Bold Action in the Face of Ambiguity: How to Reset Strategy in a Post-Coronavirus World
With the economy grinding to a halt for an unknown duration, businesses are in full crisis-response mode. Most companies have smartly focused on customers, employee health, and business continuity.
Now it’s time to get strategic. How fast and how well companies do this is where long-term winners and losers will be defined.
Those who get it right will focus on what they can control and make bold decisions; they’ll avoid knee-jerk reactions and capture hidden opportunities.
Scenario planning is the antidote to uncertainty
Rather than try to predict what single possible future may happen, you must imagine and plan for multiple scenarios. This enables your team to develop a shared understanding of and language for the dynamics at play, align on no-regrets moves that are smart across all scenarios, and define key strategic bets – and whether or not you’ll make them as your actual situation unfolds.
With this in mind, we’ve created an open-source strategy toolkit with four scenarios for how 2020 might evolve and a clear process for setting each strategy – in quick-and-dirty and/or more-considered fashion.
To help you get started, the scenarios are centered on two key uncertainties:
- How the global pandemic and health responses evolve; and
- How the economy and business environment respond
Four scenarios for how the coronavirus pandemic could unfold
In all scenarios, you should prepare for short-term revenue reduction, cost-cutting, and disruption. But how you manage these challenges, what opportunities you seek, and what risks you mitigate all depend greatly on your view of scenarios and how you would navigate them. You can’t control the scenarios, but you can control the actions you take now. Imagine these possible futures, written as though it’s January 1, 2021:
Through a combination of a less-dangerous virus than initially predicted, effective medical responses, and economic stimulation at state and federal levels, herd immunity was achieved, and disruption was shorter and shallower than many expected. By mid-summer 2020, life was starting to feel somewhat normal again. Social distancing restrictions were removed, travel and tourism quickly re-started, gig-economy workers re-booted, and unemployment dropped. Financial markets began rebounding as pent-up demand increased consumer spending and the economy seemed on-track to grow in 2021.
Fits and Starts
It was a year of unprecedented volatility as society balanced its physical and economic health. Social distancing lasted until summer when infection rates finally decreased. The economy rebounded briefly but then another round of infections hit and social distancing was again required. With this second cycle of economic impact, volatility further increased with escalating trade wars, fiscal policy experimentation, and conflict among local, state, and federal government responses. We started thinking that two months on, one month off in social distancing might be the new norm until a vaccine arrives mid-2021. Industries that rely on people-gathering have greatly suffered, and major disruptions and economic duress continue for almost all companies.
COVID-19’s impact matched the most pessimistic predictions, with over one million deaths throughout the year in the U.S. alone. Many businesses were forced to pause indefinitely, leading to bankruptcies, foreclosures, and unemployment well above 20%. Liquidity issues across industries exceeded those of 2008-09 and economic policy solutions and bailouts provided only temporary relief. The stock market took a massive hit and won’t begin to recover until mid-2021. It will take several years to return to pre-crash highs. Companies that survived did so through a combination of luck, deep and significant cuts, restructuring of liabilities, stimulus policies, and smart reallocation of effort and resources.
The Great Correction
The economic impact of coronavirus was less severe than many predicted, mostly because of fast and dramatic actions by government, businesses, and citizens. Six weeks of social distancing flattened the curve and calmed the societal vibe. We learned to cooperate across political parties and geographic jurisdictions to address the threat and manage disruption better than expected. By summer, we emerged from the disaster with a transformed collective outlook. The crisis elevated companies in industries like distance learning, online shopping, and alternative health-and-wellness delivery models. It also spurred innovation in technology, business, and politics. More sustainable, collaborative, resilient models of living and working began proving themselves out, with less travel, consumption, and waste. Successful firms adapted to this new outlook and are thriving and innovating.
Coronavirus 2020 Strategy Toolkit: Virtual Planning
To bring structure to the many futures we may face globally, and thus fuel better decision-making right now, it is critical to build a strategy for 2020 methodically. But let’s face it, in a virtual world with your leaders scattered both physically, and possibly mentally as they deal with the pressures of working from home, engaging in a strategy planning process is difficult at best.
Our open-source toolkit provides a flexible approach to short-term planning in a virtual environment. It supports a comprehensive strategy sprint over a one-to-two week period but is also suitable for pressure-testing an existing strategy in a 90-minute meeting.
A 5-Step Process
This five-step process can help you build and update a 2020 strategy in these uncertain times:
- Refine and customize the scenarios – Review the scenarios and customize them to your unique situation. In addition to the rate of containment and economic indicators we outline above, add second and third order impacts around industry and regional conditions that logically flow from the scenarios. Focus on the ones most relevant to your industry and geographic location.
- Create your winning scenario-specific strategies – Consider your company’s current strengths and underlying capabilities to design a strategy and financial plan for each of the four scenarios. In every case, make sure you address the core operating approaches your company would employ if you knew the scenario had a plausible outcome. Focus on the biggest changes you would need to make to your existing strategy should each of the scenarios occur. Your financial plan should address key shifts in revenue, costs, and cash.
- Identify robust “no-regrets” moves – Review the strategies designed for each scenario and identify no-regrets moves. In most companies there is deadwood that can be cut and strategic initiatives that should be pursued no matter which future unfolds. Not sure what constitutes a “no-regrets” move? Strategies that differentiate your company and connect to its purpose in most scenarios, and that don’t undermine the company in others offer “no regrets,” and are the moves you should feel comfortable pursuing immediately.
- Update your existing strategy – With an understanding of the range of potential future outcomes and clarity around no-regrets moves, you are prepared to update your existing strategy. Listen to the signals from the contextual environment about the value of remote learning, healthcare, and online shopping. Consider the company’s risk tolerance, investment posture, and cash position. Then update your strategy with confidence that you are not planning for a single future forecast, but instead are considering a wide range of potential future scenarios.
- Monitor, track, and be resilient – The scenarios are not just a scaffolding for designing your strategy – they provide a common language your team can use to monitor the evolution of uncontrollable conditions related to the virus, economy, and industry. As things progress and developments unfold, these conditions can be easily connected to the scenarios through dialogue or virtual war rooms. Monitoring and tracking conditions, and then linking them to the scenarios ensures that your company strategy is calibrated with the evolving landscape. Events that fall outside the scenario set should be evaluated to determine whether they represent blind spots in your strategy process.
Leading in Uncertain Times
While it’s impossible to accurately predict what will happen in the coming months, we developed a Coronavirus 2020 Strategy Toolkit that allows businesses to simulate a range of possible futures to help mitigate risk and assess opportunities. Use it as a first coat of paint for your strategy. It allows you to avoid delaying key decisions in the midst of the crisis and ensures that you don’t bet on a single future when accurate predictions are impossible. And, perhaps more importantly, it provides a way of aligning your leadership team so it can move forward with confidence and a shared understanding.
One of the biggest gifts leaders can offer is the sense that they have a thoughtful, caring, and alert approach to managing through crisis. This has never been more true than it is right now. Your team will appreciate hearing more than just the result of a scenario planning process. They will want to know how you approached it, what you considered, what it means, and what you’re still watching for. Make no bones about it – people will assume the worst right now. Because of that, a transparent, thorough, and collaborative process will go a long way in helping people manage themselves and their fears, as well as build commitment to action.
This is the first article in a series on developing strategy in a post-coronavirus world. The second article, Clear Strategies in Turbulent Times: 4 Scenarios for Navigating a Post-Coronavirus World, provides emerging insights on the four scenarios, an update on the possibility and likelihood of each scenario unfolding, and links to outside research.Back to TriumIQ