The 21st Century is a “Digitally Enabled Borderless VUCA World. It is a century of the 4th Industrial Revolution with the World Economic Forum laying a lot of emphasis on Nations investing in Information and Communication Technology (ICT).
Kenichi Ohmae, a Japanese consultant, in his book “Borderless World”, predicted the aspect of globalized world years ago and that is precisely where the world is heading. International borders are becoming fluid and trade is now moving on the Internet seamlessly across borders. Currencies are now neutral to the effect of forex on the Internet; operating 24/7;365 at lightning speed with global economies opening up.
The US, Europe, Asia and Japan are the frontiers of business, and most companies are now “Born Global”; even though they do not realize it. We live in an Interdependent-Interlinked economy, and business variables are becoming more Volatile, Uncertain, Complex & Ambiguous. Welcome to the VUCA World.
The power curve of McKenzie has a precise observation. Most companies are operating in midzone profits, becoming vulnerable to financial instability. Only top 40 companies with high ranking in stock exchanges register economic profits which are upward of 30 times the average profits generated by other companies. Average companies record returns of about 2% higher than the cost of the capital employed. No wonder cash flows are always a cause of concern.
There is something seriously wrong as depending on luck & time in business is futile, and in the long run, it is the cause and effect theory that builds a business outcome. No wonder, so many companies struggle during the VUCA onslaught that makes business cycles unpredictable. The Unicorn companies of the day are surely doing something different. Unicorn is a motivator for all Entrepreneurial minds & Stakeholders. Nobody respects an average brand anymore.
It is thus essential to see what makes an organization succeed in the 21st Century. Let us study the popular design variables to seek insights into such organizations. We are now looking at Neoclassical organizations and Lattice Organizations that shape the new economic order. These are amoeboid organizations that offer high peer learning designs and are highly collaborative and digitally enabled. They operate in Holonic Systems that make them agile and responsive to deal with any eventuality of business cycles with speed.
Let us study the hard and soft aspects of the 21st Century design determinants using the 7S McKinsey Framework.
Focused organizations that operate in narrow niches of core competence will do well. Integrated cost and differentiation leadership will be the key driver in the times to come. All organic strategies must go International. You have to be present in all relevant markets with Global products. Building Global brands and products is critical. Local brands will die or at best remain average. Concentrated or Concentric diversification will be the key strategy that will drive businesses. Conglomerates will have to strengthen their businesses and operate as independent ventures with their unique core competencies. In the 21st Century, most conglomerates will struggle owing to centralized control mechanisms. Venture funding and Merger & Acquisitions will be the core expansion strategies.
Organizations of 21st Century must be flexible amoebic lean learning structures where formal hierarchies must collapse. Across the value, chain outsourcing must be the norm for all non-core non-value-adding activities. With fixed cost on the rise, collaborations with specialized organizations are the key. Structures must go Collaboratively-Virtual. Operate your structures through subscriptions, lease and rentals. Fixed Assets are the norms of the past. With fast-changing technology, switching costs have to be managed well.
All systems must operate on digital backbones. Control Systems must get AI-enabled. Processes must undergo a complete overhaul and become frugal, and routinized activities must be driven by technology. Value addition is the only vital human contribution now. With digital systems and value-adding individuals, it is easy to let go of paralysis of systems that get created over the years. Systems must be designed to generate Customer Value only. Let Predictive and Prescriptive Artificial Intelligence drive your decision making & control systems.
Culture will have to be based on shared leadership. Authenticity will be the critical driver of culture. Corporate Governance, Ethics and Social responsibilities will be the essential factors of success. With the advent of social media and social activism, the brand image will be vulnerable. Teams will have to become increasingly diversified to bring in Innovation. Cultures will undergo diffusion and uniqueness of a “success culture” will be the critical aspect. The behavioural modification will be a continual journey in culture building.
Knowledge will be power. As per the World Economic Forum, the entire digital Universe is expected to reach 44 zettabytes by 2020. It is 40 times more stars than the visible, known Universe. Organizations will have to invest very extensively in people development. The man at the top will shadow the organization as always. The focus of Learning will be at the top of the pyramid. Incompetence will not do. Leaders as Coaches will be the new norm. While you have Learning Organizations, you will need Learning “CXO’s”. Behavioural interventions & Coaching will be essentials. Past anchored behaviours will no longer succeed. Hiring will have to be work design & psychometrically driven. Online Learning will charm the Industry owing to its transfer of learning capability and aspect of Blended Learning. It will also lower the overall cost of the development of employees. E-Learning is the next sunrise industry that is expected to touch USD 240B at a CAGR of 8.5% by 2024.
21st-century organizations will not be defined in terms of the number of people. The old paradigm of large people organizations will not work. CEO’s will need to pride competence and profitability. Organization sizes will shrink with the advent of technology. Only the best will be hired and retained, average work in any case technology will take over. Ethical Downsizing will continue. Technology will rule the roost. The only place humans will beat AI is in abstract thinking & Innovation. Cognitive abilities will define the performance. Will AI effectively handle abstract cognition time will tell. Staff will gradually become location independent to tap the best talent.
The Shared Values:
International cultures will play up. Values will be normed International values. Diffused Local values will operate in the informal social environment only. Customers would want the same experience in all transactions at all locations. Brands will have to define their shared value systems and practice them with a lot more expression of intensity. This will reduce the cost of foreignness.
20th Century designs and behaviours will not shape the 21st-century businesses. We are now in a world where the economic value will be created if we can learn fast, consistently modify behaviours and organization designs and become Socially Intelligent Techno Savvy Design Thinking Organizations that will be frugal. It’s about being global at all times.
May the “wise leaders” win is the 21st Century paradigm. Are you 21st Century enabled and ready?
*Blog is based on our Coaching insights in various organizations that we work with.