Don’t Bury Your Head in the Sand: Profitable Crisis Management

As long as everything runs smoothly, we hardly pay more attention to concerns about future crises than to confused anxiety dreams – quickly suppressed, but the unpleasant aftertaste remains. Or we are not aware of them at all and they lie undiscovered in rigid supply chains, lack of digitalization and inefficient work environments. And yes, no one really anticipated a year like 2020. That’s why we advocate integrating risk management built directly into the business model: continuing to envision the anxiety dream, identifying actual vulnerabilities, and finding creative solutions before the crisis hits. You’ll feel the aftertaste evaporate. In the following, we will show you which mindset and steps are necessary for this.

A Mindset for Winners of a Crisis

Before you jump right in and possibly lose yourself in blind actionism, you should give a thought to the correct mindset, which helps tremendously towards getting your actions in a clear line. For this, we recommend the book by Natalie Turner: Yes, You Can Innovate, whose key points we are happy to share here.

In times of good business it is nice to be happy about it and to pat each other on the back but due to the global interconnectedness of the world, an abundance of processes correlate with each other so that the next crisis will surely occur at some point. Therefore, it is of utmost importance to optimize the initial conditions for an emergency situation in advance.

Any solutions to a crisis require creativity, flexibility and innovation. All of this can only be achieved in an environment where diversity is lived and individualism is given high priority. Rigidly conformist and simple-minded thinking is steered in new directions, where a free space for individual responsibility arises. Anyone who wants to thrive must make the decision now to exchange outdated conventions for courageous innovations. This is the path from orderly negligence to confident decision-making. And for this turnaround to succeed, something has to change in the minds of everyone involved. Natalie Turner calls it the Six ‘I’s which are all interlinked with the central purpose that has to be kept in mind:

  • Identifying: spotting both opportunities and aspects to be ameliorated creates a capacity for new ideas
  • Igniting: cultivating & nurturing new ideas which may serve customers’ needs or a new trend
  • Investigating: exploring the fresh ideas by experimenting and analyzing feedback
  • Investing: once approved, an idea needs funding not only with money but also with resources like time and energy
  • Implementing: executing the new plans and ideas in an innovative way
  • Improving: repeated reviews of the product or service and adapting where needed

This new mindset may involve a more or less radical shift within the mindset of many, but it’s worth making the effort. If you would like more inspiration on this, you might have a look at the entire book. It does not stop at the Six ‘I’s but includes hands-on, practical advice with tests and assessments.

If you take the opportunity out of the crisis – it becomes a threat. If you take the fear out of the crisis – it becomes an opportunity.

Anja Förster & Peter Kreuz in “Don’t Waste a Crisis” (orig: Vergeude Keine Krise)

1. Identify the Risks

Let’s be honest – are you aware of all the risks that could affect your company in the event of social, political, global, financial or technological upheaval? In other words, which of the risks that you recognize have you ever simulated from start to finish; taken a look at the various parameters, developed an analysis and a strategy of action? The pandemic has shown us very clearly how much more emphasis must be placed on crisis management in business models in order to remain capable even in the event of an emergency.

Such crisis prevention is based on a precise analysis of various scenarios. For this purpose, it is useful to apply all possible outcomes of these scenarios to your company and to find out which ones are of central importance for you. For this there are various departments in the company that take care of their own specific areas; Enterprise Risk Management, uses various parameters to evaluate both strategic and operational risks, Compliance Management investigates legal factors, while Sustainability Management determines sustainability risks and the internal control system examines the process flow for risks. As we can see, these areas are quite distinct, but they are all more or less interrelated because rarely does a problem affect just one aspect; often several interacting points of reference are involved.

2. Minimize the Risks

What effective crisis management requires is an integrated view of all the risk factors in the various areas. After all, the outcome of a risk can of course be assessed as marginally relevant when viewed in isolation, but it is only in the concrete, interrelated structure that a potentially serious effect arises which may become a threat. We tend to assess what is known as less imminent. However, you should be aware of this subconscious assessment when it comes to risk assessment. Just because we know the danger doesn’t mean it can have less serious consequences in reality.

