Your two-step plan for the new year

Your two-step plan for the new year

600 CEOs shared the most pressing challenges that are keeping them awake at night.

Insights from Boris Groysberg and Katherine Connolly Baden

We have asked approximately 600 CEOs to share with us the most pressing challenges that are keeping them awake at night in the midst of the global COVID-19 pandemic. A number of challenges were submitted, from managing a remote workforce to making decisions in the face of vast uncertainty. Not surprisingly, one significant challenge reported by many CEOs was how to position their company to survive, or even thrive, during the pandemic and in the “new normal” that follows.

As one CEO said, “A fabricated or real crisis is an essential ingredient for effective change management, as an existential threat breaks down many barriers to change. With such an unprecedented crisis, it is stretching and breaking apart even the strongest teams. What do we need to do to view this terrible crisis as an opportunity to pivot and make changes that will allow our organizations to survive beyond the crisis?” Others are wondering if the crisis might contain opportunities: “How can we take advantage of COVID … and think about emerging stronger than our competition at the end of this?” in the words of one top executive.

Because of the COVID-19 outbreak, we are all taking in vast amounts of new information every day and adjusting to an entirely new set of behavioral habits. In addition, most of us are dealing with unprecedented tasks and decisions on the job and in our personal lives. And we are all, one way or another, grieving. According to David Kessler, an author and grief expert quoted in a recent HBR article, “The loss of normalcy; the fear of economic toll; the loss of connection. This is hitting us and we’re grieving. Collectively. We are not used to this kind of collective grief in the air.”

Two critical questions, posed by Hernan Saenz and Dunigan O’Keeffe of Bain and Company, can help organizational leaders frame their thoughts about how to survive in the present and position their companies to thrive in the post-pandemic future—whatever that may look like:

  • “How can we ride out the crisis to emerge stronger than others in our industry?”
  • “How can the organization learn through this experience to win in a new world?”

Saenz and O’Keeffe explain: “To guide the decisions and actions that will answer those questions—through the welter of competing demands, the sometimes chaotic conditions and the paramount importance of doing the right thing—some leadership teams have committed themselves to two guiding principles: act now to protect and run the business today, and plan now to retool the business for the future.”

We encourage organizations to think of the two P’s: protect the core, and pivot to new opportunities. We provide a top-level overview of major topics and ideas relevant to each concept. We hope you are interested in engaging in further research about any topics that resonate with you and your company.

Protect the core

Protecting the core is partially about becoming more and more effective and efficient in the company’s core business. The focus is improvement, not exponential growth. Improvement is always possible. Yes, it may be small, but even extremely small improvements can be worthwhile.

Look at the example of Olympic swimmer Michael Phelps, the most decorated Olympian in history, who continued to practice, focusing on shaving milliseconds off his time. Phelps never stopped improving.

Similarly, consider the career of Dirk Nowitzski, the first European player to win an MVP award after moving to the National Basketball Association, where he played for an astonishing 21 years. Nowitzki refined his skills by breaking them down into their component parts and focusing intently on the elements that needed improvement—not just practicing jump shots, but watching videos and breaking down the movements and striving to improve, say, the precision of his positioning. As Nowitzki described, during a recent address to an executive education class at Harvard Business School: “I was never satisfied… I wanted to get the max out of my talent, out of my potential. After the season, I took a week or two weeks off and then I was back in the gym. Every summer, I played on the national team to play at a high level and practice the stuff I worked on all summer. I then came back in the winter a better player. I always saw myself as a guy who was evolving.” Stars practice, and they keep practicing long after they become stars.

Organizations can also learn a great deal from the examples set by these world-class athletes, who are never satisfied, even at the top of their games and seemingly at the peak of their performance.

Like Phelps and Nowitzki, two examples of organizations that excel at continuous improvement are Toyota, a Japanese automotive manufacturer, and Danaher, a conglomerate with brands in diagnostics, life sciences, and environmental and applied solutions.

“Stars practice, and they keep practicing long after they become stars.”

Toyota employs a system known as the Toyota Production System (TPS), “a production system based on the philosophy of achieving the complete elimination of all waste in pursuit of the most efficient methods.” The system is based on two principles: automation with a human touch, and each process producing only what is needed for the next process in a continuous flow. According to Toyota, “TPS and its approach to cost reduction are the wellsprings of competitive strength and unique advantages for Toyota… Even today, all Toyota production divisions are making improvements to TPS day-and-night to ensure its continued evolution.”

