As we are now in the inital phase to re-open and re-start the Maltese economy I feel that this is a time for hope but also for caution. As I have been saying in my various Blogs, this does not mean a return to the old “normal”. At the end of the day the virus still lurks and the ability to contain its spread will dictate what happens next; any resurgence will likely bring about renewed restrictions. Large-scale testing and tracing, the broad availability of masks, and sufficient intensive-care capacity in our hospital will determine the pace of recovery.
However, in my discussions with various business leaders it is obvious that the main question on the table is “How can my business navigate this difficult environment, especially in the next few weeks, as the restrictions are loosened?” One one hand, the eagerness to restart and rebuild is understandably but on the other hand many business leaders are also plagued by a huge amount of questions that a return to business raises. Questions like what is the financial health and state of mind of suppliers and clients? How can employees be motivated to return to work and reassured about their safety? How quickly will demand return? What will health stipulations of social distancing mean for the organisation?
One thing that is however helpful is if we take time to touch base with the immense amount of research being done (not just to find a vaccine) but as to how businesses from every corner in the world is tackling such challenges. All the research being done indicate that companies will need to take a holistic approach to restarting. Here are some pointers derived from various research as to how to best overcome the re-starting challenges.
Creating a detailed relaunch map: The crisis has shattered many of the assumptions and tools that business leaders rely on for decision-making, but for the restart, they will need to define a solid framework for action in a highly volatile environment. The best approach is to develop a detailed relaunch map—segment by segment, customer by customer and product by product—in order to prioritise recovery opportunities. This map will enable business leaders to get a head start on reassessing investments and prospects in such a volatile environment. It may be appropriate to freeze some planned or ongoing projects until the company has the capacity to reassess them. The map should have a baseline reopening scenario as well as alternative scenarios that incorporate variables of high-impact market conditions—in particular, the risk of renewed contagion. The restart plan will need to be tested against such scenarios and include options for a fluid reallocation of resources if necessary. For example, such scenarios could be where consumers reduce heavily their discretionary spending over a number of weeks. In their planning, companies should never ever lose focus on its clients. Businesses will need to clarify the parameters and assumptions about their customers. The issues will vary, depending on whether the activity is B2C or B2B. For B2C, it will be essential to understand the impact of the crisis on household purchasing power and the confidence of households in the economic future of both the country and their own household. In B2B, a a clear understanding of the issues at stake will be crucial. Those who are able to develop relationships with their main B2B clients (including on an emotional level) and to achieve an intimate knowledge of their customers’ challenges, constraints, opportunities, and aspirations will rebound in a stronger position.
Providing customers with safety guarantees that restore trust: Clients will be surely more vigilant about health and increase their demands on safety. Companies will need to provide products and services that adhere to the most rigorous health and safety conditions, and be able to show or explain them to clients. Proactively communicate about measures implemented that may not be visible to customers in back offices or storage sites. These could be end-to-end processes, minimising human handling, testing procedures or strict application of the highest sanitary standards.
Safeguarding the health of employees: Many employees are eager to return to work, but many are also worried about being able to do so safely. Some articles about this are already cropping in mainstream media. Companies will need to both reassure employees about safety and find ways to motivate them. The following actions will be needed (i) Ensure employee safety in the workplace. The top priority will be to strictly control access to the workplace. That may mean implementing measures such as checking employees’ temperature at the entrance of buildings and imposing a period of quarantine for those who fall ill. Where possible Remote working should be encouraged. (ii) In parallel, managers should focus on reducing the density of office space by redesigning the workspace. This can be done by delineating safe areas to prevent contagion or by altering working hours through shifts and daily rotations. (iii) Companies will also need to apply new hygiene and safety measures such as physical distancing and provision of masks and single-use utensils. It will be crucial to communicate actively about these measures. The ultimate aim is to re-assure and motivate employees beyond their safety concerns. Employees will raise questions about the extent to which new ways of working will become the “new normal.” Many may have experienced confinement as an ordeal. It is possible that the experience will generate concerns and that there may even be family pressure to delay the physical return to their jobs. Finally, it will be crucial to strengthen the organisation’s ability to monitor well-being at work and detect signs of fragility.
