The past few years have been difficult for people who own or manage a business. The shutdowns shuttered entire industrial sectors around the world, turning profitable businesses into loss-making businesses, while many smaller businesses went bankrupt.
Many businesses are now hoping for a return to some sort of normalcy after COVID. However, there are strong signals that a return to the way things were is not on the cards anytime soon. The world seems to have entered an era of great and accelerating crises.
Even before COVID, the climate crisis was increasingly disrupting the world with 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 rise dramatically, having great ripple effects on an entire host. from other sectors.
One day there may be a moment after COVID, after the Ukraine war and even after the climate crisis. But it is unlikely that there will soon be a point of general stability. Humanity is pushing environmental limits to the breaking point, risking further crises, whether in terms of disease, conflict or natural disaster.
Companies must therefore change the way they operate. This means responding to current crises, being better prepared for future crises, and addressing their own role in generating these crises first. With that in mind, here are three types of business models companies should start adopting now.
1. Respond to crises
What is needed are responsive business models that can respond to the crises at hand. Such adaptability will naturally have an element of survival, in which organizations do whatever is necessary to mitigate the negative effects on themselves.
This means aligning management practices with the “new normal” after the crisis, instead of keeping the old normal from before. Where relevant, these models should also include an element of crisis mitigation, addressing the broader negative effects of the current crisis where they can.
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It looks like fossil fuel giants like Shell and BP could start doing just that. After long being attacked for knowingly contributing to the climate crisis and thwarting changes to more sustainable energy systems, they now seem to be adapting to the forces of the crisis. These forces include, but are not limited to, the global trend towards the phasing out of fossil fuel vehicles.
These companies have therefore begun to transform key aspects of their business. A first move, for example, appears to be to reorient their gas station operations towards electric vehicle charging infrastructure. As they ride the waves of the climate crisis, expect to see them make many disruptive ecological changes like this.
2. Be prepared for future difficulties
Companies must also move from stability-based business models to accepting that business reality is now characterized by volatility, uncertainty, complexity and ambiguity.
Value propositions encompass the benefits that a company provides, for example to its customers, employees and the community. Building business models for this new world means establishing suitable long-term value propositions, which can turn into all kinds of crisis scenarios. It also means being agile and quick to adapt.
One form this could take, for example, is for a company to offer products and services that meet timeless, basic needs like health, food or security, rather than fleeting superficial needs like those related to fast fashion or the latest technological trends.
A good example of such a business model is Chinese electronics company Haier. The company is explicitly attuned to an ever-changing world, aiming to provide “products that meet the ever-changing needs of the modern home”. For example, Haier responded to the air pollution crisis in Asia by developing an integrated air conditioner and air purifier.
At the same time, Haier uses its unique “RenDanHeYi” (or 人单合一, which loosely translates to “one person in unity”) way of working. Haier is essentially a collective of small, semi-autonomous businesses, thus 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 circumstances, the business can scale more easily with each new crisis. Due to these characteristics of its business model, Haier performed exceptionally well during and after the COVID crisis.
3. Help prevent future crises
Finally, companies can better prepare for the future by adopting models that specifically mitigate or even prevent future crises. While COVID, the Ukraine crisis, and climate change are still lingering issues, many business models have been designed to prevent other things from becoming the next big crisis.
For example, some companies are adopting business models that promote reconciliation and peace, in an effort to prevent future disruptive armed conflicts. Examples range from former members of Colombian guerrilla groups who set up adventure travel businesses that show the dark side of conflict, to coffee cooperatives in Rwanda designed for Hutus and Tutsis to reconcile through collaboration. .
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Managing businesses in an era of accelerating crises is a challenge. However, transforming business models and managerial practices can go a long way toward making current and future crises manageable, and perhaps even mitigating future crises.