Three keys to post-Covid business success
Companies that survive and thrive after the Covid-19 economic crisis will have three characteristics, says University of Auckland management senior lecturer Peter Zamborsky
There is no way to sugarcoat the fallout from Covid-19: we are entering an era of an unprecedented disruption and likely also a structural reshaping of globalisation and of many political-economic systems. How can businesses succeed in this climate of extraordinary uncertainty?
While currently the emphasis in most organisations is understandably on short-term crisis management and assuring business continuity, it is time to devote attention to mid- and long-term scenarios and strategic moves to prosper, post-Covid-19.
In my Journal of Business Strategy article, A blueprint for succeeding despite uncertain global markets, I outline three core capabilities for thriving amid global uncertainty.
The first core capability is sensing the changing context. It starts with facing uncertainty and confronting it, not ducking it. Even before Covid-19, organisations such as Huawei and IKEA identified they were in a “live-or-die” moment and responded to what they saw as a rising future uncertainty with bold strategic actions.
It is about not being paralysed by unpredictability (the “deer in the headlights” syndrome), but instead collecting information to reduce the negative impact of uncertainty and understand the nature and degree of unpredictability of the business environment. There is always some degree of market malleability, and now more than ever it is important to understand how much one’s actions can shape the market.
Practically, this capability can be implemented by developing discrete scenarios for multiple time horizons. Forget five- or three-year plans and set up a more mid- to long-term oriented “plan-ahead team” in addition to a crisis management team. Agility and speed are crucial to strategy formation and execution in these testing times and dedicated resources will be needed for identifying which scenario is emerging. Key employees can be co-opted and incentivised to help build the sensing capability, such as at Huawei where they established “commando squads” to identify new business opportunities following heightened uncertainty the firm has faced since 2019.
The second core capability is to drive the market. The Covid-19 crisis will impact both customer behaviour and business models, and companies have to consider adjusting strategies for both these factors and match them to scenarios they develop as part of sensing the context capability.
In practice, the capability of driving the market includes committing resources to a portfolio of strategic moves that yield good results in any of the unfolding scenarios. The most important strategic initiatives are the “no-regret moves” that benefit the company in any scenario. Developing e-commerce and digital products, for example, is likely to benefit many firms as consumers become more comfortable with, and demand, digital solutions at an increasingly high quality and low price.
Microsoft’s swift reaction to the rise of teleconferencing (and to Zoom’s security problems), with relaunch of an improved Microsoft Teams product, is an example of how even established companies can be agile and make quick strategic moves likely to yield short-term and long-term benefits. My research on Microsoft shows the company has been particularly adept at re-combining its resources across borders, with R&D efforts and supply chains diversified beyond one region to reduce vulnerability to shocks such as the one we are living through in 2020.
Small companies are particularly pushed to be agile during the Covid-19 crisis. They need to use temporary government subsidies and the last available resources for making no-regret moves and other strategic bets that are innovative and likely to position them better for the next “normal” which will be a less physically globalised and more virtually connected world. New Zealand’s Nanogirl Labs, for example, is an education design SME firm creating opportunity through science, technology, engineering and maths. Within a few weeks of the crisis it pivoted from live shows and plans to “go global” via physical means (theatre productions in Australia, Middle East and the UK) to a digital offering.
The third core capability for addressing the Covid-19 uncertainty is the capability to redesign the business. Every strategy in these times of uncertainty has to be approached as a design-led exercise, imagining the next normal’s consumer behaviours and redesigning the company’s business model. This needs to match the industry’s and business environment’s predictability and malleability. While some companies may be able to persevere and sustain their current business model and aim to restore operations, most will have to retrench or restructure. For example, Air New Zealand’s new CEO Greg Foran has made it clear the company would likely emerge from the crisis as a domestically focused airline with a strong international cargo component.
However, persevering or retrenching are not likely to be effective strategies for the long run. Companies should reinvent what it means to innovate, and if the extent of business model disruption and/or depth and length of industry-demand disruption are high, use their remaining slack resources for shifting and redesigning business models or shaping a new business through eco-systems and partnerships. In my analysis of Sony, I have documented how the firm reinvented itself from an electronics company to an entertainment and technology provider. In the next normal, post-Covid-19 world, many businesses will have to reinvent and redesign their business while still staying true to a coherent and consistent mission.
Unfortunately, many companies will also have to consider exiting as a strategic option, as Germany's Bauer Media did with divestment of its New Zealand operations. An exit may be the starting point of a new venture, one that is able to do justice to the changed business environment that the Covid-19 crisis is likely to create.
The financial stimuli from governments may prevent a global, multi-year depression, but a global recession in 2020 is now a certainty, according to the IMF. The stimuli are also going to be enormously costly and their benefits will have winners and losers. Some trends will continue such as the rise of China and digital giants such as Google, Amazon, Facebook, Netflix, Alibaba and Tencent, while other trends will emerge - such as, possibly, a bigger government, more frugal economy, and less globalised supply chains and sales. It will be hard to thrive amid global uncertainty during and after Covid-19, but building the three capabilities outlined above should increase your chances to do so if implemented effectively and swiftly.
Dr Zámborský’s Journal of Business Strategy article on a blueprint for succeeding despite uncertain global markets is available at: doi.org/10.1108/JBS-01-2020-0010
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