Business management in an age of crises

Business management in an age of crises

Three ways in which businesses can adapt their models to working in an age of crises

The last few years have been tough for anyone who owns or manages a business. COVID-19 lockdowns have shut down entire industrial sectors worldwide, turning profitable businesses into loss-making ones, while a lot of smaller businesses went under entirely.

Many companies are now hoping for a return to some kind of normality. However, there are strong signs that this is not on the cards quite yet.  In fact, the world seems to have entered an age of accelerating, grand crises.

Before COVID, the climate crisis was already disrupting the world through increasing extreme weather events. Then, just as some countries declared their battle against COVID to be won, the invasion of Ukraine not only reshuffled global geopolitics, but also led to a dramatic increase in energy and food prices, having significant knock-on effects on a host of other sectors.

One day there may be a time after COVID, after the Ukraine war, and even after the climate crisis. However, a point of general stability is unlikely to occur any time soon as humanity continues to push environmental limits to their breaking point, risking further crises like disease, conflict, and natural disasters.

Businesses therefore need to be adaptive in how they operate: responding to current crises, being better prepared for future crises, and addressing their own role in generating these crises in the first place.

With that in mind, here are three types of business models that companies should start adopting now in order to ensure sustainable operations in this very challenging climate.

1.Be responsive to current crises

Business models need to be able to respond to crises at hand.  Such adaptability will naturally have a survival element, in which organisations do whatever is necessary to mitigate any negative effects on themselves.

This means aligning management practices with the ‘new normal’ after the crisis, instead of trying to revert to what was normal before.  Where appropriate, such models should also have a crisis-mitigation element, addressing the wider negative effects of the crisis at hand where they can.

For example, it appears that fossil fuel behemoths such as Shell and BP might be starting to do just that. Having long been under attack for knowingly contributing to the climate crisis and counteracting shifts to more sustainable energy systems, they appear to now be adapting to crisis forces. Such forces include, most notably, the global trend towards phasing out fossil-fuel vehicles. As such, these companies have begun to transform key aspects of their business, like repurposing their petrol station operations into electric vehicle charging infrastructure.

2.Be prepared for future difficulty

Businesses also need to move from stability-based business models to accepting that the business reality is now characterised by volatility, uncertainty, complexity, and ambiguity.

Value propositions encompass the benefits that a business offers—for example, to its customers, employees, and the community.  Building business models for this new world means establishing value propositions fit for the long run that can morph into all kinds of crisis scenarios. It also means being agile and quick to adjust.

One form this could take, for instance, is for a business to offer products and services that address timeless and fundamental needs like health, food, or security, rather than short-lived superficial market demands like those related to fast fashion or the latest technological fads.

A good example of such a business model is that of Chinese electronic goods corporation Haier. The company is explicitly tuned in to an ever-changing world, aiming to deliver “products that respond to the constantly changing needs of the modern home”. For instance, Haier responded to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.

Alongside this, Haier employs its unique “RenDanHeYi” (or 人单合一, which roughly translates to “one single person in unity”) way of working. Haier is essentially a collective of smaller, semi-autonomous companies, in this way giving both individual freedom and collective responsibility to self-organised micro-entrepreneurs.

This makes Haier a fluid, agile, and resilient organisation. By operating as a network of micro-enterprises, each of which works closely with customers to respond to their changing needs and situations, the business can evolve more easily as each new crisis plays out.

Because of these features in their business model, Haier has done exceptionally well, both during and after the COVID crisis.

3.Help prevent tomorrow’s crises

Finally, businesses can better set themselves up for the future by adopting models that specifically mitigate or even prevent future crises.

While COVID, the Ukraine crisis, and climate change are still ongoing problems, many business models have been geared towards keeping other things from becoming the next grand crisis. For instance, some companies are adopting business models that promote reconciliation and peace, with view to preventing disruptive future armed conflict.

Examples range from former Colombian guerrilla group members building adventure travel businesses that show the previously hidden side of the conflict, to coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration.

Conclusion

Managing businesses in an age of accelerating crises is challenging. However, transforming business models and managerial practices can go a long way in both making current and future crises manageable, and possibly even mitigating future crises.

This article is republished from The Conversation under a Creative Commons Attribution-NoDerivatives (version 4.0 International) license.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).