Once the urgent priorities are tackled and everyone is on board, it becomes a good moment to step back and evaluate your strategic options for the future. This starts by getting a granular understanding of your situation.
In the first article of this 4-part series, we discussed the initial adjustments you need to make to extinguish the burning fires in your business. In this second part, we will look at how to evaluate your situation in preparation for soon-to-come strategic decisions.
You can do this critical assessment through mainly two perspectives. The first dimension is about getting an understanding of the environmental factors surrounding this crisis. And the second addresses the potential impacts on the 5 main dimensions of your business today as well as for times to come.
What is the world cooking for us
Crises generally come with uncertainty. Even more when it is caused by unprecedented external factors like in the case of coronavirus. How things will be is everything but sure.
Your organization’s success will be significantly impacted by its ability to create awareness about the possible scenarios to come.
How is the crisis going to evolve in the following weeks and months? What are the influential factors that can make a change in scenarios? There are many nuances of answers to these questions.
First, the scope. What geography are we talking about? The rhythm and impact in various countries of the world are different and so are the institutional countermeasures. Here the latest about coronavirus spread and curves’ evolution with worldometers.
The public health situation is an important indicator. But there are other elements to keep a close eye on. Among the main ones, the governments’ measures and their subsequent impact on the macroeconomic environment.
In a large organization, you’ll be able to leverage internal or external dedicated analysts that will provide the latest predictions. When you don’t have available specialists, you still want to have this information flowing on a regular basis. If you are in that situation, I invite you to check the insights about the “low-touch economy” provided in this report (you’ll receive it after sharing your email with BoardOfInnovation). Also interesting to see the foot traffic patterns put together by Foursquare: How COVID-19 is Influencing Real-World Behaviors
Economy recovery scenarios will evolve with time, hence the value of setting up a way to regularly review the scenarios as well as their probability to convert into reality.
Some economists refer to recovery scenarios in letter shape (V, U, L). Reality is that there are more than 3 scenarios out there. As shown in the model from First Round below, the decision aperture is especially wide nowadays.
Well, you can’t guess the future. Many try to predict it. They leverage varying levels of historical information, rationalization, and science. For example, here is McKinsey’s view.
Planning for the future with 20 scenarios isn’t an easy thing though. Based on your industry, you might be able to reduce it to three to five possible futures. Consider your business specifics to define criteria that shall drive the scenario definition. For example, you can pick two dimensions where one is lockdown duration over the next 12–24 months (3–6–12 months) and the other the revenue evolution forecast.
So, external factors will have a strong influence on the destiny of businesses. Some industries not impacted yet might well be in two weeks from now. We don’t know yet how far will the butterfly effect bring this situation. So, better to keep an eye on this when looking at possible strategies…and when assessing your own situation.
Time for a little introspection…
Well, where to start. Quite a long list of areas to check. With the aim to keep everything in sight yet focus on the essence, I love the model of Ritter and Pedersen, Department of Strategy, Innovation, and Marketing from the Copenhagen Business School. It is structured around 5 main domains. Customer (Who), Value Proposition (What), Capability (Which), Value Demonstration (How), and eventually the Results (Why).
Side note: If you have a crisis task force in place, they’ll be well-positioned to help you drive and support the teams to perform this assessment.
1. Customer / The Who
Key Questions: Who were your customers ? How does the demand evolve? Are the problems you are solving still relevant?
Making informed decisions for your strategy and business requires understanding demand evolution. In practice, you can review how the crisis impacted the demand per products and services, per market segment, per channel, etc. When you get a list of all these evolutions, it is also recommended to invest some time differentiating what is contextual (specific to the crisis/lockdown time) against what could become structural (the new normal). They’ll have very different impacts on mid and long term plans, and therefore shall be mapped in your strategy.
2. Value Proposition / The What
Key Questions: What do you sell? Which kind of value propositions do you offer? How is this impacted by the crisis?
Your products and services are more often than not the results of the combined contribution of your people, technological assets, processes, and same from your value chain partners. To perform a proper assessment here, you can go through your core processes and identify which areas are impacted or at risk of being impacted.
You can distinguish the Build, the Delivery, and the Support of your service. It might well be that your Build can function 100% in time of crisis and lockdown but that your Delivery has a few broken links to be addressed contextually as well as structurally. You can leverage the input of all the elements addressed above.
3. Capability / The Which
Key questions: Which capabilities did your organization have? What are the areas impacted or at risk?
Firstly, your People. Besides checking on their safety, it will also be useful to document how their work is impacted by the current protection measures in each geographical location. Based on the nature of their job, identify how many can efficiently work remotely. How many can’t.
Other than your people, how is the rest of the value chain impacted? This is also a very valuable exercise to perform in order to identify possible risks and opportunities. Some actors among your providers, partners or distributors might be more affected than others. Maybe they have closed their doors already or risk doing it in the near future. How does this impact you?
A good starting point is to list all actors of your value chain, especially the ones contributing to building and distributing the services or products you deliver.
At this stage, the aim is to understand if there are risks of your position weakening or if there are opportunities to strengthen your position. You can do so by assessing their own exposure — demand evolution, cashflow situation as well as strategic and operational risks, etc.
4. Value Demonstration / The How
Key questions: How do you demonstrate your value propositions to convince customers to buy them? Is this impacted by coronavirus?
The current — and potentially upcoming — lockdowns have a tremendous impact on the way you interact with your customer. In B2B, you won’t be able to participate in industry fairs or conferences. In B2C, street marketing or aggressive in-store campaigns are suddenly less of an option. It is time to review your go-to-market channels and assess which have to be stopped and which can be increased. Associating this information with as many facts and figures as possible will help make informed decisions.
Mapping the cost per lead or customer acquisition cost (CAC) per channel and expected variation will help rationalized decision making later down the road.
5. Results / The Why
Key questions: How are your results impacted by the crisis (e.g., turnover, profits, social and climate contributions)?
Of course, many financial officers do like to remind us that everything translates into a figure. In my opinion, the “Why” shouldn’t be searched and can’t be found in figures. Yet, financials remains one essential element to measure the pulse and economic health of your organization. Well, in time of crisis, this is — of course — no less true. Every element diagnosed before and every action taken from there will have an impact on cash flow and financial results. Acting strategically will require knowing what your current cash flow situation is, as well as what the positive and negative financial impacts attached to each initiative, risk, or potential opportunity identified are.
Having figures available will be key when moving to the next phases where you’ll define your strategic options.
In the Results domain, you’ll want to flag any risk or opportunity associated to people engagement and satisfaction.
The same goes for social and climate impact. New business initiatives might bring positive (or negative) variation in that area. This is also the opportunity for you to assess what may be the options be to re-align your strategy and execution with your values in terms of environmental impact and carbon emissions.
With such assessment done, you will have gathered precious information and knowledge that will be of tremendous value moving to make the most beneficial decisions.
Yet, the shaping of your strategy is still to come. Sun Tzu, Art of War captures the challenge we’ll look at in the next article very well.
“There are not more than five musical notes, yet the combinations of these five give rise to more melodies than can ever be heard.
There are not more than five primary colours, yet in combination they produce more hues than can ever be seen.
There are not more than five cardinal tastes, yet combinations of them yield more flavours than can ever be tasted.”
I hope you found this article valuable and useful. Feel welcome to share your thoughts in the comments area. Let’s stay in touch.