Article by: Viv Oates: Founder: HIA! Digital Network

Every day we are confronted by challenging economic conditions in South Africa and around the world. Countless efforts are underway to find solutions to the economic devastation that has been compounded by the COVID-19 pandemic. But, in South Africa, the shallow pockets of the fiscus means that relief measures are insufficient, while social and business casualties are mounting.

Does the bitter pill of our harsh realities make it unrealistic to expect anything positive to emerge from this crisis? I do not think so. I believe that we have a unique opportunity to rethink, reinvent and rebuild a much more robust future. To do this, though, means we must learn from the current situation (hindsight), develop an appropriate response, implement the right actions with a shared purpose and commitment (foresight and insight) and introduce sound review principles (oversight).

According to Darwin’s “Origin of Species”, it is not the most intellectual or strongest of the species that survives, but rather the one that is best able to adapt and adjust to the changing environment in which it finds itself.

Rethink

The COVID-19 crisis has been a great equalizer. Everyone across the globe is affected without favour. It has forced us to rethink many of the fundamental principles upon which our societies and organisations are built. This strange period has caused us to ponder greater existential concepts, and for many individuals and organisations, it has brought the need for a re-evaluation of purpose and moral outlook sharply into focus.

If an organisation is not clear about its purpose and moral compass, it makes it difficult to stay the course when social, environmental and economic pressures are severe. This is even more relevant in the fast-changing world that we find ourselves in today. This lack of clarity may even threaten existence. A clear purpose, underpinned by shared values, provides the ‘true north’ needed to navigate the rough waters ahead. Purpose gives us meaning – why we choose to work together – and meaning directs our behaviour. It is “the statement of a company’s moral response to its broadly defined responsibilities, not an amoral plan for exploiting commercial opportunity”[1]. Ultimately, I believe that organisations with a clear purpose and strong values are able to make better decisions during difficult times than those that are not.

I asked seasoned CEO and Board member Philip Hourquebie for his view. “Management and Boards must provide direction and purpose to their organisations that is based on a sound ethical culture. This must be socially and environmentally responsible, and stand up to scrutiny by all stakeholders, including shareholders,” says Hourquebie.

These same sentiments are found in the King IV Report on Corporate Governance ^TM for South Africa 2016, as it addresses effective corporate governance through ethical leadership, attitude, mindset and behaviour. While these concepts are not new, I believe that for many leaders, the ‘penny has only recently dropped’. The consequences of the economic catastrophe have brought the reality home – that principled and purposeful decision making is the only way forward. The message from the market is clear: companies that do not evolve and adapt to the ever-changing environment will not survive in the longer term.

Thomas Friedman’s book “Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations” is a manifesto on coping with our changing planet. He refers to three powerful forces — technology, globalisation, and climate change — that are accelerating exponentially — and “one of the hardest things for the human mind to grasp is the power of an exponential,” says the columnist for the New York Times. “We’re in the middle of three climate changes at once. We’re in the middle of a change in the climate of the climate, we’re in the middle of the change of the climate of globalisation, and we’re in the middle of a change in the climate in technology.”

I believe that we can now add a fourth force – that of the climate of pandemics.

A consequence of the COVID-19 pandemic is that social contracts are being rewritten to be more inclusive and sustainable, compelling businesses to take another look at how they create long-term value[2]. With stakeholders becoming more vocal about their expectations of organisations, we have recently seen a renewed appreciation for the impact of climate change and the need for community support and meaningful workplace diversity and inclusion of all generations, races, genders and sexual orientation. We have seen exponential growth and reliance on technology and the impact this has had on organisations and society. And, we are seeing flaws in leadership thinking being openly challenged, as stakeholders reject those who refuse to acknowledge fundamental twenty first century human principles, mutual dependencies, and impact on our ecosystems.

Recently we have seen the power of consumer opinion on major brands. On the heels of the surge in activity of the Black Lives Matter movement, Pepsico removed one of its major brands with overtly racist origins, Aunt Jemima. The extent of public shaming of this obvious failure motivated the company to act. This example highlights:

• the importance of stakeholder activism to hold management to account;
• the responsibility of management to be more considerate towards stakeholders of the impact of their decisions; and
• the role of leaders in keeping the organisation true to its purpose and values.

To support purpose, values must resonate on a global scale. For example, if your organisation claims to live the value of respect, you need to test whether that really does extend to all aspects of the business, society and the environment in which you operate. You may be asked to demonstrate your commitment to your values as you will be held to account by your stakeholders.

