Embracing turbulent times ahead of a post-Covid-19 market

As a follow-up to my series of articles on the Covid-19 crisis I’d like to share a few ideas on what corporations could do to adjust and embrace turbulent times. Now, a few words of warning. I generally dislike these kinds of discussion because they end up giving advice that are either clumsily vague (‘remove silos and be more agile’) or dreadfully unrealistic (‘rebuild your innovation process from the ground up’). 

My take on the ? best advice ? to give you would rather be to steadily adjust course with a long-term plan. As for most businesses you probably won’t have enough resources anyway for quite a few months. But the lessons you are learning as we speak and the strategic vision you might develop doing so, will have long-lasting consequences. 

For operations and management

Since the early eighties Peter DRUCKER called for more decentralization and simplification in corporate structures. I’d say it’s the right time to accept that the usual command and control / top-down model is too slow to adapt and evolve in turbulent times. 

While a lot of cost-cutting will be done, it will be important to keep a cool head and a 3 year perspective. The mistake in turbulent times would be to slash what seems too expensive to afford within the next 6 months without further discussion. If you have an extensive portfolio of product lines and services (which you probably have, because let’s face it you’re not Apple or Tesla) your instinct will be to fall back on the most profitable ones right now. Fine, but doing so will kill your next S-wave and will force you to reinvest massively to reboot your market presence sooner than you think. And because you certainly overestimate the life expectancy of your current cash-cows, you might be caught in an extremely unpleasant spot by the end of the year. 

The obvious caveat to my recommendations of gauging your costs with a long-term perspective is that you might lack this very perspective right now. Which is fair. Then invest in rebuilding your strategic vision as a top priority. Work on no non-sense future market scenarios. Keep it simple and map the junctures in the market that are always coming up in the same way in these scenarios and the ones that might differ wildly. You won’t have a perfect crystal ball, but at least you’ll get back some degree of control by identifying which junctures are stable enough to validate some of the hard choices ahead of you. (More on this in the next part.)

When speaking of simplification another trap is that contrary to Drucker’s vision though, extreme outsourcing has lived. Linked to radical financial optimization, the model of getting rid of all internal support processes and functions have built up critical fragility in corporate structures. Many business ecosystems end up being complicated codependent house of cards. 

Internalizing back supply chain or customer service could be part of the long-term plan you need. It might not be an enthusiastic pitch for your next executive committee, but doing the job to be done in-house will have many virtues looking ahead of us. If only for talents and know-how’s retention that will be hit hard when your prolific army of subcontractors rapidly unravels in various stages of bankruptcies.

In the same vein, maintaining various forms of cash flow redundancies and liquid investments should be a top priority for your financial department since three weeks ago. Extreme debt optimization is splendid when you’re cruising a ten year bull market. Now the party is over. Adjust accordingly. 

Enhancing redundancy with alternative pathways to production and go-to-market is also an obvious move on paper, but also one that will require finesse. Where are the real key fragilities in your operations and how to mitigate them? If you’ve never gone down that analysis road yet, you might be in for some rude awakenings. Better be informed and on top of this though. 

I’m very aware that changes ending up in raising cost of goods sold will be difficult to sell to most shareholders who have developed the attention span of hamsters on crack cocaine. So yes, privately-owned companies will fare better in these turbulent times because they structurally have more leeway to manage operations on their own terms. But in any case, remember that in a few months the very same investors will start to cool off and reconsider who is still alive and not too badly impacted in the market.

Surviving is not enough for now. You already need to invest again, albeit with surgical care. 

Lastly a word of caution on agility gurus who will prone for further dismantling of your core assets (both material and immaterial) and indoctrinate teams in 5-step magical methodologies. If anything, you need to regroup, recover and reorient, not get in a radical retooling of your business. And because the future will remain uncertain for a few years, promoting a single type of mindset and approach to your market will inevitably create extreme fragility for your structure. This is not the time for that.

What about strategy and innovation or your leadership and culture? Read the rest of the article here.