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Oliver Laasch

Innovation

Three Ways Businesses Can Adapt Their Models to Working in an Age of Crises

There’s unlikely to be a point of general stability anytime soon

Published: Wednesday, May 4, 2022 - 12:02

It’s been a tough few years for people who own or manage a business. Lockdowns shut down whole industrial sectors worldwide, turning profitable businesses into loss-making ones, while a lot of smaller businesses went under.

Many companies will now be hoping for a return to some type of normality after Covid. However, there are strong signals that a resumption of how things were isn’t in the cards anytime soon. The world appears to have entered into an age of accelerating grand crises.

Even before Covid, the climate crisis was increasingly disrupting the world through extreme weather events. Then, just as some countries had declared their war against Covid to be won, the invasion of Ukraine has not only reshuffled global geopolitics but also led to a dramatic increase in energy and food prices, having big knock-on effects on a whole host of other sectors.

One day there may be a time after Covid, after the Ukraine war, and even after the climate crisis. But there’s unlikely to be a point of general stability anytime soon. Humanity is pushing environmental limits to the breaking point, risking further crises—whether in terms of disease, conflict, or natural disasters.

Businesses therefore need to shift how they operate. This means responding to current crises, being better prepared for future crises, and addressing their own role in generating these crises in the first place. With that in mind, here are three types of business models companies should start adopting now.

1. Respond to crises

What is needed are reactive business models that can respond to crises at hand. Such adaptability will naturally have a survival element, in which organizations do whatever is necessary to mitigate negative effects on themselves.

This means aligning management practices with the “new normal” after the crisis, instead of holding on to the old normal from before. Where appropriate, such models should also have a crisis-mitigation element, addressing the wider negative effects of the crisis at hand where they can.

It appears fossil fuel behemoths such as Shell and BP might be starting to do just that. Having long been under attack for knowingly contributing to the climate crisis and counteracting shifts to more sustainable energy systems, they appear to now be adapting to crisis forces. These forces include, most notably, the global trend toward phasing out fossil-fuel vehicles.

Oil companies have begun to transform key aspects of their business. A first move, for example, seems to be repurposing their petrol station operations into an electric vehicle charging infrastructure. As they ride the waves of the climate crisis, expect to see them make many disruptive greening changes like this.

2. Be ready for future difficulty

Businesses also must move from stability-based business models to accepting that the business reality is now one characterized by volatility, uncertainty, complexity, and ambiguity.

Value propositions encompass the benefits a business offers—for example, to its customers, employees, and the community. Building business models for this new world means establishing value propositions, fit for the long run, that can morph into all kinds of crisis scenarios. It also means being agile and quick to adjust.

One form this could take, for instance, is for a business to offer products and services that address timeless and fundamental needs like health, food, or security, rather than short-lived superficial wants like those related to fast fashion or the latest technological fads.

A good example of such a business model is Chinese electronic goods corporation Haier. Explicitly tuned in to an ever-changing world, Haier aims to deliver “products that respond to the constantly changing needs of the modern home.” For instance, Haier responded to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.

Alongside this, Haier employs its unique “RenDanHeYi” (or 人单合一, which freely translates to “one single person in unity”) way of working. Haier is essentially a collective of smaller, semi-autonomous companies, in this way giving both individual freedom and collective responsibility to self-organized micro-entrepreneurs.

This makes Haier a fluid, agile, and resilient organization. By operating as a network of micro-enterprises, each of which works closely with customers to respond to their changing needs and situations, the business can evolve more easily as each new crisis plays out. Because of these features in its business model, Haier has done exceptionally well during and after the Covid crisis.

3. Help prevent crises of tomorrow

Finally, businesses can better set themselves up for the future by adopting models that specifically mitigate or even prevent future crises. While Covid, the Ukraine crisis, and climate change are still ongoing problems, many business models have been geared toward keeping other things from becoming the next grand crisis.

For instance, some companies are adopting business models that promote reconciliation and peace, with a view to preventing disruptive, future armed conflict. Examples include Colombian guerrilla group members building adventure travel businesses that show the previously hidden side of the conflict, and coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration.

Managing businesses in an age of accelerating crises is challenging. However, transforming business models and managerial practices can go a long way in both making current and future crises manageable, and possibly even mitigating future crises.The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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About The Author

Oliver Laasch’s picture

Oliver Laasch

Oliver Laasch is a senior lecturer in entrepreneurship and innovation at the University of Manchester and founder of the Center for Responsible Management Education.