business was conducted before.

“A lot of managers wanted to go back to the normal they knew before the crisis,” he recalls.

They could relatively easily surpass previous financial performance partly because of the ready availability of private equity and cheap debt. Businesses could grow via mergers and acquisitions and, as Vander Velpen says, they could prosper without really innovating. 

This time around, however, Vander Velpen believes there is an incentive for innovation, not least because of a COVID-19-related acceleration of key trends associated with the way we live and work – e-commerce, remote working, and digitalization generally.  

The conditions are right for “doing something totally different”, he says. “Totally different means that first you really need a strategic vision of where you think your industry is going to be in 10, 15 years’ time. Based on that, you see how your business model can be adapted to change your organization but also your culture because you’re going to make alliances or take people on board that you’d never think of maybe five or 10 years ago.” Vander Velpen adds: “If you have a vision for what can be done in your industry, then I think money is still available in huge quantities.”  

Opportunities in the marketplace 

Vander Velpen also highlights the importance of “the prepared mind”, in effect a readiness to adapt to changing circumstances, among the more entrepreneurial business leaders. As he says, they are able to spot inconsistencies in markets – and therefore new opportunities – where others merely want to revert to business as it was before the outbreak of the pandemic. 

According to Stewart, “true transformational leadership” also identifies opportunities to innovate by exploring ideas emerging at the convergence of markets and across value-chains while never losing sight of the organization’s core values. 

“They are free thinkers, not bound by the past,” she says. “They make decisions based on what is emerging and less obvious to other players rather than the current play. They think broadly as well as deeply and analyze at pace every aspect of a problem to see how sustainable an opportunity really is, considering both the short and long-term impact of solutions.” Stewart continues: “It takes courage and determination to start again and they are unafraid to shed 90% of their business if they think only 10% is really going to provide future success. Above all, transformational leaders believe in the impossible, and in a crisis, they’ll have the calmness of character to create the necessary space to make the impossible happen.”  

Leadership confidence 

There is another important dimension to the great reset – leadership style – which unites this elite group and was foreshadowed in research published by Odgers Berndtson just before the full implications of COVID-19 became known.   

Produced by Odgers Berndtson supported by Harvard Business Review Analytic Services, the firm’s Leadership Confidence Index was based on input from nearly 2,000 senior executives at organizations of all sizes and across sectors globally. Just 15% expressed confidence in the ability of their companies’ top leadership teams to manage disruption successfully. But among that winning 15% were such character traits as humility, emotional intelligence, self-awareness, compassion, and empathy.  

“I think those have really become not just important but critical as we need to care for our employees more than we need to manage them. That’s created a real shift,” says Eric Beaudan, Toronto-based Partner and Global Head of Odgers Berndtson’s Leadership Practice. “A lot of leaders have gone through this period and realized that their leadership style – if they were very hands-on – probably doesn’t work very well in a remote working environment.” 

Beaudan adds: “This crisis offers an opportunity not just to press reset on your business model, but also press reset on your leadership style.”  

In a series of articles responding to the impact of COVID-19, OBSERVE looks at how companies and their leaders are adapting and reimagining their organizations’ strategies and what lessons leaders have learned through the immediate impact of the coronavirus pandemic. Check them out now:

 

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