From vision to panic – intervention phases in addressing disruption

If disruption affects your organisation ignoring it is not a viable strategy, you have to deal with it. A group of thought leaders the Centre brought together to explore disruption found: “the best strategy in approaching disruptive change seems to be taking the threat it poses seriously and trying to position yourself optimally to use the opportunities it provides: to ride the wave rather than be swept away.”16 Looking at ICSOs’ position today the group identified three different strategies for dealing with disruption: the active disruptor, an organisation which sees itself as a disruptor and which frequently and actively disrupts; the opportunistic navigator, an organisation which is able to turn itself into a disruptor if this is advantageous; and the conservative survivor, an organisation which feels protected against disruption and will only embark on a major change if this is unavoidable.

Most of the participants in our group saw their organisations in the camp of the conservative survivors. This is important to note as this is the most risky strategy in dealing with disruption, a strategy which tries to avoid disruption and thus risks being late in reacting to crucial change. In light of the group’s findings such a strategy should be reviewed very carefully. It is also of interest to note that some participants felt that their ICSOs were in the process of moving from a conservative survivor to an opportunistic navigator. Such a development points to a growing understanding that significant change is unavoidable and that ICSOs need to play a proactive role in conducting that change.

As the understanding of potential disruption develops and the readiness to address the issue spreads, the question arises how to find the right intervention point in tackling disruption. We will now look at two different phases of intervention: one as developments slowly take shape – let’s call this the vision phase – and another one as it becomes clear that the new approach will replace traditional ones – we call it the panic phase.

The vision phase

The vision phase starts with the point in time when the viability of a new product or service is proven – in our example, in 1975 when the Kodak engineer built the digital camera – and it ends when the market starts shifting towards the new product or service – in our case 20 to 25 years later. We call this phase ‘the vision phase’ because it takes vision to detect the potential of an innovation before the market starts embracing it. During this phase there is plenty of time to think through what the innovation may mean for a company or, in our case, an ICSO, and to position the organisation for the time when the breakthrough will occur. The vision phase is the period in which it is unclear whether the disruption will happen or not. During this phase a vast majority of observers will often argue against the possibility of a disruption, usually piling up arguments why the status quo cannot or will not change. And those few who believe disruption will occur have to consider the risk that a painful and expensive preparation for disruption will end up as a waste of resources should disruption not happen. In the eyes of many the costly preparations for the so-called ‘Millenium Bug’ were such a case. When facing the risk of costly preparations for a disruption that may never come, many leaders feel that it is safer to stay with the majority and take a ‘wait and see’ approach.

This will probably have been the Kodak leadership’s approach to digital technology. There were many good reasons to hesitate: the technology was still in its infancy, computers were not yet ready to store and process the large files digital photography produces and consumers seemed perfectly happy with the cameras and films they used. Now, let’s look at the civil society sector. At present, the most likely disruptive change may arise as disintermediation: for several reasons and from different angles the intermediary role most ICSOs play is under threat. However, we are still in the vision phase and most people in our sector do not yet seem to be fully aware of the emerging challenges and opportunities.

Let’s take donations to virtual CSOs as an example. Quite often I hear the argument that virtual CSOs, such as GlobalGiving, Avaaz or do not have very much to do with our sector. Contacts with the new organisations are scarce and partnerships even more rare. We have already mentioned the argument that virtual CSOs have been around now for some years without having had a major effect on the role or income of ICSOs. While this is true this is also a typical feature of disruption: at first it doesn’t seem to happen at all and then, often after many years of lingering on, it happens incredibly quickly. I can see three possible scenarios: a) virtual CSOs continue to serve a niche market and do not produce major effects on ICSOs’ donors and income; b) virtual CSOs will have some but limited effect on ICSOs’ donors and income but both approaches will coexist for a long time; c) virtual CSOs will replace ICSOs as the preferred channel between donors and beneficiaries and deprive ICSOs of the largest part of their income. In our context we can ignore scenario a): if nothing much will change there is no need to act. We will also ignore option b) because this is likely to lead to a lighter version of the responses to scenario c), the one we will briefly examine here.

If virtual CSOs replace ICSOs as the preferred channel between donors and beneficiaries this would mean a dramatic shrinkage, or even the demise, of some of the largest ICSOs of today. Looking at our sector I have the impression that most of its leaders do not believe that this is a possible development. I beg to differ – and I believe it is a sensible leadership rule to take major threats seriously as long as you cannot confidently exclude their occurrence. While I agree with the position that we cannot be sure that this dramatic disruption will occur, I want to stress here that we also cannot be sure that this disruption will not happen. Therefore it is wise to prepare for disintermediation and to look for perspectives beyond the existing intermediary services. There are two questions which may be helpful in looking at the situation: How much and what kind of intermediation may our donors (and recipients) want in the future? And: How much will they be prepared to pay for the intermediation they want?

In reply to the first question I assume that increasingly donors will expect and value direct links to the project they support, which means, rather than waiting for a letter from the ICSO, which will arrive once or twice a year providing them with an update on ‘their’ project, they will want to link up directly with the project at any time they like. Many other aspects which are essential to the existing intermediation model may not be as important to donors as ICSOs may think: programme consistency across sectors, countries and regions is an essential requirement for programme experts, but is it really important   in the mind of a donor who just wants to support a specific project? Costly fundraising is essential for the existing model, but innumerable times donors have expressed their displeasure with being approached in the street, at the door of their home, by mail, email and text message. Communication, advocacy, administration – indispensable elements of professionally running an ICSO – are elements the average donor is highly sceptical towards. How can we be so sure that they will continue to support these necessary elements of the traditional approach if they have the alternative of supporting projects ‘pure’?

