Closing the adaptability gap to drive long-term business growth
Our Horizon Research shows that companies that prioritize adaptability create significantly more value than their peers. But, by their own admission, most companies are not good at adapting quickly and effectively to change. Closing the 'adaptability gap' is key to finding the opportunities and strategies that drive long-term business growth.
Adaptability is the ability to adjust to changes in your environment. It’s a key driver of long-term business growth, but our analysis has found that it’s something most companies struggle with. That’s because adaptability is really two skills in one, requiring the long-term vision to recognise when adaptation is necessary and the agility to act on that vision.
The need for these skills is not new. As part of our report, Beyond the Horizon, a manifesto on long-term growth, we explored the adaptability of businesses that have survived transformations in their respective industry – and come out stronger on the other side, to the point that they still make the top 100 in our Sustainable Growth Index today.
> READ THE RESEARCH: Discover how you can drive long-term growth for your business
While such dramatic changes may, historically, have been few and far between, that’s no longer the case. Between the digital revolution, occasional pandemic and threat of climate catastrophe, we can expect ‘disruption’ to become part of business-as-usual. We can use the lessons of the past to inform the best practice for the future.
What is the adaptability gap?
Our research shows that companies that prioritise adaptability create significantly more value than their peers. But, by their own admission, most companies are not good at adapting quickly and effectively to change. We call this the ‘adaptability gap’ – the missed opportunities that live in the space between how adaptable a company should be and how adaptable it actually is.
Closing this gap is key to finding the opportunities and strategies that drive long-term business growth. But how do you identify what has created your gap?
Is your business following the ‘old way’ or the ‘new way’?
Prior to the technological revolution, the marketplace was more stable, product cycles were longer, and businesses were able to evolve relatively slowly. Of course, there were bumps in the road and diversions along the way – but usually the kind you see coming. As a result, precision was the order of the day. Improving existing strategies, processes and approaches drove competitive advantage rather than constant evolution and change. We call this the ‘old way’ of doing business.
Companies that were born amidst the upheaval of the technological revolution have had to do things differently. They operate in an ever-changing landscape with very little stability. Constant change is necessary for survival, let alone success. We have some great examples of this ‘new way’ of doing business – Amazon, Netflix, Intel, IBM. They are adaptors who are highly successful.
Of course, there is a lot of middle ground between the old way and the new way, and the new way is not necessarily the right way for all businesses. Take, for example, Reckitt Benckiser, the company behind consumer goods brands like Vanish, Calgon and Cillit Bang. The market for these products is relatively stable and predictable, and a precision approach works. Having said that, being more adaptable than its competitors has enabled Reckitt Benckiser to deliver greater sustained performance.
How do the old and new ways compare when it comes to business strategy?
The rigid ‘old way’ of doing business is to create 5-year plans for business growth. This taps into the importance of maintaining a future focus, but doesn’t allow much flexibility. What if things change in those 5 years?
An adaptable approach (the new way) is also focused on long-term growth but accepts that market dynamics are a better indicator that it’s time to evolve than a calendar deadline.
Thankfully, most companies will refresh their 5-year plan every year, which gives them the opportunity to revisit their assumptions about market dynamics at least annually.
However, a better approach is to take the calendar out of the picture altogether and build a strategy based around the needs of the market. In this way, the strategy changes as and when the market does – perhaps after 6 months, perhaps 6 years. These strategies of undefined time are rarely seen, but offer a fresh, agile mindset that puts humans at the centre.
What does ‘adaptable’ look like in your organisation?
Of course, adaptability as a business strategy only works when you know what it looks like in practice. We recently worked with a company that wanted to implement a globally-led ways-of-working change to ‘agile’, but they’d come up against an immediate obstacle: no one was sure what Global meant by ‘agile’. Fair point – it’s a vague term on a behavioural wish-list. Distilled down, however, it’s possible to define agile ways-of-working by four core operating behaviours, as follows:
- Leaders empower their teams to make decisions.
- As a result, fewer layers of hierarchy are needed, so actions can be taken more quickly.
- Flexible resourcing allows resources to go to where they’re needed, rather than leaving siloed teams over- or under-resourced from one project to another.
- Everyone adopts a continuous learning mindset.
The more of these operating behaviours you can adopt, the more adaptable your company becomes and the easier it is to deal with market turbulence.
Are you ready to challenge your own assumptions?
Even businesses that would consider themselves followers of the ‘new way’ of adaptability, may find they are stymied by the human propensity towards confirmation bias. So often, people – both individually and as organisations – approve the information that conforms to our world view and ignore the rest. Not only does this not facilitate adaptability, it blinds us to the need for it.
As a test of your organisation’s adaptability, ask yourself,
- Are we challenging our best practices?
- Do we bring diverse ideas to the table?
- Do we use data to shape new stories?
Encouraging junior employees to challenge the status quo, building diverse teams and enabling them to broaden their networks, and using data to explore new possibilities can help unlock a culture of intellectual curiosity that will help drive long-term business growth.
Strategy in action
In-depth analysis of our Sustainable Growth Index – one hundred of the world’s foremost companies – shows that there is a distinct code for long-term success, and that having the capacity and capability to adapt to changing market dynamics is key. Perhaps even more important is how adaptability sits alongside purpose, long-term vision and customer-centricity to create an organisational environment that drives and supports growth.
> FOR MORE ON THAT: Read the full report
Of course, adaptability can only serve you if it is built into your business strategy, company culture and organisational structure – so that your company is not just adaptable in theory, but also in action. If you find yourself unable to assess your company’s adaptability, you might benefit from bringing in an outside perspective. As experts in business strategy, we can help you identify opportunities for growth, giving you that full ‘forest’ view, without getting lost in the trees.