Anticipating and navigating gradual disruptions

COVID thrust the spotlight on how prepared corporate boards are to confront disruptions and underscored the need for boards to proactively brace for worst-case scenarios, enabling effective disruption management and a swift recovery from initial shocks.

Recognising gradual disruptions

While explosive disruption is in your face and requires urgent attention and actions, gradual disruption is akin to a slow tide; its subtleties often escape immediate notice, requiring a heightened level of vigilance. Understanding the intricate nuances of slow-evolving changes is inherently complex, making detection challenging.

Gradual disruption is evident in the case of the mobile phone versus the desktop. The mobile phone reshaped the technology landscape and its impact was only felt in retrospect over a decade in the early 2000s. As smartphones gained prominence, desktops faced an inevitable decline and companies tethered to traditional computing models were caught off guard.

Therefore, it’s often not the sudden change, but the failure to adapt to the accumulating small shifts that brings about downfall.

The next disruptive wave

It may not be possible to anticipate the next wave of seismic shifts that could profoundly impact organisational stability or even its survivability. Nevertheless, the three mega trends that management and boards must proactively embrace and gear up for today are:

• The data economy

Data is an increasingly valuable business asset. By 2024, more companies will have streamlined their operations and improved their customer offerings by taking a strategic approach to their data. They will therefore be ready to take the next step – monetising data itself to drive new business opportunities. In addition, as access to large-scale data collection and artificial intelligence (AI)-driven analytics becomes increasingly democratised, we’ll see this trend adopted by smaller companies in niche and diversified sectors.

• Generative AI everywhere

The Boston Consulting Group asserts that “to be an industry leader in five years, you need a clear and compelling generative AI strategy today”. AI and machine learning have been making waves for more than a decade, and are thoroughly integrated into many of the products and services we buy from major companies. Now, generative AI puts the power to create and intelligently automate the customer experience – as well as internal operations – in the hands of nearly every organisation.

• Sustainable spotlight

One driver is clearly customer demand, as research continues to show that consumers increasingly prefer companies with a solid commitment to reducing their environmental footprint. On the other hand, as the green economy grows, we’re learning that green solutions often lead to bottom-line growth. Many companies have successfully embraced sustainability, reducing carbon footprint and enhancing their bottom lines. More investors, lenders, companies and consumers will be requiring their business partners to adopt environmentally friendly practices.

These mega trends have the potential to revolutionise industries and transform business models. Board leadership must emphasise continuous learning and adaptability to navigate the evolving landscape.

Are boards ready to deal with the dynamic landscape?

Do boards today have the sensing capacity to spot the gradual disruption? Unlike sudden upheavals, gradual disruption demands heightened vigilance, and may be trickier to spot and manage. In assessing your board’s readiness to mitigate potential strategic blind spots, these questions merit considerations:

I. Technological fluency

Do you have board members who have a deep understanding and knowledge of emerging technologies, and are adept in identifying subtle disruptions and anticipating technological shifts? Does the board keenly foresee industry shifts and embrace emerging technologies rather than playing catch-up?

II. Short-term vs long-term focus

Boards and management need to deliver short-term financial results, but does it come at the expense of long-term strategic thinking? Gradual disruptions often go unnoticed as boards focus primarily on immediate results.

III. Sensing mechanism and adaptability

Do boardroom discussions include updates of new trends? Is there a committee or someone from management who is assigned to scan the markets and update the board on disruptive signals? Does the management and board invest in cultivating an agile governance and culture to adapt and pivot swiftly in response to market dynamics?

IV. Overreliance on historical data

Does the boardroom conversation focus mainly on reviewing past performances, and are key decisions mostly made based on past data, overlooking evolving market dynamics? Historical success can breed complacency, blinding boards to potential disruptions.

V. Insufficient diversity

Lack of diversity in board composition may limit perspectives. Does your board have a regular and structured board evaluation process to help identify the gaps? Do you have a robust board renewal process to continuously enhance the overall board composition? Studies show that homogeneous boards may miss out on varied insights crucial for anticipating disruptions.

VI. Robust scenario planning and innovation

Do your boards spend sufficient time to debate and envision alternative futures to help prepare the organisation to mitigate potential vulnerabilities arising from subtle disruptions? Nurturing an innovative ethos to foster constant innovation is one of the best ways to shield against obsolescence.

VII. Decision-making process

Siloed decision-making impedes cross-functional collaboration. And gradual disruptions often affect multiple facets of a business. Do key decisions take into account the holistic picture, prioritising user experience and customer needs?

Conclusion

Board leadership must cultivate a keen awareness of subtle industry shifts by recognising that the subtleties of gradual disruption pose unique challenges compared with more abrupt shifts. And optimal board composition is essential for boards to effectively stay vigilant to capitalise on opportunities, manage risks adeptly, and navigate both the upside opportunities and downside risks successfully. Finally, disruption fuels innovation and the future is shaped by those who seize the opportunity to prepare for it today.

The writer is an independent director of multiple boards and a governing council member of the Singapore Institute of Directors