Comment: How can we cope when volatility becomes the norm?

Don’t let fear of failure hinder your ability to adapt during volatile times.

It’s always been the case that we’ve needed to adapt during volatile times. But more recently it seems that volatility has become a permanent state of being - whether it’s driven by the climate crisis, geopolitical tensions or a global pandemic.

While upheavals can be disruptive, the pressure to change the way we do things can also bring out the best in us. Benjamin Franklin was once accredited with saying “out of adversity comes opportunity”, so we could say with equal measure that volatility breeds innovation.

A recent study by McKinsey found that business leaders believe 50 per cent of all revenue generated over the next three years is expected to come from products and services that are not in existence today. They put this down to significant technological change and increasing demand for sustainability credentials. If this turns out to be true, companies will need to innovate simply to survive.  

Our own research, in which we surveyed 450 European manufacturing executives from the aerospace, automotive and energy sectors, supports these findings and discovered that nearly three quarters (73 per cent) of business leaders view ‘creating new products and services’ as their primary reason for innovating. It’s clear that businesses are keen to tackle the challenge of innovation head-on and are looking to reap the rewards by getting on the front foot.

What they need to figure out, though, is how they can build a culture that will drive the innovation they need to adapt to an ever-shifting landscape – and build resilience into their organisation.  

Adopting the right mindset

This all starts with adopting the right mindset, which is evident with companies that are emerging in the space industry. When rockets explode before making it into orbit, many observers see the attempts as failures. Innovators in this arena, however, would label them as a necessary step on the path to success. In the past, space developments led by Nasa would take decades to build but newer entrants come from the Silicon Valley ‘fail fast’ school of thought: they adopt an iterative approach to innovation which sees failure as part of a learning process that allows you to succeed quicker.

As businesses continue to respond to volatility, we are likely to see more embrace a philosophy similar to what Unilever calls ‘test, learn, fail and adapt’ – an approach that enables change at pace, even if it means failing along the way. This, it says, has enabled it to double its business impact in half the usual time, and at half the cost than in 2015.

This isn’t the norm for most businesses. According to our research, just 41 per cent believe they are exceeding expectations when it comes to failing fast. However, adopting a mindset like Unilever’s, is more likely to allow businesses to grab opportunities as and when they present themselves.

Ceasing opportunities 

This way of working is not exclusively reserved for start-ups and space moguls though. The same approach can be applied to legacy industries where design changes are not usually as radical. It would allow various sectors to respond quickly to changing demands, whether it’s to meet individual patient needs in healthcare, offer greater personalisation in automobiles or comply with new industry regulations in the building industry.

We saw the latter happen in the UK window and door frame industry last year, when new regulations regarding ventilation in homes came into force. Despite protests from more traditional areas of the sector, several window frame manufacturers responded by redesigning their products to incorporate trickle vents that would provide greater air circulation and improve moisture control in residential properties.    

Some embraced rapid prototyping, using methods such as CNC machining and injection moulding, to reimagine what they could achieve with a window frame. As a result, we saw several product options being quickly created that were both aesthetically pleasing and cost effective to produce.  

Building resilience

Whatever the reason to adapt, incorporating the possibility of failure into the process can enable more businesses to be more responsive, and, as a result, build resilience to change.

There are lots of ways to build resilience. If you look at the supply chain issues that nearly all sectors have faced in recent years, many have diversified their supply chain and shored up their supplier network through near-shoring or friend-shoring, by moving production to a country with similar values and culture. In fact, over half (55 per cent) of the business leaders we spoke to as part of our research said friend-shoring was their preferred way for restructuring the supply chain, ahead of on-shoring and near-shoring.  

But businesses are also looking to digitise products so they can be manufactured anywhere in the world. I worked in the oil and gas industry for many years, and we would hold duplicate stock inventory for almost everything, just in case. But if you can digitise your stock products, you don’t need to do that – instead, they can be manufactured in low volumes, on demand, within days.

As volatility increasingly becomes the norm, an ability to respond quickly will be key to survival for many businesses. They will need to innovate to adapt to the changing landscape and this will help them build resilience within their organisation. But, if organisations are going to innovate, they can’t fear failure. It’s better when people view innovation as an iterative process, where failure simply provides the learning they need to succeed faster.  

Peter Richards is the VP of Marketing and Sales EMEA at Protolabs.

Image credit | Protolabs