International Institution of Management study: 4 ways businesses prepare themselves for the future

The COVID-19 pandemic has forced companies across industries to be proactive when preparing for the future. Because when crises hit, this type of readiness doubles as a source of resilience. It shows how businesses can adapt, the strength of their internal capabilities and how proficient they are at finding new sources of growth. 

Consider how fashion brands and retailers have navigated the past two years. Top executives from the retail industry have maintained that retail is quickly moving toward direct-to-consumer, omnichannel and personalized offerings. However, when the COVID-19 pandemic hit in 2020, it is those companies that have scaled such capabilities ahead of their competition that managed to stay in business. For instance, stock prices at Hermes, Nike and Target have hit all-time highs as they have pivoted to e-commerce, as opposed to some of retail’s most iconic names: Brooks Brothers, J. Crew and J.C. Penney, which have all gone bankrupt. 

The automotive industry offers another example of the importance of becoming future-ready. While the ongoing semiconductor shortage forced companies like Volkswagen and General Motors to halt their production lines, Tesla managed to “substitute alternative chips, and then write the firmware in a matter of weeks,” explained Elon Musk. This process required quickly rewriting the car’s software, which was possible because of the company’s in-house mastery, and helped Tesla achieve a “trophy-case” performance. 

After evaluating financial fundamentals, growth prospects, diversity in the management board, operating revenue and more than a decade of data, researchers from the International Institute for Management Development identified four “universal managerial behaviors and cognitive outlooks” that are common across top-performing companies.”

Industry insight 1: Don’t play the zero-sum game with disruptors

– The year 2021 changed the game for the fintech industry. Due to retail shops being closed, people were forced to shop and bank online due to COVID-related lockdowns, which led to the unforeseen rise of electronic payments and changed consumer behavior permanently. 

How did legacy infrastructure builders Mastercard and Visa handle the rush? 

According to the IMD study, “Instead of trying to outrun fintech disruptors and tech giants, Mastercard and Visa partnered with their rivals, to the benefit of all involved. Specifically, they invested heavily in a wide range of application programming interfaces (APIs). An API is a set of official rules and guidelines that lets software exchange information with one another. This allows third parties to tap into Visa and Mastercard’s infrastructure in a way that is both secure and easily accessible. This strategy helped protect Mastercard and Visa from disruption.” 

The takeaway here is that a product’s best feature may not need to be invented in-house. Visa and Mastercard realized that disruptive apps were being invented by third parties, who are closer to their customers. “Sometimes you compete, sometimes you cooperate, but it’s never a zero-sum game. That’s the new playbook,” the study’s authors wrote. 

Industry insight 2: When everyone digitalizes, going “deep” differentiates

– For a consumer brand, digitalization is not only about the front-end, online experience; there are tons of make-or-break technologies to master behind the scenes. Consumers today prefer personalization when it comes to what they buy online and also have them delivered to them in days. To make that happen, and to stay profitable at scale, an organization should digiitalize its entire supply chain. It must automate all the tracking and coordination with external partners. All these facets

Take Nike for instance. In order to keep up with fickle consumer demands, Nike  leverages advanced data analytics to gather insights continually. A cross-channel prediction at the local level allows the sporting giant to make markdown and promotion decisions instantly and to move inventories across the country. That’s how users are able to find what they are most interested in wherever they are.

Meanwhile, Nike’s retail stores are reminiscent of an immersive gallery. Shoes are typically displayed like art pieces. In addition, customers can access the in-store Nike App to gain access to limited release merchandise, fun facts and reward schemes. This is a great example of a future-ready brand in sportswear. It employs a digital, data-driven and direct-to-consumer approach, which wipes out the boundary between the online and offline world.

Industry insight 3: In a high-speed sector, branch out even faster

– Tech companies operate at a rapid velocity, and to keep up, executives need to pivot quickly. They not only invest in new technologies, they are also biased toward action in branching out to new offerings or entering new verticals. They are willing to

acquire new capabilities and venture into the unknown. 

The subsector of semiconductors in technology illustrates this. Intel, for instance, got stuck making microprocessors for laptops, PCs and servers while its competitors, in particular Nvidia, managed to capitalize on the rising demands in chipsets for applications in machine learning, autonomous driving, natural language processing and other artificial intelligence applications.

Intel’s conservatism is understandable, since it is the only player in the

semiconductor sector that has a massive footprint of factories. However, Nvidia has evolved beyond deploying graphic processors only in the gaming sector and AMD now provides the industry with some of the most powerful processors. Both these companies rely heavily on Taiwan Semiconductor Manufacturing Company to manufacture their leading-edge products. And, because they don’t have factories or fabs, they don’t inherit any sunk cost. Since they are asset-light, they can afford to be agile.

Industry insight 4: Ask how vertical integration can help you stand out

– Tesla has used vertical integration in places where the automotive ecosystem has underperformed. In the battery technologies, for instance, the company designed and produced batteries suitable for supercharging vehicles with the coolant running throughout the entire pack. Interestingly, Tesla uses software to take over more functionalities that used to be located in purpose-built hardware.

Elon Musk prefers working directly with Samsung and TSMC instead of outsourcing electronic components. It tackles technical problems that the existing ecosystem cannot resolve fast enough. It goes beyond the conventional role of an automaker to integrate the toughest problem that needs to get solved.

Conclusion

“The fear of losing in the near term is very real. But the threat of losing relevance looms even larger. That’s why becoming future ready is straightforward. But it takes courage to drive it,” concludes the report.