It’s at a time like this when economics makes astrology look rational.
As recently as the end of January, so-called experts of the dismal science were raising their forecasts for this year’s rate of economic growth almost daily. By the end of March, their energies were engaged prophesising the size of our likely GDP contraction. It makes me think I was wrong to laugh at my parents when they had their palms read at Stokesley Fair.
The UK government is not alone in simultaneously trying to reflate our economy by subsidising businesses starved of customers and cash, whilst paying those self-same customers not to work or shop. To the question ‘sink or swim?’ it seems the answer now, is ‘both.’ Simultaneously.
I didn’t understand my Economics ‘A’ level teacher when he described Keynesianism as ‘paying construction workers to dig holes and then to fill them in again.’ Suddenly, his explanation makes sense.
It’s hardly surprising that Stock Exchanges around the world are rising one day, only to crash the next.
In the face of this terrible pandemic, the immediate destination for business is nothing less than ‘survival.’ Time is of the essence - there is no point waiting for the fog to clear before taking action. Indeed, not every business will survive anyway. It’s already clear that the impact of coronavirus will be far greater than we initially realised. Major changes in supplier, customer and client behavior are inevitable. And many business models will change radically.
So, what specifically should companies, businesses, directors, and shareholders do when faced with this maelstrom of contradictions?
To answer the above question, I have been devouring postings from some of the world’s leading management consultancies. Their conclusions (which are remarkably similar) are equally relevant to SME’s, national, and international businesses.
I summarise some of them below, helped by this useful image from perhaps the world’s best-known management consultancy - McKinsey & Co. I hope you will find the following helpful.
1. Resolve to protect employees. Try to help customers and partners
Many businesses have already put protections in place for their employees and customers, and have introduced no travel, working-from-home and distancing policies. We will need to support our major customers and suppliers if we can, and inform our business partners of future plans, as well as supporting our vital technology providers.
2. Understand our current position and our immediate cash needs
We need to start from a clear end-of-period financial position such as 31 December 2019 and work forward from that. It is vital to understand how our customers and suppliers have been impacted and, if we need to find new ones, we should start looking now.
3. Create a flexible plan for a return to work, based on our market intelligence
From our starting position, concentrate on our financial assumptions, our ability to collect and retain cash, and our strategic choices.
Monitor leading indicators as to how and where the virus is evolving. By arming ourselves with this knowledge, it will help us build alternative scenarios, ranging from the mildly optimistic to extremely pessimistic. Identify the actions we need to take operationally and strategically for each such scenario. And plan across all time horizons from this week onwards, for the next three years.
4. Re-imagine what different futures might look like
Remain open-minded and flexible in our thinking. Different sectors will be impacted differently. What seems certain today, may seem uncertain next month and completely wrong next quarter. For some, simply staying calm and carrying on might be appropriate. Others may need to take radical action to reduce their cost bases, alter their business models and source new customer and supplier chains. Will we need to downsize and, will working from home becomes a ‘norm?’
5. Do we need to reform, and if so, how?
Will the regulatory landscape change, and what? Will our supply chains become less international? Will some competitors disappear or merge? Do we need to seek new alliances? Will more interactions take place online? Should our property footprint reduce?
In an uncertain world, we should not be afraid to change our initial assumptions. A rigid plan is unlikely to be right for very long. Flexibility is the key across all scenarios.
Conclusion
If there is to be a time for a resurrection from this virus, it is now. Only the fittest might survive and decisiveness is better than delay.
Although nothing is certain, it seems pretty clear that the new normal will be unlike anything we have experienced before. We don’t yet know when the pandemic will end, or who the business survivors will be. But the next few weeks and months will be likely to shape our futures, our businesses and possibly, some of the entire sectors in which we operate.
If you would like to discuss any of this, don’t hesitate to contact me.
Andrew Lindsay
07787 525 469