Scarcity Management - Dealing with bottlenecks through and in communications

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Scarcity management is about dealing with shortages and bottlenecks so that corporate goals or functional objectives can be achieved. Current events such as shortages of labor or energy and their effects like the recession have disrupted global supply chains, limited the availability of products and services, and increased costs. The transition from abundance to scarcity and bottlenecks brings new challenges for companies. Communication leaders need to deal responsibly with scarcity when communicating for their organizations as well as when managing the activities in their communication units.

What does scarcity mean?

Scarcity describes the state of something being in short supply. That means the quantity available is below the amount required or eclipsed by demand. Examples of scarce resources include rare metals, gas, and charcoal. In recent past, shortages have only occurred rarely and in specific situations. Increasingly efficient supply chains, overnight logistics, and B2B platforms have allowed more or less all needs to be met without any delay – and led us into today’s “affluent society”.

But things have changed recently. Labor shortages, disrupted global supply chains, the cancellation of business flights, soaring energy prices, and subsequent effects like inflation have restricted the availability of products and services or increased costs. As a result, even in industrialized countries, the availability of everyday items has dwindled. When products and services are in short supply, corporate management and communication executives must deal with scarcity wisely to safeguard the company’s long-term future. An increasing trend toward scarcity management is therefore to be expected.

Scarcity management refers to dealing carefully with shortages and bottlenecks to ensure that both overarching corporate goals and more specific functional objectives can be achieved.

“Several shortages will have an impact on corporate communication departments. I mainly see the war for talent, the European energy crisis, and disruptions to production and supply chains as key drivers. We have already experienced severe problems when it comes to corporate events due to a lack of freelance workers in the service industry. During the pandemic, many people left this industry and have not been replaced to this today. This severely compromises our quality standards when preparing major external and internal events.”

Nils Haupt, Senior Director Corporate Communications, Hapag-Lloyd

How scarcity affects the economy

Scarcity is far from being a new phenomenon and has been intensively studied for many years. One key finding is that scarcity affects different levels, and can have positive as well as negative impacts.

Scarcity on the macro level (economies and societies): On the macro level, scarcity can lead to economic downturn caused by missing infrastructure. When energy, public transport or healthcare are in short supply or unavailable, this directly impacts the productivity of enterprises. On the other hand, studies have shown that scarcity can also encourage innovation. It can help to build more sustainable economies through the reduction of motorized transport, the invention of more energy-efficient processes, or the consumption of less animal-based food.
Scarcity on the meso level (companies): On the meso level, scarcity is initially seen as a red flag since it might cause business models to fail. For modern businesses, any bottleneck may have negative consequences for just-in-time supply or delivery. But companies can also make a virtue out of necessity and even use scarcity to boost their sales through positive framing ("The scarcer, the more attractive”). Moreover, pre-order models are used by start-up companies for competitive advantage via crowdfunding platforms. They use the scarcity principle to drum up orders prior to producing innovative products. Furthermore, what initially sounds positive mainly for companies can also have positive effects for consumers. For example, the feeling of self-uniqueness, power in exchange relationships, pride of ownership, or more intensive use can have a positive impact on individuals.
Scarcity on the micro level (consumers and employees): On the micro level, scarcity can lead to irrational behavior. Consumer research shows that scarcity creates a competitive environment that drives people to maximize their own profit. Such irrational behavior can be observed in stockpiling. A study of 1,325 US consumers during the COVID-19 pandemic revealed that over half of the respondents (55.5%) had hoarded products such as canned food, rice, pasta, and toilet paper. On the other hand, having less doesn’t need to be bad. Scarcity can help to break out of established mindsets and think beyond the previous use and functionality of products. This promotes creativity and more responsible consumption.

Two key lessons for dealing responsibly with scarcity

How can communication leaders deal responsibly with scarcity in order to balance its positive and negative aspects between competitive advantage and social responsibility?

1. Communicating challenges and consequences of scarcity: Scarcity can be both challenges and opportunities for corporate communications. For example, a pre-order model and waiting times for a desired product can make it more attractive. In this case, communication can focus on positively framed storytelling. On the other hand, delays and waiting times for products can generate frustration and complaints. Communication strategies must address the tension between economic rationality and social responsibility as well as between proactive and reactive approaches.

2. Managing scarcity in communication departments: Communication departments may also be influenced by scarcity. Be it missing resources for print products, personnel for events, or energy-saving measures, scarcity and bottlenecks force communication leaders to assess and redesign the business models of their departments. They could introduce new communication products and services that do without scarce resources, or try to adjust the high expectations of senior management and external stakeholders. They can build more resilient internal workflows and enforce internal budgeting and revenue models that cushion supply uncertainties. Last but not least, communicators must outline the value created by buffering negative business effects of bottlenecks through corporate communications in order to keep or increase budgets.

