Leading in an Era of Crisis-laden and Disruption-driven Business Environment

Sattar Bawany

Introduction: The Current Realities

The world is facing significant disruption and increasingly urgent global challenges affecting individuals, families, organizations, governments, and society. This volatility, uncertainty, complexity, and ambiguity (VUCA)-driven age of disruption brings new complexities, opportunities, as well as risks for businesses (Bawany 2020). The potential for crises has intensified, driven by rapid technological change, and amplified by societal expectations linked to environmental, social, and governance (ESG) phenomena (Bawany 2023).

Throughout the COVID-19 crisis, we’ve seen an acceleration of these trends. We have seen how some businesses have been successful in looking beyond the pandemic and into recovery, while others have failed and many perished, especially the small and medium enterprises (SMEs).

The global outbreak of coronavirus (COVID-19) has created significant challenges for leaders at all levels in industries across the world. A post-pandemic era will require us to embrace new definitions of leadership. The disruptive and seismic effect of the pandemic was felt by organizations across diverse industries. Leaders and employees are all asking far-ranging questions about the future: What will be the legacy of the pandemic? What kinds of leadership skills will they need to successfully navigate the various challenges in a disruptive and digital-driven workplace? How do organizations balance business sustainability and risk management while supporting the needs of the various stakeholders including their employees?

Those who have been leading organizations for some time will attest to the fact that disruption, in its various forms, can happen at any time, in any market segment, or any industry. The reality is that its impact on traditional organizations can be disastrous if not managed effectively. It has and will continue to fundamentally change the way we live and work in decades to come. A leader must see beyond the horizon to anticipate these possible disruptions and develop relevant strategies to mitigate the associated risks (Bawany 2019).

Today’s global disruptions (e.g., geopolitical tensions, supply chain bottlenecks, technological innovations, and climate change) and economic headwinds (e.g., soaring inflation, rising interest rates, decelerating growth, and currency fluctuations) have created a complex, once-in-a-generation, competitive environment with significant variations across geographic areas and sectors.

Navigating this unprecedented complexity requires business leaders to develop a dynamic perspective not only on the most likely scenarios for how their operating and economic environments will evolve but also on the distinct opportunities and risks these scenarios present for their organizations (Bawany 2018a).

To achieve organizational high performance in an era of constant disruption and crisis, both agility and resilience are important (see Figure 1).

Figure 1: Importance of Agility and Resilience in Disruptive Environment

Agility refers to the ability to make a rapid change and achieve flexibility in various aspects of the operations, in response to changes or disruptive events in the external environment. It can also be viewed as the capacity for responding with speed and flexibly and decisively toward anticipating, initiating, and taking advantage of opportunities and avoiding any negative consequences of change.

Resilience refers to the ability to anticipate, prepare for, and recover from disasters, emergencies, and other disruptions, and protect and enhance workforce and customer engagement, supply network and financial performance, organizational productivity, and community well-being when disruption occurs.

It can also be viewed as the capacity for resisting, absorbing, and responding, even reinventing, if necessary, in response to fast and/or disruptive change that cannot be avoided such as “black swan” events (Taleb 2007).

The war in Ukraine marks a devastating shift across the worlds of society, geopolitics, and business—they will not be the same for a long time. Yet, the war is only the latest in an increasing number of unexpected disruptions impacting the global economy, and it won’t be the last.

Over the past 20 years, successive economic and geopolitical crises have quickly sent shockwaves throughout the world, affecting every country, economy, trading relationship, and business operation. Amid continuing uncertainty around how the war in Ukraine may end or escalate, business leaders are faced with the challenges of navigating in the dark, accelerating already urgent transformation plans, and building organizational resilience for impacts that may yet strike.

The disruptive events of the past often have had short-term business impacts as leaders seek to return to a state of normalcy. However, we are now in an era of cumulative and extreme disruption that should more sustainably change future decision-making. For example, some immediate consequences of the war in Ukraine could be medium- to long-term sanctions and countersanctions, commodity shortages, and supply chain disruption—so companies need to factor them in as part of their agenda.

Long-term trends already in play before both crises (the COVID-19 pandemic and the war in Ukraine) are accelerating digitalization, changing consumer and employee expectations, and causing a pendulum swing-back toward regionalization from globalization as we’ve known it. Leaders need to plan accordingly without getting stuck in the minutiae of the current moment.

The likely general redesign of business priorities from extreme efficiency and short-term profit to sustainable performance, resilience, and values affects strategic priorities. It may become more important to build a sustainable, flexible but strong business model that is fit to contribute to the solution of big societal and environmental challenges as well as to sustain shocks and disruptions than to maximize short-term gains. Business leaders should focus on strengthening organizational resilience addressing operational concerns such as supply chain bottlenecks and enhancing leadership readiness to navigate these challenges effectively to ensure sustainable business continuity.

