Way back in April 2020, I wrote a piece entitled ‘Back to Normal?’. Right at the start of the pandemic and when we (other than most of the scientific community) were probably thinking we will be out of this in a few months. I thought I should re-read the article and prepare myself for naïve responses to largely unknown events to come. The article posed four questions and, while some have been addressed in subsequent articles, I think it is worth revisiting them as we start to prepare for a return to some sort of normal. Timing and exact circumstances will vary dependent on which country we are in, but the principles should hold good.
The questions were:
Will it be possible to repair the damage to our finances?
How can we get back to viable operating levels faster and steeper than others?
Will the new world offer more challenges and opportunities than the old? Will there be a new normal?
Do we need to review our business model to build in more resilience?
Eleven months later, are we any the wiser?
Our finances
We know that our national economies are suffering and that many sectors have suffered terribly, even taking account of government interventions in many parts of the world. But many have survived and some who have been positioned for online delivery of service and product have thrived.
From discussions with clients and friends, I believe most of us have been in ‘survive’ mode:
striving to keep cash flow positive,
less attention to profit
adapting the offer to the immediate needs of customers
maintaining a workforce that will be important for recovery
For our business this has meant a lot of hard work to operate at around 75% of our normal levels (following an initial two months of very little revenue coming in). And here lies an early set of lessons:
There may be false dawns before getting back to sustainable levels of profitable business. The market will be weak for some time.
There is a need for ‘patient capital’ that will be prepared to wait for dividends and growth, rather than weaken balance sheets before recovery is more certain. Easier said than done for the publicly quoted enterprise, but necessary for many to be persuaded that short term strengthening will lead to better returns as ‘normal’ returns.
There are opportunities for those who have operated prudently and have the cash to invest.
But I am not sure that these general observations are as valuable as taking stock on a case-by-case basis and as we move to ‘recover’ phase considering our changed circumstances and the lessons we have learnt:
What will be a desirable level of liquidity for our business?
Do we need to assure new credit lines to cover a future, similar event? Lucky this time for some of us with governments that have been able to provide support. But what if that wasn’t available?
Will we need to restore inventory levels, or provide for higher inventories to allow for a future supply chain disruption? Or at least ensure that our supply partners are that: partners, not just suppliers.
There is a window that will open very soon to secure future trading. Time to explore, with bankers and investors, the appetite for those businesses that have been run prudently and successfully and are ready to attack new opportunities. And an opportunity to develop relationships strengthened through the pandemic to develop healthy and lasting strategic partnerships with key suppliers.
Faster and steeper
Early days, we were thinking about the V shaped recovery path and that quickly turned into U, suggesting a longer period before recovery and then a W implying a double dip (which has been closer to the truth in much of Europe). But then again, we might still be bumping along the bottom for a while yet, so more like an L shape. And we are still working through the alphabet with a K shape to the recovery (more of which later).
But it will end!
Our earlier thoughts were published back in June 2020 and, re-reading that article (Faster and Steeper), the principles hold true, even if we got the timing wrong. We posed two challenges:
to get set for the next stage of the organisation’s journey to continuing successful operations and
to pull out of the crisis quicker than anyone else and with greater impact, a ‘faster and steeper’ exit, or better put, entry to the new world.
I would now add a third:
to be deliberate about a decision about returning to the way it was, or to use the pandemic as a catalyst for change
And this will be a question which can only be answered on a case-by-case basis. The headlines are full of generalisations. ‘Air travel will never be the same again’; ‘people won’t go back to the high street in a hurry’; 'there is no need for an office, we can all work from home’; 'the city centres are dead, no-one will want to commute into centrally located offices’. I could go on. The truth is that there will be trends and each business will need to take stock and embrace any changes that will be needed to thrive in future.
Time for the entrepreneurial mindset to be dusted down and exercised:
some markets will bounce back to similar levels and we will be able to return to the way we were. But should we? Are there things we have learnt during the pandemic that suggest we can be more competitive by adapting our offer?
some markets will be forever changed and going back to the way we were is not an option. But is there a niche that still values what we were doing before the crisis? It may be a different, maybe specialised market, but it could still be there (stimulated by unearthing a small collection of music cassettes, I read there is still a market for them!)
Some (most?) markets will keep some features while others will have changed. And this might lead to a need for most of us to re-examine our business model:
What have we learnt about our customers and their changing needs during the pandemic?
Are there costs we no longer need to incur?
Are there new markets that we can explore?
Are we seeing new competitors, or have some of them suffered more than we have?
