Burn Down your Business and Imagine Rising Pheonix-like

In their speech and conversation with Stuart Crainer, the authors propound the Phoenix Encounter Method that dozens of major businesses around the world subscribe to. Research on the Phoenix Encounter method was started four years ago and today, that method is relevant for people to be able to have the strategic dialogue they need in this Covid-19 crisis. This is an unprecedented crisis -health, social, economic- and crisis is a time of not only urgent action, but also a time of need for deep introspection and reflection. Despite the pressures of the moment, leaders can also use this crisis as an opportunity to think about how they can reimagine the future. This is critical because things will be different, the ecosystem of stakeholders across the value chain from employees, customers, regulators, and investors will have changed expectations and experiences as a result of COVID-19. Before this crisis, the last two decades saw major fundamental shifts and changes in businesses, or in other words, a Firestorm Disruption- industries driven by technology, digitization, changes to platform and ecosystem business models, changes to the demographic profile of customers and employees. Firestone disruption was already there, and COVID-19 seems to be accelerating many of those preexisting trends. A problem faced in research while working with senior leaders was the legacy trap. The leaders and leadership teams were unable to bust through biases- confirmation bias, status quo bias, and looking in the blinkered review of past successes rather than imagining changed and transformed futures. The Phoenix Encounter Method aims at breaking through the legacy trap and taking advantage of Firestorm Disruption. The proposition at its center is simple- Burn your business to the ground and imagine rising phoenix-like from the ashes. This imagination then feeds into a debate of a wider range of strategic options and changes. Dozens of major businesses around the world use this methodology systematically to be able to create that wider option set, and then come up with a set of tactical and strategic activities. The Phoenix Encounter Method aims at breaking through the legacy trap and taking advantage of Firestorm Disruption. Fundamentally, this encounter method relies on a principle called radical ideation. This goes well beyond traditional scenario planning or war-gaming, to the notion of bringing as many multiple perspectives in and having a strategic debate that imagines somebody destroying your business and industry with unconstrained firepower. In the research, the unconstrained element has shown to help bust through those legacy blinker traps. The next thing is to bring that into an extreme and dramatic war gaming analysis, which is a series of debates and attack debate that imagines unconstrained devastation and forces of contemporary firepower -business models, platforms, ecosystems, technology, demographic shifts- that you would bring in to destroy the firm or organization or industry. Horizon defense follows next, that is, coming up with the immediate to short-term, medium-term, and long-term options that are available to both fortify the core of the business and release resources, and do transformational projects and innovation. Now, the opposites debate requires people with an outside-in view looking at the external environment and doing a habit which is part of the Phoenix attitude of leadership, which we call proactive scanning, that is, looking well beyond industries and geographies for ideas that are emerging elsewhere, which can be used for both attack and defense, and then engaging the debate around that. A discussion about the future and about being the Phoenix leader, who is proactive and looking forward, is incomplete without talking about technology. Technology is bringing about some of the fiercest disruptions that we have ever seen. We've always seen technology-based disruption since the discovery of electricity, or the invention of the steam engine, but we have never seen the scale, the scope, and the speed of how quickly things are changing in today's world, which is why the Phoenix leader, the proactive leader, has to have a very proactive ability and a scan to see what's going on, and then understand what this means to them. Phoenix leaders need to be proactive in thinking about ways in which these technologies can be exploited, perhaps in different combinations to give you a strategic advantage, before somebody else comes in and disrupts the industry. To make sense of the world of technology, it can be categorized into two buckets. The first bucket is what we would call indispensable technology or essential technology, which comprises three technologies- cloud computing, artificial intelligence, and big data and analytics. These three technologies are considered as the backbone of what is enabling all other technologies to accelerate and to disrupt businesses out there. A Phoenix leader needs to realize that these technologies are not merely meant to give you an advantage that can help lower costs but can also be used in a way to give you a strategic advantage, like helping create a new business model or new forms of engagement with the customers. For example, Hippo, a home insurance company, takes data from public records, combines that data with geospatial satellite data, analyzes it using smart algorithms, and can provide insurance products and services to its customers in a matter of minutes, which is unheard of in this industry. This is how an old legacy industry like Hippo leveraged technology to create strategic advantage and not just to lower cost. Based on these three basic technologies, there are a bunch of targeted technologies that are being developed. These are the Internet of Things, autonomous vehicles, 3D printing, robotics, blockchain, et al. A big misconception around these technologies is the idea that they are locked into some silo of an industry, and thus cannot impact other industries, like the service industry. However, when used in a combination and