As we stand, the future relationship between the UK and Europe is unknown. This means that over 45% of our exports and over 50% of our imports are at risk of being affected in ways that are not known, or knowable, now.
Whether your focus is on services or products, all aspects of your business are likely to be affected by how this political moment plays out over the next days, weeks, and months.
Effective responses to unknown outcomes
There are multiple paths that the UK may go down. We’re not trying to predict those here. But what we do know is that these choices will impact us in significantly different ways – some bringing opportunities, some threats. All, however, require a strategic response from businesses and organisations. Resilience and adaptability in light of these are critical to success.
UK PLC: For UK PLC there is a range of short- to medium-term opportunities and threats that sit across its PESTLE.
- Greater focus on the needs of UK businesses
- Movement away from referendum based decisions
- Opening up centre ground
New approach to entering global value chains / terms of international trade
Risk factored into markets
Housing market opening up
Potential dividend to health and social care
Rejuvenated localism agenda
R&D VfM given pound
Innovation-focussed regulations possible
Government focus on industry 4.0
Renegotiation of jurisdiction of the European Court of Justice and trade terms
Repositioning of food and environmental standards
New agriculture and environmental policies
Uncertain final position/extension
Loss of focus on core UK PLC requirements
Split political landscape, no clear consensus or majority position
Regional agenda rising (NI ‘hard border’, Scotland independence)
Reduction in ‘soft power’ and influence
Increasing takeover/M&A activity driven by comparative value
Uncertain trade terms
Relocation of global HQs from UK PLC
Uncertain labour market conditions/supply
Pricing sensitivity due to supply chain and border transaction uncertainty
Short term border challenges (Dover)
National schism (52% – 48%) around in or out, without a clear approach to reconciling
Loss of trust in politicians / decreasing trust in democracy
Consumer confidence decreasing
Splintering European research and funding networks
Barriers to multinational technology transfers, if UK importer from EU
University funding and talent impacts unknown
Regulatory change and legal transition burden on businesses (contract novation / change)
Lagging time to re-establish stable legal landscape post outcome
Need to coordinate / recruit core talent to support new legal policy and drafting
Impact on agricultural funding and short term food security
New standards for global imports to be set
So, given all the unknowns about Brexit, is this a challenge to businesses unlike any other?
Yes and no. Or, to be more accurate, no and yes. Have there been more significant external shocks and challenges in living memory? Yes. Did GDP and productivity maintain after these? In the medium term, yes they did.
However, did all businesses survive these external shocks? No. Equally, are we working in a comparable age, given globalisation and technological developments? Outside of 2007, we aren’t. Has there been a shock this big to the UK in isolation before, given this new level of integrated labour markets, supply chains and governance across geographies? No.
What we believe is that we are at the cusp of an unprecedented challenge. But we also believe successful businesses are structurally well set up to respond to this challenge because they have been honing their strategic flexibility for many years. Some purposefully. Others simply by responding to the new conditions of business or stronger regulatory regimes that have increased over the last decades. Successful past performance, in this case, is a good indicator of future performance.
What is critical now is to recognise the internal strategic resilience that has been developed and focus this on how to deal with each opportunity and threat that materialises into ‘known-knowns’.
Deploying strategic resilience
We believe that there are three key activities that you can do to maximise your ability to respond to the reality, once it crystalises – your ability to ‘spring back from’ or ‘spring into’.
Understand how you will purposefully respond
In light of uncertainty, rehearsing how you would respond across different scenarios is critical to building resilience in key business functions. From our experience, it’s critical to factor in this preparation time and process across your market, supply chain and people teams.
1. Supply chain and markets
Take the time now to ensure that you understand your current supply chain, where you are now and, specifically, how much preparedness has been undertaken to date. Rapid end-to-end reviews will allow you to quickly see the exposure points you will be subject to. Plan to mitigate these and have a clear market-by-market (national and regional) approach to this, with an accountable lead identified for driving changes once impacts are known.
2. Have a clear people plan
Have an identified rapid response team within HR so that they can address changes as and when they appear. Ensure that there is headroom across your portfolio to adequately manage and review the change windows that you have planned. Not only will there likely be a tactical set of change considerations that come out of a final agreement, but, more generally, there will need to be a quick turnaround outlining a strategic response for how you may need to reposition your employee value proposition and longer-term recruitment and training plans.