Many of the challenges businesses are facing now echo what has transpired throughout the COVID-19 pandemic, from the initial uncertainty and initiatives to keep employees safe, to new ways of working and navigating broken supply chains.

We live in a constant era of disruption in which powerful global forces are changing how we live and work. The new world order is leading to growing challenges to globalization, geopolitical tensions, the rapid spread of new disruptive innovation, shifts in demographic forces, and the challenge of reaching net-zero greenhouse gas emissions. These trends offer considerable new opportunities to companies, sectors, countries, and individuals that embrace them successfully. They are bringing forth dynamic and innovative new players on the world stage and could give a much-needed boost to productivity and prosperity in many countries.

Leading during the period 2020 to 2023 have been extraordinary. What we are seeing is surely more than the progression of just another business cycle. The unnerving combination of a global pandemic compounded by energy scarcity, rapid inflation, and geopolitical tensions boiling over has people wondering what certainties are left (Bradley et al. 2022).

The Ukraine conflict has also caused food, fuel, and fertilizer prices to skyrocket. It has further disrupted supply chains and global trade and caused distress in financial markets. By current estimates, the war could cut global economic growth by 0.9 percentage points in 2022, as well as undermine development aid to the world’s poor (United Nations 2022a).

The six megatrends of future disruptive forces that would lead to potential crises in the coming decades (see Figure 2).

Figure 2: The megatrends of future disruptions

Taking advantage of the opportunities that these trends offer—and avoiding or taming the challenges—will require big adjustments. we sketch out the impact of these six mega-disruptive forces and what businesses can consider in achieving a balancing act toward how a more sustainable society might look like. These ideas do not amount to a comprehensive action plan and are not meant to be exhaustive.

Climate Change

According to the United Nations, the global temperature has already risen 1.1°C above the preindustrial level, with glaciers melting and the sea level rising. The impacts of climate change also include flooding and drought, displacing millions of people, sinking them into poverty and hunger, denying them access to basic services such as health and education, expanding inequalities, stifling economic growth, and even causing conflict. By 2030, an estimated 700 million people will be at risk of displacement by drought alone (United Nations 2022a).

A critical mass of the world’s largest companies and countries have now made net-zero pledges, creating a snowball effect that will encourage others to join. As net-zero rapidly becomes the standard for government and corporate commitments, it’s appropriate to stop and ask: Is net zero a sufficient tool to address climate change? How can businesses leverage net-zero emissions strategy to offer the abatement of climate risk for shareholders without abrupt disruption to near-term returns, and achieve reputational benefits for companies that serve customers or businesses that are climate-conscious? What are the significant limitations to the approach, which, if unaddressed, could easily misrepresent and undermine progress toward the goal of environmental sustainability?

The New World Order

In the world order, there is a tendency toward multipolarity, which in turn may imply realignment into regionally and ideologically aligned groups. This immediately raises questions about what multipolarity might look like in practice. According to the Boston Consulting Group research, the global economy will lose up to $10 trillion in GDP in 2025 unless governments repeal or reduce tariffs and non-tariff barriers that currently obstruct global merchandise trade, according to a new report released today for G20 governments (Anaya et al. 2020). Will the economy remain global, and will we find new workable mechanisms to cooperate beyond the economy? Moreover, years of relative moderation in international politics seem to be giving way to more political polarization between blocs. How effectively will global and local institutions and leaders adapt to, and shape, this different world order?

Geopolitical Tensions

The first geostrategic theme will be continued shifts in geopolitical power and the international system. The two-tiered world will contribute to these shifts. So too will relations among the great powers—the United States, Russia, and China—which will be somewhat inwardly focused while also competing for global influence. While these great-power dynamics are creating a multipolar system, how will the variety of middle powers play a larger role in their regions and on the global stage? To what extent will the conflict between Russia and Ukraine create further severe geopolitical and economic shockwaves with lasting effects? What are the implications if the South China Sea geopolitical flashpoint evolves into a truly global conflict?

Metaverse and ChatGPT

Across technology platforms, the key drivers of the most recent era’s digitization and connectivity seem to be approaching saturation. Yet, a set of already potent transversal technologies, particularly artificial intelligence (AI) and bioengineering, may combine to create another big surge of progress in the next era. According to technology research specialist Gartner, a metaverse is a collective virtual shared space, created by the convergence of virtually enhanced physical and digital reality (Wiles 2022). It is persistent, providing enhanced immersive experiences, as well as device independence and accessibility through any type of device, from tablets to head-mounted displays. The metaverse will impact every business that consumers interact with every day. According to Gartner, the metaverse is where a quarter of us will be working, studying, shopping, and socializing for at least an hour a day by 2026.

In early 2023, the other disruptive technology that is taking the world by storm is the rise of generative AI such as ChatGPT, which has the potential to be a major game-changer for businesses. This technology, which allows for the creation of original content by learning from existing data, has the power to revolutionize industries and transform the way companies operate. By enabling the automation of many tasks that were previously done by humans, generative AI has the potential to increase efficiency and productivity, reduce costs, and open new growth opportunities. As such, businesses that can effectively leverage technology are likely to gain a significant competitive advantage.

