A textbook lesson on disruption
The game-changing Brexit referendum
Mention “disruption” and the conversation often defaults to technology. As in, what new and emerging technologies are both upending and changing what’s possible for business? That’s an important story. But when it comes to disruption, it’s not the only story. Disruption also occurs when the conditions or assumptions that underlie a company’s business success change—and change quickly. A textbook example? The shock and aftershocks brought about by the Brexit referendum.
- Were we prepared for the vote?
- What's the lesson?
- What are the challenges?
- Where's the upside?
- What can we do now?
We knew the vote was coming, but were we prepared?
On 23 June 2016, the British people voted to leave the European Union (EU). Even as the votes were counted, most British citizens, United Kingdom (UK) government leaders, world leaders, and interested observers thought the Remain vote would win the day. The next morning, the Leave campaign’s 52 percent victory was met with both disbelief and alarm.
Some consequences were immediate: The resignation of the British prime minister, the fall of the British currency, a tumble in the equities market, and the subsequent challenge to the opposition leadership. However, the long-term consequences won’t surface until the UK actually leaves the EU. The impact is huge, the uncertainty, unprecedented.
Business leaders were forced to confront a situation that few had taken seriously.
What’s the broader lesson for business leaders?
Certainly, the Brexit referendum is important in and of itself. This is particularly true for companies with investments, people, and exposure in the UK, as they face unparalleled disruption and a reorientation to a new set of trading relationships.
But Brexit also offers a broader lesson: Geopolitical, geoeconomic, and international issues beyond our control can suddenly disrupt conditions that had only yesterday seemed like safe bets, and the circumstances upon which we make decisions on how to compete and win in the marketplace can shift in abrupt and unexpected ways.
What are the immediate and long-term challenges?
Brexit brings two challenges to the fore: The first and more immediate challenge is how business leaders should react to this prolonged uncertainty. There is no precedent to know what this transformation will look like. Equally as challenging is determining how long it might take, as estimates for the transition range from at least two to 10 years. Without that knowledge, it’s hard to make strategic decisions confidently.
The second and longer-term challenge for business leaders is how to better anticipate and manage strategic surprise. It’s one thing to acknowledge that the world changes quickly and that events in distant markets may have unexpected consequences on strategic commitments. It’s another to create capabilities that can help companies be better prepared and more resilient when those surprises occur.
Because only time will tell what the Brexit vote really means. Is it a domestic political story confined to the UK? Or might it signal a broader retreat from globalization and a withdrawal from economic trade relations that have been developed over the last 60 years? If the latter, it could potentially trigger a cascade of instability—not only within the EU, but also with the EU’s trading partners around the world.
So where’s the upside?
At the moment it’s difficult to know where opportunities may lie, or how resilience and preparation helps you deal with uncertainties and unexpected events, in turn powering performance. But sudden change means that advantage can be seized by those who are ready to act. For example, there are already opportunities where companies can acquire valuable assets that have suddenly dropped in price.
There will also be opportunities for companies that can identify and take advantage of circumstances more quickly than others. Because when sudden and unexpected change occurs, there are two dominant responses: denial and paralysis. Both are natural tendencies but they do nothing to help a company gain or maintain competitive advantage.
The upside, therefore, may be found for those organizations that can mobilize before the dust settles. Companies that can move beyond denial and paralysis, recognize the many variables in play, and develop a plan of attack should be better positioned in the evolving UK and EU marketplace. Companies that sit on the sidelines may see opportunity pass them by.
A call to arms: What can we do now?
Brexit is a call to arms for business leaders who are concerned about where they see growth and opportunity and how they win in a global marketplace. This call can be answered with a commitment to:
- Look out into the world beyond our control
- Scan for changing circumstances
- Rigorously explore, aggressively question, and methodically review how those circumstances could threaten the fundamental assumptions of how to go to market
Every strategy and strategic commitment is built on assumptions about how the world works. What Brexit has shown us is that leaders must create the capacity to take nothing for granted because circumstances can, literally overnight, change the game, and upend the strategies they have in place. And the resulting consequences may take years to resolve.
Business leaders can’t singlehandedly make the world more stable. But they are in a position to anticipate, adapt, maneuver, make decisions, and adjust course as needed to help their organizations become more resilient. They also have scenarios, simulations, and other tools at their disposal to support and accelerate this process.
Brexit isn’t the first big surprise that organizations have had to manage, and it won’t be the last. How are you preparing for disruption, wherever it may come from?
If you’re interested in learning more, please contact one of our leaders.