Change management: preparing for the future There is no room for prediction in business, but there is for preparing for the future. In this spirit, the IMD has created the Future Readiness Indicator
Change management: preparing for the future
According to the old Danish saying, attributed to several celebrities, but likely true, ‘It's hard to predict, especially about the future.’ There is no room for prediction in business, but there is room for preparing for the future. In this spirit, the independent academic institution IMD has created the Future Readiness Indicator. By looking at the future readiness rankings of individual companies, there are many lessons to be learned for managers who, unlike their competitors, are looking to the years ahead and are willing to invest in change management.
Are you ready for the future?
For every successful Apple, there is a Rovio, Nokia, or Sega story. All three of these companies were at one time at the top of their industry in terms of awareness, profits, and penetration. But then wrong decisions - or no decisions - came and their glorious days were over. Even if they survived, they were forced to cede their former territory, which had once been a source of huge profits, to others. At one point, corporate crisis management might have helped, but that is all in the past.
The present was working against them, and the future was not their friend.
Apple itself has experienced the heavy-handed intervention of change management. A competent old-new CEO, with an eye on future technology users, pulled the troubled, once better-off company out of the mud, and we see the results in the profits of its products today.
The key aspect here is a sense of foresight, attention to the future, and a high degree of adaptation and adaptability, claims the IMD. The organisation's Future Readiness Assessment shows how well individual firms can build new capabilities. The term ‘pivoting’, familiar to the start-up world, is also used: it refers to adapting to a new situation, changing direction, redesigning, and setting new goals.
These ideas seem almost cliché after a pandemic that occurs every hundred years, a European frontal war that triggered the disintegration of the post-WWII order, an energy crisis, the rise of a new superpower, or the emergence of a global climate threat. Yet many businesses, even larger corporations, only want to deal with the OKRs of the next quarter (Q) at most. Profit now, they say.
The IMD is showing that this is not a wise approach, and as a counterexample, it presents its list of companies that are ahead of the pack in terms of future readiness, the Future Readiness indicator.
The IMD method
The research institute evaluates based on publicly available data. Examples include company websites, annual reports, business models, or even third-party data. The ranking is based on seven equally weighted factors: financial fundamentals, investors' expectations for future growth, business diversity, employee diversity/ESG, R&D, early results of innovation efforts, and cash and debt.
But what are the companies that score well on the Future Readiness list? They have the resources to build new capabilities, prepare for future change, seek profits, create their strategy, anticipate change, and sometimes make quick decisions. They operate according to very well-defined principles, but they also ‘keep their gunpowder dry’, i.e. they are open to experimentation and new ways of doing things.
Often this manifests itself in top-down change, with the role of CEOs being more important than ever (while communication within the company should also leave channels open for bottom-up projects).
An apparent contradiction and how to resolve it
How can a company be successful quarter after quarter while building long-term change into its operations? How can you maintain the status quo and invest in innovation, which often involves risk?
Well, according to IMD, the solution here is self-evident: firms need to excel in both short-term adaptation and long-term innovation focus. The IMD has named this idea ‘Performance and Transformation’, indicating the need for a proactive approach to looking to the future and responding to the changes of today.
This is a very difficult task according to the ranking company. Yet, the list itself is proof that more and more companies can do this, and do well in the future-proofing survey for years to come.
Lessons for 2024
Looking at IMD's latest Future Readiness list, we can immediately see the practical application of the principle, i.e. the ‘secrets’ of truly future-ready companies.
In the financial sector, for example, VISA and Mastercard are at the top of the list thanks to their innovative and open policies, while in the beauty sector, L'Oreal is leading the way with its investments and developments in beauty technology. In the car sector, Chinese electric car manufacturers such as BYD, which is building a factory here, are already giving Tesla a run for its money. It is interesting that even a long-established industry competitor with little consumer habits, such as Coca-Cola, can be considered Future Readiness with its personalised digital solutions.
Different companies are not only competitors in the spirit of capitalism, but also inspiring competitors for each other. The list also includes CoinBase, active in crypto, and PayPal, a digital payment service that is outsourcing banks. It is precisely the latter that have forced the old, slow-turning battleships of the industry, the legacy financial institutions, to find and incorporate the role of neobanks and cryptocurrencies in their operations. In other words: to innovate.
There are no salvation models: each leader must consider the situation of his or her firm when using the numbers to initiate new processes to sustain a vision.
Interim Ltd. can bring an external perspective to the operation of a company, providing a quick decision later. After a thorough diagnostic, our experienced and dedicated senior interim managers can prepare your company for a successful future by spearheading change management.
Change can sometimes feel painful, but good change management can create a healthy organisation.