Every day there are articles, reports and podcasts talking about the disruptions and uncertainty in the world. Leaders already have a lot to deal with through the pandemic and headlong into the cost of living crisis, war and an increasingly likely recession.
Drawing on decades of research, we’ve come to understand that the end of the digital revolution and the emerging impacts of even more change and uncertainty (climate, emerging technology, geopolitics and more) all point to an emerging paradigm shift.
Amidst all this businesses are advised to be more resilient and adaptive, to innovate and to seek the opportunities that can appear. In order to make this advice practical, leaders need to understand the context that these disruptions are occurring in. Only by understanding what a paradigm shift is and what it means for the future of business, will they be able to move forward and succeed in the future.
A different mindset and different tools are required in order to navigate the uncertainty that is characteristic of a period where multiple unpredictable dynamics collide to change the environment business will be required to operate in and the behaviour and needs of the customers they serve.
During paradigm shifts, traditional strategic approaches and operational models are not able to address rapid, multiple disruptions and the unexpected consequences of these disruptions interacting with each other.
This article starts with defining paradigms and paradigm shifts within the context of this discussion. It will then outline some of the key starting points for business leaders to navigate paradigm shifts successfully.
The word “paradigm” refers to a broad range of ideas, from a general “model of something, or a very clear and typical example of something” to a slightly more specific “set of theories that explain the way a particular subject is understood at a particular time”.
For the purposes of this article, we will use a more detailed definition based on The Structure of Scientific Revolutions by Thomas Kuhn. Kuhn wanted to understand how it is that radical revolutions, such as the transformation from Aristolean and Newtonian physics, happen. It was difficult, according to Kuhn, to understand the radical rupture within a scientific community using the then-current understanding of how change happened in science.
Kuhn’s idea was that scientific activity was generally what he called “puzzle solving”. The puzzle solving occurred within a paradigm: a self-defined group of people using agreed concepts and tools to answer specific questions in the world around them, such as the Ptolemic or Copernican systems of astronomy. These were the shared conceptual schemes and sets of basic assumptions about astronomy through which the group operates. Over time, they had become the dominant paradigm in that particular field.
The dominant paradigm manifests through how the members of the group are trained, the tools and processes they have to work with and the rewards they receive when they use the tools and education successfully. Once the paradigm is established, it enters into mature science where there are incremental discoveries and validations of theories.
While Kuhn focused on paradigms at a single level: physics or optics for example, it is easy to extend the concept and realise that paradigms exist on different levels. There can be a paradigm of specialists, such as physicists who sit in a more general paradigm of scientists. This more general paradigm may be contained by an even larger paradigm such as the entire economy.
As a result, paradigms are complex systems that influence and are influenced by the world around them. Kuhn’s model of paradigms opens up the possibility for scientific revolutions as a result of the interaction of these multi-level paradigms. These scientific revolutions are what Kuhn describes as a “paradigm shift”.
Thomas Kuhn highlighted the fact that paradigms are not permanent. They have a life cycle, therefore there can be a number of different paradigms over time. He identifies three stages to a paradigm: when a paradigm emerges, maintains itself and collapses. For him, scientific progress comes about through the movement from one paradigm to another. In other words, a paradigm shift.
The paradigm shift is triggered when scientists encounter anomalies that they cannot solve using the tools and concepts of the existing paradigm. For a time, the anomalies can be ignored, but once enough significant anomalies accumulate, the “normal science” they have practised up to now fails. This is when the paradigm shift occurs. The basic concepts that the scientists have built their work on are called into question.
As the scientists struggle with these anomalies, camps start to form. Some continue to cling to the old paradigm, attempting to fit the new reality into the old paradigm. Others throw the old concepts and tools out and attempt to identify and solve the new problems. Over time, these camps come to have radically different worldviews. The scientific community splinters as the new paradigm begins to emerge. This is the scientific revolution that Thomas Kuhn investigated.
Summarising Kuhn’s idea of a paradigm shift, we can identify three key characteristics that are important for business leaders in this moment:
Another characteristic of paradigm shifts is that they take time. Paradigm change does not happen overnight. Often it takes at least a generation to play out so that a new set of people who are not beholden to the old paradigm begin to act based on new belief systems.
As a result, paradigm shifts are difficult to observe in the moment. The struggles to leave the old paradigm and define a new one just seem like ordinary struggles. It is only when we step back and look at what is happening in a field over time that the paradigm shift comes into focus.
So what does Kuhnian paradigm shifts have to do with business and leadership during this time? Kuhn was focused on describing a scientific paradigm and its life cycle. While he felt that the concept of paradigms could not translate to other fields, we argue that the concept of paradigm shifts is extremely useful in understanding how it is that major change occurs in other disciplines, like law, specific markets or in the larger economy.
