Welcome to 2020, and what a start is has been.
Already we’ve seen the escalation of tensions between the United States and Iran, which has subsequently placed further strain on the relationship between western countries. Wildfires in Australia are bringing even more focus on the environmental impact of industrial society. Still to come is the United Kingdom’s formal exit from the European Union, along with a U.S. presidential election.
That we know.
What we don’t know is if there will be a recession. We don’t know if trade relations will come to a reasonable conclusion between the U.S. and China or whether it will result in the complete unraveling of China-dependent supply chains. Even if China and the U.S. work out trade differences, will it end there or simply work its way around the globe? There’s a chance we could end 2020 in a much more stable place…or not.
With this as a backdrop, I continue to wonder whether the past success of supply chain will become its own undoing in this environment of more extreme swings and events. Over the last 40-plus years we have built a successful profession on the skill set of simplification and standardization. We have become masters of doing more with less. We’ve focused on the idea of creating “alignment” throughout the supply chain. The most successful of us have succeeded in creating “alignment” throughout the business. In periods of stability, “alignment” means that everyone in the organization pulls in the same direction.
A recent Gartner research study shows, however, that in times of instability, that type of “alignment” doesn’t necessarily translate into success and can actually hinder progress due to the inertia of the organization heading in a singular direction. During this time, alignment should mean that the organization can stay together while it shifts to a new direction. Most organizations built for stability fall behind when attempting a change because the old way has been engrained into employees and executives lack the ability to articulate the urgency of the needed change.
The same research study introduced the concept of “fit” organizations and “fragile” organizations. Fit organizations get stronger when tested by turns while the fragile ones get weaker. Only about one-quarter of respondents proved to be fit. Over a third of organizations in the study got worse at attracting talent as well as funding, launching and completing new business initiatives when challenged by a turn (see figure).
There were three focus areas that enabled the “fit” to be fit, including a different approach to alignment (which we’ve discussed), anticipation and adaptability.
Anticipation means positioning the company to take more balanced risk, not simply waiting for circumstances to force a change. Fit leaders actively search for emerging trends or situations that require a change, and are willing to do what it takes to act on these discoveries. Leaders of fit enterprises pay attention to the forecasts of the strategic planning and competitive intelligence departments. They look eagerly for opportunities and threats, because they know that their enterprise can take advantage of them to surpass the competition (a.k.a. winning in the turns).
Adaptability means having a culture of innovation that embraces appropriate risk taking and learning from failure. In a turn, our organizations must possess the ability to change established habits and think in creative ways to meet a new set of challenges.
While we can’t predict the future (although this is the time of year where predictions abound), we can certainly improve upon our ability to identify future scenarios (this is different than forecasting). We can prepare our organization to excel in an environment where more extreme swings and events are common, even if this means challenging what we’ve built up till now.
Happy New Year 2020!
Chief of Research,
Gartner Supply Chain