A Leadership Mindset for Uncertain Times
Leaders are facing unprecedented uncertainty. But history clearly shows that no matter how stark the crisis, there are always opportunities to innovate and grow.
History clearly shows there are always opportunities to innovate and grow, no matter how stark the crisis.
asked Innosight co-founder and Harvard BusiPEOPLE OFTEN ness School Professor Clayton Christensen to give his opinion about various industry developments. No matter what industry, no matter what context, he would always start by saying, “I don’t have an opinion. Theories have opinions.”
The word theory, used in this general sense, can be considered a catch-all term that covers frameworks, models and tools. Christensen’s point was that just like putting on the right lenses can help you to see clearly, the right mental model can simplify and bring clarity to often confusing situations.
When confronted with the vast, chaotic maelstrom of change caused by the COVID- 19 pandemic, we have found ourselves returning to first principles, looking to the core frameworks, models and tools on which we base our fieldwork helping forward-thinking organizations to navigate disruptive change. In this article we will present four lenses and the ten questions they suggest executives consider as they work through today’s uncertainty. Consider this a crib sheet that will help you and your leadership team to both zoom-out to big-picture implications and zoom-in to near-term threats and opportunities.
LENS 1: FUTURE-BACK STRATEGY
While you have no choice but to live life ‘present-forward’, in the face of uncertainty you should develop strategy ‘future-back’. Otherwise, you can end up unintentionally defaulting to your past playbook even if you know that competing in tomorrow’s world requires doing something materially different.
Future-back strategy starts by picking a point of time in the future beyond your traditional planning horizon. In normal times, for most organizations, that might be five to ten years; in abnormal times, where planning horizons shorten, it might be only 12 months. You then look at underlying trends and come to a consensus about what the world is going to look like at that future date. While your picture of the future won’t be perfectly precise, you can paint a kind of impressionist painting based on explicit assumptions that allows your leadership team to strategize within a shared frame of reference.
Next, you set an aspiration for the company you want to be in that future environment, including financial targets as well as broad strategic choices about where to play, where not to play and how to compete and win. Finally, you work backwards from
that future vision to determine what, specifically, needs to be done today to begin closing the gap between your future aspirations and present realities.
In the COVID- 19 crisis, the future-back strategy lens suggests asking two questions:
Which assumptions will have the biggest impact QUESTION 1: on how the future will unfold? This isn’t a sensitivity analysis, but an exercise to identify outcome-determining assumptions that define tipping points between different potential scenarios. These assumptions should be as precise as possible by having time frames and numbers around them. For example, ‘governments will loosen stay-at-home restrictions’ is not precise enough; ‘by September, 40 per cent of the world’s population will be freely moving’ is precise enough to track and monitor.
What underlying trends have been catalyzed by QUESTION 2: the crisis and will have deeper and faster impact? For example, every university head knew that online learning would be mainstream by 2030. That timeline has been accelerated significantly.
LENS 2: JOBS TO BE DONE
During a crisis, it is natural to think about which temporary behaviour shifts will stick beyond the crisis. The jobs-to-be-done lens, which is a broadly useful way to identify opportunities for innovation and new growth, informs analysis of this issue.
The theory holds that people don’t buy products and services; they ‘hire’ them to get jobs done in their lives. This is consistent with management guru Peter Drucker’s famous quote, “The customer rarely buys what the company thinks it is
You can paint a kind of impressionist painting based on explicit assumptions.
selling him. Nobody pays for a product. What is paid for is satisfaction.” We define a ‘job to be done’ as the problem a customer is trying to solve in a particular circumstance. It puts the customer at the centre of the innovation equation, allowing the wouldbe innovator to precisely characterize the customer’s important, unsolved problems and to define quality in the same way the customer defines it.
One of Christensen’s most famous parables describes how a fast food company used the jobs lens to rethink the milkshake category. When the company asked customers what they wanted in a milkshake, it heard a lot about desired features (flavours, thickness and so on) but was unable to use these insights to increase sales. When it shifted to studying why customers bought milkshakes, it found two segments with distinct jobs: commuters looking for a ‘companion’ during a long, boring drive to work and parents looking to connect with their children in the afternoon. The offering had to be completely different to get each of those jobs done, so a one-size-fits-all milkshake ended up being a onesize-fits-none solution.
While the jobs-to-be-done theory holds that jobs are stable, events like COVID- 19 can dislocate them by changing a customer’s circumstances, available solutions and measures of quality. Executives should ask three questions to look for jobs-to-bedone dislocations:
Where will temporary changes lead customers QUESTION 3: to discover a new solution that gets the job done better than existing solutions? For example, it is very possible that the use of video-conferencing solutions for meetings will persist past the current crisis, as people learn that technology is now good
enough to provide a good experience and that they save the hassle and headache of travel.
Where will new habits lead to lasting changes in QUESTION 4: how customers define quality? When making decisions to hire a product or service to do a job, customers (often implicitly) consider functional, emotional and social dimensions. If customers spend enough time following different behaviours, it can rearrange which of those criteria are most important. For example, even when social distancing protocols are relaxed, customers may continue to place premiums on safety and look for financial solutions that minimize face-to-face interaction or physical transfer of cards or cash.
Where will post-event system-wide changes imQUESTION 5: pose new barriers and therefore change the way customers
prioritize solutions? It would not be surprising, for example, to see significant healthcare reform after COVID- 19. Perhaps telemedicine, which has been a fringe solution, could become a mainstream solution as efforts seek to keep hospitals free from being contagion hotspots.