Danaher’s system for achieving its goals is called the Danaher Business System (DBS). According to Danaher, the DBS engine “drives the company through a never-ending cycle of change and improvement: exceptional people develop outstanding plans and execute them using world-class tools to construct sustainable processes, resulting in superior performance.” DBS is used to to “guide what we do, measure how well we execute, and create options for doing even better—including improving DBS itself.”

Cost cutting is inevitable in dire times, but the current crisis is an opportunity for an intense questioning of processes—including in areas where your company already excels. We have seen that companies can save 20-30 percent on costs by improving processes. In fact, we heard from two companies who are considered gold standards in operational efficiency in their industries, and in examining and honing their processes, they were still able to improve their efficiency by 10 percent and 15 percent respectively. Whenever you think you’re done and your organization is running as efficiently as possible, think again.

Whether it be eliminating duplicate procedures or useless and cumbersome paperwork, there are always ways to streamline operations. There is no limit to continuous improvement and innovation. Below are three suggestions for enabling continuous improvement in your company:

Call on cross-functional teams to help solve problems

In order to achieve greater efficiency, one best practice is to build a cross-functional team who can interrogate your areas of excellence, asking questions such as: What is truly necessary? How are things done? At the individual and company levels, how is time spent, and where are there opportunities to make processes more efficient?

When managed well, cross-functional teams can add a great deal of value. As a first step, help the team define and understand its common goal by empowering members to discover how a challenge affects other functions beyond their own and the company as a whole. In other words, members need to adjust their perspectives to encompass the needs of more than just their own function, which may be easier for some people than others, in order to reach their goal.

Next, help negotiate the allocation of resources within the team, recognizing that some functions will contribute more to the team (at the very least, in terms of people’s time) than others will and that some functions may see a bigger payoff than others will if the team is successful. It is also important to remain flexible and recognize that the allocation of resources may shift over time.

A third consideration is that you or another leader may need to help guide the team through concerns that become “sticking points”—it is important to keep the team progressing toward their goal, but to properly address all concerns raised along the way.

Use the “clean sheet of paper” exercise to think creativity about company processes

Another best practice is to perform the clean sheet of paper exercise with your executive team, meaning to have conversations about how you would organize the operations of the company if you were just starting out and there was no such thing as “but that’s always the way it’s been done.” As explained by Team Strength Inc.:

”Start [the clean sheet of paper exercise] by questioning assumptions. The question is simple: Why? Why do you do this? Why do you do things in this way? Just keep asking “why?”—every subsequent “why?” will go deeper. Asking “why?” five times is a strategy pioneered by Toyota to track down the root cause of mistakes. Consider the elements and processes are there for a reason, and then try to understand it. When you thoroughly examine the assumptions behind their current use, you will likely make surprising discoveries with a capacity for large changes. When you get to the root cause, you are not only solving this symptom, but a whole family of similar problems that did not –but very well might have– occurred.”

Perry Evans, President of ThriveHive, stated in the New York Times, “In any transformation I’ve seen, the winner is always the one who takes out a clean sheet of paper and says, ‘This is how you would do it if you didn’t have the drag of your traditional business.’’ This exercise may greatly help illuminate opportunities to improve effectiveness and efficiency.

Keep people accountable and adjust their deliverables

The COVID-19 outbreak presents us all with an unpresented amount of uncertainty. We do not know how long the crisis will last, when and how restrictions on the public will be lifted, how customers will behave in the aftermath, and how the once-familiar environments in which your company operated will have been impacted for the long-term, if not permanently.

As a result, it is nearly impossible to plan for the next six months—there simply is not enough data and information to do so. Plans, and the corresponding KPIs and other metrics that will empower your team to execute them, should be adjusted to address the company’s immediate needs and short-term goals, and communicated continually. This will enable you to hold people accountable for performance while ensuring that their limited energy and processing capacity is being spent on truly mission-critical tasks.

“It is nearly impossible to plan for the next six months — there is simply not enough data and information to do so.”