This holistic and objective assessment is successful if the different departments cooperate – each is expert in its own area, but at the same time gains a deeper understanding of the processes and risk factors from other areas and can bring new perspectives to the table. Such loose collaborations are a great solution when it comes to short-term action, but in the long run, it needs to become a solid organization that serves as the basis for risk management and thus sustains crisis prevention.

Within this organization, the goal must be to calculate profitability based on real numbers, focusing on both the best-case and worst-case scenarios. In order to make better decisions, it is necessary to agree on risk factors, which, in conjunction with predefined key figures and qualitative aspects, allow for more well-founded scenarios. In addition, a decision tree can be created in advance on the basis of these scenarios, which increases the freedom of action in the respective situation, because it is much more difficult to act clearly and with a firm grasp of the facts when under pressure. These strategies make it much easier to recognize which decisions are likely to have which consequences.

3. Perform Regular Revisions

This last step is simultaneously the first step. It is by no means just a matter of meeting regulatory requirements, drawing up a plan for the crisis and then twiddling your thumbs. Instead, the focus must be on the safe continuation of the company’s business activities. To do this, we need to recognize that we are operating in an environment that will certainly not become less risky in the coming years as a result of strong global interdependence.

Once again, this means always keeping an eye on current changes in the world of technology, politics and business, regularly reviewing the different areas and possibly eliminating or exploiting new potential correlations, risks and problems in advance. We can clearly conclude that a holistic, forward-looking approach with a coherent purpose and the right mindset are the key elements.

How to Master the Digital Transformation Successfully

“We need to advance the digital transformation!” This is a frequent statement in various discussions, be it on the subject of education, finance or administration. As important and correct as this request might be, we should first be on the same page of what the digital transformation entails. That’s why this article outlines the diverse fields of action for digitalization as well as the accompanying challenges, opportunities and future outlooks.

Do you know the important fields of action in digitalization?

  • The IT division needs to be included from the outset for each business model as at least an equal branch of the company.
  • A flexible and agile digital organizational structure of the company increases the ability to act and general resilience to crises.
  • For employees, it is crucial to be able to work remotely in an effective way which also offers enough space for communication. Social aspects are important, such as the online meeting culture, the handling of technological progress, internationalization and the growth mindset. Each employee should be familiar with and create future prospects of the company and thereby take the opportunity of initiating progress themselves.
  • A trustworthy and transparent style of leadership is closely connected with the digital field of action of the employees. Being a role model when it comes to digital aspects of growth mindset, social behavior and internationalization is as much a part of that as is 360 degree feedback. Good leadership combines the components of modern management and of an inclusive leadership style.
  • If not already in place, now is the time to think of marketing and sales digitally. An online presence is indispensable, be it with a website with an online shop, online advertising, social media channels or a combination of these options. A CRM becomes the central component in the sales process around the product and for customer communication./li>
  • In the production branch, the focus is on setting up flexible supply chains and calculating downtime scenarios in the event of an emergency. Dynamic planning and response is advantageous and the issue of automation must be taken into account. Industry-specific strategic characteristics, such as Industry 4.0, should be further expanded by means of supporting technologies.
  • Supply chain management follows a similar pattern as production does – an agile supply chain ensures flexibility. Proof of origin and quality certificates result in an increased transparency vis-a-vis a growing global awareness of sustainability.
  • In IT as the central area of digitalization, professionally created, agile application and service landscapes are required. Continuous innovation calls for simple and creative networking in order to achieve stability. Cloud-based services and platforms such as SaaS, PaaS and IaaS help to achieve this. The vertical range of manufacture is increasingly being reduced, which in turn leads to more freedom for innovative change processes.
  • Last but not least, digitalization also makes expertise in cyber security essential. It is a matter of closing data security gaps which can arise as a result of constant technical progress. Here, too, you can make use of existing services on the market to quickly and professionally identify the necessary fields of action.

It is all about the harmony of People, Processes and Products and the capability to make courageous decisions.

Jana Bulkin, CEO of S2BConnected

Be prepared for these obstacles:

In September of 2019, KPMG’s Future Readiness Index found that the majority of German companies had a positive outlook for the future, but that risk management had taken a downward turn in their self-assessment. While 27 percent of companies still invested to adapt to changes within the global economy in 2018, only 18 percent did so in 2019. And lo and behold – barely a quarter later this very aspect was completely put to the test. So it’s not surprising that just short of half of all German companies on the 2020 index said that investing in managing crises and conflicts of international proportions was a high or the highest priority. In the previous year, only 13 percent of companies agreed with this.

