Listening to the business ecosystem can turn unpredictability into opportunity

One of the main challenges of the business environment during the Covid-19 Pandemic was that uncertainty dominated the market which made it very difficult for many companies to plan ahead. In essence, challenges were dealt with on a reactionary basis as opposed to a planned approach. This uncertainty has mostly been replicated in 2022. The Ukraine war and rising inflation has made the cost of production higher, but it has also put discretionary spending under pressure. Companies are under pressure at both ends of the spectrum.

The key issue for companies to address is the future outlook of this environment. Will market dynamics change enough for companies to be able to implement a planned approach or will the reactionary approach continue for the foreseeable future? An article by Deloitte points out that if companies listen to the business ecosystem, they can turn uncertainty into profitability.

Skate to where the puck is

The article points out that the secret of success, as the saying goes, lies in having the foresight and agility to skate to where the puck is going to be, rather than where it is.  Accordingly, organizations have always tried to anticipate trends so they can capitalize on where the market is going. They line up potential products to develop, new markets to penetrate, partners to work with, new this and that—and then, via a cascade of choices direct their efforts where they expect them to be most effective. There have even been recent moves to harness artificial intelligence (AI)-based “prediction machines” to turbocharge this approach, tracing weak signals to find otherwise hidden opportunities and challenges, better allocate resources, and respond in “AI” rather than human time.

This method of strategic planning centers on trying to predict the future, the better to prepare for and succeed in it. And that’s why relying solely on it is increasingly a recipe for disruption—because prediction loses much of its potency in an unpredictable world.

The article adds that, to say that unanticipated change is becoming the rule rather than the exception is as cliché as the platitude about the puck. Major surprises, from the 2016 US presidential election through COVID-19 and the conflict in Ukraine, are constantly invalidating predictions about the future. We’ve seen the growth of meme stocks and influencers, and how a fire at a single factory can disrupt global supply chains. Skating to where we think the puck will be doesn’t work when we cannot anticipate most (or even many) of the obstacles and opportunities that the puck, or our organization, has in front of it.

Changes are more pervasive

The Deloitte article adds that it’s not necessarily that more things are changing or changing faster than they did in the past. What’s different is that changes are now much more pervasive, and they’re also more apt to interact with each other to create still more change. As businesses have shifted from vertical integration to ecosystems, and as those ecosystems become bigger and more intricate and interconnected, changes are transmitted further, touch more entities, and take unanticipated paths to appear in unexpected places. Moreover, the distinctions between industries and sectors, geographies, and even firm, partner, and supplier are eroding so that changes in one domain resonate across many others.

The resulting complex, chaotic, and hence unpredictable environment calls for us to go beyond anticipating potential futures to sensing and acting on unanticipated futures. We need to engage with possibilities and not just projected actualities. But how do we sense and act at pace when these possibilities emerge at the edge of overlapping ecosystems outside the firm?

The article adds that, to help figure this out, let’s look at how opportunities arise. Someone, some group, somewhere, has an idea for a way to make things better:

• an innovative product or marketing campaign;
• a new way of serving customers; and
• a plan for expanding market share.

Some of those ideas occur among senior executives and strategic planners in the organization’s “head,” its centre. But most opportunities originate among workers on the ground, close to the work, who likely have the potential to surface more and better possibilities than any centralized strategic function. Why? Because that’s where the information is. Working in the head office means working with summaries and abstractions, high-level models, and average values. You just can’t see the possibilities from that perspective.

Mobilising workers

Where are these on-the-ground workers? The article points out that most of them are outside the organization, distributed throughout its extended ecosystem. It’s not just that many organizations today have more people working for it in the ecosystem outside it than within their four walls. It’s also that when organizations are as interdependent as they are today, creativity—the generation of new possibilities—depends crucially on engaging creatively with other entities. By connecting across boundaries, exchanging ideas, and learning about each other’s capabilities, people gain the knowledge and connections to help them develop new ideas and navigate the relationships needed to make them happen.