perhaps even a creative combination, these technologies can have a disruptive impact on various industries. Hence, a Phoenix leader needs to keep their eyes open on every technology out there. Local Motors’ shuttle bus called Olli is an example of a creative combination, which is a result of combining 3D printing, and autonomous vehicles, and electrification of vehicles. This 3D printed autonomous electric shuttle can be seen in college university towns and theme parks taking people from one place to another. Thus, by combining technologies in a unique way, Local Motors, a new entrant, was able to enter and challenge the status quo of a legacy industry that is not very well known for newcomers coming in. Therefore, Phoenix leaders need to be proactive in thinking about ways in which these technologies can be exploited, perhaps in different combinations to give you a strategic advantage, before somebody else comes in and disrupts the industry. Another example that highlights this point further is that of Alibaba, one of the biggest established companies in the world right now. This company realizes the need to constantly be proactive and ahead of the curve, and so despite their success in online business, Alibaba has also recognized the importance of physical presence in customer engagement. Thus, they started getting into the physical retail store-based business. But instead of entering the legacy retail store business, they started the Hema stores or what is known as the new retail concept, essentially creating a seamless experience for customers between their online and offline shopping, leveraging their digital capabilities, and providing personalized recommendations. If something was not available at the store, people could still order it and get it delivered in their home within a matter of minutes or at best a few hours, using the last mile online delivery network that Alibaba had already built. And the kitchens are powered by robotics in the back to make sure that the cost structure is well maintained. The emerging markets always have a lot more problems than developed markets, but the digital and social platforms and technologies allow them to pole vault over their infrastructure deficits. The interesting part is that this concept of retail that they created not only helped them capture more than 10 million customers in the retail world in China, but also helped them provide digital retail as a service to big brands like Starbucks. It also helped them provide digital retail as a service to more than 10 million mom and pop retailers in China, which exploded their ability to have a footprint in the retail market in the world. Today, Alibaba is not considered just a player in China, it's becoming the platform of the world. It has exact information on who in the world needs what and who in the world has that. And they can connect those dots to essentially become the matchmaker for the world. Even during the COVID crisis, this digital ability that Alibaba had created, helped them manage the COVID crisis amazingly. When the entire country was gone into lockdown, their digital capabilities helped it survive during the lockdown period, which we know many parts of the world were struggling with or are still struggling with. Again, this further drives the point that Phoenix type leaders can make sure that their companies stay ahead of the curve by being proactive, and understanding how technologies and business models can be combined. This is the supply side of the story, which deals with technology, the adopters of the technology, and what they can do to change their business models. To understand how new ecosystems will be formed, especially as we come out of this crisis, the demand side of the story is equally as important, which deals with consumers, how they are going to interact with the technology and what do they want from companies. More important, if you want to be a Phoenix leader, it is important to know what you need to do to make sure that your organization is ahead of the curve, rather than scrambling to catch up. While it is important to know the potential of combining technologies for creating new ways of doing business, it is also important to pay attention to and be ready to respond to the changes happening in the world of consumers. The first thing that is changing the way consumers think is the reality that we live in, which is the digital reality. Today, there are more devices than there are people on earth, which means the world is more connected than it was ever before. This implies that unlike in the analog world, in today's world, information flows freely. Moreover, this information flow is no longer controlled, which has had great implications. Firstly, it has led people to ask if they can reimagine the future, if they need to keep doing things the same way or if they can do it differently. It also then leads to the next question, which is, beyond just doing things differently, the new world of digital and social allows you to do different things than you could do in the analog world. This can be better explained through the following two examples. The first is a company called Glossier, a cosmetics company focusing largely on women. Unlike other traditional cosmetic companies that are very brick and mortar and detail-oriented, Glossier does everything digitally, through social media. This is not limited to the developed world. A company in India called Trringo is in one of the oldest industries- agriculture. One of the characteristics of those markets is that farmers have extremely small land holdings, and cannot even think of buying mechanized equipment like tractors. Mahindra & Mahindra, one of the world's biggest manufacturers of tractors, offers to rent out not only tractors but all kinds of farm equipment through the Trringo app, and deliver it straight to the farms. They also send a driver along with a tractor if the farmers don’t know how to drive. These organizations have leaders with the Phoenix attitude. They can scan technology and figure out how digital technologies can disrupt their industry. Thereafter, they