While digitization was almost forced by the pandemic to move forward at a rapid pace, it is now important to act prudently and upgrade in key aspects such as IT security and structure. Risks and escalating costs must be anticipated and minimized, while the digital workplace should be optimized for sustainability and effectiveness. The flexibility to react appropriately to crisis situations, to have plans on hand for a state of emergency, and to find the right balance between cooperation and independence is thus one of the key challenges of digitization. However, achieving this heavily depends on political decisions. Decision-makers do not always see the forward-driving progress as clearly as experts do, and for this reason digitization is often kept on a tight leash in a variety of areas.

Food for thought: It needs the flexibility to respond appropriately to crisis situations and the availability of plans for a state of emergency. Finding the right balance between cooperation, independence, speed and flexibility is therefore the central challenge of digitization.

With demographic change comes a challenge that has been foreseeable for years. As the average age of society and thus of potential customers rises, so does the need for change in digital customer needs. This does not always require a complete alteration of the system, but it does require foresight to protect investments that have already been made. One solution is to use artificial intelligence or machine learning technology, which in turn support predictive maintenance and customer retention.

But beyond that, customer needs are continuously changing even without demographic change. Fresh trends emerge as quickly as they disappear, which is why an informed assessment is needed about which product or service has a future; where it is worth deploying; and which trends will quickly evaporate. The sustainability awareness of customers, on the other hand, can hardly be called a trend these days – this has manifested itself especially during the last decade and should always be considered on a digital level as well. Professional input is therefore undoubtedly required in order to meet all needs and be dynamically structured at the same time.

Turn Your Obstacles into Stepping Stones

It is these very challenges that give rise to opportunities in the various fields of action of digitalization. Here, too, the pandemic can no longer be removed from the big picture. In a sense, the restrictions of the lockdown were a catalyst for entrepreneurial progress in terms of working models, conditions and trends as well as general digitization, which in turn leads to a resilient business design. This drive for digital transformation can be used to digitally reorganize and optimize those areas of the company that are appropriate. Economic dominance in various key technologies, such as artificial intelligence and big data, is fiercely contested internationally, which is why it is worthwhile for companies to always keep an eye on technological progress, its origins and to include them into their strategy.

Dare to Have a Look at the Future Today

It is certainly not a brand-new insight when we say that our future, the digital tomorrow, is being shaped right now. Its success depends above all on whether, how and which current opportunities are seized and challenges mastered. The resulting visions of the future could not be more contrary. In the event of further stagnation and sluggish progress, a handful of states or corporations will stand at the pinnacle of global power, dictating the economy, digitalization and progress, while the world’s population is forced to comply. Or, in a positive scenario, Europe and the world are joining forces: Technology is used at the service of people instead of the other way around, the world’s knowledge is freely accessible at all times, and societal challenges are resolved with the help of ethically sound, sustainable, and efficiently integrated technology.

It is now up to us to make the latter vision a reality, to influence the digital transformation in the right places, and thus to shape our shared future.

This is How You Succeed in the VUCA World

Welcome to the VUCA World! Things are turbulent and unsteady here. That sounds exhausting? It only is if you don’t know how to deal with it. In this article, we will take a closer look at what exactly it is all about and which strategies are helpful. Roughly speaking, it’s about the fast pace and unpredictability of the business world in all its areas. These circumstances impose completely new demands on managers and companies.

Why you should get to know the VUCA World

The acronym VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity and originated at the Army War College in 1987 in reference to leadership in volatile, uncertain, complex, and ambiguous situations, which was then adopted by the business world. The continuous changes, uncertainties and new challenges, which have become the norm in the VUCA World, mean that mistakes can have much more serious consequences than they did 15 years ago.

