Corporate transformation in the Covid 19 crisis (1): What happens when you don’t change
The problem with digital transformation is transformation. The current health crisis brings this home to us in a frighteningly unmistakable way. Many organisations have quickly managed the short-term transformation of the essentials, but are making no progress in adapting their processes in the medium term. This creates the potential for disruptive innovations. In many areas, the same pattern can be seen: the most necessary things were changed quickly and successfully and then the crisis was forgotten. The list of common omissions after the first change is long:
- No regular quality checks of the new practices and processes
- No regular adaptations of these practices and processes
- No catching up on what has been put on hold – often the memory of it is even lost
- Hardly any anticipation of the next two years
- No strategic reflection on the specific situation
- Few attempts to profit from the crisis through new business models
Causes 1: Wrong assumptions
All of this speaks to the assumption that the crisis will only be temporary. However, it now appears that the crisis will continue for at least another two years and may even be with us for much longer. Not only did the virus not disappear in the summer (as many hoped), it has actually turned out to be more dangerous than originally thought. Even in young people without risk factors and without symptoms of disease, it sometimes causes very unpleasant after-effects that could even be life-threatening in the medium term. However, we still know very little about Covid-19 and even the little knowledge we have has hardly been reflected as a society so far. Emotions rule and often according to a zero-or-one logic. Companies report, for example, that young people in particular panic after a positive test because they have heard about late effects of harmless courses of the disease. At least there is some hope that we will make rapid progress in the field of therapy and that the feared long-term effects will occur only very rarely. The only thing that is largely certain is that the virus cannot be treated like the annually recurring waves of influenza because, all in all, it is much more dangerous. It follows from this realisation that there will be no quick return to pre-Corona times. Many types of business activity will have to be adapted to the new situation and largely transformed. A few companies have started to do this and have since radically transformed their business. Many other companies and institutions remain in quickly constructed provisional arrangements. This is also true for organisations that are fully committed to the digital transformation but struggle to actually transform in the face of adversity.
Alternative interpretations: Memories of Building 20
But is transformation necessary? Aren’t provisional solutions, in their simplicity, frugality, tranquillity and their focus on people with a lot of time and leisure, something beautiful? Could they not be an occasion for rethinking? Absolutely. But thinking is free and therefore rarely leads to the normatively desired results. An example will illustrate this. Many of the temporary buildings that were quickly constructed at the end of March are reminiscent in their method-free and concept-poor construction of the legendary building number 20 at MIT, which was once also designed in a hurry by a non-professional. With its systemic disorder, this building changed the world as never before – until bureaucracy, aesthetic conceit and modern creative thinking disposed of it (although the myth says it still exists). In Bau 20, to find one’s target, one had to ask the next best thing and got talking. To realise a project, on the other hand, you didn’t have to ask anyone. This transformation of asking had the power to change the world. It is conceivable that the Covid 19 provisional buildings will have a similarly beneficial effect. Certain analogies are recognisable. But if they exist, the consequences will hardly meet the expectations of our value society. For Building 20 worked differently than expected. It primarily helped the crazy geniuses, the visionary future thinkers, the irrepressibly willing and the creative doers with strong ideas. It changed the world through its anarchy, not through its tranquillity as a storage place for supposedly useless scientists.
Cause 2: Lack of transformation practice
While the assumptions about the temporary nature of the health crisis may have been wrong, they do not explain why they played such a big role. Why didn’t many enthusiastically jump into the transformation as an opportunity? There is no one answer to this. However, two important reasons are that, firstly, those willing to transform were busy and employed and, secondly, transformation practice was lacking. Transformation requires experience – and this experience only comes through closeness and, better still, being embedded. It starts with understanding problems as assets and wanting to penetrate them as much as possible in terms of content, and it ends with experiencing solutions to problems from the point of view of those affected and going out to find new problems. This has many similarities with good craftsmanship, differing from it only in that clients play a central role (Sennett 2009). It is very much in line with the sensemaking concept (Madjsberg 2017). And it is likely to gain little esteem, similar to the real entrepreneur as described in the last chapter of (Thiel 2014). Moreover, transformation is rarely consciously perceived where it actually takes place. In practice, substantial transformation rarely takes place – and this is not a problem because mostly continuity is not a bad solution. Nevertheless, transformation is often experienced by managers. They use management tools, storytelling and smart tricks of attention control to convince employees and themselves. The price for the satisfying experience of artificial transformation, however, is the loss of sensitivity for situations in which the lack of transformation actually becomes a problem. So we are dealing with too little real transformation experience and too much artificial transformation experience at the same time. The result is that after five months of health crisis, many companies and institutions are still acting as if tomorrow is like yesterday, like the time before Corona.
Alternative interpretations: The future is already imagined
But maybe the transformations remain only invisible – or still invisible? Maybe we don’t even see how the business models are currently being transformed? Short-time work in particular can hide a lot. Example (D/A): Sales representatives of the pharmaceutical industry to inform the medical profession are on short-time work. Will they be re-employed when the state co-financed short-time work ends? Some pharmaceutical companies are currently evaluating the impact of short-time work on sales. The example is more characteristic than it appears. Short-time work compensation does indeed primarily support companies whose costs are primarily wage costs – and this creates incentives to delay digitalisation. However, the structural policy effect of short-time compensation is more than unclear. After all, it also creates room for manoeuvre to drive digitisation forward. It enables companies to replace human labour without having to bear the full costs of the parallel phase of human and machine labour. It defers the need for layoffs until it is clear whether digital automation will work. It also makes transparent (to a certain extent) how large the losses due to non-work are. If they are low, the rationalisation of jobs becomes an issue. Short-time work compensation can therefore be used by companies to test the effect of rationalisation. Whether this happens is difficult to decide from the outside. Similarly, other provisional arrangements could be just facades behind which business models are being rethought. We don’t know who is doing nothing and who is just reinventing themselves.
Conclusion: The potential for radical innovation is great
There is so much inefficiency and irrational assumptions “in the system” right now. This makes disruptive change as a result of Covid-19 very likely. A few will be able to hold on to customers with plenty of time and make a virtue of their provisional arrangements marketing-wise. For the rest of those unwilling to transform, there will be little to hold on to. And: “crisis solutions” will probably be the “Next Big Thing” of the IT economy. Digital technology solves distance problems, can bring together what belongs together and elegantly take over many challenging organisational tasks. The important thing to remember is that it is not about digitalisation per se, but about digitalisation as a means to an end: solving problems and transforming the way we do business.
Part 2: Part 2 analyses concrete transformation examples from the business world. Part will be published on 28 August 2020. Part3: Part 3 formulates recommendations for companies on how to deal with the health crisis in the coming months.
Many thanks to all those who contributed to the creation of this article. These are in particular Siegfried Kolnberger, Andrew Kresch, Tine Melzer, Reinhard Starka, Paolo Vanini and Anne-Careen Stoltze-Siebmann.
- Christian Madjsberg: Sensemaking – What Makes Human Intelligence Essential in the Age of the Algorithm, Little, Brown, and Company, 2017.
- Richard Sennett: Handwerk, Berlin Verlag Taschenbuch, 2009.
- Peter Thiel, Blake Masters: Zero to One – How Innovation Will Save Our Society, Campus Verlag, 2014.
- Vfa: Therapeutic elements against the coronavirus infection Covid-19, www.vfa.de (28.7.2020)