3. Test the key points of your operating model
You will see high returns from a full operating model review in light of the UK leaving the EU. Understanding the impacts across your corporate and operational functions in terms of your obligations, your contractual arrangements, and how any functions need to change to meet a different customer or employee journey in the new world. Ensure you have the legal and procurement firepower at hand to process and enact changes. In our experience, this is best done through a targeted, senior leadership-led accelerator event to focus on the key pain points and identify what can be repaired now.
Gate One has been helping businesses understand how they will purposefully respond to the UK leaving the EU. For an FTSE 50 business, we have been supporting their preparedness by establishing and running a programme focussed on addressing their key supply chain, procurement, HR, IT, and legal considerations across all markets.
The outcome of which has been a clear set of scenario-based delivery plans, owned by key functions across the business, building out resilience.
Evaluate and articulate the space needed for decision-making
1. Build the headroom to support delivering change
You will have an extensive portfolio of transformation and digital programmes underway. Pausing or stopping these in light of uncertainty is the last resort. It is critical to understand the key resources you will need to accommodate the ultimate outcome, and how these may be freed during the critical March to June period this year. For example, review your IT infrastructure resources and implement fundamental changes to your systems and data. Having a picture across your business, understanding the change and release windows already programmed and stopping some of the smaller, lower priority projects to build additional headroom for change are clear actions to take now.
2. Take an emergent strategy mindset
Taking an emergent mindset is key to resilience. Listening to your people, leads, and suppliers are the first steps to getting yourself ready for change. Asking and proactively responding is the step beyond that marks out those that are really resilient to change. For example, jointly aligning response plans with your third-party logistics providers will ensure that you and your key suppliers are collectively positioned to respond. Building in this flexibility throughout your value chain is as important as it is within the business alone.
3. Lead with messages, once known
Noise levels have increased to near-deafening levels around what the ultimate outcome may be. Those that are set up for success, while selectively listening, have been more focused on building out their key communication and change impact channels for when the unknown becomes known. Equipping leadership with key messages and the right cadence to take messages to their people and partners requires clear accountabilities and plans. Getting these in shape now is a must.
Gate One has been working with FTSE 100 businesses to set-up transformation and portfolio offices that allow them to see the single version of truth, build the headroom for change, and then stand up and integrate Brexit Programmes into their portfolio. We stress-tested portfolios and did a deep-dive review of the critical change windows that are aligned to the likely scenarios of external change.
Getting ready to deploy your strategic resilience toolkit
Once the dust begins to settle, then is the time to deploy the right future service tools to support the agile response required and to take advantage of the opportunities that will present themselves.
1. Pick must-do/must fix changes and deliver as “micro-battles”
Once the backlog of immediate changes materialises, employing a triage-based approach to solving them is key. Ruthless prioritising and then building equipped teams to deal with them in week-based sprints is a demonstrable way of getting through the must-dos. Agreeing, communicating and building effective micro-battle teams under executive leadership is a hallmark of high-resilience organisations.
2. Deliver bigger change in agile “chunks” to secure benefit early and maintain agility and flexibility to respond as the market evolves
There will be large change programmes resulting from this change. Building a change engine throughout your business creates adaptability in what will still be uncertain times. Moving to a scaled agile delivery approach, underpinned by an agile change mindset and professionals – ChAgile – is the way that large, disruptive businesses look to deliver at speed.
3. Drive change through visible, transparent and accountable leadership, enabled by change accelerators
As ever, visible, transparent and accountable leadership will underpin whether your response is effective or not. Building out key events where leaders can drive change is key to an effective 100-day plan and beyond. Focusing these around change accelerators – specific events focused on concrete outcomes – has been shown to be a successful tool after large change events or crises occur.
Whether it is supporting business post-integration or divestment, or to responding effectively after a significant strategy or design realignment, Gate One has supported FTSE businesses to rapidly deploy future service tools to support a common sense of purpose and focus on delivering the most important transformation programmes of the business.
Gate One is well positioned to support companies facing into the final outcome of the UK leaving the EU, having supported clients in building strategic flexibility and specifically readying themselves for whatever outcomes occur this Spring.