- You didn’t see the COVID-19 pandemic coming. Neither did your competitors. Now, what’s important is that you come back stronger and more resilient.
- Talk to customers, suppliers, employees and partners. You never know where the next million-dollar idea will come from.
- As you develop short- and long-term demand forecasts, rethink operations with an eye toward mitigating risks, particularly those revealed over the past three months.
For most of the last century, Bell Labs was the center of innovation in communications. The Bell System, flush with cash, funded research that most companies would never even contemplate undertaking. Perhaps Bell Labs’ most visionary leader was a man named Mervin Kelly . Kelly spent his career at Bell, leading a variety of research efforts, and he was president of the Labs for most of the 1950s. His original work was around perfecting vacuum tubes, but he soon became interested in solid-state devices and built the team that would invent the transistor in the late 1940s.
Almost certainly, without his influence, the transistor wouldn’t have come about for another five to 10 years.
One of Kelly’s lesser known, but arguably more impactful, accomplishments at Bell Labs was to gather a group of employees he thought to be the best and brightest. On the first day of one famous retreat, he walked in and told those smart people to imagine that the Bell System had been destroyed overnight and that it was their job to recreate it — better than it was. Out of that meeting came innovations in areas including touch-tone dialing, video calls and microwave call transmission as well as time-division and frequency-division multiplexing, advances that allowed Bell to carry more than one call at a time over a single circuit.
Kelly was a brilliant man, but his best accomplishments came by fostering the brilliance in his team and giving them permission to do things that hadn’t previously been thought possible.
What does that have to do with restarting your business?
After a typical catastrophe, getting back up and running isn’t easy, but it’s normally straightforward. You put out the fire. You fix the water damage. You determine that the environment is safe for workers and customers and you get back to it, pretty much as before.
For most businesses, that’s the wrong goal now. The coronavirus pandemic, and our ongoing recovery from it, are profound events that should inspire leaders to rethink the concept of good business from the ground up, drawing ideas from across the organization.
For CFOs, the reevaluation, on an individual business level, of risk acceptance, the availability of money and the notion of resilience should be just as profound. Six months ago, no one’s risk assessment included “a potentially deadly virus to which no human is immune” or the possibility that governments would shut down substantial parts of the economy for months to protect public health.
There’s a lot of discussion now about runway. Particularly for smaller businesses, few finance teams could foresee the need for — and fewer could have actually built — the 90-day cash reserve that would have yielded some protection from the financial ravages of COVID-19.
The JPMorgan Chase Institute measures cash on hand for various businesses; before the pandemic, most maintained three to five weeks of reserves. As the economy restarts, leaders need to think through the practicality of keeping more money in the bank. But there are other ways to foster deep enough resilience to withstand whatever transformative event comes next.
Starting Up: Steady & Smart
A lot has been written about how to cope with the new realities that businesses face in the short run as the economy restarts. Our take is that the standard playbook for returning to business as usual doesn’t apply. For a restaurant that experiences an electrical fire, the process of recovery and rebuilding trust is straightforward: Your products and services are available, and your employees can meet demand. When catastrophes aren’t of your own making, customers, landlords and suppliers will generally be empathetic.
After all, it’s not like every tenant or customer is in dire straits and asking for help at exactly the same time.
Welcome to COVID-19 and the realities of pandemics. This catastrophe isn’t about your business in the minds of many stakeholders. And unlike a fire or hurricane, it will be impossible to know the catastrophe is over until it’s been over for a while. Even now, three months in, there are still plenty of unanswered questions.
For executives, and founders in particular, that realization can be humbling. A business they created or nurtured suddenly faces unheard-of challenges. Our advice: Reflect, listen, observe and learn before taking action. Instincts aren’t to be ignored, but they should be overridden when data dictates. CFOs can help here by being the data-driven voice of reason.
