Even high performing, strategically sound businesses, that have been run extremely well over the pre-covid years, are having to reassess their futures. Some will become stronger, some will recover, and some will cease, but there is one thing for certain, not everything will return to normal once this pandemic is beaten.
The 7P questions a board should be addressing to understand the business realities of the country coming out of lockdown:
Q1. Power Struggles?
The normal world order is in the process of being tipped upside down as the economic superpowers vie for supremacy. The established organisations and bodies that have framed our current global relationships such as the EU, WHO, WTO, NATO, UN, even UNESCO are all being challenged or undermined or simply ignored.
25 years ago, China’s economy was smaller than Spain’s economy, today it is the second largest in the world behind the US. It is already home to 28% of the world’s manufacturing, nearly as much as the US Germany and Japan combined.The country is our third largest trading partner after the US and EU; and has been busy funding “overseas” investment, securing economic and political influence, and now has significant representation in over 70 countries around the globe.
So, what has that got to do with your business?
Nothing unless you, your suppliers and your customers are insulated from changes in International trade tariffs, exchange rates, product compliance, innovation etc – imagine the conversations that have taken place in the UK Boardrooms of the companies involved with the 5G roll out and all that means to the future shape and size of our economy.
Q2. Potential Opportunities?
Acting now could position a business not only to survive covid19 but prosper post covid19.
Market share will be available from the failure of competitor businesses to re-open or stay open but more immediately for those businesses who handle the crisis better than others, from simple PPE measures to sensitive and clear communications.
Acquisition targets will be cheaper, and more acquisition opportunities (be they companies, people, products, or processes), will present themselves as businesses struggle to recover.
Cash has never been so cheap, so now’s the time to be reviewing if you have sufficient cash or the investment means to support growth through acquisition, new product development or process innovation.
One thing that probably hasn’t changed for the majority, is a company’s your purpose – the why a company does what it does.
That’s not to say it hasn’t or won’t be affected by accelerated changes in how we think and feel about the issues and opportunities facing us as we continue to address life in and beyond this pandemic.
After months in social isolation, waiting for life to reboot and worrying about what the future may bring; many more people will be looking for more meaningful work and as we all know, those engaged with a strategic purpose generally contribute more to a business – as every B Corporation business will testify too!
Actions are now expected on the pre-pandemic issues round diversity, inclusion, equal pay, climate change and BLM. Company words and good intentions will no longer cut it with the pandemic public – the mood has changed.
As some of the 9 million UK furloughed workers begin to return to work, it’ll be an emotional and anxious time for some and a different return for all; beginning with the commute, compounded by a work environment that demands distancing, PPE, and possibly different start and finish times. One of the challenges facing businesses will be resetting their culture (and policies) with employees potentially working at home, in the office, in the warehouse or in the call centre. How quickly they can re-establish a sense of common purpose, shared identity and a sense of belonging will give them an advantage.
The return to work will carry a huge cost for both business and state and will likely impact on disposable household incomes and the recovery of our economies.
The mental, emotional, and physical states of those returning to work will need support and patience. Speaking to recently re-opened retailers they have already received requests for: holidays, a pay rise to cover increased commute costs, shorter hours, extended furlough due to lack of child care and a member of staff who had “other” plans for the following week didn’t want to come back in. A friend had his office relocated from Canary Wharf to Acton, and his week will now be spent between there and home – he’s not happy especially with the additional commute time and the further intrusion of work on his home life.
Others will be fearful of redundancies as furlough support ends and businesses have insufficient sales or reserves to maintain them before revenues return to anywhere near normal.
This type of change and uncertainty could lead to high performers looking elsewhere for increased security in expanding and pandemic proof sectors. On the flip side companies may find they have a greater choice of who they hire than in times of low unemployment.
Internal discussion will be driven by how companies regard their products / services but more importantly how their customers regard them; to use pandemic parlance – are you supplying non-essential or essentials?
As a profit rule it’s always better to choose difference over discount and to avoid responding in kind to product dumping and price cutting, which is easier if your products have a compelling difference.
Businesses supplying the retail sector may find they have fewer customers than they had pre-lockdown because of high street closures. Others face with being exposed by a reduced customer base and will need to find new customers ideally with higher margin business. Others who responded to the call to provide home deliveries, PPE, ventilators, vaccines, online services and the like, may well find they now have an a new product line, and new relationships in new sectors which they are well placed to grow and develop alongside their existing business.
The pandemic impact on processes will present opportunities and threats across the business, here are just a few examples to kick start your discussions:
- Innovation – acceptance has accelerated from Zoom to Drones, the latter have been used in the pandemic to spray slums in Mexico, deliver meals in California, mail in France and medicines in Rwanda.
- Shipping Delays – the majority of goods still travel on cargo ships but with ports closed around the globe very little is actually being delivered and lead times are no longer being quoted. In June 250,000 mariners were stranded on ships anchored outside ports and another 250,000 were sitting at home not knowing when they’d next be contracted – that’s a significant percentage of the 1.2 million mariners that keep our goods moving.
- Resourcing and Onshoring – countries and factories not yet open or recently re-opened or re-closed in a new outbreak, are struggling to fund orders and deliveries.
- Supply Shortages – have led companies to address their supply chains. A recent USP survey of 1000 big companies reported that 76% of firms from America 85% from North Asia and even 60% from China say they have already moved or plan to move some production away from China.
- Online Shopping – is no longer the domain of food, clothes, books, music, and small ticket items. 4 months of lockdown has introduced millions to the convenience (and security) of online shopping; perceptions and habits have changed as have the price tickets.
- Sales Skills – the UK’s largest recruitment firm Reed has reported that job vacancies have fallen dramatically, but there has been an increase in the demand for sales professionals. How fit for the future is your sales process?
- Finance – the cost of money has never been so cheap in terms of interest rates, but it may prove more difficult and ultimately more costly getting your hands on it, as lenders are increasingly risk averse. Then there is the cost of trade credit insurance against unpaid invoices, the impact on cash flow, the impact of credit ratings, and the impact of the currency markets. The business also needs to understand the risk – in terms of who owes who and how much, where are the biggest sector, customer and supplier exposures and ultimately how long will the cash last.
- The Next Pandemic – what lessons have been learnt in during covid 19, that will help the business mitigate the damage of the next pandemic.
Just one question that needs answering here, How will the above impact the profit line?
Some will become stronger; some will recover, and some will cease, but there is one thing for certain, not everything will return to normal once this pandemic is beaten.
Michael has extensive experience in facilitating Management Teams and Boardrooms in reality-checking existing strategies and developing new strategies.
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