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“THIS IS NOTHING!” – Adaptive organizations react better on crises

“Wag the dog”, one of my favorite movies, portrays a Hollywood Producer (Outstanding: Dustin Hoffmann) who needs to counter a political crisis. He famously reacts to every unfortunate turn of the story with the above outcry “This is nothing”, only to stimulate ever more creative solutions even in dead-end situations.

Climate change, inflation, and supply chain risks are far from Hollywood movie fantasy and are much more serious issues above all. Still, imagine the twist, if you had somebody sitting in your meetings, shouting “THIS IS NOTHING” to all the Job´s news affecting your company. This would be the start of a clearly adaptive organization.

In those multi-crises times where you are lacking a clear path forward (here is the link to our picture above), what should you do? In this week´s article we will cover the unbalanced understanding of “Sustainability / ESG” as an example and what “Adaptation” has to offer (okay, it is a provocative stretch, but let´s take a look).

First understand the value at stake, secondly decide as fact-based as possible and lastly enhance digital processes to increase speed.

1.      Value at stake

What is the problem with climate change? In general, scary, scientific scenarios towards 2040/50 come to mind. And that´s why we should mitigate climate change today and all become carbon neutral in order to limit global warming to 1,5°C. The upcoming COP27 will again emphasize the agenda. However, a frustrating fact: we will most likely fail and will find ourselves in a more or less >3°C world. What that will imply a vivid video featured by The Economist impressively shows. Next contradiction, while the `burning platform` of global warming is obvious, the individual corporate implications need to be crystalized out explicitly. The focus on mitigation may create a blind spot for the needed adaptation today - since rising temperatures are affecting the way we live and do business substantially now. It is not only our responsibility for future generations to save the planet (mitigate), but in parallel, to do everything we can to adapt right now.

Big insurances´ focal point, like MunichRe, is the instantaneous impact of climate change. Frankly speaking, because risk mitigation is their business model. But wait, whose business is 100% risk-free with respect to the meanwhile annually occurring “Once-in-a-hundred-years”- storms/ floods/ heatwaves? Talking about value is about big numbers: Roughly 95% of “green” capital is flowing into mitigation projects, such as renewable energy or any other decarbonization technology. Only in 2022 did the first Private Equity firm, Lightsmith, launch a growth fund on adaptation. Thus, the value is clear?

Mitigation: The decarbonization journey until 2050 may cost from €130trillion up to €275trillion (as e.g. IRENA or McKinsey forecast).

Adaptation: The UN estimates the costs of adapting to flooding, heat & co at up to €500bn each year until 2050. Sum it up and you end up in the low trillions until 2050.

May adaptation be possibly much cheaper and actually saving lives and livelihoods at last?

2.      Fact-based decision

Constantly evaluating what is going on and making sure you have the best opportunities at hand is key for adaptability. Like in “Wag the Dog”, today's decision makers might find themselves confronted with increasingly escalating (but real) problem fields: Each time a fire seems to be put out, two bigger ones flare up. Increasing speed and severity with which the effects of global warming impact different parts of your organization.

When emotions are running high, it can be difficult to think clearly and make rational decisions. However, if you have already prepared for fact-based decision-making, you will be in a better position to make decisions that are in the best interest of your organization. Gather data and information before a crisis hits you so that you can make informed decisions when one does occur. The crises-tested World Food Program calls it “preparedness”.

In this environment, businesses must not only be able to adapt their processes, but also their goals. This is not about "moving goal posts", but about the capability to measure success and therefore retaining the ability to act, even in progressively harsh conditions. This is where adaptive strategy beats out spreadsheet-powered annual strategy processes. Aided by powerful digital tools that are fed with the right data, business leaders and strategy experts can create model scenarios for any gradation of a certain impact, like for example inflation or bouncing raw material prices. This also enables fact-based decision making, free from factors like optimism bias that might hinder taking undesirable, but none the less realistic scenarios into account. This enables business to realistically plan for the worst, to make the best of it.

3.      Enhance digital processes to increase speed & accountability

But having a wide portfolio of scenarios available is only one aspect – and maybe worthless if the decision process and necessary execution related to a respective scenario aren’t sped up as well. In today's digital world, speed is everything. During a crisis, it is important to be able to quickly adapt and respond to changing conditions with distributed responsibilities. Divide and conquer in parallel: Make your organization more connected and tap into every department – and with this, into every corner of expertise, to tackle complex problems from many different angles.

One way to do this and keep the overview is by enhancing digital processes so that they are faster and more connected. By increasing the speed via digital processes, you will be able to quickly adapt and respond to changes, which will put your organization in a better position to succeed during times of crisis.

Herewith you may turn a “THIS IS NOTHING” situation into a portfolio of fast & relevant responses across your organization. Hopefully encompassing the one or the other adaptation measure to counter climate change, too.

What do you think?


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