- Resilient firms have set themselves apart from the crowd.
- The gap between resilient firms and the rest widened significantly.
- Resilient firms were clear about their strategy and had a business model to achieve that resilience. These were already sound and in place before Covid. They just needed to adapt to the changing environment and changing client needs.
- Better start now, or you’ll never catch up. Innovation happens five times faster than in the past. Don’t wait!
- Research from Carlyle Kingswood – Executive Search. Professional Services. Global.
What can you do about it? (At the end).
The Benefits for Some
The global economy is continuously affected by multiple sources of disruption, with only one of them being the COVID-19 pandemic. Some firms have proven more resilient against these forces than others. These firms have quickly adapted their strategies to take advantage of both the challenges and opportunities presented. We define resilience as the extent to which an organisation’s strategy, business model, and competitive position are future-proof and have the capability platform to handle disruption.
The pandemic has led to a rapid acceleration of pop trends in place before the crisis. The gap between the best and worst-performing firms is widening, as firms with sustainable business models are pulling away from the pack. In contrast, those that have fallen behind the more resilient players must take swift, bold action to make up lost ground.
In most cases, when a crisis appears on the horizon, the initial management reaction is being defensive, followed by patching up. However, this methodology and mindset rarely work.
The crisis has exposed weaknesses in firms’ strategic resilience, expected to persist beyond the situation. With more projects in the future, emerging new business models will only be able to endure over the long term if they learn how to adapt to disruptive situations.
What differentiates successful firms from firms that stagnate or struggle?
Non-fragile organisations rely primarily on their business model, systems and processes or powerful brands to survive amid widespread economic shocks. The only way is with differentiated offerings and a highly-skilled workforce—the right people in the right roles doing the right things.
All of this confirms the tried and true maxim: In times of significant disruption, there are also great opportunities. The assumptions on which the entire organisation was built and operated pre-pandemic are thrown out, often shaking the firm’s very foundation.
The gap is widening, and as the pace of change accelerates, the fastest and boldest movers are likely to separate themselves from the pack. Many firms manage to respond to challenges with unprecedented speed, doing in days or weeks what would have taken them multiple months in the past.
Expect these innovations to persist post-pandemic with even more projects to come. The widening gap means these firms are ready for the future.
Key components of Success
The first steps should always be a thorough diagnosis and analysis. Accept that achieving goals and rapid growth requires a severe rethinking of business theory is a must-have.
Business model innovation was by far the most important strategic lever in addressing the crisis. Innovating the service portfolio to meet clients’ changing needs in delivering their services is an adequate response.
The development of new capabilities focused on:
- New digital experiences.
- New partnerships within and outside the profession.
- Faster services and development through speedier iteration.
- Changes in their ability to deliver these new needs and new services.
Most innovations focused on the client-facing parts of the business, including service models and client experience improvements. Cost and headcount reductions are only made by the firms most affected by the crisis. While many firms initiate innovation through investment to develop their core business, others use mergers and acquisitions to increase resources to gain the upper hand.
Creating Your Strategic Future
Strategy development is about adapting to an emerging future. The task of organisational leaders is to build substantial firms in attractive areas and industries. They must choose the best business model to deliver their services to clients by meeting their needs. In addition, leaders must develop organisational capabilities to support these quick changes, building on the most highly skilled and flexible talents.
A business model describes the rationale of how an organisation creates, delivers, and captures value.
Today’s countless innovative business models are emerging. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves. With a breakthrough business model, you may even become a shaper and transformer of this environment and set new standards for your industry.
The capability platform that underpins the business model or business model includes the culture, competencies, and people and the structure, systems, and processes through which the organisation is managed. The organisation capabilities facilitate or limit the strategies that can be pursued and ultimately determine success.
For a strategy to be successful, there must be a clear and unbiased view of the emerging future. Without a developed approach to shape this vision, the opportunity for businesses to catch up is extinguished. Your strategic planning process must be flexible enough to deal with high uncertainty.
