It has been a tough few years for business people. Lockdowns paralyzed entire industrial sectors around the world, turning profitable companies into loss-making ones, while many smaller companies went under entirely. Many companies are now hoping for a return to some kind of normalcy after the COVID crisis. However, there are strong signs that things are not in sight anytime soon as the world appears to have entered a crisis Age of accelerating major crises.
Even before COVID, the climate crisis was increasingly disrupting the world (and the companies that serve it). extreme weather events. Then, just as some countries had declared their war against COVID won, the invasion of Ukraine not only reshuffled global geopolitics but also caused energy and food prices to spike dramatically consequences to a whole host of other industries.
One day there could 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 any time soon. humanity is shifting environmental boundaries to the breaking point and risk further crises – be it in the form of disease, conflict or natural disasters. Companies must therefore change the way they work. This means responding to current crises, being better prepared for future crises and, first and foremost, addressing their own role in creating those crises. With that in mind, here are three types of business models that companies should start with now.
1. React to crises
Reactive business models that can react to current crises are required. Such adaptability will, of course, have a survival element, with organizations doing whatever is necessary to mitigate any negative impact on themselves. This means aligning post-crisis governance with the “new normal” rather than sticking with the old normal from before. Where appropriate, such models should also include a crisis mitigation element to address the wider negative impact of the current crisis, where possible.
It seems that fossil fuel giants like Shell and BP may be getting started. Attacked for a long time knowingly contribute the climate crisis and counteract shifts towards more sustainable energy systems, they now appear to be adapting to crisis forces. Chief among these forces is the global trend to Phasing out fossil fuel vehicles. Therefore, these companies have started to transform important aspects of their business. A first step, for example, seems to be their conversion service station operation into a charging infrastructure for electric vehicles. As they ride the waves of the climate crisis, we can expect them to make many disruptive greening changes like this one.
2. Prepare for future difficulties
Businesses also need to move away from stability-based business models and accept that business reality is now one characterized by volatility, uncertainty, complexity and ambiguity. Value propositions include the benefits a company provides, such as to its customers, employees, and community. Developing business models for this new world means creating value propositions for companies that are fit for the long term and can transform into all kinds of crisis scenarios. It also means being agile and adapting quickly.
For example, one form might be that a company offers products and services that address timeless and basic needs, such as health, nutrition, or safety, rather than short-lived, superficial needs such as those associated with fast fashion or the latest technological fads. A good example of such a business model is that of the Chinese electronics group Haier expressly agreed to an ever-changing world with the aim of “delivering products that respond to the ever-changing needs of the modern home”. For example, Haier replied to Asia’s air pollution crisis by developing an integrated air conditioner and air purifier.
Alongside this, Haier employs its unique way of working “RenDanHeYi” (or 人单合一), which loosely translates to “a single person in unity”, and makes it a collective of smaller, semi-autonomous companies, giving both individual freedom and collective responsibility towards each other self-organized micro-entrepreneurs. This makes Haier a fluid, agile and resilient organization. By operating as a network of micro-enterprises, each working closely with customers to respond to their changing needs and situations, the business can more easily evolve as each new crisis unfolds. Because of these characteristics in their business model, Haier has done exceptionally good during and after the COVID crisis.
3. Help prevent tomorrow’s crises
After all, companies can position themselves better for the future by adopting models that specifically mitigate or even prevent future crises. While COVID, the Ukraine crisis and climate change are still issues, many business models are designed to keep other things from becoming the next big crisis. For example, some companies adopt business models that promote reconciliation and peaceto prevent disruptive future armed conflicts. Examples range from building former Colombian guerrilla group members Adventure Travel Company that reveal the previously hidden side of the conflict to create coffee cooperatives in Rwanda for Hutus and Tutsis reconcile through cooperation.
Managing companies in times of accelerating crises is a challenge. However, the transformation of business models and management practices can make a major contribution to making current and future crises manageable and possibly even mitigating future crises.
Oliver Lasch is Senior Lecturer in Entrepreneurship and Innovation at the University of Manchester. (This article was originally published by The Conversation.)