Look, no business knew, definitively, what to do on March 1. Even if you make protective gear for healthcare workers and the obvious move was to produce as much as you possibly could, there was the question of your own workforce’s health.
Just as Kelly brought together the best and brightest, put together a response team following crisis management best practices. We’re all feeling our way in the dark. It’s leadership’s job to illuminate the path to the extent they can so stakeholders feel supported and understood as we work our way forward.
Here Are 9 Ways to Head Off Legal Risk as the Economy Reopens: Expect to see ‘creative’ lawsuits as people go back to work, says attorney.
For now, resilience means doing what local, state and federal health officials say. Some states have enacted laws protecting businesses from being sued as the result of an outbreak in their operations, but those laws are generally predicated on the business following established guidelines. OSHA may begin to levy fines for non-adherence to its rules. The CDC has a strong set of policies, as do most state and local health departments. Make use of that guidance.
Developing a Broad Strategy
Now that we have that straight, it’s time to look at other aspects of the business and consider the short- and long-term effects of COVID-19 in the context of increasing resilience.
CEOs are going to lead this effort, but the CFO will have an outsize part to play. To put it bluntly, CFOs need to know when to say “show me the receipts” by insisting that department heads back up claims about sales, production — or anything else — with data. Finance is tasked with managing cash flow, so it’s incumbent on your team to require multiple, and realistic, revenue estimates based on various scenarios.
Question assumptions in sales, technology and human resources.
Reality-based sales: It’s rare that you can take the first numbers out of a sales leader’s mouth and plan to them. Salespeople are optimistic by nature and tend to think they’ll have more success than they will, even in the best of times. In these times, CFOs in B2B businesses need client-by-client reports of expected activity for the next three to six months. Your sales team should have been in contact with at least the top 50% of customers by now, more if possible.
In B2C businesses, look at your own data, that of your industry in general and, to the extent possible, data for regions where you do business. The media tends to focus on macro measures of consumer confidence, which are universally down . But COVID-19 is affecting consumer confidence differently from rural to urban areas. This can be difficult data to get, but the more you know, the more you can understand what resilience will mean for your business.
We spoke to representatives from two car dealership chains for this report, one with stores primarily in a midsize city and another with stores in suburban and rural markets. The urban stores were struggling because, we surmise, the rate of infection (183 cases per 100,000) was much higher than in rural areas (54 cases per 100,000). Thanks to aggressive financing and discounts from MSRP offered by automakers, the rural dealerships were actually ahead of 2019 same-month sales. Not so for the urban locations.
The process of developing a structured sales response to COVID-19 should be in the works by now. We’ve talked through a few of the steps here, and the Boston Consulting Group has laid out a good four-part plan .
It’s a sensible approach to reengaging sales.
The 4 Rs of B2B Sales Response
|Immediate value realization||Sustained, longer-term impact|
Must-dos in the next 2 to 4 weeks
Build your medium-term plan for the next 3 to 12 months
Lay the foundation to gain momentum
Accelerate strategic initiatives to win the new normal
|Support customers’ immediate needs, such as product and pricing.||Revisit business plans and scenarios.||Digitize your go-to-market strategies.||Scale e-commerce, digital sales and inside sales.|
|Shift to digital communications and remote channels.||Track the pipeline and deal risks.||Update your offerings and prices.||Personalize account engagement with joint marketing and sales tactics.|
|Monitor and reprioritize sales, liquidity, supply and service agreements.||Review the sales team with HR and tweak.||Rebuild the foundation in terms of data and CRM.||Deploy agile teams and conduct value-focused sprints.|
|Arm teams with remote-selling tools and battle cards.||Revisit customers and reprioritize needs by segment.||Track emerging trends and execute in an agile way.||Set up artificial intelligence and machine-learning capabilities for pricing.|
|Scan the competitive landscape to spot opportunities.|
|SET UP A VIRTUAL COMMERCIAL WAR ROOM||Create a cross-functional team to first execute rapid responses and then to identify, prioritize, pilot and scale longer-term digital initiatives||EXTERNAL
|SOURCE: Boston Consulting Group|
Digital drives success: One thing BCG emphasizes, and that we’ve seen in our own data, is the need to refocus on digital business strategies. In that regard, our most recent Brainyard research showed CFO respondents out-of-step with their non-finance peers. For example, non-finance leaders want to maintain their investments in technology, while CFOs are more likely to want to cut those investments — along with everything else.
