Over the past few weeks, management teams across the country have worked tirelessly to manage the impact of the COVID-19 pandemic on their business. Looking after the safety and security of your people, managing cashflow and operational emergencies and simply staying on top of the day-to-day changes, in reality, will, I’m sure, have taken up most of your time.
There will have been little or no time to think beyond the next few weeks. At one business I know, there is a daily executive video conference at 8.00 am. Of these, four are devoted to managing issues covering the next 24-48 hours, while one is focused on planning the next 1-4 weeks. This last meeting is called the long-term planning session!
Managing day-to-day is essential at this time. But you also need to think about how you are going to succeed in the next waves of this crisis. And you need to think about and plan for that now.
As the health crisis – the first wave of it, at least – starts to recede, a second crisis will grow in importance. This is the COVID-19 economic crisis, and there are three things that are pretty certain about it even now:
Reality 1: We are facing a deep and potentially lasting recession
The economic shock of COVID-19 will be bigger than anything we’ve seen in our lifetime. Take the UK, for example. A sample of 14 banks and economic forecasting businesses, reviewed by the BBC, suggests that the country is heading for a 6-10% decline in GDP this year, with a 10-25% hit to Q2 GDP alone. The government’s own Office for Budget Responsibility gives an even more bleak assessment for 2020: a GDP hit of 35% in Q2 and 12% decline for the year as a whole.
This picture is repeated across the globe. The World Bank has said that South Asia is facing its worst economic performance in 40 years, while the World Trade Organisation has forecast a decline in international commerce of 12-32% this year. Finally, the IMF believes that world is facing the worst economic crisis since the Great Depression of the 1930s and that there will be only a partial economic recovery in 2021.
The impact of this recession will vary by sector, but, despite the government’s best efforts, is likely to mean higher unemployment, lower disposable incomes and weaker demand across the economy. Recognising and responding to this new economic reality should be at the heart of your post-COVID business strategy.
Reality 2: Social, political and business attitudes and behaviours will change
All crises lead to changes in attitudes and behaviours. My mother still has a ‘make-do-and-mend’ approach to life resulting from her experiences in WWII, while the 2003 SARS virus crisis in China accelerated the growth of on-line shopping.
Exactly how attitudes and behaviours will change is hard to predict with any precision, but here are some reasonable possibilities:
- An accelerated shift to on-line shopping. As shops have shut in the lockdown, more people are using on-line shopping than ever before. It is more than possible that these behaviours will lead to an acceleration in on-line channel growth in the post-COVID world. Amazon, for instance, has just announced that it is hiring 75,000 more workers to cope with its growth in business, on top of the 100,000 new staff it added last month.
- Greater focus on our immune systems. Tragically, the virus targets those people with the weakest immune system. Developing a strong immune system will become more important to healthcare providers but also to every individual. Exercise, eating well and the use of effective supplements could well rise higher in our list of priorities.
- The ongoing search for value-for-money. As in the 2008 crash, companies that offer great value are most likely to be the winners. In the UK, brands such as Aldi, Lidl, Primark and RyanAir have flourished and it’s likely that value brands will once again have an advantage. As a result, all businesses will need to seek more efficient ways to serve their customers.
- More home working and less work travel. Most executives are starting to realise that, by using technology effectively, they can run their business effectively without leaving home. At one food company, for instance, travel and accommodation expenses have fallen by over 90% at a time when sales have seen double digit growth! Over time, as lease agreements allow, companies are likely to move into smaller, lower cost premises without any impact on their sales performance.
- More pressure for de-globalisation. It is likely that economic recovery will be best served by countries working together to create the conditions for growth. The early signs are not encouraging, however. Trade and political tensions between the US and China are increasing, for example. Elsewhere, President Macron of France has recently called for more sourcing and manufacturing closer to home to protect supply chains. His calls are likely to be repeated by other national leaders, increasing the likelihood of protectionist measures and a rise in trade barriers.
Reality 3: There is no going back to ‘business-as-normal’
The post-COVID recession, and the changes to our lives and structures that will result from it, mean that there can be no going back. That is why all business leaders need to start looking forward and preparing for the next phase of this crisis, rather than just dealing with their current list of issues.
As part of that planning, there are three attitudes that will most help you create a positive outcome and raise your chances of success:
- Think big. For most companies, incremental change will not be sufficient. You will need to think far bigger and bolder and be willing to consider more radical changes to your markets and your business. For example, what is your response to a double-digit reduction in the value of your market over the next 12 months?
- Greater operational efficiency is a given. New strategies that fail to significantly improve efficiency will have little chance of success. The pressure on providing greater value-for-money to customers is such that step-change efficiency gains are going to be crucial to protect and minimise the impact on margins, particularly when you’re also likely to be looking to bring at least parts of your supply chain closer to home and away from lower-cost countries.
- Speed and agility will trump everything. The ongoing uncertainty and the likelihood of rapid changes to your markets mean that pace will trump perfection even more than now. You will need to raise your organisation’s game when it comes to accelerating the pace of change, developing and delivering new ideas at pace, as well as your ability to shift focus and resources away from loss-making activities to winning initiatives. Finding ways to organise and lead this greater level of speed and agility across your organisation is a critical task that you need to start now.
The leadership and strategic challenge resulting from the COVID-19 crisis is enormous – but it cannot be avoided. While most of the people in your organisation should continue to focus on the immediate day-to-day issues, you should now also establish a smaller team to consider the longer-term implications, challenges and opportunities.
Tomorrow, I’ll focus on the steps you can take to develop a meaningful post-COVID strategy during this time of uncertainty.
© Stuart Cross 2020. All rights reserved.