By Allen Roberts, Principal of Strategy Audit and Angela Haynes, President of Cumberland Business Chamber
˜A silver lining in every cloud” is a familiar phrase and when the cloud emerges, we will face a new challenge of finding the silver. We look past the doom, gloom, and general alarm that is presently being discussed, along with the loo paper wars and consider the silver ˜in them there hills”. Look for the Pareto fun fact too.
Catalyst for change
Change during stable times is hard to make stick however, when faced with a situation where the status quo is no longer an option, we tend to embrace change as a survival mechanism. Those that see past the current crisis and can articulate a vision of the benefits of change to processes, structures, work patterns, behaviours, and attitudes, have a once in a lifetime opportunity to effect change that has been out of reach.
Whether it is upgrading a Microsoft Office package, through to AI, machine learning, big data, subscription, and others, central is the notion of using the available digital infrastructure to remove friction and time from transactions. Suddenly, thanks to COVID-19 there is the opportunity to reimagine and the need to rethink and transform.
Working from home
This requires digital infrastructure plus a range of cultural and management changes. A previously denied request to work from home based on the failure of crusty senior management to acknowledge and lead the change put up barriers for women and men who juggle carer roles. Talent transitioned to more contemporary organisations and as a response. Private enterprise is excelling in delivering a work from home options, Government slower moving but on the way. Working from home will be the new norm for many, well beyond the pandemic.
Supply chain accountability
Supply chain transparency and resulting accountability will extend to businesses seeking control of its secondary and tertiary suppliers. The drive to offshore to reduce costs is confirmed as the flimsy strategy it always was and has resulted in a broken supply chain for many. Challenging times pave the way for negotiation, added discipline, transparency and accountability through supply chains. Significant opportunity will prevail for resilient manufacturers.
Distressed asset sales
The reality is that some businesses will fail, or survive only by aggressive reduction of activity types, so there will be assets of all classes on the market at distressed prices. From capital equipment, to customers whose suppliers have let them down, to inventory, and great people suddenly looking for alternative employment. For the sharp eyed, it may be a bonanza.
Home delivery will surge
Home delivery has been limited by refrigeration or keep-warm capability at the point of delivery. We now see supermarkets investing in food manufacturing capability as well as trucks. Adjusted dock delivery and store opening hours may be clawed back by the Unions and Fair Work Ombudsman in due course but exclusive hours for those with disability or infirmity is likely to stay. In the new world, vehicles will move more goods and less people as consumers become spoilt for choice in delivery of pretty much anything.
The instinct now is to hunker down, and stay away from customers and suppliers, reduce contact and cut costs so do the opposite, as the old saying goes, Zig when others are zagging. This will build relationships that will sustain when the recovery happens. As companies set about survival, investments in marketing are amongst the first to be hit. Wrong strategy, the time to muscle up is when other are cutting. Quality marketing works for you long after the expenditure has been accounted for in the monthly P&L.
Improved strategic & operational focus
It is normal to accumulate a bit of fat in good times however, as times get tougher, enterprises increasingly focus on areas with the greatest return or greatest potential return. Coronavirus will be the catalyst to aggressively “Pareto” the enterprise, improving the focus and making for a healthier enterprise in the long run. What is Pareto you ask? It is the 80/20 rule. Italy was famous well before Coronavirus, in Pareto’s first work he showed that 80% of the land in Italy was owned by 20% of the population.
Innovation hubs will be crammed
Innovation hubs will be bursting at the seams as entrepreneurs see all sorts of new opportunities emerge. Crises always accelerate innovation, and this will be no different. Perhaps it will be even more pronounced than previously, as digital has blown away the barriers to entry to most industries.
Tourism, travel, and hospitality
International travel has come to a standstill, and domestic travel being actively discouraged resulting in hibernation at best of airlines, travel agents, hotels, restaurants, tour operators & resorts. Local tourism may have an opportunity, as some will still want to get away from it all. The towns on the coast recently devastated by fire and struggling to recover, will find fertile ground marketing a no stress, no crowds low cost family experience to stressed city dwellers. This presupposes an appropriate level of social distancing.
Home renovation and styling
Home renovation will boom again, as people reignite their love affair with having a nice home. In times of crisis, people look inward, to their security and safety, and that of their immediate family, close friends, and local community. People will also enjoy simple pleasures like having fresh flowers in a vase and taking time to look at pictures of family on the wall.
Keeping people employed or connected to employment is becoming strained. The challenge is to keep those that will be the core of the rebuilding when the recovery comes. Those enterprises that explicitly set about keeping their staff in the face of such uncertainty, will gain enormous loyalty and commitment from staff, reducing turnover and retraining costs when the good times return. Based on evidence from past recessions, jobs lost do not always re-emerge as times improve so if the glass is half full then the workforce will adapt.
Cash is king
Never was this phrase more appropriate, except in the 2008 crash, the recession we had to have in the early 90s, the sixties (that claimed my fathers business), 1929, and the great depression of the 1890s. Do you see a pattern here? Those with cash, and the will to use it, will benefit.
Interest rates are at an all-time low, but this has had minimal stimulus of economic activity. Banks remain gun shy from the Royal Commission. Simultaneously the stock market is seeing red so there may be an excess of tightly held liquidity in the economy seeking a more productive home. This could underpin a surge in canny investing and acquisitions of bargains emerging, particularly for those with cash.
Learning from experience
Controversially, pandemics aren’t black swan events as we have experience how they respond, and strategies to combat them, but we are still learning. The behaviour of viruses in computers are mathematically very similar to biological infections, so there is a host of data there for the analysis and learning. The earlier flattening of the curve by countries who suffered SARS, MERS and Ebola also evidences that experience makes for better preparedness and response times in a crisis.
Importance of debate
Our institutions are being tested. Ideology has no place in a debate that requires facts to be brought to the table. In considering the future, when facts are not available, we need to be able to have informed, intelligent debates that examine issues from a range of perspectives. For example, asking an ecologist, economist, and marketer the best way to save a rain forest, will yield three different answers which are all correct but individually incomplete. Sustaining the war cabinet put together by the Prime Minister with the exclusion of any representation of opposition political parties or points of view may prove short sighted.
Respect for integrity and accountability (and logarithmic spread)
The core risk of Coronavirus is its compounding and the capacity of the virus to spread in a logarithmic manner, before detection by the carrier. In the absence of measures to lock down the potential for contact, it will just keep compounding. Einstein called compounding “the most powerful force in the universe” this is a harsh demonstration of that power.
As the public and institutional disruption increases, politicians will come to realise that transparency is the best disinfectant for rumour, innuendo, malicious words and deeds, and as a result, integrity and accountability will get a boost.
Allen Roberts is Principal of StrategyAudit a boutique consultancy assisting Australian SME manufacturing businesses with revenue generation, operations and performance improvement to increase competitiveness and sustainability.