Companies Must Be Robust in Six Key Areas to Cope with Uncertainty
Today’s organizations face a double challenge.
On the one hand, they must deal with issues that call for urgent action, crises that may even threaten their very survival. On the other, they must cope with a level of uncertainty greater than most have ever experienced in the past.
Just two years after the Covid-19 pandemic broke out, the war in Ukraine is now causing tremendous human suffering and global turmoil. At the same time, the world is reaching tipping points on the climate crisis, biodiversity loss, and human migration.
The ultimate impact on the future geopolitical landscape, economic growth, and global supply chains is to a large extent unforeseeable. A range of megatrends, from deglobalization to changing demographics, will transform business in every way.
How can organizations cope with these urgent challenges during a permanent state of uncertainty? How can they adapt to a world in turmoil that demands immediate action?
The answers lie in robustness.
Beyond Organizational Principles
What kind of new world awaits us? How will the global balance of power affect our operations? Which new strategies should we adopt to ensure that our businesses thrive, even in an era of turmoil?
Today’s organizations have very little time to evaluate and react to these fundamental questions. Modeling the many variables makes forecasting and advance planning almost impossible.
Instead of trying to plan for the unplannable, companies should look beyond organizational principles and focus on the concept of robustness: the ability of an organization to adapt, develop, and evolve to navigate uncertainty while preserving its functioning, competitive stance, and long-term growth.
Six Dimensions of Robustness
This approach is more holistic than the standard organizational theories of the past three decades, which tended to focus on specific ingredients of success (such as financial factors and organizational questions), specific events, or certain issues such as sustainability.
Instead, look at robustness as a whole—a combination of strengths along different dimensions that enables an organization to remain standing, even as the ground shifts beneath it, and to turn both long-term trends and short-term crises into its advantage.
A company has six key dimensions of robustness:
- purpose, culture, and strategy;
- ecosystems and networks;
- process and organizational dynamics;
- technology and data;
- leadership and talent; and
- financing and investments.
For each of these six dimensions, organizations can use specific levers to achieve robustness.
In the area of process and organizational dynamics, companies can ensure robustness by building strong support and business-platform functions, project-based work in changing teams, and rapid-cycle processes, especially for fast and well-informed decision making.
Robustness in the dimension of leadership and talent calls for leaders who demonstrate vision and the ability to make bold decisions based on collective intelligence, acting as role models for employees through their attitudes and behaviors. Just as important, companies need an empowered workforce supported by a deployment mechanism based on tasks and competencies.
Where Companies Struggle
Organizations often struggle with holistic robustness. But to identify the aspects of robustness that are the most challenging, organizations can use the Roland Berger Robustness Maturity Index tool to assess the performance of their short-, medium-, and long-term abilities in each of the six dimensions.
Based on the 330 assessments carried out on the index to date, several commonalities among companies have emerged. Not surprisingly, about 40% of firms say that they struggle with getting ready for flexible and scalable IT systems. They also report problems with acquiring the skills and capabilities necessary to implement digital technology in their operations.
Another finding: Many companies struggle with the lever of decision making (the dimension of process and organizational dynamics). Fewer than one-third of companies using our self-assessment tool say they have an integrated, decentralized system of decision making and a structure that is fast and responsive with rapid escalation across levels. One in five organizations reports that they have very limited decentralized decision making and a slow and bureaucratic structure with several iterations across levels of the company and a very hierarchical process.
Similarly, organizations frequently have a problem with the lever of customer centricity (the dimension of ecosystems and networks). Just one-quarter of organizations directly involve customers via workshops, focus groups, or surveys in the areas of idea generation and market definition, while three-quarters seldom or never involve customers in developing new products and services. And even the companies that perform best on overall robustness face challenges in ensuring shared values among the workforce and retaining talent.
Assess Your Robustness Maturity
To cope with today’s unrelenting uncertainty and the urgent necessity for action, companies must strive to achieve robustness across all six dimensions. Only by becoming robust organizations can navigate uncertainty and survive unforeseen crises while preserving their functioning, competitive stance, and long-term growth.
Credit byHarvard Business Review