Three ways you can adapt it to become more strategically resilient.
- Set bold aspirations: explore new business opportunities and reset the long-term strategy now. Previous downturns had shown that the firms that moved early and invested heavily before the recovery were able to increase their profits.
- Create a hedged portfolio with big moves: be they portfolio-relevant, such as mergers and acquisitions, capital expenditures, resource reallocations, or performance-oriented, such as improvements in service differentiation. Such actions are especially effective when your competitors are often paralysed by uncertainty.
- Adapt your strategy dynamically.
Finally, assumptions about core competencies define where an organisation must excel to maintain leadership. The assumptions about the environment client’s new needs and the necessary core competencies must fit the reality!
- Strategic positioning must be known and understood throughout the organisation. The more successful a business becomes, the more it tends to take its theory for granted, and it becomes sloppy.
- Strategic development is a discipline. Ignore it at your peril.
- Test it constantly. It is not inscribed on tablets of stone, and your strategy is somewhat similar to a hypothesis about things that are always in flux.
- The first signs of fundamental change rarely show up in your clients. Changing client needs are very likely to show up first in the targeted prospects. Surveying potential target non-clients of changing client needs. You will be better placed to attract new clients.
- What are your competitors doing?
Adjust your strategy dynamically, as a mere annual strategic planning process is no longer flexible and quick enough.
For example, some firms have moved to monthly strategy meetings. Take time each month to work on the business as a senior management group – on the firm’s future.
Research Findings by Carlyle Kingswood – Executive Search. Professional Services. Globally.
- Profitability: In most cases, it can be assumed that profitability has declined. There are a few examples where the point gain continued the trend of annual increase for resilient firms.
- Changes in the practice area: Some first-tier firms are pulling back from volume business. One example is insurance claims work – a challenge with rates.
- Perceived new practice areas for the future: Increase in cyber matters (e.g., insurance) – this was the case before Covid; Continued interest in family/estate planning among commercial law firms;
- Cash flow during Covid; In the context of lateral partner recruitment, there is a greater emphasis on revenue flow from the outset; Partners who require a transition period are less attractive than in the past;
- Staffing issues in the future; What to do with WFH/WFO moving forward? Law firms seem to be moving towards four days in the office; many law firms have mandated that everyone be back in the office full time.
- How are lawyers trained? – Do they use the traditional master & servant approach/concept where both parties have to be in the office at each other’s firm, or do you have tech-based training that happens remotely.
Creating a crisis-proof strategy and being visionary is hard work. It doesn’t mean being clever, instead being conscientious, and that’s what senior leaders are paid to do.
The time to act is now. In a few years, I believe it will be too late.
To ensure your firm is strategically resilient, whatever the future holds, start by establishing dynamic planning processes that allow you to tap into new opportunities or differentiators needed to stay ahead while being flexible enough to change direction when needed.
What to do
- It’s changing, so adjust or get left behind.
- Do substantive diagnosis and analysis based on research and investigation.
- Just researching your existing clients is not enough. It is essential to research targeted non-clients in your identified market. This will give you a much more comprehensive view of the needs of clients.
- Continually reviewing all markets’ client offerings, competitors’ offerings and evaluating your capabilities is an essential ongoing discipline.
- Make sure the organisation clearly understands and is engaged in the firm’s strategy.
- Don’t make unexplored assumptions about client needs, the market, the optimal business model, and the organisation’s capabilitie
- Because of the acceleration of change, review current assumptions at least quarterly.
You’re not looking for a brilliant idea or solution. Instead, you have to work on your strategy continuously and iteratively.
Question for you.
Why do people plan their vacations but not the future strategic direction of the firm?
“Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.” – Anonymous
“There is nothing quite so useless as doing with great efficiency something that should not be done at all. – Anonymous
“long-range planning does not deal with future decisions, but with the future of present decisions.” – Anonymous.