A Phased Business Strategy:Living or Dying in Post-COVID-19 TimesBy Federico Cerdas | Mon, 08/10/2020 - 09:12
After a Long Confinement, these reopening times have made companies run with higher operating costs, lower sales, and restricted collections.
During this new normal, the sum of all those expenses additional to the operation, such as personal protection equipment, adapting our facilities in order to respect social distancing, reduced work hours at the work sites, and recurrent testing to find out whether or not an associate is infected with COVID-19 can considerably affect the performance of our Company. If to this we add a period where there is a deceleration in sales and collection, the outlook gets complicated and the perfect storm appears on the horizon.
Meteorologists define a perfect storm as that where two or more critical weather conditions occur at the same time. No doubt this will be one, as we are amid a health crisis that turned into an economic crisis.
A phased strategy shall be the key factor to pull through in turbulent times and succeed. Only the best practices will allow us to absorb increasing costs and deal with better cash flow.
We have macro and microeconomic variables. The solutions to the macroeconomic part will depend on the government’s decisions regarding different subjects. The solutions for the microeconomic part lie in our own hands as well as what we do today so our companies can thrive.
I have learned through business that in order to survive we must focus our efforts on what depends on us and stop focusing on all those things where we have little or no influence whatsoever. It is quite nice to think that we can modify something in the public policies, but that depends on other people, groups and interests.
What is up to us and where we can have an impact is in our own company. There, what we define will happen and will redefine the way we do business.
This realistic approach has allowed me to be effective in decision making and in growing our company. Do not expect to see economic solutions in this contribution as they most surely stay on paper. I will focus on the things us businesspeople can do from our trenches in order to fight the effects of COVID-19 in the market and get through as winners.
What you are reading is part of my experience in the field, learned through trial and error. To convey a solid message to you I will first provide you with a theoretical framework and, afterwards, four suggestions that you may implement in your company at any time.
The VUCA Strategy.
In 1987, the U.S. Army War College created the acronym VUCA to describe the world’s Volatility, Uncertainty, Complexity and Ambiguity when the Cold War ended.
In essence, this term was used to describe what continued after the disappearance of the Soviet Union, and when the leadership became fragmented in several regions instead of having two leaders dominating the globe.
This change in factual powers caused a less predictable political and economic setting and outbreaks of guerrilla in several areas of the world.
These guerillas acted disruptively and were much more versatile than organized armies. The guerillas could attack unpredictably, cause damage, and retreat back to their bases before the governments could get organized.
The Pandemic is that guerrilla that attacked and then retreated, and our businesses are the entity which must adapt rapidly in order to face it. We must execute a bullet proof strategy, while at the same time resist an acid and alkaline environment.
As we can see, this acronym is applicable up to this day. The initials have the following technical meaning:
V = Volatility.
The opposite of stability. It refers to the dynamics of change acting in a market. This is the main catalyst variable of change in entire organizations.
U = Uncertainty.
The antonym of predictable and certain. It defines our lack of understanding of the environment and the events happening in our industry. This variable is what makes us scared and robs us our peace.
C = Complexity.
The opposite of simple and linear. It describes the multiplicity of forces, the hotchpotch of issues and the confusion surrounding our organization. This variable consistently makes the execution of a strategy difficult as we must repeatedly adapt to a new setting.
A = Ambiguity.
The opposite of clarity. It indicates the distortion of reality and the confusion of cause and effect. This variable is what limits the steadiness of our actions when executing a strategy in our organizations.
Putting all of these initials together in one single event is what make up a VUCA setting.
In a VUCA setting a common mistake of management is to seek to have a high visibility to make medium and long-term decisions. This vision is not possible in this type of setting, as the short term does not allow for it. The nature of this setting awards our capacity to respond immediately.
The VUCA setting can be dangerously disruptive; therefore, it is very important to understand how we must behave and react. We must divide our strategy in small sections that will gradually direct our business to the desired goal.
This capacity of cutting into pieces is what will allow our organization to adapt rapidly and consistently to meet the proposed goal; however, this ability will be a complement to the three skills that will lead us to be highly effective in this crisis.
1. Train your organization’s and your resilience
As we well know, the person is the beginning and the end of every organization. In order to develop a successful organization, we must first begin with the individuals that make it up.
First, we must understand that a VUCA setting lowers the morale of an organization. Immediate removals, reduction of benefits, disappearance of bonuses, budget adjustments, CAPEX reallocations, and halting salary increases, among others, give rise to a heavy and uncertain atmosphere within our team.
A discouraged staff is equal to sending an army to war without weapons. The emotional effect can be devastating, not only for the individual but also for the overall organization.
As leaders, our obligation is to explain our team that everything that happens in the VUCA setting is natural. The main sources of discouragement are the sense of guilt overwhelming us because we have let friends and loved people go, combined with the reduction of our purchasing power.
There is no normal strategy that is VUCA setting proof. Many of the decisions made before the Pandemic no longer make sense with this change of reality. The consequences and economic impact on our organization are partly the result of a clash of external factors we have little control over. We are not one hundred percent responsible for what is happening. We must bear this in mind to have clearness and peace of mind in order to continue acting.
We should know that, in these times, the only sure thing is that things will not turn out as we wished and/or planned. There will be many things that will get out of control, and others will behave differently than what we have been used to.
The best training we can give our mind and that of our people is to know this and to learn to be comfortable with this situation. Resilience is our ability to deal with volatile, uncertain, complex, and ambiguous situations both mentally and emotionally, as these are the situations that will appear in a VUCA setting.
Resilience will be our best ally and will allow our organizations to flourish during this complicated period. Let’s begin to train it.
2. Build a flexible organization
As I mentioned, this setting awards our capacity of immediate adaptation more than our capacity of success in the medium term. We should concentrate our time in building a flexible organization capable of rapid transformation when faced with any change we see in the market.
As I explained in the above graphics, instead of viewing our corporate strategy as linear, we should divide it in smaller sections in order to be capable of adjusting our direction continuously in short periods of time.
In these times full of disruption and change, our ability to divide our road in small steps towards our goals will be the survival differential. The logic is simple, one thing is to analyze long-term elements and situations with little visibility, and another is to do the same in shorter periods. The possibility for us to make mistakes is dramatically reduced as we make the time threshold smaller.
To achieve this, we must analyze the important variables of our industry and, specifically, we must consistently review the changes in the preferences of the consumer and the market trends.
This technique will allow us to deal with abrupt changes, give us the capacity to move forward, and ultimately reach our goals, one step at a time.
3. Clearly define your objectives.
A clear direction to go makes the difference between success and failure, both as an individual and as an organization.
Clear objectives will allow your organization and yourself to know the goals to be attained. This clearness will give you definition, and definition will give you focus. An approach results in order and order will generate efficiency. And this, which sounds like common sense, many times is not reflected in corporations of all sizes.
If the setting is ambiguous, why should we make it more ambiguous with our lack of definition?
In these times, the market will award whomever walks with a defined plan, with small steps, and adapts like a chameleon to the changing conditions of the market. What is more important, is for that strategy to be combined with a long-term steady goal that will not change.
Although the current situations are acid and somewhat unpleasant, having a fixed point to be reached in the future, sheds lots of light at the end of the tunnel. If to this you add a realistic approach to define what stage your business is at: growth, maintenance or survival, will give you a clear idea of the dividing your strategy in sections that you must implement immediately in order to attain your medium- and long-term objectives.
Mexico needs us, we should not give up the fight. Remember that many families depend on our analysis to divide our strategy in steps and our capacity of resilience, flexibility, and clearness. Let’s keep going forward!