As the lockdown nears its fag end and businesses pick up the threads again, there are several decisions that confront them. The period of lockdown has taken a toll on many fronts. For most it has meant severe loss of business. It has also meant the disappearance of the workforce for some and the breakdown of channels of doing business for some others. Yet others face the reality of their sources of business drying up.
All this has led to business needing to respond to several decisions in primarily two areas – Surviving & growing business and Managing Costs. How each business makes choices in each of these areas will determine how well the business continues in the post Covid world and thrives in the long run.
Strategic choices for surviving & growing
When it comes to surviving and growing business, there are several aspects that the business needs to consider.
- Who are the customers we need to focus on to get quick returns?
- What channels should we now use to reach our customers?
- How do we manage relationships with our best customers?
- What products do we focus on now & invest in promoting them?
- What new products can we look at in the current situation?
All these and more need to be thought through to make the most in a situation when business has taken a beating. There are several examples of companies that responded to the questions above and made strategic choices that have helped them navigate the impact of the crisis and sustain their business.
Examples of Strategic Choices on Products
For example, some of the companies in the clothing & fashion industry, moved quickly to start manufacturing designer face masks. The adversity where non-essential goods were banned became an opportunity as they created a product that is essential in current times and for which there is a huge demand. To top it all, they also catered to the fashion needs of the customers.
Another example on similar lines is that of those companies that overnight went into production of sanitizers or vegetable & fruit cleaners recognizing that the crisis has heightened the sense of personal hygiene in customers.
A company in the sporting events industry that offers sports experiences to clients was impacted severely by the cancellation or rescheduling of all events. They had tie ups with sports stars. They created a product whereby fans could get their photographs displayed with the desired players put up at specific venues. All this for a small fee engaging a virtual medium. This has helped them manage their sustenance while creating a new offering for the future.
Examples of strategic choices on channels
Then there are those companies that chose a different medium to reach to their customers. The most common was the proliferation of online teaching and courses that all those in the education & training business latched on to. This has been an example of making a strategic choice about the channel & product to reach the customers.
In another company they focused on the products that were being sold online and increased the investment in that channel. Their business was largely through physical stores based in malls and they realized that it would be aa long time before that came back to normalcy. The focus on the online channel helped them grow revenues through that channel multi-fold while retaining the brand recall in the minds of the customers.
Yet some other companies, realized that their customers, especially those who bought from supermarkets, were missing out on some of their key products. And that these products would not be in the priority list of delivery through the regular channel. So, they outsourced their delivery to existing aggregators & ensured that they reached their customers.
Enablers to making right strategic choices for survival & growth
What enables making such choices – an honest and deep reflection of the strengths that the organization brings and a clear understanding of the customer needs. And a willingness to let go of pet projects or those ideas that worked in the past, if required.
Strategic Choices for Managing Costs
Managing costs is the other area that becomes critical to ensure that the business survives the crisis and emerges with least impact. The questions that the organization needs to reflect on are:
- What are the costs that we have considered essential so far? Which of these are truly essential?
- What are the alternate ways to serve the purpose that these costs served in the past?
- What are the costs that we can reduce or eliminate?
- What has been our approach to managing our cash flows? What are some new ways that we can look at in managing our cash flows?
An honest reflection of these and responding to them unemotionally can help businesses make strategic choices about costs.
Examples of some companies that made such strategic choices to manage costs effectively are as follows:
Examples of choices to reduce or eliminate costs
Quite a few companies assessed their office rental costs and either negotiated with their landlords to reduce the cost or even gave up some office space (where they had multiple offices or office spaces in co-working areas) to reduce the cost and thus a monthly outflow significantly.
Yet others, did a detailed exercise to figure out which tasks and roles could afford to work virtually with the same levels of productivity in office, even post lockdown. This reduced the need for office space as well as turned out to be less expensive for the employees.
On similar lines, many organizations evaluated the need for travel to see how they could reduce their travel costs for doing business while retaining the connect with their employees and customers. For some this has meant, decisions to invest in some form of technology that was earlier missing. So, some times, strategic investments are required to reduce certain costs.
Examples of choices to manage cash flow
To ensure cash flow, many organizations resorted to classifying customers who are relatively less impacted by the crisis and could pay as per the existing norms.
With some others, they explored the possibility of cash discounts to get an early payment. And yet, for some other key customers, where the customers are impacted, but maintaining relationship is important, they rejigged the terms of payment to ensure that both did not lose out. And last but not the least, they had to decide which customers to let go off, at least in the short term (where possibility of credit turning to bad debt is high).
On the front of employee costs, different organizations have taken different routes to manage costs. Most wise organizations first studied the cash flow and assessed the likely business scenario to determine whether they needed to impact the earnings of their employees. If they needed to, they had to make choices of how much & who to impact. One strategic choice they did have to make was to segregate those who have been critical to the organization performance and those who have not been (who previously may have been overlooked when the going was good).
Strategic Choices – Crisis Forced or Conscious Practice
The crisis has forced many organizations to make such strategic choices. Those who have not made thoughtful choices have perished or are likely to do so. Those who have made the choices are likely to emerge stronger post the crisis. However, on a different note, while the crisis may have brought to focus the need for such strategic choices, these have always been required for a business to do well and grow sustainably. The companies which made those choices in normal times are likely to be less disrupted by the crisis or at least are likely to be able to respond in a more agile manner to the crisis.
So, how conscious is your organization in making these strategic choices. And how many people in the organization share a common view on the strength of the organization in making such strategic choices. Getting the senior leadership team to take the Value Dynamics Diagnostic and discussing the insights from the report can enable the organization to determine the strategic choices they need to make collectively.