LENS 3: DISRUPTIVE INNOVATION
Christensen introduced his theory of disruptive innovation in 1995 as a powerful way to understand innovation-driven growth. Disruptive innovations create new markets and transform existing ones by making the complicated simple or the expensive affordable. Disruptive innovations typically start with lower performance along dimensions that historically mattered to mainstream customers. Those limitations mean they have to start in market segments that are unattractive or ignored by established incumbents focused on more profitable segments. However, as the entrant’s solution gets better, it steadily moves up-market until it delivers the performance that mainstream customers of the incumbents expect — all while keeping intact the unique advantages that drove its early success.
Consider Netflix. Its Dvd-by-mail service had limitations compared to physical rental shops in terms of immediacy, but it offered new benefits related to customization, access to ‘long-tail’ content and the lack of late fees. As it got into streaming, it combined these new benefits with better immediacy than physical stores and drove incumbents like Blockbuster into bankruptcy. Other examples of disruptive innovation throughout history include the transistor, discount retailers, the personal computer, Apple’s ipod and asset-sharing platforms like Airbnb.
The disruptive innovation theory highlights two critical questions for executives:
Are key job-to-be-done dislocations being tarQUESTION 6: geted by disruptors on the brink of breaking through and therefore should be considered clear-and-present nearterm threats? Our research shows that companies that are following the pattern of disruptive innovation but haven’t yet crossed $1 billion in revenue are a good bet in the midst of downturns. Financial services by players like Grab and Gojek in Southeast Asia, cloud computing tools such as Box and entertainment platforms like Amazon’s Twitch seem to be examples of disruptors ready to take the next step in their evolution.
What ‘reverb’ opportunities to drive disruptive QUESTION 7:
growth have opened up? History clearly shows that innovators have an opportunity to drive growth by filling a gap that a ‘big-event disruption’ exposes. Consider how the oil crisis in the 1970s, for example, hyper-charged the growth of small cars from Japan.
LENS 4: ENCOURAGING INNOVATION HABITS
Over the past two decades, innovation has moved from a fringe to a mainstream concept. Organizations have poured billions into enabling structures, employee training and investments in start-ups, yet most executives still report that innovation is a struggle. Why? The fundamental challenge is the behaviours that drive innovation success, like curiosity, customer obsession and being adept in ambiguity, run counter to the established habits inside most organizations. In other words, the enemy of innovation is institutionalized inertia that is reinforced in underlying systems and structures.
A prime enemy of innovation is the institutionalized inertia that can be reinforced by underlying systems and structures.
The answer is to rip a page out of the habit-change literature and launch a well-constructed ‘BEAN’ that combines a Behaviour Enabler (i.e., a checklist) that details the desired new behaviour, an Artifact (i.e., a trophy or desktop object) that reinforces the new behaviour and a Nudge (i.e., a leaderboard) that invisibly encourages behaviour change.
Detecting disruptive threats and seizing disruptive opportunities requires companies to innovate at an unfamiliar pace and scale. While COVID- 19 is leading to mass experimentation with new ways of working, companies still need significant work to become more agile and responsive. To accelerate and maximize the impact of this work, leaders should ask three questions:
What, specifically, are the new behaviours that QUESTION 8: need to be encouraged to compete in an increasingly dynamic environment? It’s all fine to say that organizations need to be more agile, but what does that actually mean? As Chip and Dan Heath noted in the book Switch, what looks like resistance to change is often just a lack of clarity.
What, specifically, are the existing habits and sysQUESTION 9: tems that are blocking those behaviours? It is easy to say ‘We don’t have time’ or ‘We don’t have proper training’. These kinds of superficial blockers seem easy to fix, but the reality is often more subtle. Ask questions like ‘What do we do instead?’ or ‘why are we doing what we are doing?’
What BEANS can break the blockers and encourQUESTION 10: age the behaviours? For example, employees are often afraid to take risks and run experiments because of the perceived stigma of failure. Tata Sons, India’s largest conglomerate, offers a prize called ‘Dare to Try’ that celebrates noble failure. Australian software company Atlassian regularly runs pre-mortems, where teams discuss what would happen that would lead their projects to fail, helping to anticipate issues before they happen.
In closing
Executives are facing what feels like unprecedented uncertainty. In the face of such a challenge it is natural to respond by focusing even more intensly on day-to-day operations. But history clearly shows there are always opportunities to innovate and grow, no matter how stark the crisis. Remember, Sony launched the transistor radio in the midst of a global pandemic in 1957; Microsoft was launched in a downturn in 1975; Apple launched the ipod after the dot-com crash of 2001; and Adobe built the foundation of its remarkable transformation in 200809, right in the middle of the Great Recession.
To spot and seize opportunities in a crisis, it is important to avoid battles of beliefs where statements start with ‘I think this...’ or ‘I believe that...’ Such battles often lead to emotionally-charged stalemates. If, on the other hand, two parties agree to look at the situation through the lens of an applicable theory, and have an aligned view of the mechanics of the theory’s model and the inputs going into it, there is often one and only one conclusion.
Of course, there can still be debate over the model and its inputs, but that kind of conversation both lowers emotions and leads to more productive discussions about what to explore or where to experiment. Ultimately, using the right lenses in the midst of a crisis helps to bring clarity by cutting through the fog of massive uncertainty.