We argue that we are currently in the midst of a large-scale paradigm shift. One that is similar to the industrial revolution of the eighteenth and nineteenth centuries. Klaus Schwab has defined it as the Fourth Industrial Revolution. It is:
characterized by a range of new technologies that are fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human. [World Economic Forum]
While we can argue about the exact shape of the emerging paradigm and the questions it asks of us, the fact is that there is a global disruption of our technological, economic, social and environmental context. These large-scale disruptions are bringing into question basic assumptions about our relationship with each other and the wider world we inhabit.
The old answers and tools we have used successfully up to this point, including the ideas of neoliberal capitalism, are being challenged more and more as inadequate when faced with the current situation, both in terms of risks and opportunities.
If we accept that we are currently in a paradigm shift, there are several significant shifts, related to Kuhn’s the characteristics of the paradigm shift, senior management will need to work with as they guide their businesses forward.
It is important to note that a paradigm shift is an unusual situation and, as such, requires a different approach than when there is a dominant paradigm in place. The biggest challenge is to not simply reproduce what has worked in the past but to read the new data that starts to emerge to inform a search for the best possible responses
A paradigm shift is a complex social process that is, by its very nature, unpredictable. The basic assumptions on which the current paradigm was built come into question. Disruption after disruption buffet the macroeconomic, technological and societal landscape in which business must operate. What is more, no single disruption can be considered in isolation as they interact with each other to create unexpected, emerging situations.
We only have to look at the last few years here in the UK to see this play out. The layering of Brexit, Covid and the war in the Ukraine on top of existing disruptions caused by climate change, new technology and the alienation large segments of the population have from the benefits of the current economic system have led to a huge amount of short term change. For example these have all, in measure, triggered labour shortages in various service industries that, in turn, create new disruptions, as seen at airports around the UK over the summer.
In this environment, the certainty of traditional strategic planning goes out the window. The dynamic nature of the business environment makes past performance a not-so-useful guide to aid planning and deliver future results. What is needed is an adaptable “anti-strategy” built around testing assumptions in response to emerging opportunities and risks and pivoting if they don’t work out. Critically, businesses must find a way to learn what does not work leveraging “of the moment” data, insight and a chunk of intuition as traditional strategic planning’s data inputs are a product of yesterday's paradigm.
This can make the senior team appear answerless in response without engaging communication and an overall vision for the company that can serve as the directional constant for the business. Executives need to manage their own fears about the future in order to inspire those around them to not give into their fears, but move ahead in the uncertainty. The trick here is to action progress and build momentum into the new paradigm, recognising it is still emerging and, as such, so is the optimal response and future operating norms.
In an environment where people are strongly attached to the old ways or are championing the new ways, successful businesses have to find the balance between the two throughout the transition. If you are leading an “old school” business, even a successful one, the radical change from what you have done to what the new paradigm requires will balance pushing into the new while pulling away from the old.
In order to do this, leaders need to resist the propaganda and pressure to either radically transform now or resist, to the death, the fundamental change required to survive in an as yet certain future.. If leaders can look dispassionately at their business, assess how much and how fast the business needs to change, and where in what order, then they can engage staff, customers and stakeholders in an exciting learning journey toward future readiness. The alternative is moving too slow, or worse, stasis, whereby competitors will steal the march while your team and customers will increasingly judge your business on its lack of relevance rather than its past glories.
One of the biggest challenges that businesses face in a paradigm shift is the fact that the barriers to entry into their market erode, allowing companies who do not have the same legacy strategy, operations, and technology to compete by offering new, more efficient or relevant value added services.
Because of the radical uncertainty and customer expectations shifting to reflect the new paradigm, the advantage of old paradigm experience and reputation no longer holds. Instead they can become a burden as the company struggles to apply them to addressing the new customer needs that the disruptions have created. Meanwhile, newer entrants will be busy pioneering new business models, customer value exchanges and cementing their advantage looking forward and building future-facing momentum as opposed to seeking the answers in what was.
The idea of a paradigm shift is one of more useful conceptual schemes we have to understand the disruptions and uncertainty that has become the “new normal” for business. Drawing from Thomas Kuhn’s work on the structure of scientific revolutions, we can better understand and organise our response to the collapse of the old paradigm of industrial capitalism under the pressures of new technologies, social realities and climate change.
In a paradigm shift, the strategic tools that work during the “normal science” of a mature paradigm are not effective. They are based on stability, where the past is an indicator of the present because the environment that the past events occurred in is nearly identical to today’s. If the context in which the business is operating today is radically different from what it was months or years ago, then a new set of tools is needed. These tools are designed to increase business adaptability, innovation and resilience. In addition, business leaders must develop new personal and communication skills in order to help calm the fears of staff, customers and investors so that the business can thrive and prosper in the uncertainty of a paradigm shift.