Key facts about the 5 trends

State Revival: The state is experiencing a renaissance. Governments, regulators, political parties and politicians gained in importance both as a partner and as an antagonist of businesses. After a period with almost no state intervention in the economy (neoliberalism), the pendulum is now moving back in the other direction towards more state control (neodirigism). Multiple reasons such as the pandemic or the Russian war against Ukraine have prompted this trend. The state is interfering more strongly in the economy – both by providing subsidies and accelerating the growth of specific markets by means of high spending.
Scarcity Management: After years of abundance, Europe has to get used to scarcity. Whether in raw materials, energy, personnel or products – there are shortages in many areas. This development is being exacerbated by demographic changes and geopolitical upheavals. Price increases, inflation and bottlenecks are the result. Many companies have to adapt their value chains and processes in order to achieve their long-term corporate goals. But scarcity offers opportunities as well. Rare products or services raise profitability for those who can deliver. Additionally, in times of scarcity, innovative and more sustainable solutions are increasingly developed for which there was previously no market.
Unimagination: A third world war, widespread blackouts or computers striving for world domination – today many unimaginable incidents are considered for being possible someday. However, companies cannot prepare for every future scenario. Rather, it is important to take precautions. Organizations must adapt their structures and processes and empower their employees in order to remain capable of acting even when the unimaginable happens. On an individual level, psychological stability and robustness are needed. This can be promoted through training on ambiguity tolerance, resilience and improvisation.
Augmented Workflows: AI-based technologies will enable new forms of interaction between humans and technology in the next few years. They promise to improve productivity by performing routine tasks, to reduce human error, and to generate insights that improve decision-making. As exciting as these prospects are, they may also be problematic. The prospect of augmented workflows challenges us to think about questions such as: Who delegates tasks to whom when humans and AI collaborate? How do outputs change if an AI makes suggestions – and who is responsible for them?
Parallel Worlds: New technologies are increasingly enabling us to create and immerse ourselves in extended versions of reality – so-called parallel worlds. This can make abstract concepts more tangible for consumers. More and more companies are recognizing the potential of these technologies, for instance for product launches. Behind this is also the idea of creating a worldwide "Metaverse" in which the real and virtual worlds are combined in a single environment. So far the Metaverse is primarily a vision. If and when it will arrive and what it will look like is anybody’s guess. Due to the increasing possibilities of 3D technologies, this trend should not be misjudged by communication experts.

Methodology

Sources & screening: First, information sources which provide relevant insights into the professional discourse in the areas of management, technology, and society were monitored and screened. These sources primarily include recent publications from scientific journals and conferences in the respective domains, but also selected newspapers (e.g., Economist Science and Technology), magazines (e.g., Harvard Business Review, Wired), social news sites (e.g., Reddit Science), blogs and websites (e.g., ReadWrite, The Next Web), whitepapers, and corporate trend reports.
Trend profiles: Each potential trend was systematically documented in a trend profile consisting of a brief description and several criteria estimating the trend’s relevance to corporate communications. Specifically, the research team assessed the impact of the trend on the corporate communications function, processes and management.
Scoring: Based on the criteria detailed in the trend profiles, a scoring method was developed that was used to rate each of the trends.
Selection: These trends were first discussed among the Communications Trend Radar team during a workshop. Each team member then voted individually for the top trends in the areas of management, technology, and society. We proposed five trends for 2023 (depicted below) based on the outcome of this process.
Reflection: These trends were examined further and later discussed with communication leaders during an online workshop in November 2022.
Report: All trends were analyzed and described in more detail in our publication - the Communications Trend Radar.

Research team

The Communications Trend Radar 2023 project was conducted by a research team of the Leipzig University, the University of Duisburg-Essen and University of Potsdam.

from left to right:

Stefan Stieglitz is Professor at University of Potsdam. He is head of the SAP-endowed chair of Business Information Systems and Digital Transformation.
Daniel Ziegele, M.A. is a research associate at the Institute for Communication and Media Studies at Leipzig University, Germany.
Sünje Clausen, M.Sc. is a research associate at the chair of Digital Communication and Transformation at the University of Duisburg-Essen, Germany.
Ansgar Zerfass is Professor and Chair of Strategic Communication at the Institute for Communication and Media Studies at Leipzig University, Germany.

Downloads

Download Communications Trend Radar 2023