Business Crisis. “Crises, or situations of chaos, are simply opportunities that lead to change and to growth. A change leader sees change as an opportunity and not as a crisis”. ~Peter Drucker
Organizations that exist on the edge of chaos are forced to find new and creative ways to compete and stay ahead. Organizations are re-inventing themselfs not just for survival but also to prosper in an otherwise dismal market. These organizations are embracing the element of chaos due to crisis, so that self-organization and re-invention can occur.
Self-organization, as opposed to natural or social selection, is a dynamic change within the organization where critical changes are made by recalculating, re-inventing and modifying its structure in order to adapt, survive, develop, and grow. Organizations existing on the edge of chaos due to crisis can, in fact, flourish, develop, and grow…
In the article “Chaos Theory: The Uncontrollable Factor in the Development of Management Systems” by Heidi Mina writes: “chaos theory” or simply “chaos” could be considered a core management theory for the 21st century. According to McNamara, “chaos theory recognizes that events are rarely controlled”. When management systems grow in complexity, they become more susceptible to cataclysmic events. One way to plan for such chaos is through “contingency management”.
Contingency management is defined as having an alternative plan to fall back on when chaos strikes, which allows for critical internal processes to continue and meet the desired outcome. However, contingency management is often overlooked, and until management recognizes its importance it could have a catastrophic impact on the business. According to Bertelsen & Koskela, an organization can manage chaos but it requires; good management team, contingency planning, tracking critical factors, and issuing early warnings…
In the article “Can Your Company Survive and Even Prosper in Chaotic Times?” by Axel Chaldecott & Alan Moore write: The corporate world is dividing into two sections; insurgents and incumbents. In the book ‘Blown to Bits’ by Evans & Wurster they write: “In the vast majority of traditional competitive situations, the ‘incumbents’ has the advantage. But when the economics of information are shifting, ‘insurgents’ are advantaged precisely by their lack of legacy systems, legacy assets and a legacy mindset. Having nothing to lose becomes an advantage.”
Evans & Wurster write: “the glue that holds today’s value chains and supply chains together is melting; even the most stable of industries, the most focused of business models, and the strongest of brands can be ‘blown to bits’ by new information technology.” Your competitive advantage is up for grabs. The internet and other digital technologies are changing everything… Corporations are built on the assumption of continuity; their focus is on operations.
Capital markets are built on the assumption of discontinuity; their focus is on creation and destruction? Unless companies open up their decision-making processes, relax conventional notions of control, and change at the pace and scale of the market, their performances will be drawn into an entropic slide to mediocrity.
Most companies are fighting over the spoils of existing marketplaces, when they should instead be seeking to create new ones. The ‘surplus society’ has a surplus of similar companies, employing similar people, with similar educational backgrounds, coming up with similar ideas, producing similar things, with similar prices and similar quality. These are chaotic times requiring businesses to rethink their existence, innovate, and get ‘out-of-the box’…
“…crisis is a perception or experience of an event or situation as an intolerable difficulty that exceeds the business’ current resources and coping mechanisms.” ~James and Gilliland
In the book “Funky Business” by Kjell Nordstrom and Jonas Ridderstrole write: “To grow, companies need to break out of a vicious cycle of competitive benchmarking, imitation and pursuit … Aiming to beat the competition has the opposite effect to the one intended. It keeps companies focused on the competition. When asked to build competitive advantage, managers typically rate themselves against competitors, assess what they do and try to do it better.”
The central question is whether companies, be they on-line, “clicks and mortar” or just ‘bricks and mortar’ can continually ‘re-imagine’ themselves to keep pace with technical convergence, and the consequent change in customer behavior. As Gary Hamel says, “Customers become harder to find and more difficult to keep”. The crisis is here; unfortunately, many businesses just don’t know it...
In the article “What Is The Key To Survival In A Constantly Changing Environment?” by DK Matai writes: Look beyond competition and market share to more fundamental questions of survival and sustainability in a turbulent and continuously changing environment. We are in a time of extreme turbulence accompanied by rapid evolutionary change, which means ‘understanding the role and responsibility of the organization in the context of the entire environment is absolutely critical’.
The key to success in dealing with crisis is change — at an individual and at an organizational level. It is normal to resist change: to try bargaining and negotiating things back to the way they were; and to feel frustrated when the change inevitably continues. It is equally important to understand that these feelings are within the leader as well as all team members and must be dealt with, if the organization is to surivive and grow as a cohesive group. In order to survive in a globalized society that is constantly changing, we need to see crisis for what it is: the natural order of things…
In the article “The Four Myths of Crisis Management” by Dr. Billie Blair writes: Management in the modern organization, of necessity, requires managers that are fleet-of-feet and able to manage ever-changing conditions. When the term “crisis management” was coined forty years ago, organizations were still rather staid and unchanging entities. Consequently, it was deemed an unfavorable sign if an organization of that time was regularly in a state of crisis, or, change.
And, the management of that organization was viewed as needing to exert more influence to obtain control of events at the firm. All business managers have been warned against operating in an environment of crisis management. To be a more effective manager and leader, they need to know that there are prevalent beliefs about crisis management that need to be understood and discounted.
To examine beliefs that have been assumed for many years, I’ve described these prevailing ideas as the myths of crisis management as follows: Crisis Management Myth #1, experiencing frequent change in organizations, (or “crises”) is a bad thing. On the contrary, an organization in today’s business climate that is not in a constant state of fluctuation, change, and growth will not be able to survive. Organizations that understand the nature of change and its usefulness are those that do well. These organizations know that:
- change is inevitable, as nothing is certain, except change itself.
- changes that are faced with courage and confidence are readily managed.
- change brings a certain amount of ambiguity and turbulence.
- change brings company cohesiveness, and better alignment with customers and community.
Crisis Management Myth #2 – Inherent in the beliefs about crisis management and its consequences, is the assumption that managers should have full control over all events in the organization. Fifty years ago, that might have been an accurate depiction of appropriate corporate management. Today, however, events are rarely “controlled,” but are, instead, managed or orchestrated for best effect. And, only in the rarest of organizations will any one single individual have the ability to fully control all of the events and “goings-on” in the organization.
Crisis Management Myth #3 is a corollary to Myth #2: The “crisis manager” has no focus, because there is no control when managing in a state of crisis. The simple remedy for lack of focus is to engage in a sound strategic planning process. The sole purpose of the strategic plan is to serve as the focus and the ballast for the organization when faced with serious questions and challenges. For an organization that has developed a solid strategic plan, there should be no question of straying from the central focus.
Crisis Management Myth #4 goes like this: When you’re dealing with crises, you’re not dealing with business. In today’s business world, in fact, crisis is a part of business. There are many people in the management ranks who are “change-aversive” and do not relish change. For these individuals to function effectively they must either, be coached to understand the importance that processes of change can bring to an organization, or they may not be the right person for the business.
“Any business that does not have some measure of risk assessment and risk management embedded in its operational structure and culture is most likely a static and non-innovative enterprise. It has no true situational awareness and thus, in the long term, will have no long term — because it will have neither means for preventing and mitigating crises nor for identifying and optimizing opportunities.” ~Tom Ridge