This takes us to the question concerning the costs: in the long run I find it difficult to imagine that donors will accept that between 20% and 30% of their donation will be kept by the ICSO to cover their costs while virtual CSOs can offer their services at minimal or no fees at all. In our discussions we often talk about better educating our donors, making them understand that our programme, advocacy, communications, fundraising and administration departments play a crucial role in the quality of the projects they support. To me this sounds a bit like Kodak trying to convince its customers that chemical film is of better quality than digital photography and that taking the film to the photo shop in their neighbourhood, waiting for a few days for it to be processed before going back to pick up the pictures is so much more fun. Haven’t we all switched to digital photography meanwhile?

So, what could be done during the vision phase to prepare for the expected disruption? Let me start by explaining that I don’t expect intermediation to fade away completely: even if you search for projects on the internet you have Google as a minimal intermediary and you pay indirectly for this service by enduring advertisements and other features which generate Google’s income. On the other end you have the fully-fledged ICSOs with their much higher intermediation cost. Somewhere in between – and much closer to Google than to the ICSO – the future price for intermediation will settle. If an ICSO accepts this scenario it has two options to prepare itself for this change: either phase out of the role of intermediary looking for a different role and business model; or start reducing the costs of intermediation in order to remain competitive once donors start moving en masse to virtual CSOs. In concrete terms the second option means that ICSOs will have to develop an ‘intermediation light’ concept which reduces the services they provide to donors to the essential ones and abolish – or finance differently – work which donors no longer accept as ‘part of the package’. This will require a significant change to the ICSO’s business model and organisational culture. It will also mean a significant reduction in the number of staff ICSOs employ both in the donor and the recipient countries. Taking these steps at a time when the case for disruption has not yet fully been made will be an uphill battle. On the other hand, once disruption occurs and the panic phase sets in, being unaware and unprepared may very well mean going down quickly.

The panic phase

One of the secrets to successful navigation of disruption is taking the right steps at the right time, and the closer the point draws to when the tide will turn, the bolder the actions will have to be. In the best case an organisation detects potential disruptive change early and starts turning the mindsets of board, senior management and staff towards the potential change, seriously considering its options. As disruption continues building-up, the organisation gets prepared to embrace and influence the changes. The organisation repositions itself, tests new business models and other means to navigate disruption and develops its plans for the time when disruption strikes and quick decisions will be required. At this point the organisation will know what to do while many others will be panicking.

Those who analysed the Kodak disaster mostly agree that during the early 2000s the company lacked a management which was bold enough to lead through the dramatic turnaround the company would have had to go through in order to survive. In its comparison between Kodak and Fujifilm The Economist comes to the conclusion: “Surprisingly, Kodak acted like a stereotypical change-resistant Japanese firm, while Fujifilm acted like a flexible American one.”17 Once you have entered the phase when the market turns and panic arises, time for lengthy debates, hesitant leadership and complicated decision making runs out. This is a special challenge for the ICSO sector where participatory decision making and insufficiently empowered leaders are the norm rather than the exception. If we look at the complex, slow and often ineffective global governance of most ICSOs it is difficult to imagine that they would be able to successfully navigate the panic phase. Therefore it is advisable that ICSOs do their utmost to detect disruption early and get ready for in depth organisational changes as soon as possible in order to avoid being paralysed when panic strikes.

Given the tendency among many of the larger national affiliates to withdraw to their national powerbase and advance on their own whenever the opportunity arises, it is quite probable that an ill prepared ICSO will disintegrate during the panic phase of disruption when individual affiliates or groups of affiliates may each take their own approach to managing the crisis. This may lead to a situation where part of the organisation goes down while another part survives or where several parts survive but each based on different new business models, which cannot be brought together to provide a common basis on which to reassemble the global organisation. Avoiding such a threat is another reason to focus on addressing disruption as early as possible. In any case, whether threatened by disruption or not, ICSOs will not be able to avoid developing much more consistent, more streamlined and fully empowered global decision making structures and processes. We will discuss this in more detail later.

Let’s get back to the panic phase of disruption and look at an ICSO which is not properly prepared for the situation. Let’s assume the organisation comes to a point where its board can no longer avoid the recognition that disruptive change is happening and that they are in the midst of it. What shall they do? Let us go back to our disintermediation scenario and assume that over the last year the ICSO has lost 10% of their donors and there is no hope of this trend changing. What I have seen with shrinking ICSOs in the past is that they did not renew project commitments once the contracts finished and did not take on new commitments, whilst keeping all of their employees on board. Obviously this increases overhead costs but it may still be an acceptable approach for moderate income decreases if growth can be expected to pick up again in the longer term. With a more dramatic and possibly ongoing reduction of income this should not be an option. The ICSO would have to fully empower a capable leadership to lay off staff, cancel project contracts and quickly turn the organisation around to be better equipped for the new requirements.

While this would be enormously painful but perfectly possible for any single national CSO it will be far more difficult for today’s typical ICSO. Turning around a complex federated global structure with a decentralised power base at short notice looks close to impossible. Besides trying to avoid such a situation, what can be done if an ICSO enters the panic phase unprepared? The best possible strategy from my perspective would be to bring together a handful of the key national CEOs under the lead of the international CEO and empower this group to take all necessary steps in order to manage the crisis. At the same time the international board needs to be fully empowered by the whole federation to provide governance oversight of the crisis management. At a later point we will come back to the governance and management requirements of the future and look at the question of how ICSOs may have to change in order to be better equipped for the decision making and implementation requirements of a more uncertain, more volatile and more disruptive future.