In rivers of red there are streams of green
Special Report by Chris Graeme
International business consultant Rob Hanly has been helping businesses all over the world understand what’s wrong with their business models and helping to fix them. In a webinar organised by the British-Portuguese Chamber of Commerce ‘Adapt or Die – How you can survive in times of crisis’ he shares a few tips on getting through the current Covid-19 crisis.
Regardless of whether you think shutting down the world’s economy because of the current coronavirus pandemic was a wise or foolhardy policy, the stark reality is, in the words of the head of the IMF, Kristalina Georgieva, that the world could be facing the worst economic and financial recession since the Great Depression of the 1930s.
But with a high percentage of employees working from home using Skype and Zoom, how will individual businesses be affected. Rob Hanly thinks: ‘substantially’. But then what will happen to business models? How should business restructure the way they operate or even that products they produce?
There are challenges but also opportunities. Take company advertising for example. Face Book has been slashing its charged so it is getting cheaper for brands to take out advertising and with so many people under ‘lock-down’ surfing social networks, that’s a no brainer.
Rob accepts that while nobody knows exactly what is around the corner, you can look ahead and anticipate what might be coming, and if you do that you might be better prepared.
“Those who are proactive will do well, those who wait and see will be buffeted. But one thing is for sure, it will get worse before it gets better,” he says, particularly on the labour side.
Rob says we are in the “new normal” with changes in spending while priorities will change too. So what comes next, after most of Europe has “flattened the curve”?
According to a report by the World Economic Forum, it could take years for the US economy to recover from Covid-19, while the consultant McKinsey predicts that from now to Q4 and beyond we will be in a deep recession with results three times worse than expected.
And some worst case scenarios suggests a loss of GDP of up to 9.9% with a total global loss of $9,170Bn.
So what will drive spending? For consumers it may no longer be about spending for entertainment.
There will also be changes in labour availability. “People are being let go, they have less money to spend, with the crisis being a psychological as well as an economic one” says Hanly.
Hanly says it is important to maximise the cashflow you have because cash is oxygen, but retain labour, even if that means laying staff off. You should always be honest and provide tangible assurances that they will be retained after the crisis is over.
It is important, he says, to reorder and prioritise cashflow management by collecting accounts payable first by offering a discount to do so if necessary while paying invoices a bit later while, always being honest to staff and clients/suppliers.
The most important thing is being honest and not use the crisis to be mercenary as people will remember later on that you tired to fleece them and your reputation will be burned in the market place.
“Ask yourself the question. Is it important to have the money now or later when it could be worth more?”
The main way of maximising cashflow is by cutting expenses. You must retain good talent as it is rare that a set of strategies work together as quickly and effectively with a group of newcomers than a team which has built up a solid working relationship.
The Four Horsemen
Whatever your medium to long term strategies and goals, there are risks. Rob calls them the Four Horsemen (in a nod to the Biblical horsemen of the apocalypse). First he questions the presumption that things will go back to normal quickly, that you won’t be affected and you’ll cruise through. That may be the case. Some are doing well.
However, a general lack of urgency can threaten your ability to adapt and transition. Your employees may not understand the impact, or may be suffering from recency bias (i.e., SARS and MERS didn’t affect us, but in other parts of the world these epidemics were devastating to business). One thing Rob Hanly says is important is to educate your workforce without panicking.
This is important because your employees will be stressed and may be more worried about their lives and loved ones than about your company’s goals and missions. “It would be irrational for them to do anything else, so you must be calm in the midst of chaos” says Hanly. “This is why you have to be honest, transparent and open, support staff and adapt your company culture” he says.
Sales and marketing will be less effective as old techniques fail to work in new contexts. There will be a need for better offers and guarantees, better positioning and better optimisation to win your share of a more limited dollar or euro.
“It is therefore important to look beyond the data and see how needs are changing and risk can be reduced while maintaining a posture of calm in the midsts of chaos,” he says.
Businesses will face a knock to their operational capabilities from sick, distracted or fearful employees. The answer is remote work where possible, which many are already doing. But it is important to supply your teams and employees with health and safety materials and the tools they need to work effectively from home.
“All of these risks must be addressed and your ability to do this can determine your ability to leverage your assets in the next stage,” says Hanly.
Survival Plans and opportunities
One thing is for sure, new conditions present new problems, constraints, ideas and opportunities in moving forward.
It is important to gather internal data and get your execution infrastructure right and you need to be asking nine key questions: What are the most important things we should NOT change and why? What are the five things that should be changed and why? What do you most hope to do? What advice do you have for me? What do you expect from management? Should management expect the same from you? What are the top five things that could get you fired? What are the top five things you could do that would guarantee you would get a raise or promotion?
You also need to know your strengths and weakness in terms of skills, resources, knowledge and processes.
Gathering external data too is equally important to understand what opportunities and threats do and will exist whether on overall demand, competitor activity, market saturation, government policies, economic conditions, social, cultural and technological developments.
Rob Hanly says that simplifying in the short term is a good tactic by asking yourself what is the one general goal for the next 90 days? For this you need to identify three to five things that will help you to confirm you have reached your goal.
What strategy are you using to achieve these objectives? What are the specific actions that you must take to achieve this strategy to fulfil these goals, and when you have them how are you going to distill them neatly in a general idea?
“Every one in your company must know the answers to these questions and how and when you will be adapting towards these goals and finally, when you achieve them, people need to know what success looks like,” he concludes.