Coronavirus Will be a Graveyard for Many Businesses. How to Emerge Stronger Instead.

Many people consider Covid-19 to be a temporary nuisance which will pass in no time. They are wrong. The pandemic will be with us for quite some time – two years according to some estimates. As a result, nations are now focusing - not on when is the virus is going to be eliminated - but on how to adapt to life with the virus, an exit strategy as it is called.

What this means is that the ‘laying low’ strategy will not work for businesses. The disruption that is being done will be long term. Supply and logistics chains will continue to suffer. The travel and tourism industry will remain uncertain. Many in the leisure and entertainment industry will be laid off. Oil demand – having recovered from the below zero value – will remain in the doldrums. Healthcare practitioners will continue to wonder what is happening to their normal clients.

The 'laying low' strategy will not work for businesses since the disruption will be long term.

For small businesses, numbering about 2m in Tanzania, the situation can be more troublesome. Given that only 10% of SMEs survive the first two years in a normal business environment, and given that the vast majority of SMEs in Tanzania are characterised as small and very small, when Covid-19 is thrown into the mix their survival chances can become slim indeed. So, unless one is in the few businesses that are being buoyed by the pandemic, e.g. selling masks and sanitisers, you have to determine how to proactively manage this tumultuous environment.

This is the New Normal and Businesses Need to Adapt

The smartest thing at this point is to accept this reality and seek to adapt one’s business accordingly. The market is a dynamic reality, and this is the new normal. What we know is that the possibility of multiple waves of Covid-19 is quite high so one should not expect the market to bounce back immediately, the so-called V-curve response. This is going to be a drawn-out war that is going to affect how people live dramatically, so we may not know how the market is going to pan out.

Avoid Short-Termism Even During the Pandemic

Secondly, organisations have to be reinforced to survive uncertainties. We know what types of organisations tend to survive. These are companies which are ‘built to last’ if I am to borrow that terminology from the authors of ‘Built to Last: Successful Habits of Visionary Companies’. While many companies are started simply to make some quick bucks, the ‘Built to Last’ thesis of founding visionary companies – that is one that will be successful through multiple generations – is pertinent for times such as these. Short-termism will condemn the organisation anyway.

Organisations that are founded on visionary long-term principles tend to survive crises unscathed.

Time to Manage Mercenaries Out?

Thirdly, managing mercenaries out. One of the biggest liabilities that an organisation can have is to have mercenaries at the top at a time such as this. Mercenaries, even though they are paid generously enough per month to sustain them for a year, they will never risk their incomes even once. Their whole focus is on squeezing the last dime from the company before they jump ship just before it sinks. An organisation needs leaders who identify with its future to survive times of crisis.

A couple of years ago a construction company that was fighting for survival hired two executives from the UK to turn it around at an exorbitant cost. Those executives took no time to buy themselves expensive vehicles, install a golf course, and allocate huge payments for themselves whereas even low paid employees were not being paid. The company went under.

Time to Improve One's Internal Systems

Fourthly, an organisation needs to uncover internal weaknesses in its operations and correct them immediately. This is the time for proper due diligence in one’s decisions.

A while ago I received an email from a CEO of a group of companies in need of consulting services. The group – over a dozen companies – did not have a strong recognisable brand but it was immensely powerful in some circles. After I had helped the CEO manage some projects, he asked me to survey his yard operations. I found that the yard had about 80 trucks parked in different states of disrepair. Many things were amiss: a truck had vanished a year before (so they doubled on security); a crane was broken (so they had paid more money for leasing a crane than was needed to buy at least two cranes); there was no computerised system (so cost could not be tracked); and – above everything – millions of dollars in revenues were being lost since the yard’s efficiency was very low! Worse still, managers could not be held responsible – they were related to the CEO! This operation - which had great potential - didn't make it either.

Cash rich operations are usually quite profligate. But crises tend to punish profligacy.

Business catastrophes usually punish wastefulness. And most cash rich organisations are usually quite profligate. They pay for anything because they can. Their systems are usually laden with internal contradictions, and when catastrophes hit those organisations collapse like sandcastles. One is reminded of Enron here.

The fact is that Covid-19 will be a graveyard for many businesses around the world. But some will take this as a cue to forensically examine their operations and may even emerge from this crisis stronger. It is all dependent on how managers react to these new realities.

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This article first appeared on the Citizen Newspaper (30th April 2020). Do you agree with the contents of the article? We would like to hear from you. Please comment, like and/or share the article.