In some sense, a crisis is natural process of maturation. Each time you run or exercise, you put yourself through a degree of stress, but you end up transforming yourself to a much stronger and healthier person. When we talk about organizational health, we look at the process of building a resilient company the same way. When we talk about resilience, we look at the ability to cope financially with changes in market demands which affect a sudden fall in income or unavoidable rise in expenditure.
Even before COVID-19, revolutions in technologies, market preferences and business models were affecting the global business landscape. The virus has accelerated and intensified this and is forcing organizations to rethink and reimagine their operations, strategies and business models. Across industries, small and large companies began to understand their organizational capabilities in the areas of productivity. They are also getting a better idea of where they stand and most importantly, their ability to compete. Undoubtedly, some will transform themselves into stronger players and others may be left behind. Clearly, to emerge successfully from any crisis, an organization needs to nurture its adaptability and resilience.
What are the main problems faced by entrepreneurs and companies? What are the key elements for financial resilience which will be key for the organizations to emerge from the downturn?
Sharp drop in demand
For start-ups, a sharp drop in demand may hit them hard. Those that would survive need to balance optimism with realism, manage risk, build resilience and plan how to turn the crisis into opportunities.
In the sectors which are hardest hit by physical distancing and government-recommended isolation guidelines—kitchen equipment for example– McKinsey’s analysis has indicated a drop in demand by as much as 80 percent. Such companies are now simply aiming to survive the crisis by getting far more creative in their survival methods by altering their business models, limiting their products, reducing costs or forming partnerships with other distributors.
Supply Chain Risk
A crisis can also bring opportunities. I know of another company that sells products for children at home, and its business grew tenfold in a few weeks during the lockdown period. Companies like this one may struggle or worse, find themselves unable to respond to the surge in demand due to its supply chain.
Supply chain resiliency is already a hot topic before the pandemic. The COVID-19 crisis has demonstrated the vulnerability of the old supply-chain model, in which the lockdown of Wuhan in China forced several global companies, in other parts of the world, to slow down or even halt operations abruptly. The argument for “just in time” on-demand production capacity has now transitioned to “just in time and just in case.” Increased disruption should be an impetus to accelerate the switch to a more resilient supply chain by enhancing flexibility while simultaneously driving efficiency.
Flatter structure for speed
The ability to reconfigure strategy, structure, processes, people and technology quickly toward value-creating opportunities. Many organizations which have been forced to transform during this crisis have seen positive results through empowerment and speed. Learning from Skype, the voice-over-IP communication company, their flat and nimble management style has helped them maintained a clear focus on outcomes and obsession on delivering for customers, as they scaled up.
These companies are now more decentralized and depend less on top-down, command-and-control decision making. The overarching idea is to allow the right people to be in the position to make and execute decisions. The flatter the decision-making structure is, the faster and more flexible it becomes.
Many companies are fundamentally rethinking their business model. The crisis is proving that companies that embrace the digital revolution are significantly more resilient than others. In 2007, the number of digital natives that were amongst the top 20 companies in the world was less than a handful. Today, that number is more than half. Research also shows that companies with strong e-commerce platforms or a digital presence have been weathering the crisis better. Amazon, the leading digital distributor, nearly doubled its sales in May 2020 and is benefiting tremendously from their investments in digital sales and analytics. Many large distributors have one thing in common with Amazon; they achieve higher value by aligning offerings with customer willingness to pay and promptly addressing the pain points.
Many big traditional companies are adopting the start-up mentality, using pilots to digitally enable the advanced analytics to commercial and operational cases for sales optimization.
Strong emotional skills for healthy ecosystem
In this “distance economy,” every client-facing employee must cultivate social and emotional skills to develop, on a remote basis, the relationships which, in the past, were nurtured in person. The maintenance of these ties, despite distances and remote digital connection, create and grow client relationships, drive change and support employees.
Successful entrepreneurs and companies with healthy ecosystems of suppliers, partners, vendors and committed customers can find ways to work together during and after crisis because those relationships are built beyond transactions. Entrepreneurs and business leaders will need advanced communication and interpersonal skills, including empathy. This is essential for rapid action, and to adjust business model and operational structure when needed.
Upskilling and Reskilling of Employees
An organizations should always see what worked and what didn’t during the crisis. Conscious, deliberate learning and, to some extent, codification of that learning are crucial. An organization that is always learning is always improving.
What better time to learn than during a downturn? Resilient companies should start upskilling and reskilling employees to take advantage of opportunities, especially where they benefit from digital skills. These skills enable employees to feel comfortable and maintain seamless contact with the organization’s ecosystem, especially the clients, partners, suppliers and authorities.
For critical employees to use today’s new experiences in distance economy as a source of learning, they would need the support to build self-awareness, confidence and reliance. Reinforcement of resilience include their ability to manage time, boundaries and their own mental health. A cashier in a supermarket will need adaptability and resilience skills to become a telephonic customer service agent when more customers order for online deliveries.
“New ways” of business become the norm and organizations that fail to train their muscles on upskilling now will be limiting their own financial resilience to optimize their potential to scale up in the future.
Omnichannel approach to sales
Before the COVID-19 crisis, 50 percent of B2B buyers preferred an omnichannel experience with an e-commerce platform and 60 percent preferred not to interact with a sales representative. This trend has been accelerating rapidly for the past few years. Buyer preference for self-service more than doubled from 2016 to 2019, and suppliers that offer a seamless digital experience have been rewarded with increased loyalty.
The COVID-19 pandemic has solidified these trends and accelerated the shift toward virtual experiences. In fact, over the past few months, more than 4 out of 10 transactions are taking place virtually while 90 percent of B2B sales have transitioned to remote selling. This model is proving more effective.
A leading North American healthcare distributor relied on an expensive, high-touch field sales force to collect orders. Representatives saw the company’s online platform as a competitive threat, creating a downward spiral in prices and customer experience. After years of revenue decline, leadership decided to invest in growth through an omnichannel sales model that combined field, inside, and digital sales. The bets paid off, with revenue growing by roughly 10 percent within a year and margins remaining stable.
While acknowledging challenges, entrepreneurs and CEOs of companies should always be conscious that a problem is also an opportunity. How do you use it to strengthen your organization? How can you come out on the other side stronger and financially better than the competition?
The very important thing is to maintain an optimistic and agile frame of mind.
Learn more about Nina at http://www.ninajustin.com/.