With the triggering of Article 50 occurring on 29th March 2017, the vast majority of companies, both international and UK registered, conducting cross-border trade will be nervously anticipating how to best mitigate risk. How can they act now, using practical and effective commercial foresight, to get ahead of competitors?
The Brexit crystal ball
I cannot envisage many entities escaping exposure to the chaos and confusion from seesaw negotiations. This exposure is likely to manifest in of one of 3 ways:
- Organisations find themselves potentially able to secure an opportunity from Brexit
- Organisations find themselves exposed to the overall net cost of Brexit
- Organisations find themselves exposed to both and must prepare for a balanced portfolio of initiatives requiring rapid decision making to preserve or increase shareholder value
The smart executives are building regulatory resilience to preserve shareholder value. They are achieving this by creating sectoral influencing groups to embed their requirements into the negotiation teams and developing channels for insight.
The really smart executives are reshaping their risk governance models to reap rewards for adapting their business models and reinventing themselves with a view to securing competitive advantage within or outside the EU.
Organisations that will be robust in the face of Brexit uncertainty are those building early warning foresight modelling to react instantaneously to negotiation outcomes. This approach will allow them to position themselves effectively, take swift advantage of evolving opportunities, and secure the necessary lead times for all eventualities.
They are creating specialist and dedicated Brexit teams wholly accountable to the executive with mandates to develop innovative business models as the landscape changes. Some focussed on protecting products, services and resources, others seeking insight arbitrage, to be able to see what others can’t. These teams are already demanding large-scale resources from the executive to ensure they can move quickly to secure those opportunities that evolve from Brexit.
The future planning carried out by these teams is vital. Following the triggering of Article 50, many of the accepted premises of doing business in the UK and Europe will cease to exist. Changing political forces within the EU and beyond will lead to a widespread re-evaluation of the way in which trading relationships are considered by both political and business leaders. As pre-existing mechanisms are dismantled, and the structural landscape becomes increasingly murky, organisations will need to be agile and responsive to ensure the future nature of their business adapts to the new environment and all opportunities are fully explored.
I believe Brexit will be the catalyst for organisations to perform a root and branch review of their business models to identify how agile they are in decision making and executing change at pace.
However, my concern is that this could rapidly lead to a proliferation of sector-wide cost reduction programmes badged as agile transformation.
I believe aggressive cost reduction programmes (however they are dressed up), achieved through budget ‘haircuts’ and headcount reduction will not deliver the rejuvenated, dynamic and commercially resilient workforce necessary to make a success of Brexit.
Cost efficiency will be crucial to drive and embed agility and free up scarce resources. However, if it diverts the focus of leaders who become embroiled in large, complex and slow change programmes – 60%(1) of which fail – undoubtedly, the organisation will be travelling in the wrong direction.
Traditional cost reduction programmes are not sustainable and lead to a cyclical outcome lasting 2-5 years. Several years after declaring success prematurely, the business will experience the return of high operating costs because behaviours and investment decision making based on new priorities are not clear or compelling. Nor are they understood, resulting in the floodgates opening once more, with leakage across all areas that were previously deemed efficient.
With the immediate impacts of Brexit upon us, but the long-term repercussions as yet unknown, the question now is how to redress the consequences of taking the wrong path. Executives could quickly find their options seriously limited and Board and shareholders asking themselves: How did we miss out on the opportunities of Brexit?
Commercial foresight with dynamic decision making will be the critical new battleground for competitive advantage in the next 10-20 years
Complex change programmes are not the right path for Brexit. They will lead to long term failure because they miss the principle of adaption and reinvention. Innovation supported by dynamic risk taking is an approach we used to be great at as a nation, but haven’t really had to embrace over the last 40 years inside the EU.
Strong leadership is now required to prevent teams navigating down the wrong path. Organisations should turn to mobilising workforces to embrace dynamism, simplicity, collaboration and frontier thinking – key capabilities that will place organisations on ‘war footing’, enabling them to execute mandates for change at pace with rigour and resolve
Here are 4 solutions that organisations must consider to ready themselves for Brexit and beyond:
- Build ‘executive alignment’ and consensus to focus and prioritise decisions in order to build commercial resilience whilst exploring options to reinvent and adapt in line with a new Board appetite for risk.
- Develop an early warning capability to model the ‘Cost of Brexit’ to ensure all opportunities and risks are instantaneously monetised so that executive teams can rapidly determine where investment priorities lie and where scarce resources should be focused to optimise shareholder value.
- Create a ‘single investment currency’ or language, a new unprecedented and complete realignment of the way organisations value and prioritise both commercial opportunity and risk
- Build ‘commercial capability’ across budget holders with a behavioural framework that is underpinned by the principles of rapid and dynamic decision making wholly aligned to the new executive priorities.
Given the dynamic nature of the negotiations and outcome, professed or otherwise, the above thesis can bring benefits in any event through its self-evaluation and innovative alignment to the real business environment. Indeed, this week’s Bank of England latest scenarios for testing the biggest banks to weather dramatic changes during Brexit negotiations is a timely reminder to all businesses of the potential volatility that can throw up opportunities from this immediate phase.
It could be said that too many directors and politicians across the UK have yet to engage with the present and future from the referendum result and are behaving like victims that still can’t accept it’s time to move forward and embrace what can be an ‘opportunity of a generation’. If they don’t take swift action, they will be asking themselves,
“How did we miss out on the opportunities of Brexit?”
I say don’t miss out. As soon as your early warning system flashes GO, GO, GO, mobilise your leaders and prepare your workforce to move rapidly on multiple fronts, executing mandates at pace with rigour and conviction in order to secure the opportunities Brexit presents.
For aspiring frontier leaders, revisit your appetite for risk, have courage in your conviction and reinvent yourself by building commercial foresight that allows you to see what no one else can. Unleash an aura of ‘Churchillian spirit’ and steer your organisation to secure those global opportunities ahead.
Jason Box is an independent consultant specialising in performance improvement and commercial modelling and can be contacted via email: Jason.firstname.lastname@example.org.