In the face of the unprecedented market conditions caused by COVID-19, companies around the world are mobilizing and adapting their corporate strategy to meet the rapidly changing demands from a broad set of stakeholders, including customers, shareholders, employees, business partners, federal and local governments, and even family needs at home.
These unparalleled market changes are shifting focus (rightly so) away from longer-term imperatives into shorter-term activities to urgently close the operational challenges of the day.
This need for shorter-term thinking and immediate action poises a fundamental question about the role of strategy in a time of crisis: what then, is the role of strategy in a time of intense difficulties requiring immediate action?
Organizational leaders have the tough task of balancing the immediate needs of the business with the longer-term ambition of their organizations. In this environment, the role of strategy and strategic leaders is to create and enable the right structure and frameworks to operationalize all the required changes needed to get from today and into tomorrow.
To do that, we believe five shorter-term strategic imperatives should be top of mind for leaders across any organization looking to bridge the today’s crises into tomorrow’s opportunities.
1. Establish a Corporate Strategy Cross-Functional Command Center to Evaluate Needs and Impacts
Leaders need to devise a way to evaluate disruption and potential impacts from a crisis across the entire organization, not just individual silos. In other words, deep coordination across sales, marketing, finance, operations, IT, and other critical functions is required to get a full picture of the short-term challenges and long-term impacts during a crisis. For example, while attending to supply chain disruptions during COVID-19 is key for CPG and life science organizations, leaders should also be jointly working with HR to protect their employees, implementing and adapting to local and federal health guidelines to protect employees; at the same time, there is a need to work with sales to ensure customer safety and needs continue to be met. For marketing, reassuring customers and building deeper bonds will be key, all while readying for investments to maintain or gain share and prepare for bounce-backs alongside operational leaders. Crises require cross-functional leaders to work closely together on their corporate strategy and companies should have this cross-functional team in place to plan for the unplanned.
2. Model and Pressure Test Different Scenarios to be Prepared for a Variety of Events
Leaders should be prepared for a variety of potential scenarios (e.g., from social distancing to full lockdowns), their impacts (see #4 below) and durations (e.g., from weeks to months). Organizations need to have a deep understanding of their value chain and where supply chain bottle necks exist and to what extent supply and demand can be shifted around different geographies within the US or globally. Understanding what a good, bad or worst-case scenario and what the potential actions required under each is a must – that way, leaders can strategize to get ahead of the curve rather than creating and executing a plan when an uncertain future arrives. This exercise should go beyond critical financial modeling (see #4 below) to include U-shaped, V-shaped, and in-between bounce back scenarios across all key stakeholders – i.e., it is not just about consumer bounce back, but should also incorporate considerations around government funding, customer liquidity, solvency and disruptions across business and supply chain partners, and the evolving needs of markets and shareholders.
3. Set the Tone for the New Collaboration Conditions to Drive Engagement and Productivity
For most organizations – and most employees – remote work is a rare exception. While rules of engagement for remote work may seem simple, leaders need to create and share the right tools and approaches for employees to effectively manage their time and energy when working remotely. Creating a high-performing remote culture takes careful thought, consideration, planning and action – it does not happen on its own. Leaders need to ensure productivity and morale is sustained for any given duration of time by helping employees adapt to remote working environments. Effective guides like tips for working remotely and using the right tools effectively can go a long way to standardize how organizations can still perform at a high level, even remotely. Ensuring consistent and transparent communication is also key in establishing trust and driving accountability from remote employees.
4. Understand Your Organization’s Cash and Liquidity Position
Leaders need to have a strategy in place to understand their balance sheet and the required cost and liquidity levers available in the short-term while minimizing long-term impacts. Working closely with their finance counterparts and all other cross-functional leaders, the role of the strategist during times of uncertainty is to help create clarity around the organizations’ cash and liquidity position under several different scenarios (see #2). As an example, coming out of the 2008-2009 recession, the Federal Reserve created economic stress test scenarios to assess banks’ capital adequacy under two scenarios: baseline and adverse. These tests were used as a proxy to understand the robustness and health of the banking system in the US. In today’s environment, senior leaders need to understand their organization’s balance sheet position under a series of different scenarios and have plans in place to adapt to rapidly changing market conditions.
5. Unlock Hidden Opportunities
For every challenge there is a great opportunity. Without a doubt there will be a subset of organizations for which today’s chaos could unlock merger and acquisition activity and other opportunities to double down in areas where competitors are cutting back. Marketing spend tends to be an area where companies cut fast, but in our experience and research from the 2008-2009 recession, several CPG organizations who maintained (and sometimes accelerated) their marketing investments were able to outpace their peers several years after the recession ended. Investing for the long-term in a time of crisis requires a mix of expectation setting, prioritization, and careful planning – all key areas that strategists can help support in a time of crisis.
Moving Forward with Corporate Strategy in a Time of Crisis
Hindsight is 20/20 – but amid this crisis, it is imperative for leaders – and strategists – to continue to help their organizations prepare for the unknown. Ensuring organizations account for these five short-term strategic imperatives is a first step in preparing your organization not only for today, but also for what is coming tomorrow.