To identify these ideas, an organization needs to excel at “listening” to the ecosystem to find out what and where the new possibilities are. To encourage productive ideas, it needs to understand how to help increase the range of possibilities that the ecosystem creates—to foster the cross-boundary collaboration and creativity that generates them. And to benefit from those ideas, it needs to be able to sense where in the ecosystem the most promising possibilities are developing—not by sensing the possibilities themselves directly, but the conversations and activity of the teams collaborating around them—and step in as they tip over into actualities.

Ceding a measure of control

The article points out that, taking guidance from possibilities arising throughout the ecosystem isn’t a matter of simply collecting information and then deciding what to do with it. Nor is it the same as reacting to one’s surroundings or seeking to anticipate potential futures through scenario planning or similar techniques. Rather, it requires ceding a measure of control to the ecosystem. Instead of assuming that all decisions should be made in the head, the corporate centre, leaders must be willing to push much of the decision-making down into the ecosystem, into the interactions between the organization and the suppliers, partners, and even clients it works with. In a complex environment, this gives organizations the advantage of leveraging nuanced contextual information—information that workers constantly assimilate in their day-to-day activities, but that becomes too rarefied to be optimally useful by the time it makes its way up to the head.

The article adds that an analogy from psychology is apt here. Researchers investigating cognition have made a surprising discovery: We don’t make decisions purely in our heads, but by interacting with the environment around us. Put another way, we act to decide rather than deciding to act. A canonical example is catching a baseball. Instead of calculating its trajectory and then running to where we estimate it will land, we continually adjust our velocity, watching the baseball all the while, working to create and the improve the options we have for catching the ball while avoiding anticipated and unanticipated obstacles. Through their actions, the player strives to keep multiple possibilities alive until one of them becomes so attractive that the player feels compelled to commit. Should they run behind or in front of second base? Should they dive to catch the ball before it hits the wall, try and get between the ball and the wall to catch it, or catch it on the rebound? Should they jump and catch the ball earlier to make it easier to throw it to home plate? All of these possibilities arise out of an ongoing feedback loop between ball, environment, and a player who acts to improve the available possibilities until one emerges that (they hope) delivers the result they want.

Following the same principle

The Deloitte article points out that engaging with possibilities in business follows the same principle. The head office’s strategic function sets the organization’s direction and determines the extended ecosystem’s overall shape, but the actions in the ecosystem’s trenches are what create and improve possibilities. A chance meeting between suppliers and a franchise owner might, for example, result in the (newly formed) team exploring the possibility of a burger of the week. As possibilities crystallize into actualities, as the burger of the week develops from an interesting idea into an obvious one to pursue as a business, the head office can become increasingly engaged to drive scale.

Strategy and execution are thus intertwined and interrelated, extending from within the organization to the ecosystem’s edge. In this way, decisions become dynamic, not static, moving from point-in-time determinations to a fluid system of actions, observations, and adjustments. Workers in the extended ecosystem act, discovering and developing possibilities. Sensemaking becomes a tool to feel the pulse of the ecosystem, to sense the vibe of the extended organization and discover possibilities as they emerge by finding the teams that are forming to collaborate around them. Leadership can then get out of the head office to engage directly with the more mature possibilities and the teams working on them. This enables leaders to better understand the challenges and opportunities a particular possibility represents, and to provide guidance and support until the idea is either valuable enough to apply the full weight of the firm, or else withers away.

It’s important to find the right balance between top-down direction and bottom-up emergence of opportunity.

The article adds that knowing when it’s better to leverage the heft of the institution and when to let the ecosystem guide lies largely in understanding which decisions are for the long and the short term. By nature, long-horizon choices are less frequent, based on broad trends, and deal with generalities. Shorter-horizon choices are more frequent and highly contextual, requiring rapid adjustments as the marketplace shifts. The distinction can be framed as the difference between generating and capturing value from the ecosystem and keeping the ecosystem itself healthy and productive. Short-term decisions pursue advantage by tapping into the ecosystem’s shifting potentials; long-term decisions aim to help the ecosystem thrive by placing bets, investing at scale, and managing and mitigating risks.

The principles in this article are elements that turnaround professionals can study and expand on to offer value to their clients and improve the profession. 

Phahlani Mkhombo is the MD of Genesis Corporate Solutions and is a Senior Business Rescue Practitioner.