Explore or exploit? How your organization can strike a balance between new opportunities post-COVID-19
Continuously anticipating and adjusting to deep, decisive trends that can permanently impair the earning power of a business is not easy, but it is the key to strategic resilience.
Professor Howard Yu, author of the bestselling book “LEAP: How to Thrive in a World Where Everything Can Be Copied”, took a deep dive into this resilience in the webinar LEAP: thriving in a post-crisis world. Together with his research team at the Center for Future Readiness, he investigated how exactly organizations have managed to increase autonomy without sinking into chaos, how they pursued new business opportunities when resources were scarce and, ultimately, how they successfully pivoted towards the future.
Knowing who and what should leap
According to Yu, certain types of companies thrive both during and after a crisis. This includes those that are prepared for the next seismic risk – in other words, seeing what’s ahead so they can leverage the shift in their organization’s own favor.
During COVID-19, companies that engaged consumers with both marketing and direct to consumer experiences, and also had an advanced digital strategy already in place, did very well – this includes luxury group LVMH and fashion brands Nike and Burberry.
“Scaling up investments with focus and commitment – exploring and then exploiting opportunities – is part and parcel of the LEAP strategy,” said Yu. “Today companies are looking at omnichannel, personalized experiences and customized offerings as the next big thing.”
Other industries also have champions ready to leap by committing to a future-focus. In the automotive industry, carmakers are racing to shift away from the internal combustion engine towards electric and hybrid vehicles, or driverless cars that run on algorithms.
“What you are seeing here is a leap in a completely different sector,” said Yu. “Companies like Tesla that are already deep into these new trends have high valuations – others are now moving quickly and setting ambitious goals. Volvo aims to turn completely electric by 2030, for example.”
In the case of credit card companies, accepting the concept of “frenemies” was the key success factor. Some payment companies that move money like Visa and Mastercard understood that sometimes they needed to compete (enemies) while at other times they needed to work together (friends). Others, like American Express, were not so lucky.
“This epic battle towards leaping was all down to becoming digital first,” said Yu. “It was the hold up for AMEX, which couldn’t build new competencies ahead of time, unlike its competitors.”
Knowing when and where to leap
Yu concluded with four principles to help executives rethink their organization’s priorities: look beyond peer group benchmarking; allocate resource allocation to experimentation; articulate and measure new Key Performance Indicators (KPIs); and foreclose options based on evidence in order to focus.
“Ask yourself if your organization’s core profit is beginning to stagnate,” suggested Yu. “If your customer has other choices, your offering may be under risk of getting commoditized.”
The vital step here is determining the urgency with which your organization will be required to leap. It must avoid getting stuck in early exploration and be able to move to focused exploitation.
These bottlenecks and more can be explored further with Yu’s Center for Future Readiness, which can help organizations in every industry navigate a reality of constant disruption. It publishes the LEAP Readiness Index – a composite of proxies that are proven by management research to predict an organization’s adaptability quotient, such as revenue generation or research and development spending. The ranking gauges within a given sector which companies are ready for a bold new frontier.
If you are interested in learning more about preparing for an uncertain future, we invite you to discover the IMD program “Advanced Management Program: chart your new path ahead”, beginning 21 April, and Business Growth Strategies (BGS), a fully virtual offering beginning 27 September.
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