Drawing upon his latest book, Jonathan Trevor provides helpful guidance for leaders on how to realign their businesses to thrive in times of change.
The disruption stemming from the COVID-19 global pandemic presents leaders of established businesses with a rare opportunity to change the fundamentals of their organisation for the better, in ways that would not be possible or palatable in ‘normal times’. Consider the example of the international airline, British Airways (BA). BA announced last month that it intends to reduce its staff headcount by 12,000 (out of a total of 42,000) to weather the COVID-19 storm that has seen immense disruption to the global travel industry. The number of scheduled international flights in March 2020 originating from the US was down 72% on the previous year; 81% in the UK and 90% in China. Beyond survival and recovery in the short-term, British Airways is also exploring long-term realignment of its product portfolio, modernization of its fleet, optimization of its landing slots and change to its legacy employment systems, which include custom and practice dating back to before it was privatized in 1987.
What should be different about your organisation to make it a better fit for purpose in the long-term? What do you need to consider when making key decisions, and what are your options for turning adversity into advantage? Drawing from my book Align: A Leadership Blueprint for Aligning Enterprise Purpose, Strategy and Organisation I offer some advice.
Only as strong as your weakest link
Leaders should adopt a strategic approach to the alignment of their organisation over the short and long-term. Strategic alignment is where all elements of a business - including its market strategy and how it is organised – are arranged (and rearranged) in such a way as to best support the fulfilment of its purpose. These elements form an enterprise value chain, which is only as strong as its weakest link. Whilst an organisation’s purpose is the north star to which all other components should be aligned, other links in the value chain are dynamic and should change in step with a fluid external environment, especially in times of disruption.
An enterprise’s business strategy is how it intends to strive in the environment in which it competes, whether for market share or resources. Three critical considerations stand out when seeking to reformulate this strategy. First, what is being offered to the market ̶ what products and services ̶̶ to fulfil the enterprise’s purpose. Second, how are those products and services responding to the changing preferences of customers. Thirdly how should the enterprise’s offerings be differentiated from their competitors.
You should consider which new offerings will fulfil your enterprise purpose in the long-term and how you might align your offerings to the changing preferences of future customers and markets. Ask yourself: who will be your competitors in the post-COVID-19 landscape; what will they be capable of and how can you be different? Your answers to these questions will define your long-term strategic priorities.
Choosing what to win at
Even the best-formulated business strategy or vision for the future is worthless unless it can be implemented in your organisation. For example, prior to the economic disruption posed by COVID-19, HSBC announced a planned headcount reduction of 35,000 employees as part of a deep overhaul in response to “plunging profits”. These cuts have been postponed for the immediate future due to the impact of COVID-19, but they form part of a longer-term and radical restructuring intended to improve long-term performance .
Like other major banks, HSBC had undergone rapid expansion in the last two decades, especially in terms of its size, both in terms of employee numbers and the value of its assets. It had also diversified its lines of business and geographic reach. Its portfolio of businesses, products and services, is considerably more complex that it was at the turn of the century. Indeed, it is now one of the biggest and most complex banks in the world. Different elements of its portfolio are highly successful (its Asian business, which accounts for 90% of its profitability); others much less so (investment banking in the Americas, for example).
Poor performance in one area can affect the strategic advantage of the entire group. Competing for advantage in these different markets requires HSBC to be capable of implementing multiple different business strategies. Such organisational ambidexterity is hard to achieve in practice, especially at scale. HSBC is strong in Asia, for instance, but has not had the opportunity to establish itself and develop the competencies for superior investment banking in the US, which is intensely competitive with multiple long-established market incumbents. Regardless of COVID-19, HSBC is committed to a reorganisation that reflects a shift in strategic priority to double down on what it does best: banking in Asian markets. COVID-19 disruption has merely served to accelerate these changes.
So consider which strategically valuable capabilities will you need to develop for competitiveness in future. Will superior execution be vital to recovering and rescaling your product-centric business? Or customer agility for customised and highly differentiated offerings to market? There is a challenge to leadership here as excellence in one area tends to preclude excellence in other areas. For example, extreme efficiency and extreme flexibility make for uneasy bedfellows. Whichever you choose, your answers to these questions will define your long-term organisational priorities.
Best aligned, best performed
Times of great upheaval often result in significant change and new ways of doing things. The best-aligned enterprises are the best performing, now and always, but this does not happen by chance. Some organisations will always emerge from severe disruption stronger than others; stronger even than they were previously. It will be because their leaders, when facing disruption, imaginatively and courageously envisioned how to realign their organisation to thrive in the future and embraced the opportunity for positive change.
Jonathan Trevor is author of Align: A Leadership Blueprint for Aligning Enterprise Purpose, Strategy and Organisation and is programme director of the Oxford Strategic Alignment Programme.