Business Transformation in the Covid 19 Crisis (2): How to Change
Companies can use the health crisis to optimise their business models. But they can also develop new business models that address newly emerging needs or benefit from the increased acceptance of online solutions Part 1 outlined why the economy will change significantly as a result of the health crisis. There is a high degree of heterogeneity among companies in terms of starting point – cafés cannot be digitised, but the business meetings that take place there can – and in terms of readiness for transformation. In all sectors, companies are planning to replace human tasks behind the façade of short-time work. In the service sector, some have already radically transformed their business. At the same time, however, the majority of companies assume continuity. Figuratively speaking, these companies look at the waiters in the café and overlook the business people among the guests. Such a juxtaposition of accelerated change for the few and non-change for the many creates a business environment in which disruptive change is likely.
Now established good practice for large companies is to adopt company-wide health management (Höltl 2018). Remarkable successes have been achieved in the past in reintegration after long periods of sick leave. The pioneers of such developments now rely on the concept of “test, test, test”. In this way they increase resilience and save money. It remains incomprehensible why this practice is not widely copied. In marketing and sales, reductions to the services actually required by customers are promising. If multimedia online documentation and call centres with organised knowledge management take the place of product advertising by field staff (in B2B) or salespeople (in B2C), this can greatly improve the quality of information. There are considerable transition risks, but the last few months were the ideal time for such a change due to the lockdown and short-time work. However, even for innovative companies, this “opportunity” usually came as such a surprise that they only developed the necessary concepts for it during the crisis. To this end, new transparency concepts for e-commerce are currently being developed, specifically, for example, in relation to sustainability. The “objectification” that this seeks to achieve additionally calls into question personal product advertising by people. Surprisingly, successful “limitations to the essential” can be observed in a very concrete and real way in lobbying. When it comes to preparing good solutions with representatives of several stakeholders, online meetings save a lot of time and increase the willingness to participate. The key people are simply more easily available. Online lobbying is therefore not only more efficient in some areas, but also more effective. Physical meetings are not replaced, but reduced and upgraded. It is noticeable that some of those involved are now uncertain about the significance of physical meetings. They perceive participation in important events, which used to be a matter of course, as a time-consuming activity and cancel and cancel participation several times. These fundamentally positive approaches to business change are contrasted with worryingly negative patterns of behaviour. A typical pattern in industry: short-time work has ended in production, but continues in R&D and the patent department. Anecdotal quote from a manager: “50% working time means 25% performance.” All in all, unfortunately, many people limit themselves to what is easy to do. Services are geared towards customers with a lot of time on their hands. Innovations are put on the back burner in favour of production. Managers practice change management-as-usual. As long as everyone behaves this way, everything stays the same. But if too many people understand and seize the new opportunities, the markets and the economic future of entire countries will change. The result will be productivity growth. It is therefore high time to drive the digital transformation forward energetically – much faster than it has seemed sensible so far!
The drivers of transformation
Digital transformation is not fundamentally new – old questions revive it:
- How do people live and what problems do they have?
- How can I generate value for a significantly large group of customers through new services or products?
- How can I focus the interaction of everyone in the company on creating this value? (see e.g. Christensen 2017)
There are new answers to all three questions, because digitalisation has changed our lives and gives us new tools to solve our problems. The health crisis is now forcing us to practise social distancing and to realise tracing of contagions – if possible while preserving privacy. This opens up promising fields of innovation. New services can be developed especially where clients face the following challenges:
- Too little time to deal with the Covid-19 related slowing down of life (e.g. people with high workloads or/and high performance pressure)
- High pressure to change in order to survive the crisis economically (e.g. sports clubs with government restrictions on spectator numbers)
- Explicit need for consistent social distancing (e.g. people from risk groups)
- Need to keep contagion rates low (this applies not only to the state, but also to individual companies – a critical role is played by tracing while maintaining privacy to a large extent)
- Great difficulty in maintaining a good mood, high motivation and actual performance among employees in the current situation (e.g. in departments of companies with short-time work)
- Individual excessive demands due to the additional requirements in the crisis (e.g. parents in the case of school closures
Promising fields of innovation also arise from people or institutions accepting practices that they have previously rejected, and from an increased interest in digital relationship management:
- Online service delivery (e.g. blended care in health care with a combination of on-site appointments and telemedicine)
- Online information for relationship management (e.g. visual insights into production on e-commerce platforms)
- Networking at a distance (e.g. round-table discussions conducted online)
- Further education through online courses (especially distance education for people on short-time work)
- Involving experts who are not physically present in service provision (i.e. all forms of remote intelligence in dealing with acute challenges, e.g. complex diagnoses in rural hospitals or in technical workshops)
The biggest challenge
If we want to develop solutions for the challenges listed above in the short term, this requires functioning cooperation within the company. This is the biggest challenge. Many employees cannot imagine helping each other all the time. Besides winning teams in sports, good music ensembles show how to focus the interaction on the customer’s benefit (in this case the unique sound experience in the audience). Despite the apparent importance of the conductors, the singers and solo instruments set the pace. When one of the leaders in the orchestra starts a solo, the partner on the podium takes over the leadership tasks. And if the conductors conduct the wrong piece, the orchestra spontaneously organises itself. Apart from that, orchestras elect their members and leaders. And they change conductors from concert to concert. Because in the end it’s all about one thing: the beautiful sounding and fading of music. Unfortunately, this kind of purpose-oriented cooperation is rare. Apart from sport and art, it can almost only be observed where human lives or billions are at stake. In IT, agile instruments have therefore been developed that minimise frictional losses (see e.g. Appelo 2012). In experimental economics, instruments closely related to agility have also been successfully tested to establish trustworthiness in companies (Fehr 2018). Both – trustworthiness and low frictional losses – are the cornerstones of effective collaboration. These are most urgently needed for successful transformation projects. Companies should therefore rely on the aforementioned tools from the IT economy and experimental economy when it comes to responding to the health crisis. In doing so, they must not let themselves be distracted by the fact that 80% of computer scientists and economists deeply reject these instruments. When a new world emerges, reason counts more than mainstream opinion.
Part 3 will be published on 18 September. In it, recommendations are formulated 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 Matthias Hofstetter, Tine Melzer, Wolfgang Stummer and Anne-Careen Stoltze-Siebmann.
- (Appelo 2012) Jurgen Appelo: Management 3.0 – Leading Agile Developers, Developing Agile Leaders, Addison Wesley Longman, 2012.
- (Christensen 2017) Clayton M. Christensen: Better than Chance – “Jobs to Be Done”, the Strategy for Successful Innovation, Plassen Verlag 2017.
- (Fehr 2018) Ernst Fehr: Beliefs, values, and business success, Video on Youtube, 2018.
- (Höltl 2018) Eva Höltl: Wiedereingliederung nach langer Krankheit – ein arbeitsmedizinischer Prxisbericht, www.billrothhaus-at 2018