Reviving demand: One imperative for businesses will therefore be to revive their customer base. They will then have to stimulate demand, guarding against any risk of distorting price models. More than ever, it will be important to win on several fronts. (i) Identify and capture pockets of profitable growth – companies will have to be ready to reallocate exploration and marketing expenses quickly. Every promotion must be weighed against the risk of triggering a price war that could aggravate a situation already marked by a slump in volume. (ii) Adopt tactical pricing. The aim is to ensure the material and psychological conditions that enable customers to make their purchases and create favorable business conditions for a rebound in consumption, while avoiding a dangerous situation in which simultaneous pressure on prices from suppliers and customers put companies in difficulty across the value chain. Depending on these requirements, companies will have to finely measure the promotional or discount models they will use. (iii) If possible help core and top clients with solvency issues. To secure sales, pragmatic assistance should be provided to customers in financial difficulty by providing them with payment facilities or extensions of deadlines in a highly targeted way. Again, the choice between usual practices and exceptions must be made strategically so as not to upset your whole cashflow. (iv) Optimise the marketing mix. Marketing departments must ensure that the offering is in line with the crisis-related shift in demand. In the short term, this will mean actively encouraging customers to interact through digital channels. In the medium term, companies need to strengthen their ability to detect all the signals sent by their consumers. This will help companies determine all solutions that can quickly enrich the customer experience.
Rebooting operations and supply chain: The optimal restart of operations requires returning to the market at the desired speed to serve the demand accumulated during lockdown—but without going faster than the pace of recovery. Secure the supply chain on strategic procurement, as well as for operational processes that are critical to ensure recovery. Strengthen the company’s ability to anticipate and meet demand. This includes adjusting the ramp-up speed to avoid generating new stocks of finished products for which customers may be few and far between.
Keep IT & technology central in your recovery plan: If this pandemic crisis has taught us anything it is the importance of technology and being prepared with a solid digital strategy. Companies that were not prepared struggled immensely as they forced their internal or outsourced IT people to perform heroic efforts to cope with spiraling new demands against tight deadlines and ramp up digital channels to serve customers, even as they solidify their company’s IT infrastructure at a time of very large load increases. There is however much more that still needs to be done. (i) Accelerate digital transformation to serve new customer and employee needs. The IT infrastructure must be relevant, secure, and able to meet the emerging expectations of both customers and internally. (ii)
Improve data-driven decision making and data availability. After the restart, that will likely not go back to the way everything was previously. Marketers will need more granular data to steer their digital marketing and media spend in order to stimulate demand with greater precision. Algorithms trained on a pre-pandemic world and assumptions on digital adoption rates will need to be revisited.
(iii) Rethink the portfolio of IT projects and technology spending. The expected decline in revenues in most sectors will result in pressure on costs and investment capacity in the short-term. At the same time, internal work-from-home collaboration tools will see growing adoption and executives will want to accelerate their digital transformation to meet e-commerce demand. Companies must reprioritise their technology programs, projects, and purchases accordingly, in order to meet a dual objective—namely, to contribute to a reduction in the company’s cost base during the crisis, while absorbing new technological investments needed to restart and to build or further scale digital businesses.
Handle the restart with special care: Increase the speed of decision making. A successful restart will require addressing a large number of interdependent issues simultaneously. Many go beyond the usual corporate governance framework because of their scale, complexity, and the speed of response they require. It will be important to maintain the flexibility, speed of execution, and simplified decision and reporting lines. To initiate the subsequent phases of the actual recovery, a plan-ahead team or taskforce may be needed. Management of working capital requires special attention to ensure that cash flows will be sufficient to cope with the shocks of the crisis and recovery, regardless of which scenario takes place. Companies must model their financial data in each scenario and systematically identify factors that could affect liquidity. For each of these factors, companies can determine appropriate measures to preserve their financial resilience. Indeed, the restart phase is likely to further increase the liquidity pressure. Suppliers and customers, themselves looking for working capital, will lobby for advantageous payment terms. It should be answered in a targeted way.
In just a few short weeks, companies are or will have to plunge into a new phase of the restart with many unknowns that will remain nebulous for a long time. They may be far from having all their operational capabilities. They will lack links in their supply chain and have only restricted access to their various markets. Moreover, they will have to live under the shadow of a resurgence of the epidemic with new confinement measures. The transition to the ”new or even the next normal” will require companies to reinvent their business models, even as they continue to respond effectively to the aftershocks of the crisis.