Many economists are indicating that the world may face an economic situation similar to The Great Depression of 1930s. Angel Gurria, Secretary-General of Organization for the Economic Cooperation & Development (OECD) mentioned in an interview to BBC that;
“Rrich nations were predicting a V-shaped dip, with a steep decline followed by a rapid recovery. It was already then mostly wishful thinking. Right now, we know it’s not going to be V-shaped. It’s going to be more in the best of cases like a U-shaped with a long trench in the bottom before it gets to the recovery period. We can avoid it looking like an L-shaped if we take the right decisions today.” (Company 2020).
While watching several videos and reports by different Economists about Covid-19 and its impact on Global Economy, a statement of Donald Rumsfeld flashed in my mind which he made during a press conference in February 2002, he said;
“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.” (Goodreads 2002).
So true, in these unprecedented times, we are battling the known knowns, known unknowns, and most importantly, unknown unknowns. We all had our plans; things were going our way, but suddenly we are all pushed to the wall. Businesses, economies, and countries are facing the challenge which was never anticipated.
Mike Tyson once said; “Everyone has a plan ‘till they get punched in the mouth”. (Knowledge 2016). We are all punched in the mouth, bleeding, and trying to gather our senses back, regain our consciousness, and rebuild our plans to move on in these uncertain times.
In these uncertain times, I asked a question to myself what to do next? I was thinking:
Q1. What should we do as an organization or as a leader?
Q2. How to understand and make sense of this unique and fragile business context or New Normal?
Q3. How to reassess and reinvent our business, and correctly aligned it to the new market realities?
Q4. How to create strategic readiness to face uncertain tomorrow?
Q5. And, how to turn current uncertainty into an opportunity for our business, people, and stakeholders and above all for our economy?
To answer the above questions, in my view, we must have a three-phase response to the Covid-19 crisis for our businesses.
Phase I – Discovery [Analysis & Assessment]: Discover and understand the short-term and long-term impact of Covid-19 on your business, industry, and country. Keeping in mind that this pandemic could impact the global economy in three ways, (i) Production, (ii) Supply Chain (iii) Global and Country specific Financial challenges. Some organizations started creating a blueprint of revised strategy based on new challenges, and with a focused view on how to identify hidden opportunities during these crises.
Phase II – Response [Containment & Implement]: Respond quickly to the immediate crisis, implementing measures to contain the local spread of the virus, modifying processes to comply with Covid-19 related legislations or SOPs, implementing new ways of working such as working from home, etc. Installation of disinfection tools, educating and training a workforce, etc. are some of the actions falling under Phase II.
Phase III – Recover [Rehabilitation and Sustain]: Implement agile methodology (where appliable), ensure continuous review, and amend business strategies, plan or process as quickly as possible. Adapt to the new business realities, engage in data gathering and analysis, support evidence-based decision making. Ensure to create an aggressive overarching governance model to ensure sustainability.
To be effective in discovery, response, and recovery phases during these unprecedented times, it is highly recommended that leaders must go back to the BASICS immediately, this will enable them to create AGILITY. Agile organizations will be able to respond to changes quickly and enabling them to capitalize on the upcoming hidden opportunities during these uncertain times.
Donald Sull, a professor of management at London Business School, highlighted the crucial advantage of an Agile firm as:
“In turbulent markets, agility is invaluable. When the cumulative effect of uncertainty gets bigger, you get some great opportunities out there. You need to attack those opportunities. Managers need t to be entrepreneurial and aggressive, willing to take risks, mobilize resources, adapt to circumstances, and live with uncertainty” (Syrett and Devine 2012).
What is Agility?
“The capability to move rapidly and flexibly to shape or adapt to the opportunities or threats arising from uncertainty”. (Syrett and Devine 2012).
Creating agility is a difficult process, it is a complex network of interconnected agilities created at different organizational domains which typically includes Financial Agility, Portfolio Agility, Operational Agility, and finally Organizational Agility.
Financial Agility:
No brainer, all types of organizations need liquidity to sustain in the turbulent times, without sufficient liquidity in unprecedented times, survival chances are very bleak. Financial agility allows the organization to maintain its position and stay in the game, especially in turbulent times when rival businesses are struggling.
Mark Thomson, head of PA Consulting’s Strategy and Marketing Practices advised the following steps for the companies to build their liquidity, he suggested that organizations should: (a) Raise Capital, (b) Focus on Refinancing Debts and (c) Perform careful Divestment [sell valuable assets without compromising their well-being].
What organizations should avoid, on the other hand, is aggressive cost-cutting, non-thoughtful, and unplanned cost-cutting eventually impacts the organization’s overall capabilities in the long run, so cut the cost but not the capability.
Executives must keep the big picture in mind, the future is uncertain but tomorrow is a reality, closing eyes from the reality and New Normal, may impact the organizational future capabilities to operate. Peter M. Senge mentioned in his best-selling book “The Fifth Discipline”:
“We are taught to break apart problems, to fragment the world. This apparently, makes complex tasks and subjects more manageable, but we pay a hidden, enormous price. We can no longer see the consequences of our actions; we lose our intrinsic sense of connection to the larger whole. (Senge 1994).
Therefore, keep the cash, avoid aggressive cost-cutting, relook at the business model, and only invest in value-creating activities.
Operational Agility:
Every organization is forced to rethink and reassess how they operate, unfortunately, there are no clear guidelines where to start, there is no map which is stuck on the wall, telling us ‘You are here’ and how you can reach to your new desired destination.