also figure out how they can leverage these technologies to skill their business. COVID has completely accelerated this process of digital transformation. As Satya Nadella said, the level of digital transformation that has in the past two months would have probably happened in two years otherwise. The question for leaders now is what are they doing in terms of looking at this for renewal and transformation? On the demand side, customer satisfaction has become a lot more difficult today. The digital and social are combined to create a new way of doing business now, and the people who love it are the consumers. In the analog world, consumers strictly had a preference for what products they wanted to buy, and if you built it, they would come to them. But in the world of platforms and ecosystems, consumers have a preference for not only what they want to buy but also how they want to buy and how they want to consume. Thus, the product is not enough to satisfy consumers. The beauty of the platform ecosystem model is that it can do this all with a one-stop shop. This one-stop shop reduces, if not eliminates all the frictions and transactions of the analog world. More importantly, this one-stop shop creates network externality effects that allow these platforms to run their businesses using economic models that are completely different from the analog days. And lastly, it is such a powerful model because a one-stop platform ecosystem has access to a wealth of data. The possibilities of the data are best illustrated by this company called Ping An, which was an insurance company that completely digitally transformed their business to an extent that today they have expanded to banking, finance, healthcare, entertainment, housing, auto and have a whole peer-to-peer setup. Ping An’s example demonstrates that this model can scale and mutate across industries. COVID has essentially allowed these models to scale even faster than it was before. The companies that have grown during the pandemic are Amazon, Alibaba, Grab, Jio, and Shopify, and Shopify has grown even faster than Amazon. This drills the point that companies that run platforms can mutate across not just industries and sectors, but even geographies. When we look at the leadership characteristics of a Phoenix-like leader, the capacity to deeply collaborate and use emotionally intelligent empathetic-inquiry and engagement is paramount. Some of the most innovative things that are happening with regards to platform and ecosystems and digital and social is in the emerging markets. The emerging markets always have a lot more problems than developed markets, but the digital and social platforms and technologies allow them to pole vault over their infrastructure deficits. Some of the most innovative thinking and doing in terms of reimagining and transforming are happening in these geographies. For example, a learning app in India called Byju is like the equivalent of Netflix but for education. They run a freemium model, which allows people to come on board free, look at their content, and convert it to an annual membership if they like it. The annual subscription is more expensive than Netflix’s but because of their concept and content, people convert their freemium to an annual subscription, which has led Byju to be a profitable unicorn. In addition, the long shelf life of their content sets them apart from Netflix where they have to keep creating new content every season. This way, Byju leverages the content and leverages the economics to become profitable. The other example is a company called Rebel Foods. They are the world's biggest internet restaurant. Companies like Uber Eats, Deliverall, Grab Hub, Meituan, and Cloud Kitchens have imitated the model of Rebel Foods. Some of these new upstarts in the emerging markets are growing and scaling like there's no tomorrow. The founders of these enterprises are a bit like the virus of COVID, in the sense that they don't care about boundaries. Thus, even if leaders are not interested in emerging markets, they should be scanning, because these could be in other markets very soon. More importantly, the question for leaders is how are they going to figure out what these things mean, and how this can help them to disrupt their own business, to renew and transform their business to make it future-ready, going forward. One of the things Phoenix-like leaders do is that they stretch the boundaries of their option set. A dramatic example of this was about two and a half years ago when a major hospital in the Asia Pacific region went through an encounter exercise that included an attack involving an Ebola-like virus suddenly being in the community and being a massive stretch on healthcare. Aiming to be a successful hospital in that environment, the CEO and their leadership team developed a series of potential options, starting with pilot projects. Firstly, specific pilot projects in using robotics for service delivery within the hospital for safety and sanitation reasons. Secondly, the utilization of a pilot in artificial intelligence not only for patient monitoring but for data analytics that monitored quality control. Thirdly, a re-optimization of the supply chain to be able to have a range of possible backup service providers for critical infrastructure and supplies. This particular hospital and the leaders are now paying a benefit to those people they're serving because they had those pilots running. Therefore, in a leadership team, there needs to be people who take responsibility for insight generation, the scanning of the environment to find out what is happening elsewhere at the moment and what trends might be emerging relating to customers, employees, supply chain, technology utilization, accelerated digital transformation, and people for creating those insights, capturing them and then sharing them as part of an ongoing leadership dialogue. It is because Phoenix-like leaders want a wide option set first, and then they are subject to stress tests, and this requires the opposites to bite. At the center of the psychological research done with leaders, it