As we head towards the Covid-19 exit, organisations must re-evaluate how they engage in what will be a new world order.
Reverting to legacy business models may well leave some flat-footed or even redundant.
Over-reaching on a short-term spike or anomaly could be a deceptive distraction.
Finally, betting the house on ‘sure-thing’ future predictions must be carefully discerned.
Reconsider Purpose. Clarifying purpose should be an ongoing, reflective routine for every organisation. Unlike strategy that can be top-down, bureaucratic and permanent, we prefer purpose that is organic, synchronous and agile.
Our methodology includes three cyclical steps: Environmental Analysis, Comparative Competence and Value Creation. This is an ongoing practice, at worst considered every 90-day and no better time than now.
A Preferred Model. There are numerous theories about business models and most of them well-researched and proven. Wherever possible, we prefer the following three key factors:
• Recurring Revenues
• Sustainable Earnings
• Under-managed Industries or organisations
Based on the above framework, it’s worth exploring the present and the future and what part we will play in it. A useful tool to accomplish this is Ansoff Growth Matrix. We recommend organisations invest time and energies in comprehensively working through the matrix as they navigate their exit.
1. Reverting to Status Quo
Are we going to re-emerge from this crisis unchanged?
For the select few entertaining this, it will be useful to answer the following questions:
• What are the implications and risks of ‘business as usual’?
• Will customers return to past levels?
• Will sales volumes bounce back to what they were? If so, how quickly?
2. Market Penetration
Even if the inclination is to continue unchanged with current products/services and current customers it is important to at least pursue market penetration by growing market share – either organically (sales and marketing) or through acquisition (in Australia, we have the luxury of government-backed credit of up to $250,000 in an environment where some businesses are likely to be undervalued).
3. Rethinking Price
Whilst most sectors have become used to a cost-based pricing model in recent times, general affordability, at least in the near term, will be significantly lower. This will require a rethink of pricing strategies – specifically – price-based costing; finding innovative ways to be more efficient to reduce input costs in order to lower prices to market expectations…this means more than just pay cuts or lay-offs.
4. Product and Market Development Disceptions
The post-pandemic environment will have artificial demands and unsustainable highs that will require careful consideration. The temptation for product or market development must be evaluated against life-span and life-cycle. For good examples, we note the short-lived spikes in demand for toilet paper, hand sanitisers, face masks, home office equipment, even food home deliveries. If the ‘term’ of these ventures are not well accounted for, they may have unintended consequences.
5. False Positives
Closely related are false positives that will materialise in the near term. We will witness an immediate spike in areas that have been temporarily suspended or curtailed. Expect pubs, restaurants, cafes, movie theatres and the like to be overwhelmed when the quarantine ends – we are all longing to socialise. Shopping centres and departments stores will also benefit. When they re-start, sporting attendances and broadcast viewership will experience medium term growth. Conversely, streaming services and video conferencing will temporarily decline. Longer-term shifts in travel and tourism is also likely. Understanding these as best we can is important. But let’s not forget that the pre-virus declines in some of these will return, eventually.
6. Diversification – Discernment vs Distractions
Most critical of all is the need to have considered plans to navigate opportunities that present themselves.
• We know that technology adoption and digital transformation will be permanent. Investing resources in this will be important.
• Similarly, logistics – both supply and demand chains – will be forever altered.
• Global and political machinations will result in lasting shifts in exports and imports. Our historic reliance on some countries for manufacturing and outsourcing will change. Many nations will have to rethink what they produce, focus on, specialise in, and how they go about doing so.
In Australia, for example, how we manage tourism, mining (say lithium – production rather than export), farming, foreign ownership and investment, international education will have to change.
• The Catalyst effect (discussed in our previous article) must not be ignored.
Just as 9-11 resulted in irreversible changes to the way we travel, Covid-19 will permanently impact our future. Our approach now will define the organisation’s survival, sustainability, success even growth.
As always, if you’d like us to assist, do reach out.
This article was originally published on 19 April 2020 at https://marvin.in/covidexit/