Creating operational agility is fundamental during uncertainty, organizations need to react quickly and swiftly to capitalize on the upcoming opportunities but the window to react is to very slim. Rigid, bureaucratic, and hierarchal organizations tend to miss the opportunities, especially in these unprecedented times.
Reengineering processes and systems is the key, the quicker companies can identify waste activities and eliminate them, substitute them with the activates which create value, better the chances for these companies to meet the changing preferences of their customers in an uncertain environment.
A simple example during this pandemic is the implementation of Social Distancing, for the aviation industry, this poses a huge challenge, for Airports, it is a significant process change, for manufacturing it requires complete rearrangement of their production/assembly lines, etc. In summary, during these devastating and unprecedented times, organizations with Operational Agility will be having significant Competitive Advantage on their competitors.
Portfolio Agility:
Not every organization will be able to relook at their portfolio in uncertain times, however, if possible, companies must explore opportunities for acquisitions, joint ventures, and alliances. One of the biggest opportunities for the organization during these times is to look at possibilities of Outsourcing. There are many non-value-add activities that can be outsourced to save time and create additional value.
One of the basic tools which organizations can use is BCG Matrix, created in the 1970s and to date, this tool is used extensively by companies to decide what they should keep, sell, or invest more.
Organizational Agility:
Irrespective of the challenge, the starting point will always be to relook at the current organizational structure, authority matrix, and taking a fresh perspective on the role and responsibilities of executives and front-line managers during these uncertain times. The focus should be on enablers which will facilitate the growth mindset, apatite to accept change, let go of the status quo, these adaptations will help the organizations in capitalizing on opportunities quicker than their comparators.
Combined together, the financial, operational, and portfolio agility will pave the foundation for revived, more AGILE, and NIMBLE organization. It is important to remember that concentrating on a single agility domain will not help the creation and reinvention of an agile organization in uncertain times.
How to move towards agility?
As mentioned earlier, in uncertain times, organizations must go back to the drawing board and must go back to the BASICS. Executives and senior managers must do the following basic activities:
1. Reassess internal and external environment:
Conduct PESTE analysis, assess new patterns of uncertainty i.e. Variation, Foreseen uncertainties, Unforeseen uncertainty, and Chaos. Michel Syrett and Marion Devine defined Chaos as “Chaos is where unforeseen events invalidate a firm’s basic premise and strategy”. (Syrett and Devine 2012).
PESTLE analysis is the most cost-effective way to foster a deeper understanding of environmental factors influencing the business, it helps to ascertain the big picture with flexibility with the narrow down approach, most importantly, it helps the executives to explore the hidden opportunities and threats faced by the organization in a given time in a particular business context.
P=Political, E=Environmental, S=Social, T=Technological, L=Legal, E=Economical
2. Conduct SWOT analysis:
¨ Understand which strengths will keep the organization still in the game.
¨ Understand what opportunities you foresee in the turbulent times.
¨ Ascertain your weakness and threats with a fresh perspective and in-line with the current business and economic context.
SWOT will facilitate in predicting the changing trends which can potentially benefit the business decision making process during these uncertain times.
This is the most common technique but an important one, SWOT will help the executives to reinvent and recreate their business model, have a fresh look at their available resources and its existing capabilities. It allows the organization to have a fresh perspective on positive and negative factors influencing the organization from inside and outside of its business context.
3. Use McKinsey’s 7S Framework tool
This tool will help to assess the stability and dynamism of value creation processes. It will also help in:
¨ Understanding internal challenges within the organization due to current uncertainties.
¨ Understanding what requires realignment to help the organization steer through these crises.
¨ Creation of Shared Value for the organization, a much-needed ingredient for survival in these volatile times. (McKinsey 2008).
4. Relook at your Vision, Mission, and Strategic Plans.
Based on the information from PETLE, SWOT, and McKinsey’s 7S Framework tool, relook at your vision, revise your strategic plan tailored to different types of uncertainties to create value in uncertain times. The new strategy must include your revised resilient business model, your products or services, assessment of your competitors, and trends or behaviors of your customers in this new modified post-COVID-19 world.
5. Revise Objectives and Goals.
Develop/revise organizational objectives, cascade them to the executives, and Line Managers. Line Managers must develop/revise their departmental objectives and align them with organizational objectives. Teams and Line Managers must use Objective and Key Results (OKRs) methods to measure their success on a periodic basis. Ensure learning during this entire phase is documented, discussed, and shared within the organization.
Conclusion
During these unprecedented times our plans are shaken, countries, economies and businesses are faced with uncertainty and ambiguity as never before. There are considerable literature and research available showing the trends and advice to the organizations on what to do next.
In my view, I strongly believe that we all have to go back to BASICS. These approaches that have been there and used for decades, will help us navigate through these unprecedented times. Many of us agree that Agile organizations are better able to survive during an uncertain business context, but it is always difficult to create agility within the organization especially during uncertain times.
It is important that organizations must understand the agility first, its components such as Financial Agility, Operational Agility, Portfolio Agility. To achieve overall agility, it is important that organizations must work towards all dimensions of Agility, it is important to note that concentrating on one agility domain will not be sustainable in the long run.
To achieve agility during these unprecedented times, it is absolutely critical that the organization’s leadership should go back to the drawing board, conduct PESTLE analysis to understand the fragile business context, contact SWOT analysis, list their current organizational capabilities, and ascertain the gap for desired capabilities. Use McKinsey 7 S model to understand the stability and dynamism of their structure, systems, style, staff, skills, and strategy to ensure the creation of shared value to meet the needs of today’s Post Covid-19 economy.
I strongly believe what Winston Churchill once said;
“An optimist sees an opportunity in every calamity; a pessimist sees a calamity in every opportunity”.
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