Building Agility in the Face of Adversity
If the Charles Haughey legacy is characterised as GUBU, then this current crisis might well be described as GURTAGE. We are experiencing a ‘gargantuan and unprecedented reaction to a global event’. It is quite incredible how the world has changed in the last few weeks.
Like you I’m sure, I too have been monitoring the significant disturbance and trauma being created by the Covid-19 Virus and I’m particularly bothered by the economic consequences. Of course I’m concerned about the health risks. I’m being diligent and taking extra but reasonable precautions. And of course I feel for the victims and their families. It must be devastating.
In the meantime and for better or worse, there are mixed government responses. While our government acted quickly, the Cheltenham Festival went ahead and the London Underground is still running. Airlines are still operating while many factories in China are in restart mode. However, I was booked to facilitate a global sales conference this week in Germany. Fifty people from twenty European countries were due to arrive into Mainz for three days. Understandably and justifiably, the event was postponed.
Spare a thought for the independent family hotel that has no way of replacing a big chunk of lost revenue. I have also spoken to a number of my Irish hotel clients by telephone this week and they too have similar stories to tell. Add in the news that the St. Patrick’s Day festivals have been cancelled. That will be an enormous hit to those directly servicing the domestic and international tourism trade.
As for retailers, they are at risk at both ends of their supply chain. Their inbound supply chain will be affected for those goods originating in China. The outbound route to market for traditional bricks and mortar stores will be threatened by a possible migration to on-line, if shoppers get even more worried about going out and about.
The knock-on impact of these and other examples are real and very serious. And it’s often the B2C sectors that feel it first. But I believe that we have to maintain perspective and not let this very unfortunate outbreak cause a macro-economic change of business sentiment. For that reason, I think it’s a good idea to take some time out now and consider the consequences for your business and plan accordingly. Agility is key.
Tips for Immediate Action and to Build Resilience
1. Reach out to key stakeholders
Speak to trade associations, suppliers (and even competitors where relevant) to get early visibility of emerging impacts in your sector.
2. Form a Resilience Team
Form a temporary cross-functional steering group internally, reporting to the CEO. Depending on your business type or size, set time aside for team members from commercial, finance, operations, HR and supply-chain to get into a room to talk. Firstly, they should come up with a plan to protect your team against the virus.
Then they should apply a SWOT framework (strengths, weaknesses, opportunities, threats) to the key pillars of your business such as people, product, route to market, brand and internal controls. Consider all risks to your business. then rate them in terms of the scale of their impact and timeframe. Then make recommendations for corrective actions.
One client of mine imports components for their technology product from Italy. That factory is closed for the foreseeable future. That means my client has to either source the components elsewhere (easier said than done) or reforecast the sales targets downwards.
3. Contact customers
Your customers might be just as concerned as you. As you learn more about the implications for your sector, speak to your key customers to reassure them that you are all over this and planning like crazy. Reassure them that they are still in good hands. Don’t let competitors slip in behind you with some attractive offers.
4. Challenge your cost-base
Since 2008, businesses have already built expertise in reducing costs. Public companies in particular have had to do it, as shareholders applied pressure. Therefore you might feel that you can’t get blood from a stone. But do re-look at this again. Some of your variable costs should scale up and down with your sales. But are you on to this? And can you do anything with your fixed costs? Is agility in your culture?
5. Communicate with your own team
Don’t forget to pay due respect to your own people. Include them in your planning. At the very least, let them know what you’re doing and reassure them as much as you can. Rather than letting people go and reducing payroll, could you work collaboratively with them to reduce cost and/or increase productivity?
One company I’m aware of held a meeting with its full team to discuss the crisis. An idea came from the floor that everyone should temporarily cut their salary by 20%. That was an amazing gesture. Perhaps this team remembers the challenges of 2008 and is now being proactive.
6. Check your Balance Sheet
Can you relook at your balance sheet and see if you can unlock some assets or liabilities? At the start of the global crisis in 2008, many large companies acted quickly and reduced debt. They then sat on their cash and were ready to pounce quickly when opportunities re-presented themselves. We have no idea how long this crisis will last but if it is protracted, cash will be king as we come out of it and value will be there to be had.
7. Use the temporary downtime wisely
I participated in a webinar this week for conference speakers from around the world. Cancellations are our new temporary reality, which releases a little more downtime for some research and writing. If you now have unplanned downtime in your business, what can you do with it? What about organising that training programme for your team that you have been parking for some time?
In addition to this crisis, here is another reality in our world. Every spurt of economic growth is followed by a downturn. Whether it is a virus outbreak that causes a macro-economic shift, the price of oil or another financial crisis, the ‘S Curve’ (Sigmoid Curve) continues.
Check out the work of Economist Hyman Minsky who describes the five economic phases of a ‘bubble’. We’ve had a global economic boom for the last ten years. You need to listen to the senior economists and form your own view of where the world is at right now, regardless of the virus outbreak.
Best practice is to not bury your head in the sand or wait for your trade association to lobby for government support for your industry. You are the master of your own destiny so control your controllables and plan for the uncontrollables.