is busting through that blinkering, that legacy trap. It's not a comfortable thing for a senior leader to face disagreement over their old-world thinking, but the Phoenix-like leader gets with resilience and courage through that emotional state and enters into a constructive dialogue. For this, diversity of views and opinions is essential, and the opposites debate needs to be structured and methodical. The research has shown that a lot of processes of Strategic Dialogue are too specific to an industry. The idea of an encounter method which provokes different ideas were designed to be agnostic to industry, and allow leaders to engage in a dialogue, irrespective of whether or not they are in the profit world, the nonprofit world, the public sector world, in any industry or geography in the world. As we go through this crisis, the priorities at the moment are around surviving and stabilizing. Nevertheless, leaders should have that dialogue and debate, that opposites debate, to search for post the COVID-19 situation. For this, the Phoenix Encounter suggests having an option set that is both about fortifying the core and making sure that core is robust coming out and may have changes to it as a result of stakeholder interactions, employees, customers, and the like. Secondly, an option set to transform the future is really what a Phoenix-like leader is thinking about and that's why the Phoenix Encounter method as a system is there. Also, this method is not only agnostic to context, but it's extremely complementary with a lot of other different forms of strategic thinking and analysis, scenario analysis, other forms of war gaming, product and service, value creation through the blue ocean, etc. It is complementary, but it tackles that firestorm disruption and legacy trap problem. Stuart Crainer in Conversation with Ian Woodward, V. Padmanabhan and Sameer Hasija Stuart Crainer: How different is an idea like red teaming, a term used in the American army, and elsewhere? Ian Woodward: Red teaming is a great tool when there is a defined battle plan or tactical plan and getting a group of experts to be able to stress testing. We see it as a stress testing tool and extremely valuable. We've had a lot of our leadership teams using the Encounter get developed ideas, and then use a red team, a stress test on their pilots. So, it's once again complementary, but it focuses more on stress testing the ideas as opposed to the radical ideation. Stuart Crainer: Can you give us any examples of legacy companies that have leveraged themselves to reinvent themselves? Sameer Hasija: In one of our programs, we ran a Phoenix Encounter for a company in the gaming industry, wherein an imagined attack was going on about how the gaming industry could be completely challenged by a Netflix type-disruptor, a cloud-based system coming in trying to replace devices, the consoles, etc. It caters to a small kind of niche market at the beginning, but perhaps this could be the disruptive innovation, where the Netflix type provider comes in and then takes out everybody. The senior executive from the gaming industry was extremely concerned when we were running the encounter process, and came up with a strategy of how is it that they're going to prepare themselves going forward, their whole cloud strategy, the non-device strategy, or even becoming the device-agnostic strategy, which is not being dedicated to their console. Interestingly, months after the encounter was run, two of the biggest technology companies in the world, announced that they would enter the cloud-based gaming business in a big way and would pump in billions of dollars. This strategic Encounter or the Phoenix Encounter thinking was used by them to leverage different technology than what they were used to in their industry, to prepare themselves for an oncoming disruption from the big tech players. Stuart Crainer: What do you think of the emergence of technology in Africa? And how can we use it to promote and help develop the continent? V. (Paddy) Padmanabhan: Africa is one of the youngest continents. It has a series of problems, one of which is that it has a huge issue in terms of being able to finance innovation. Now, many of the opportunities for a lot of these innovative technologies, whether it be digital, social, or along the lines of technology, could have the biggest impact on continents like Africa. For instance, the diffusion of mobile phones is much, much faster in Africa than it is in most developed markets. The result is that the penetration per capita of mobile phones in a country like the Gambia is higher than the per capita penetration of mobile phones in the U.K. It is because consumers find it to actually makes a difference for them, from connectivity, to safety, to security, to jobs. These things are also going to be leveraged across a whole bunch of other things, including healthcare. Another instance we have is the Africa Club, which is full of MBA students who are always interested in figuring out what they can do to leverage the possibilities of these things to create innovation, new companies to be able to take this to those geographies. Stuart Crainer: Where does empathetic leadership fit into your Phoenix-like leadership? Isn't the emphasis now on collaboration rather than competitive warfare? Ian Woodward: We see it as a combination. When we look at the leadership characteristics of a Phoenix-like leader, the capacity to deeply collaborate and use emotionally intelligent empathetic-inquiry and engagement is paramount. It is because unless they have that willingness to listen to and engage diverse points of view, their options set is too narrowing. We deliberately use some quite confronting, war-like language as a bust through with radical ideation of the blinkers, but then we ask it to be engaged in what we call constructive debate. So, in our list of characteristics for a Phoenix-like leader, we have not only this dreamer and doer, the imagineer and the engineer, but we also have them as a leader who is deeply and personally engaged with people, and wants to see a culture of emotionally