Organizations must learn to adapt and try to fit in with components within the external environment for them to be successful. This environment comprises of components that are beyond the control of organizations. Organizations can be broken down into four main categories. They include; Private, Public, Profit and Not-for profit organizations. These components impact businesses, either positively or negatively. There are two main types of external environment, the micro-environment and the macro-environment.
The micro-environment comprises elements that have a direct impact on the operations of an organization. The macro-environment comprises elements that organizations have no control. The success or failure of any organization relies on their adaptability to this environment. There are several types of the macro-environment which are political, technological, sociocultural, economic and natural disasters. The size, purpose and type of an organization are important in determining the type of external environment it will operate.
To ensure the flow of its operations, an organization must respond to outside forces that impact on them. For example, the outbreak of the covid-19 early 2020 resulted in the collapse of numerous companies operating in different industries globally. This collapse resulted in the global increase in the rate of unemployment. It also resulted in global economic recession. However, Walmart, a multinational retail corporation, was able to respond to these changes and grow their revenue.
The value of Walmart’s stock in 2020 increased by 22%. This can be attributed to the 30% to 50% discounts that Walmart was giving to its customers. Walmart understood that the post covid-19 period presented tough economic times for millions of Americans who lost their jobs. It also took the advantage of the stay-at-home advisory to grow its digital business through its eCommerce platform. This led to a tremendous growth of its sales revenue by 97% in 2020. The value of stock at Walmart grew 0.7% to $144.95. A dynamic environment is a type of environment that keeps on changing. This type of environment is characterized by rapid changes and uncertainty. For example, technological advancement, market expansion, the evolution of new products in the market, activities in the marketplace and government policies.
To survive in such an environment, organizations must watch out for signs for change.
For example, changes in the interest rates has a resulting effect of either expanding businesses or resulting to their closure. A fall in the rates of interest for businesses has the impact of allowing the growth of businesses and their competitors. This, consequently, changes the growth rate of the industry. A number of other factors can also lead to changes in the business environment. Such factors include the socio-cultural, demographic, geographical and economic.
One of the ways that organizations can survive in an ever-changing environment is through embracing innovation. There are 5 ways through which organizations can achieve innovation in a dynamic environment. One of the ways is embracing failure. Being innovating has its own share of risks. Innovative organizations should be willing and ready to take different levels of risks. However, not all risks can bring success to an organization.
It is imperative that organizations prepare for any uncertainties that may result from taking certain risks. For example, Walmart took a huge risk in investing heavily on its digital business. The ‘order and pick’ policy embedded in its eCommerce platform was a risky decision. However, this risk resulted in an overall increase in sales revenue by 32%, from 65% in 2019 to 97% in 2020.
It is also important for organizations to give freedom to their employees to discover and explore new business opportunities. Organizations that motivate their employees and give them a chance of learning from the mistakes they make are more likely to succeed in their business venture. The second way organizations achieve innovation is by dedicating the appropriate resources. Being innovative requires and organization to have a wide range of resources at their disposal.
These resources can range from funding to increasing the number of employees required to accomplish a specific project. However, the resources required for innovation depend on the type of project to be accomplished. Some organizations go an extra mile of handpicking a team from all the functional areas of the organization that is primarily focused on accomplishing a specific project. Another way is exposing the company staff to open innovation.
One way of creating and encouraging an open innovation is by funding start-ups. Open innovation encourages collaboration within an organization in the creation of a new product or service. There is equal sharing of risks and rewards amongst all company shareholders and stakeholders. A classic example of a company that has embraced open innovation is General Electric. This company has hosted over a hundred challenges of open innovation.
The latest one being the development of an approach that will solve the issue of water scarcity. The winner of this challenge would bag $10,000 cash and an additional $25,000 grant for development. Another form of reward is being a supplier of General Electric. Another way is offering incentives. There are various ways of giving incentives to employees to help propel innovation. One of the ways of giving incentives is through giving cash and bonuses.
This strategy is mostly used by large companies such as Amazon and Best Buy. Offering non-monetary incentives is another way of motivation. For example, small and medium-sized companies give incentives in various forms. For example, week-offs, promotions, treating the workforce to breakfast or lunch and hosting a party. Different employees have their own perception on what motivates them best. Some prefer monetary incentives while others prefer non-monetary incentives. For example, acknowledgment by the management.
It is important for organizations to consider motivating their employees in the right manner in order to become more successful. The fifth way of achieving innovation is through employee training. All organizations must train their workforce to develop a more critical thinking approach in line with product design. Developing a design thinking amongst employees is one of the best ways that organizations can motivate innovations.
Design thinking is a core element for successful organizations. It involves developing solutions to problems and brainstorming ideas that are relatively new to the organization. Through the observation of end users, a person is able to understand better the specific needs of a customer. A person is also able to discover new opportunities that the company might have missed. By participating in both convergent and divergent thinking, employees are able to brainstorm better for the benefit of the organization.
From the above discussion, organizations can take advantage of these ways of becoming innovative to enhance their creativity. Customer feedback is a crucial tool that organizations can use to get a competitive advantage over their competitors. Through employee motivation, organizations can get various ideas from employees that they can develop to improve on their existing products for maximum sales. They can also use these ideas in developing new and creative products that customers need in a dynamic business environment.