Lesson Learned #4: Shift Happens Fast!
2-minute read: Excerpted from “Adapt or Fail! A 5 x 5 Governance Framework for Boards of Directors.” Rick Funston and Jon Lukomnik. De Gruyter, Spring 2025.
True shifts result in more than incremental change. They represent a sea change. They transform the environment. For example, WeWork, a coworking real estate company, was valued at $47 billion in 2019.(1) It was optimized for an economy that assumed white-collar office workers and a low-interest-rate environment.
By 2023, neither of those assumptions was valid. COVID had created legions of former office workers who now worked remotely, and interest rates were heading higher. By November of that same year, the company had filed for bankruptcy.(2) We Work was too finely adapted to a specific set of circumstances. When the shift happened, it happened fast, and they couldn’t adapt.
Lesson Learned: The momentum of change is accelerating exponentially.
“Said the Queen ‘Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
According to the Red Queen effect, constant adaptation and evolution are needed just to stand still and maintain one's relative position. Unfortunately, standing still has proven to be a recipe for disaster for any organization over the long term. A willingness to fail, to take Intelligent and necessary risks must be embraced to innovate, adapt to changing circumstances, and achieve the mission. Of course, unnecessary risks need to be avoided or mitigated.
This is why situational awareness (for early warning) and strategy (to take necessary risks intelligently and avoid being buffeted by unanticipated risks) work synergistically. It is far preferable to have a range of options in extreme uncertainty. It is also why developing a range of realistic options in advance (from the least to the most that could be done) is so valuable.
The momentum of external change (its mass and velocity) is accelerating exponentially. Every day inevitably propels us toward more unforeseen crises. Shifts interact virally, potentiating one another. The result is a wave train of different tsunamis of change. Technical shifts. Scientific breakthroughs. Medical advances. Multiomics.(3) Cybersecurity threats. Environmental changes and demands. Workforce expectations. Demographic changes. Rapid regulatory changes. Artificial Intelligence and generative AI. Social media and instantaneous reputational risk. The list is virtually endless, with unknowable causes and effects that every board and organization must nonetheless navigate if it is to adapt successfully.
Lesson Learned: Extreme uncertainty and instability will continue for the foreseeable future.
Current and foreseeable conditions are extraordinary. WeWork ran into two “once in a lifetime" crises almost back-to-back. But in the 21st century, that’s not unusual; there seems to be a new “once-in-a-lifetime” crisis every couple of months. The Global Financial Crisis. Drought. Deluge. Pandemics. Market events. Wars. And, of course, competition (both symmetric and asymmetric).
How prepared is your board and organization?
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(1) Allison Prang, “WeWork Raises Additional Capital from Softbank”, Wall Street Journal, January 8, 2019
(2) Catherine Thorbecke, ”WeWork files for bankruptcy," CNN, November 7, 2023
(3) Multiomics is a comprehensive analytical approach that integrates various omics data sets, such as genomics, proteomics, transcriptomics, epigenomics, metabolomics, and microbiomics, to identify and establish previously unknown cause-effect relationships between genes, phenotypes, and environmental factors. This method helps researchers gain a comprehensive understanding of how genetic, molecular, and environmental factors interact to influence biological processes and outcomes. It is at the frontier of biological and medical advances.