Now is a good time to think very deeply about the purpose and values of the organisation and to extend the thinking beyond the obvious return on shareholder investment to broader stakeholder groups of the business and to answer the question: why do we deserve to be in business at all, and what value, beyond shareholder returns, do we provide? What gives us our ‘licence to operate’?

Reinvent

A renewed purpose must be reflected in the organisation’s business strategy. And every element of the business strategy must be tested against the purpose. Albert Einstein is reputed to have said: “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions.” Einstein believed the quality of the solution you generate is in direct proportion to your ability to identify the problem you hope to solve. Framing the problem statement in the right way makes a big difference in the ultimate outcome.

If it were possible to reinvent your organisation, which parts of your heritage would you hold onto, which parts do you expand and which would you discard? Which parts of your strategy are at risk of making your business irrelevant, and do you know what must be done before it is too late, and your stakeholders force your hand? Are you in touch with what your customers want and need from your organisation, and is your business geared to meet that need?

Reinvention requires innovation. It means deliberately choosing to take a fresh perspective and undertaking a thorough review of all aspects of the business to identify new markets, develop new products and services and challenge the current ways of doing things. This is a major exercise, but one that can potentially deliver significant sustainable benefits if approached with an innovative mindset and in a systematic way.

I have seen several nicely worded strategies that do not resonate with the purpose, are not easily articulated to stakeholders, and do not recognise the ever-changing environment we operate in today.

Strategies are often made up of several pillars – each pillar setting out objectives, goals, key performance indicators, targets, and potential outcomes. From a reinvention point of view, I am suggesting that each pillar should be challenged to determine relevance as a starting point and then each objective, goal, KPI, target and outcome should be reviewed to ensure that ‘old’ thinking has not taken root and stifled new ideas, which are more responsive to the future.

The following diagram[3] is one way to view the overall business landscape and may help in developing some structure to the thought process:

By considering each component in the landscape above, we are able to challenge the status quo and develop a range of new ideas for consideration. 

Some trends that are driving investment decisions in Europe[2] include the accelerated adoption of technology, a reconfiguration of supply chains and a refocus on sustainability and climate change.Ideally, purpose should be at the centre of these decisions. Entirely new possibilities and opportunities await organisations that can successfully plug into the new economy in a responsible and sustainable manner. Turning adversity to advantage will be a key theme going forward for those who see opportunity and have the willingness and means to proceed.

Rebuild

As with any aftermath, the challenge to move forward will be in the rebuilding. Key decisions need to be made now in order to protect the organisation and secure it against future shocks. Friedman asked himself what the world most needs to survive in the face of rapid change. It needs two things: “You want resilience. You need to be able to take a blow, because you don’t know when the disruption is going to come, but there will be disruptions. At the same time, you want propulsion. You want to be able to move ahead.” What this means is that the organisation needs to build resilience and propulsion at the same time in order to survive and thrive. It needs to be able to handle reasonable exposure to unforeseen disruptive events, but at the same time it needs to be sufficiently agile to re-emerge victoriously after the disruption.

In the next few months, we can expect to see an increase in business failures and closures as organisations challenge and refocus attention on areas to achieve future success. This will provide opportunities for others and potentially result in a much more efficient allocation of capital and resources in the longer run. Ideally, purpose should be at the centre of these decisions.

As the rebuilding gains momentum, it is essential to consider how to safeguard against corporate fragility to weather future disruptions. These considerations should not be bolted on as an afterthought but be an ambient part of every aspect of your business.

Let us use this experience wisely to not only rethink, but also reinvent and rebuild our organisations to fortify against unplanned events. To do so requires adaptive leadership, foresight, fortitude, innovative thinking and collaborative actions that are inclusive across value chains. Importantly, this is a great opportunity for organisations to strengthen their purpose and values and to drive a new commitment towards achieving a more inclusive culture.

Hourquebie sums it up well when he says: “Organisations that do not include innovation as part of their core purpose and keep humanity and the broader environment at the centre of their focus, run the risk of quickly becoming redundant and irrelevant.”

But, words without action don’t matter, and actions without purpose matter even less. If survival of the fittest depends on our ability to adapt to change, as leaders it is our responsibility to help our organisations and people navigate uncertainty. We must make purpose-driven, and often difficult, choices demanded by ethical leadership. The winners will be those who get this right.

[1] Harvard Business Review, “Beyond Strategy to Purpose” (1994)

[2] EY Megatrends Report 2020

[3] Copyright HIA! Digital Network, 2020