Article by Bill Fonvielle
Words matter! We use words to understand and ultimately control our world. Many companies are looking to the expertise of strategists and forecasters to help them navigate the post-COVID waters ahead. These experts use two words that figure prominently in their vocabulary and thinking: “evolution” and “trend.”
However, to better understand what is happening in today’s environment, those two key words now need to share a stage with the field of physics and the mouthful phrase
“discontinuous phase shift” (DPS).
In the world of science, DPS describes systems with alternative stable states that shift from one state to another as certain parameters cross a threshold. In everyday life, it describes what happens to water at 0˚C (32˚F) where it changes from liquid to solid state and again at 100˚C (212˚F) where it changes from liquid to a gas. Each phase instantly changes to another at a critical threshold or tipping point.
In the world of business, a DPS might be described as a sudden shift in direction or circumstance, often triggered by an occurrence of some sort and with wide-ranging, usually permanent effects.
While the phase change event might be broadly predictable (with hindsight, we always say that of course!) the exact timing is usually not predictable and the triggering event may not even arise in any directly related field, meaning the DPS can often come as an unanticipated surprise to many.
The immediate outcome is almost always a state of crisis for some segments of a population, but also presents opportunities for others.
With recent world-wide events, the concept of DPS may suddenly seem all too familiar! So how does this understanding help us?
Learning from past examples of DPS
DPS’s tend to fall into several categories which are useful to recognise and understand:
The Dutch Tulip Bulb Market Bubble during the early 17th century was the first widely recognised speculative bubble. Investor speculation over years drove the perceived value of tulip bulbs to extremes. In February 1637, tulip traders suddenly could no longer find buyers willing to pay the grossly inflated prices. The bubble burst. Prices plummeted and the market collapsed. Many tulip holders were instantly bankrupt and Dutch commerce suffered a severe shock.
The Dot-com bubble is a more recent example that was caused by excessive stock market speculation akin to tulip mania. The bubble burst with calamitous results for many technology firms.
For millennia, innovation of one sort or another has been creating disruption. In today’s world, it refers to a new product or technology that significantly alters how a market or industry functions. This creates a crisis for those that cannot or are unwilling to adapt to the new order. Examples abound including the likes of Amazon, Apple, and Uber all of which profoundly changed the global business landscape and all of which continue to innovate.
Worth noting is the fact that for all the talk about how Digital Transformation is generating major changes in how companies are doing business, it is more like a trend undergoing evolutionary change than it is signalling a phase change.
Like Digital Transformation, climate change is an evolutionary trend rather than a DPS, gathering pace and voice, increasingly spawning massive changes in day-to-day life and giving birth to entire new industries.
However, Covid-19 illustrates a true DPS. It began somewhere in China likely with a single infected person, and in a very short time mushroomed into a global pandemic. The changes it is causing to our daily lives, economies, and business processes are massive and unprecedented in scale. The strain on global economies is not itself a DPS, but an outcome of one.
The murder of George Floyd has sparked a DPS, especially in the U.S. but also elsewhere in the world. Local governments and businesses are promising and, in some cases, delivering sea changes in how members of minority groups are treated by society. Numerous instances of police misconduct and racial injustice have been publicised for years in many countries, but the George Floyd incident tipped the scales to create a DPS.
Brexit will almost certainly be a DPS, beginning with the vote in June 2016. However, it is a work in progress with an unknown outcome. Strong, disruptive leaders such as Boris Johnson and Donald Trump may or may not be exemplars of DPS. Time will tell.
Implications and coping strategies
What is distinctive about the age in which we find ourselves is the nearly simultaneous emergence of these DPS’s and global trends leading to crisis upon crisis for most businesses.
With connectivity, communications and economies being so closely linked in the modern world – this pattern of layered and seemingly unending stream of crises is likely to continue.
So, if we feel engulfed by turmoil, how do we not only survive but thrive?
Take a leaf out of Coveys’ Circle of Concern and focus on things you can control. Whilst we may not be able to anticipate or influence factors that create a major disruption, we can all focus on becoming better at what is within our control. This is what will make us all more adaptable and fitter to survive and thrive despite changing times.
We believe that companies should undertake two sets of activities to become and remain organizationally fit.
The first is to become crisis masters. If being in a state of crisis is the new normal, the key to basic survival is to have installed in the fabric of the organisation a set of tools, policies, and processes specifically dedicated to handling crisis. We looked to the military, an institution steeped in addressing, overcoming and managing crisis and stress, for a method called Mission Command. This is a learnable and repeatable method that creates fast re-alignment and execution whilst building resilience, resourcefulness, and resolute leadership into your organisational system.
The second activity speaks to thriving and finding opportunity even in the midst of chaos. The key is to anchor yourself to your customers. This requires understanding your customers’ expectations and from that, creating ideal customer experiences that both encompass and capitalise on opportunities.
Normally, customer needs are somewhat constant, and expectations are relatively stable over a 1 – 2-year period. As we have seen recently, while customers’ fundamental needs remain, expectations can change dramatically during a DPS. Even in stable conditions, gathering and addressing customer expectations is an area untapped by many companies, but in times of crisis it becomes a crucial key to unlocking future success.
Reliance on Customer satisfaction and Net Promoter Scores (NPS) is unlikely to signal these shifts or diagnose what you need to do to adapt because they look to the past while everything is changing. However, knowing how expectations are also changing can be a reliable guide to the future, helping you to keep one step ahead of competitors and assuring more sustainable success.
Whatever you are choosing to do in these changing times, remember to:
- Take a step back, and get really curious about what and how you do what you do
- Resist the urge to simply snap-back to old practices – use the opportunity to re-invent yourself
- Prioritise – don’t feel compelled to try and change everything at once or you will end up feeling overwhelmed
- Create the future with the help of the people who make your business a success – your customers, your employees, and your suppliers.
Focus on building ‘business as usual’ practices that drive constant organisational learning and adaptation.
If you would like to know more about Mission Command or unlocking Customer Expectations, then click here to book a short call with one of our experts