Now is the time to start thinking about what the impacts of COVID-19 mean for your business in the medium to longer term. The majority of business owners have been in crisis management mode, focused on stabilising their business through a range of initiatives targeting costs, working capital and cash. The world will look a little different moving forward, with permanent shifts in business models, different consumer behaviour, augmented ways of working and a residual health risk associated with a second wave of COVID-19.
The road to recovery is uncertain and will no doubt take a number of twists and turns as we move through the next 6-18 months. Some industries will forge ahead, for example food and grocery, healthcare and telecommunications. However, even these industries will need to adjust to the rise of e-commerce and e-health which will permanently change business models. For those industries that have been moderately to significantly impacted, the road to recovery may be more prolonged. That’s not to say there won’t be an abundance of opportunities.
What we are experiencing will need to unwind and certain sectors may face a perfect storm:
- Stimulus – Current Government stimulus will conclude at some point and although further stimulus may be introduced, all investment will eventually need to be funded. This may have flow on consequences to taxes, cost of capital, ability to adapt to further disruptions and disposable incomes.
- Demand and consumer confidence – The higher proportion of people unemployed or receiving reduced incomes will require time to consolidate their finances, before returning to pre pandemic levels of discretionary spend. International boarders are unlikely to open for some time, with other restrictions being lifted gradually. This means reduced demand compared to pre-pandemic levels.
- Liquidity – Companies have needed to leverage their balance sheet and deplete surplus cash, resulting in reduced capacity to invest and now potentially carrying increased liabilities through deferred lease arrangements, deferred principal and interest and repayment of other stimulus measures.
Now is the right time to take stock, revisit your strategy and set a plan to navigate the next 6-18 months. In developing a strategy there are few key elements to ensure success:
- Align the business around a common measure of success – Establishing this measure will be the platform from which your strategy and growth aspirations will cascade. Start with your shareholders to understand how their aspirations have changed. It is also very powerful in aligning the board and executive around a common purpose to appropriately prioritise initiatives and resources.
- Identify key strategic themes – The next step is to understand what strategic themes will either help or hinder the achievement of your purpose. This will include a full market assessment from a political, economic, social, technological or environmental perspective. These themes will then form the basis of what initiatives are explored, quantified and put into action.
- Develop a plan and governance – Sounds simple and it can be, however in many instances it is challenging whilst trying to remobilise. Careful consideration is required to interlock key elements of the plan across fundamental operational areas of the business. Establishing a clear link to the operating plan will aid greatly in execution. A strategy will not be successful without establishing appropriate governance, accountability and action to ensure implementation.
This will be the first part of a series of posts focused on strategy. As you re-visit your strategy, there will likely be a number of complex challenges and opportunities that need to be worked through. The following parts of the series will look at some thoughts and practical steps in relation to re-mobilising your business, impact on your business model, building resilience into your supply chain, strategic M&A opportunities, optimising your capital structure and the importance of strategy execution.