What do you do when revolutionary change hits your industry? Plenty of businesses are facing it: banking, logistics, hotels, news media and retail; perhaps also healthcare, consumer goods, telcos and education. We have spoken to businesses talking of eliminating 80% of roles in functions with more than 50,000 people. But the slash and burn approach won’t work. It’s not sustainable, even for the most stable business model.
How do you deal with change on such a scale? Could an organisation’s leaders even turn the crisis into an economic opportunity? In this blog post I look critically at four strategic responses to revolutionary change.
- The ‘Skunk Works’ strategy
Set up an international arm with freedom to experiment (ING Direct, set up by ING, the Dutch bank, is an example) or set up a skunk works with a team of 100 IT professionals given a specific mission (‘replicate our business’). The challenge is, once the team succeeds, how you re-integrate the new operating model into the rest of the business.
- The modular strategy
Fix functions one by one, usually starting with marketing, sales, logistics, then arcing back through the core corporate functions. Risk? Modular change may be disjointed and slow. Example sectors trying this: oil majors, defence industries – well established businesses with medium entry barriers.
- The recycling strategy
Who are the people in business who have core competencies to be retrained and work in new areas? How do you identify them quickly and retrain them at scale? Example sectors trying this: government departments, healthcare systems – strong entry barriers, low competitive pressure.
- The ‘many acorns’ strategy
Can the organisation liberate its people to create new opportunities within the boundaries of its core competencies? Can it support and benefit from the expertise and energy it has already hired and trained? Example sectors: financial services, media, logistics – strong reserves, heavy redundancy costs, rapid digital change.
More about the acorns: the economic opportunity
People leaving large organisations due to redundancies are often highly skilled: during their employment they were screened, recruited, trained, coached and promoted. What could the organisation do to help them? Could it provide physical space, some seed capital and a continuing network to enable new ventures?
Organisations have the opportunity to step up to the outplacement challenge. Some quick numbers: say you’re heading transformation of a large German Bank and you have to cut back 50,000 positions at a cost of €2.5bn (average €50k package each) how many of them could:
- Set up their own Financial Services business
- Be re-trained
- Be re-employed in another part of the bank
- Be placed in another Financial Services company
- A bank that employs 200,000 people today might become a financial services start up factory of 1000 new companies, part-owned by the old shareholders plus a lean version of its old self, at 50,000 people.
- A retailer with a great brand and wonderful employees but declining in-store footfall might branch out into other areas where its brand and its employees’ skills in personal engagement are critical.
- A hotel operator might consider providing its expertise in logistics, cleaning, maintenance and customer experience to Airbnb hosts, private landlords, and even private residents, expanding into the real estate and homecare space.
Revolutionary change is worth talking about because it will soon be a reality for many organisations, but no good model of how to respond yet exists. Consultants have strategies for the 10,000 who stay, but not the 50,000 who do not. I believe that a whole range of strategies for response are possible and they will differ by industry, regulatory environment and company situation. Some ideas are outlined above, but as we work with companies to develop them, I’m sure that other and better ones will emerge.
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