“The best way to predict the future is to create it” -Peter Drucker
With COVID-19 cases growing worldwide, business leaders are scrambling to deal with a wide variety of problems, from slumping sales and stalling supply chains to keeping employees healthy and making sure they can continue working.
Many companies have predictably shifted their focus to core operations, cost management, and short-term thinking. Some will take these practices further to engage in financial engineering and use the year to take a wash. Even the CEO of Unilever released a statement last week stating that strategy was taking a back seat!
However, the most savvy operators will adapt to the new environment by thinking for the long-term. Leaders that can better understand what customers will value in the future, and orient their business models towards those needs will come out ahead. Because, no one can reasonably predict when the lockdowns will end — there is speculation of a second wave in the fall — there is a greater need for leaders to think ahead. We are already seeing good examples of leaders that are defining post-Covid business models.
- Amazon has made its bet to compete on safety building its own PPE to ensure business continuity. This will safeguard worker health, and a maintain a competitive advantage. How many more people will visit Wholefoods because they feel safe due to the free masks Amazon is distributing?
- Similarly, Apple will continue to compete on innovation. Last month, Apple announced they were severing ties with Intel and would be designing their own chips moving forward. This expands capabilities from design to manufacturing, and makes the company more vertically integrated. This makes sense if Apple has identified that security is the most important feature moving forward.
- High-end restaurants are forming collectives and selling futures.
There are two things that leaders can be sure about as a result of the pandemic:
(1) Consumer tastes will change: Unlike the last economic downtown consumers are not likely to feel comfortable shoulder to shoulder in bars and restaurants, visit crowded retail venues, or travel as readily when the lockdown ends. Reduced consumer confidence has a high probability for less investment in luxury items. Low oil prices are likely to harm the environmental agenda. If you are Tesla you should be concerned about what the new environment will mean for the future of your product.
(2) Operators will have to contend with inefficient throughput: Much has been written about the need to pursue resilient business models. McKinsey & Company found those who invested for the long-term outperformed those who didn’t during economic downturns by 150 percent, and with an astounding 25-point higher EBITDA over a 10 year time horizon.
The speed at which the environment is moving requires operations to be more attuned to strategic planning and to control time to remain competitive. One solution might involve entrepreneurial venturing using design thinking principals to create value for gaps in what consumers will be missing over an extended time horizon (i.e. 3-months, 6-months). For example, we know public events during the summer (concerts, food festivals, etc.) have been cancelled. Can something be done to solve these unsatiated and non-salient needs?
To be clear: I am not arguing that short-term survival doesn’t matter, rather looking further ahead will allow leaders to better fuel-growth and remain competitive.
Here is a simple four step framework to navigate through the fog of uncertainty:
- Establish a working committee: Launch a PLAN-AHEAD team to elevate your view above the day-to-day response.
- Scenario Plan: Create many flexible long-term plans, actions and strategic moves across a range of scenarios for all organizational business units. High-level, effective, and continuous institutional learning are prerequisites for ensuing the success of corporate change during uncertainty.
- Set trigger points: Milestones should be pre-established to guide action and execution at the right time.
- Iterate: Continue to refresh the process on an as need basis.
Leaders that continue to think about their business models will come out ahead, those that don’t might be asking themselves where all their customers have gone once lockdowns end.