  • Volatility in this context means that companies and their markets are subject to constant change, which happens rapidly and can also take on large dimensions. It is a fast rise and fall of the economy, and constantly new trends that change direction more often.
  • Uncertainty is relatively easy to explain. No one can say with 100 percent certainty which opportunities and challenges the future will bring. Take, for example, the Corona crisis, which suddenly made everything uncertain overnight.
  • With increased Complexity arise new challenges for companies. Nowadays, there are many more different and interdependent factors that influence performance, so that the expert knowledge of a single person is hardly sufficient.
  • Ambiguity is similar to Uncertainty but it is important not to confuse the two. While Uncertainty means that no one can anticipate the important information because it is not known, Ambiguity means that one has this information but does not know how to interpret it because different interpretations exist depending on the change of perspective. This can lead to prejudiced, one-sided assessments of the situation.

It is therefore clear that in the age of the VUCA World, companies have to make a greater effort to achieve their corporate goals. The effects of the VUCA world not only influence the market, but also the internal structures of your company; employees may be worried about the future, feel demotivated and unstable, which in turn reflects on your company. Decision-making processes become more difficult, especially when it comes to long-term projects and innovations. If management does not take the initiative in this matter, there is a possibility that a VUCA world will emerge within your own company, characterized by unpredictability, rapid changes, complexity and opaque areas of tension.

The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.

Peter F. Drucker

How Does Your Business Survive in the VUCA World?

In the following, we will show you the important and promising strategies. These include, on the one hand, the ‘Build, Measure, Learn’ scheme and, on the other, the steps of lean management.

Lean Start-Ups: Build, Measure, Learn

When it comes to founding a new company in the VUCA world, startups with limited budgets have a particularly hard time factoring the many risk factors into their planning so as not to fail right at the starting gate. To do so, it is worthwhile to embrace the principles of Build, Measure and Learn.

First, the minimum version of the product is launched (build), then it is continuously evaluated on the basis of previously defined parameters and customer feedback (measure), and finally, conclusions are drawn on the basis of this data for the next adaptation steps (learn). This is to be understood as a cycle that is run through again and again in order to guarantee optimal adaptation to the customer and to be able to react agilely to upheavals.

Food for thought: Effective strategies for success in the VUCA World always involve foresight and continuous learning through calculated experimentation around new initiatives as well as adaptation to change processes. Thus, the strength lies in agility to seize opportunities and to proactively plan for a change of circumstance. The journey is the goal.

The three stages of lean management

Lean Management is based on the principles of Logical Incrementalism. At first, this sounds like another empty ‘ism’, but it brings both safety and progress to the VUCA world. An increment is the size of a step-by-step change and that is also the heart of this strategy; it is a deliberately chosen, small-step approach characterized by calculated experimentation and learning from the results obtained.

The first step is to collect and analyze data. This should be done with foresight, which, in addition to learning from past experience, also takes into account trends, different scenarios and coexistences. This is particularly important when it comes to the uncertainty and fast-moving nature of the VUCA world. The scenarios should not be neglected because they prevent ambiguity and allow a flexible view as well as action possibilities depending on the potential outcome. In doing so, you should ask yourself the questions of what could happen and which effects it might have.

The second step is strategy creation which is a very subjective process that often involves various action steps. These are based on a set of goals and objectives. Young companies in particular will initially see a kind of black box here, which will only gradually be filled with more experience and insights. So-called road-mapping should be taken into consideration. It answers the questions of where the company currently stands, which goal it wants to achieve at which point in time, and the ultimate plan of action. Dynamics is a key factor; if the strategy is designed with this in mind, implementation will succeed all the better.

Which leads to the third step: an implementation of the planned strategy based on logical incrementalism and dynamic road-mapping. It allows a flexible approach for achieving the strategic goals. Road-mapping is more than just strategy definition and implementation. It includes the immensely important factor of successful communication of this strategy, because without the pervasive understanding of all involved, the implementation cannot unfold its full potential.

Gain Strength from Continuous Learning

No matter where you are with your company at the moment – effective strategies for growing in the VUCA world always include foresight and, above all, continuous learning from controlled testing of new measures and the appropriate adaptation for change processes. Thus, the strength lies not in a rigid organization but in the agility to take advantage of opportunities and proactively plan for changes in circumstances. The path is the goal.

It is worthwhile for the creation of this strategy, to bring experts on board, who are characterized by great networks and experience in management. Contact us – we are happy to be your sparring partner and always have an open ear for your ideas.

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