The big questions remain. What impact will this next wave of disruptive innovation technologies have on businesses, work, and social order? How are organizations ensuring their workforce readiness to leverage these latest technologies?

Demographic Shifts

In demographic forces, a young world will evolve into an aging, urban world, and inequality within countries may increasingly challenge the social fabric. The majority of the world’s workforce is aging rapidly while, at the same time, we see the rise of Generation Z, also known as “digital natives.” This major demographic shift is bringing an end to the abundance of labor that has fueled economic growth since the 1970s. Thanks to longer and healthier lives, many people are working well into their 60s and beyond, but the trend toward later retirement is not likely to offset the negative effects of aging populations. As the total size of the labor force stagnates or declines in many markets, the momentum for economic growth should slow. How will governments and businesses address the major challenges, including surging healthcare costs, old-age pensions, and high debt levels? How will countries, institutions, and individuals adapt to demographic changes—will we age “gracefully”?

Future Pandemics

In the wake of COVID-19, there have been calls for the world to be better prepared for the next pandemic. These calls are driven by a sense that the outbreak could have been foreseen and prevented or that the spread could have been more effectively contained, causing less social and economic disruption and averting deaths. Yet, the world tends to move on quickly, with new crises taking center stage, resulting in the now familiar cycle of “panic and neglect.” This is a concern: Although the timing and nature of the next pandemic spark are unknown, it is certain to happen. How can governments and businesses address the limitations of past efforts and the need for a more ambitious and sustained approach to preparedness? What roles do global institutions play in ensuring more financing, reform of global governance for health-related crises, and fresh thinking around global public goods?

Conclusion: Is Crisis a Threat or Opportunity?

Each of the megatrends highlighted earlier would be challenging on its own; taken together, they can seem daunting. Yet, the opportunities for the economy, business, and society that these global forces generate are equally compelling and there is indeed new prosperity for those quick to embrace them. We cannot ignore the potential challenges, chief among them the growing social inequalities that could arise as a result. As societies, we will face challenges related to the future of work as well as inclusive growth; the two are closely linked. Embracing the trends while mitigating their negative impact on those who cannot keep up and our environment is the new imperative of our era.

References:

Anaya, P., N. Blyth, R. Hanspal, M. McAdoo, S. Ramachandran, K. Ramadurai, and S. Schram. September 17, 2020. The $10 Trillion Case for Open Trade. Boston Consulting Group.

Bawany, S. 2023. Leadership in Disruptive Times: Negotiating the New Balance. New York, NY: Business Express Press (BEP) Inc. LLC.

Bawany, S. 2020. Leadership in Disruptive Times. New York, NY: Business Express Press (BEP) Inc. LLC.

Bawany, S. 2019. Transforming the Next Generation of Leaders: Developing Future Leaders for a Disruptive, Digital-Driven Era of the Fourth Industrial Revolution (Industry 4.0). New York, NY: Business Express Press (BEP) Inc. LLC.

Bawany, S. 2018a. “Leading in a Disruptive VUCA World.” Expert Insights Series. New York, NY: Business Express Press (BEP) Inc. LLC.

Bradley, C., J. Seong, S. Smit, and J. Woetzel. 2022. On the Cusp of a New Era? New York City, NY: McKinsey Global Institute, McKinsey & Company.

Taleb, N.N. 2007. The Black Swan: the Impact of the Highly Improbable. New York, NY: Random House.

United Nations. April 1, 2020a. “COVID-19: Disrupting Lives, Economies and Societies.” World Economic Situation and Prospects: April 2020 Briefing, no. 136.

Wiles, J. October 21, 2022. What Is a Metaverse? And Should You Be Buying In? Gartner Inc. Stamford, CT. www.gartner.com/en/articles/what-is-a-metaverse (accessed on November 2, 2022).

About the Author:

Professor Sattar Bawany is the chief executive officer of the Disruptive Leadership Institute LLC, New York, and the Centre for Executive Education (CEE).

Over the past 35 years, working with global clients across various industries, Professor Bawany has delivered coaching engagement as well as developed a series of professional development and initiatives designed to enhance leaders’ capabilities leading and engaging the workforce in the highly disruptive and digital-driven World-of-Work (WOW).

Professor Bawany is an astute advisor to boards and senior executives who need to know how they are perceived and want to focus on what is most important in their professional and personal lives. He has coached a range of leaders, from CEOs to senior vice presidents, and high-potential managers. His current work in organizations focuses on encouraging individual initiative and leadership from a systemic perspective to achieve clearly defined business results. His specialty is effectively linking people processes to business outcomes.

He is currently a professor of practice in disruptive leadership and digital transformation at the European International University – Paris (EIU).

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