Paying attention to the core business and the efficiency of your operations is critical because, even if you are not prioritizing it, your competition is. In addition, your competition may also be operating with 10-20 percent less real estate needs post-pandemic due to a long-term increase in remote work. Do not be satisfied until you achieve greater efficiency, as it will benefit your organization now and after the crisis has subsided.

Pivot to new opportunities

Some companies pivoted immediately to address the crisis, motivated by the need to generate new revenue streams as well as public spirit, as reported on NPR’s The Indicator on Planet Money:

“Some companies have reacted [to the spread of coronavirus] by laying off staff and closing their doors, hunkering down and waiting for the storm to pass. Others have decided to pivot. They’ve come up with innovative ideas of how to retool or reconfigure their operations, to keep their doors open and their employees working. Some are big, like General Motors, a car company that’s making ventilators. Others are small, mom-and-pop restaurants that are making up fruit-and-vegetable boxes for people and delivering them door-to-door.”

General Motors is not the only big company stepping up to this challenge. For example, LVHM, a French multinational corporation and conglomerate specializing in luxury goods, announced it will cease the production of perfumes in some of its factories in order to make hand sanitizer, and Nike stated it will start producing personal protective equipment for health care workers. These responses may be focused on the immediate emergency of the pandemic with the idea of returning to business-as-usual at some point.

Other companies are making deeper changes that are changing their business-as-usual models for good. Take two examples from the United Kingdom.

Marco Castelanelli, founder of the two-year-old company Club Vino, has made one such pivot. The company had been hosting themed wine tastings, often in prestigious locations, but when the COVID-19 outbreak hit and social gatherings were no longer permitted, Castelanelli had to rethink the business. He decided to promote the idea of wine tastings from home. Customers can order a tasting package from the company website, including the wine, tasting notes and a link to a video that would essentially serve as a virtual tasting. As Castelanelli explained to, “This is a more scalable business and complements perfectly the physical business we have built so far.”

Another example is MyoMaster, a company that specializes in recovery products and knowledge for athletes. Founded by couple Joe Gray and Lottie Whyte, MyoMaster generated revenue by selling at sporting events and to gyms. After the COVID-19 outbreak, however, when sporting events were cancelled and gyms were forced to close, they pivoted to ecommerce and started focusing on home workouts.

As Whyte explained in the same article, “What we used to sell in a month, we are now selling online in a single day. There are real opportunities out there for brands that can sell online and provide people with products that can bring them joy at home.”

Both companies were forced to leverage ecommerce in unexpected ways to survive the COVID-19 outbreak, but in the end these changes led to a long-term revision of their business models, which will continue to add value after the crisis subsides. Saenz and O’Keeffe state: “Leading companies are reallocating resources to pockets of current and future growth, such as e-commerce, to protect against revenue loss.” This exactly what Club Vino and MyoMaster have done.

Whether pivoting for the short-term or the long-term, the three practices below might help your company to think through its pivot.

Again, look to cross-functional teams

As stated earlier, a cross-functional team assigned to this challenge would be one practice to consider. Ask this team, with their diversity of experiences and perspectives, to focus on what opportunities exist outside the core business. Ask them to think about new revenue streams for the short term and long term. Challenge them to think outside the box. You may also want to consider monitoring the team for burnout, given the intensity of their work, and perhaps rotating people off and on the team in predetermined intervals. This could both prevent burnout and provide a pipeline of fresh perspectives.

Create an agile enterprise from the top down

We recommend building agile leadership teams to support an agile enterprise. Building such an enterprise means striking a balance between standardizing operations and pursuing innovations. Bain & Company’s Darrell Rigby, Sarah Elk and Steve Berez elaborate on the role of the agile leadership team:

”To find the optimal balance, the agile leadership team typically begins by creating new metrics to help determine how agile the company is, how agile it should be, whether it is moving in the right direction at the right speed, and which constraints are impeding progress. Surveys of internal and external stakeholders to obtain their subjective views of business processes combined with objective measures—such as innovation cycle times, flow efficiency (work time versus wait time), and market share changes—are useful for determining the existing state of the operating system components. The team then develops a sequenced list of activities aimed at achieving an optimal balance for each component. The agile process forces leaders to get out of their silos and work together as a multidisciplinary group, breaking through impediments and pivoting when necessary. By rebalancing whichever of the components are out of alignment, they will, over time, create an operating system for an agile enterprise.”