intelligent engagement. It is even more critical in the COVID-19 situation and post COVID because the leaders who are demonstrating engagement and demonstrating willingness to listen as well as to tell are actually being much more effective. This is seen with Phoenix-like leaders. In our work, in Encounter Method in the workplaces of today and the future, higher levels of leveraging diversity are also essential; gender diversity, cultural diversity, and intergenerational diversity, as well as a diversity of thought. Part of busting out of the legacy trap of the past is corralling the leverage effect of the different viewpoints and perspectives of those diverse actors within the leadership process. Stuart Crainer: Organizations don't have a history or an ability to encourage multiple perspectives. A lot of executive careers, a lot of organizations have built themselves around doing exactly the opposite, and when you look at the number of boards dominated by white middle-aged men, their willingness to embrace multiple perspectives seems unlikely. Ian Woodward: That's one of the reasons we have a method that systematically takes the leadership teams and boards of directors through phases of discomfort. Simply asking them to look at multiple perspectives might be well-intentioned, but people's minds are hardwired and some of the cultures are hardwired. We have had many examples where leaders have taken their boards through an Encounter-type process, simply to bust through that thinking. It was one of our takeaways from the early part of the research, that how important some kind of systematic method was that was allowed, and still as relevant to the circumstance of the business. Stuart Crainer: It seems to me that ecosystems make organizational life much more complicated and ambiguous. Doesn't that make it more difficult to apply your idea? V. (Paddy) Padmanabhan: We are trying to make a point that not all ecosystems are alike. In particular, if it's going to be an ecosystem, which is made out of partners who are all from different industries, who are all different independent agents, then getting all of these things to work smoothly is a lot more difficult. But the beauty of it is that, if this platform has enabled in a way that everything is digital, one of the biggest benefits of digital is the visibility. Once I have visibility, it allows me to take care of what is going on where, and not only do that but then cascade across all the agents in the value chain. That is very hard to do in an analog world. It is not as simple as saying, “I'm going to create an ecosystem and voila, it's a beautiful day tomorrow.” There's a lot of careful work that needs to be done in terms of orchestrating not just the partners but also how they're going to interact with one another, how they interact with the people in the value chain, and how they interact with customers. It is because the customer is the person who's going to see it first, and in today's world, the digital customer is a lot more demanding. If you don't give them what they want, when they want it, how they want it, they are the first person to leave. Sameer Hasija: I think it is very important for organizations and Phoenix leaders to understand what exactly is their role in the ecosystem going forward, which means asking an existential question. We often don't have time to reflect because we're trying to put out fires most of the time, so the Encounter method, in a way, stops you in your tracks and asks you to reflect and go back, and question yourself about the role you need to play and the value you can create. Then, how to create that value is the second question. It's a little bit of a breaker in that sense. Stuart Crainer: What if your industry is already burned to the ground? What would you do then? Ian Woodward: We've actually had some examples in our field work of some people who were in industries pre-COVID, where virtually the industry was on its knees, profit pools had been shrunk, market shares and customer changes were taking place. One of the things they did in their Encounter exercise was to imagine that something has emerged with respect to transportation and connectivity between people notwithstanding the restrictions, whether or not it's in business, holiday, travel or the like, and to imagine what might that look like. If you're a successful player in there, take that as your ground zero, and then imagine how that would be destroyed and what would be your defensive ideas. It is because radical ideation needs to reimagine when you've got a situation where it is burned to the ground, where there's virtually no aircraft capacity going on. You would have to imagine post COVID-19, with restrictive air travel, what else might happen? And so, we use this Imagineering at a second level in that situation, and we've had examples of that. V. (Paddy) Padmanabhan: We had a participant in one of the Encounters we ran a couple of months back, who was from a very different industry, which is also in the same shape now. This is the cruise industry, which had their version of disaster, which wasn’t about COVID but about sustainability and a lot of other things. What they did was that they figured out what kind of people would still be interested in experiences, but perhaps the way they go about doing those experiences would be completely different, one that probably doesn't require a ship. This tells us that all of this gets you to focus on what is the value-added activity and what is the idea at the core. Then, you ask if the constellation of technologies and digital and social can allow you to reimagine how this thing could happen. This is what we get at with the extreme ideation in terms of how these things might combine to kill your business, that is, not to say that the activity your business was doing is going to burn down to the ground but to make you reimagine how your company could have value in a transformed world.

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Burn Down your Business and Imagine Rising Pheonix-like

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