Crisis Time: Crunch Time: Survival Strategy
COVID-19 has shattered the traditional way of doing business. Within a span of a quarter, globally, businesses, small and large alike, have abruptly come to a halt, and we are looking at the beginning of a global recession which currently appears to have the potential to drive a lot of organizations to bankruptcy.
COVID-19, however, is a crisis, much like crises faced by organizations. Market collapse of 2008 was a large crisis. Y2K bubble burst was a crisis. And going through history, every decade has had a crisis with a potential to destroy the world as we know it. And yet, as humans, as businesses, we tend to overlook the experience we faced during the previous crisis, and tend to believe a smooth sail as soon as this current crisis is over.
In modern businesses, Strategy has evolved into a continuous effort, to keep up with the changing marketplace, and technologies. Strategy, however, also plays a key role in Crisis management. Survival strategies help organizations float through, and live, to fight another day.
The following are some essential strategies to business survival during crisis and disruptive times.
Bottom Line Vs Top Line:
Startups run through the market to capture the marketplace without short term considerations of the bottom line or the unit economics. Unit economics becomes crucial during the times of crisis. Do not pursue the top line at the expense of the bottom line. If sales and profits are not growing proportionally, prepare to turn customers away through premium pricing tactics or by focusing on profitable customers.
Change the way you sell your products and services. If your workforce continues to sell traditionally, i.e. providing estimates where winning the bid is based solely on pricing, you need to challenge your conventions. Focus on Value Selling rather than bidding on a price war. A global USD 300M IT services organization with its HQ in Hyderabad, anticipated a pandemic and tested out work from home options with alternating weeks for 3 months. Now, with the entire world in lockdown, their customers are already assured of business continuity with a proven model.
IT as Enabler and Driver:
ERP systems help maximize existing tools and equipment. It is paramount to minimize labor intensive tasks and prevent estimating errors, while gaining control over your business. Ensure adoption of IT to help navigate and grow in times of disruption.
Capex Vs Opex:
Work to invest in state-of-the-art equipment to improve efficiency. Renting/Leasing the equipment will minimize the upfront costs. If equipment that costs $100K reduces manpower requirement by 100 hours per month, it will pay for itself within two years (considering a FTE cost of $100k per year).
Improve your trading cycle on both up stream and down stream. Ask customers to put a larger down payment and request suppliers to temporarily extend credit terms. Ensure you revert back to normal payment terms once financial performance improves.
Be prepared to inject equity when needed. Banks are reluctant to lend when your bottom line is negative. A CFO of a large infrastructure organization once told me: Borrow when you are doing good, no body lends when you are doing bad. Anticipate risks and create enough runway for tough times.
Scale up or down when necessary. When work is scarce, lay off redundant employees and only keep the key employees. Parting with an underperforming estimator may well be part of the solution to the problem. This harsh reality is a better alternative to going bankrupt. Establish practical key performance goals for those that you keep.
Any crisis brings lots of opportunities. Drive sustenance and growth by defining the right go-to-market strategy specifically designed for disruptive times. Utilize tools to measure, capture and refine the strategic initiative for better market penetration.
Collaboration / Alliance / Partnership:
Collaborate, create alliances and strategic partnerships to rationalize costs. If two companies are barely surviving, perhaps it’s time to merge operations. Large corporations do it, why shouldn’t you.
Whatever your strategy, bottom line for any organization is to survive and grow. Every crisis is different, every market is different, and yet, the challenges faced by the organizations are universal. Use Strategy and Analytics as your driving factor, to make decisions, to define strategic initiatives, and to grow.