An agile leadership team includes some or all executive team members. They do not dedicate all of their time to a single, specific initiative; that would not be possible. They must balance establishing an agile enterprise with the more traditional duties of their roles. As such, they act as sponsors of the specific initiatives that are most closely connected to their areas of expertise, letting assigned “initiative owners” take full-time responsibility for their projects. The central project of any agile leadership team is creating an agile enterprise in which all other initiatives are undertaken. Rigby, Elk and Berez state in their HBR article:

“An agile leadership team views development of the agile system as an agile initiative—in fact, as the most vital of all agile initiatives. Senior executives learn to manage the transition as an agile team. They view it as a continuous improvement program, not as a project with predictable end points or fixed completion dates. They realize that going too slowly may fail to achieve escape velocity, and that changing too fast will create chaos. So they sequence and balance all the components, recognize the value of role-modeling agile behaviors, and appreciate that how they make decisions will be as important as the decisions themselves.”

In time, your agile leadership team will come to focus considerably more on strategy and less on operations management. A greater focus on innovation, collaboration and strategy will help guide your company on how and when to pivot.

Generate insights about where to pivot

In addition to cultivating the right types of teams and company culture that will allow your company to pivot, you must look externally to understand what types of pivots would be well received in the market. There are many ways to collect helpful insights on your customers’ needs and therefore find opportunities to serve them. You can analyze and then leverage the customer data your company already has. You can turn to the younger members of your organization, who are more likely to work on the frontlines in customer-facing roles, to gather their understanding of customers’ needs. Of course, you can also reach out to customers directly to ask how you can best help them through this challenging time. This is the time to practice customer intimacy, not only customer centricity.

Protect and pivot = exploit and explore

Exploiting opportunities to make incremental improvements to existing operations while also exploring future possibilities for innovations and solutions is the hallmark of an ambidextrous organization. In an ambidextrous organization, new, exploratory units are separate from traditional, exploitative ones. This allows the new units to create processes and procedures that enable their creative goals. They are not beholden to the traditional way of doing things. Companies then compensate for this separation with integration at the senior management level, ensuring alignment at the top. As Charles A. O’Reilly III and Michael L. Tushman explain:

“The structure of ambidextrous organizations allows cross-fertilization among units while preventing cross-contamination. The tight coordination at the managerial level enables the fledgling units to share important resources from the traditional units—cash, talent, expertise, customers, and so on—but the organizational separation ensures that the new units’ distinctive processes, structures, and cultures are not overwhelmed by the forces of “business as usual.” At the same time, the established units are shielded from the distractions of launching new businesses; they can continue to focus all their attention and energy on refining their operations, improving their products, and serving their customers.”

In order for an ambidextrous organization to be successful, ideally leaders themselves should be ambidextrous, meaning they can attend to the needs of different kinds of businesses. Also a key to success, leaders must consistently and clearly communication a vision for the company that allows exploitation and exploration to exist in harmony with one another. The figure below summarizes the different requirements of the two kinds of businesses found within an ambidextrous organization.

The COVID-19 outbreak has created a period of high stress for individuals and companies alike. It is also, however, an opportunity to examine current business practices in order to increase long-term operational efficiency and competitiveness, as well as to innovate for the sake of surviving now and thriving later. It is a time to protect the core business and pivot to new opportunities, or, in other words, to exploit and explore.

To achieve your goals, consider leveraging cross-functional teams, employing creative exercises, adjusting expectations and deliverables, supporting an agile enterprise and generating customer insights. As Saenz and O’Keeffe claim, “Bold leadership teams are beginning to imagine this [post-pandemic] new world now and already adjusting their strategies and operating models. At this moment, teams want to hear four messages: our people are safe, our business is protected, we will recover stronger, and we will redefine the new world for our industry.”

The gravity of the challenges facing businesses right now is not be to understated, but shifting perspective to see what opportunities are also presenting themselves will help companies to see another day and eventually adapt to the reality of the post-pandemic world, despite all its uncertainties.

About the authors

Boris Groysberg is the Richard P. Chapman Professor of Business Administration at Harvard Business School.

Katherine Connolly Baden is a research associate in the Organizational Behavior Unit at HBS.


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