Are there new agenda items that have come to the fore through the pandemic? As an example: environmental impact and I comment on this later.
Generalisation is dangerous and we need to ignore the general and look at the specifics as they apply to our business. The K shaped recovery is a timely reminder that some of us will be on the upstroke of the K, but some of us will be on the downside. And with a transition period ahead of us, there is an opportunity to reflect on where we are on the K and re-examine our strategy.
The new world
Faster and steeper takes us down a path to examine the external factors that will impact our businesses. But there will be other changes as we emerge from a shared experience of relative isolation and dependence on technology.
For a start, the people that went home from the workplace are not the same people who will come back post pandemic:
They will have developed new skills and learnt how to work remotely. Another area of over generalisation: ‘you can’t build relationships without face-to-face contact’. I completed a review for an organisation to assess how they were managing over the past year and they reported that they felt that, as a senior team, they were closer and felt more involved than ever before. They put it down to shorter and more frequent team meetings. And I would add that it has created a level playing field for the whole team, wherever they are in the world. Will they want to go back to the old system with some of the team in a physical meeting, and others joining remotely? Or fewer meetings when everyone gathers in one location?
They will have experienced advantages of working away from the office and will have enjoyed the flexibility in their work patterns. There may be a reluctance to get on the 07.45 train every morning and come home on the 18.00, particularly when they know they can be more productive from home.
Their relationship with the business will have changed and will be influenced by the way the organisation has behaved over the past year. One of our clients published what has become known in their organisation as ‘the trust triangle’ early in proceedings. A clear commitment to their purpose and values, a summary of the business model and how it would be applied during the crisis and key actions to sustain the business. Their employee engagement ‘score’ is well into the nineties, despite a very tight market.
And of course, some will be biding their time until the employment market strengthens, before deciding that they need to move on. With time on our hands, have we not all felt a need to examine what is really important to us?
There have been other changes too. I believe (but maybe this is hope) that we are more aware of our impact on the environment and the delicate balance between the needs of the planet and the needs of a current generation’s need for consumption. Lockdown has not all been about box set bingeing and there has been time to be better informed and to reflect more widely on broader world matters.
While on the ‘hopeful’ agenda, I can also see a change in our expectations of our leaders, whether at a national, political level or in our own organisations. While there is a respect for the complexity of the situation, the failures to walk the talk and the impact on the nation/organisation are clear for all to see. The new world may hold the poorer leaders to account.
Again, it will be important not to generalise, but there is a need to take stock on people and changes to the needs of other stakeholders as we prepare for re-entry into new normal.
A more resilient future
Let me first give way to the countless articles and advisories on ‘corporate resilience’ and start with a definition:
'the capacity to mobilise characteristics that enable the business or service have an attitude to tolerate, overcome and be strengthened by adverse events and experiences'
I think you will agree that the last twelve months qualifies as an ‘adverse event and experience’. Our resilience has already been tested and if you are reading this, you are still standing! So now might be a good time to take stock and think through what would need to be in place if all this were to happen again. I fear there is another nasty little virus out there and waiting and so running a debrief and capturing the lessons could be a worthwhile investment.
My starting point for the debrief would include the following questions:
How many weeks’ cash reserves would it be reasonable to hold? Is there a period that we need to plan for to recognise that getting structural changes in place takes time?
How ready is my organisation to embrace change? There have been some very impressive performances where organisations have been on the front foot and have been able to implement necessary changes quickly and to mobilise ‘keep safe’ policies. All have acted speedily and in a well-informed way. Changes were underway before the extent of the crisis was revealed.
How robust is demand for my organisation’s products and services? How can I ensure that what I do, stays on my customers’ wish lists?
How strong are our people? Can they weather a crisis, financially, physically, emotionally?
There is a bigger question that may need to be addressed. The ‘why?’ of my organisation. As a result of the events of the past twelve months, is my purpose still valid? Is there an ongoing challenge that my organisation is designed to meet? If the answer is ‘yes’ then building additional resilience will be an essential component of this debriefing process.
A final word
I subtitled this article ‘the road to corporate freedom’ and I believe it is the desire for self-determination that drives a lot of our enterprises. If there is a will for an organisation to survive, and that will is shared by its leadership team, then it is probable that the culture, direction and strategy will be set for the organisation to survive and thrive.
Taking stock of the pandemic and its unique impact on an organisation not only can help to get back on track but can also prepare us for the next and (importantly) test the resolve of our leaders to deal with a changed business and the environment in which it operates.
Survival to recovery - The road to corporate freedom
Written by Peter Ward, Senior Consultant at Telos Partners 16 March 2021