We understand concerns around balancing short-term liquidity versus long-term resilience, but CFOs should hear their colleagues out here. Almost universally , businesses that were well down the path to digital operations are weathering COVID-19 better than their less-advanced competitors.
Finance pros need look no further than the pain associated with closing the books remotely under quarantine conditions to understand the value of modern, cloud-based business and collaboration tools.
For sales, digital means meeting customers where they are, which is, increasingly, online. Internally, integrated customer relationship management systems will not only help your company understand sales demand, they’ll help develop the structured approach to sales development that BCG recommends.
No single points of human failure: If Bridget in accounting is the only one who knows how to kick off payroll, you’ve got a threat to day-to-day operations. What if she gets sick, possibly to the point of not being able to tell someone else the steps to take? For each critical function, identify a backup, have a training period, then task that person with running the process in alternate cycles. People learn by doing; a short-term productivity hit is well worth decreased long-term risk.
Pairing people up on critical tasks is just one approach to dealing with HR-related single points of failure. Smart use of technology can provide even better coverage while improving other performance factors.
We’ll circle back to sales as an example. Salespeople tend to be transient — there’s always a better territory with bigger commissions around the corner. When salespeople leave, they aren’t always diligent about handing off their accounts. If your team is large enough, you could pair up a senior and junior rep, so you have more than one person familiar with each account. While this has the side benefit of creating a mentoring system, again, it brings some inefficiency. And let’s face it, salespeople tend to have their own processes, no matter how much you try to coach them to do things the way the company wants.
Providing a CRM — and requiring that salespeople keep complete client records — is the basis of a more resilient sales team. Customer relationship management systems can sort a trove of information about clients and offer visibility into the sales funnel, as well as teasing out nuances about customers. A fully used CRM (and that “fully used” is a big caveat) truly lets sales leaders understand how accounts are being managed at both a micro and macro level.
The challenge is that not everyone on the sales team will use the tool the same way.
Particularly for purposes of creating contracts, sales admins need to pair with someone in the finance office so that they don’t also become single points of failure. For organizations that want to create complex sales contracts directly out of the CRM, a sales administrator who knows the CRM at an expert level can serve as that second person who knows all the accounts while also keeping data going in, and contracts coming out, consistently and correctly. Depending on the number of contracts and detail of unique services specified, one sales admin should be able to manage $10 million to $20 million annually, or support up to about 10 salespeople.
This is a rare case where by adding headcount, you may realize both better resilience and higher productivity. Salespeople spend more time with clients, clients get contracts more quickly and you have someone who knows enough about each client to provide stability when salespeople leave.
Process, People and Infrastructure
If your business has been affected by physical distancing requirements, it’s likely that you’ve come across a number of issues that couldn’t easily be handled when workers were at home, or when customers couldn’t interact with your team in the usual way. Think about what would have made for smoother business continuation and how productivity, automation and collaboration tools can create the more resilient organization you want.
Adding resilience takes more than just having a plan. It takes action. As we look at companies that coped well with COVID-19 , we see three consistent themes: They empowered employees to work differently, they opened new lines of business and/or sales channels and they worked toward supply chain diversity.
Human resilience: Ensuring that knowledge workers can do their thing from most anywhere is wise. Asking your employees to travel less but interact more is now imperative, and you’ll likely use office space differently. People costs could go up, so automation projects make sense now.
Business resilience: Marketing and messaging best practices have changed in the short run, and maybe the long run, too. Diversifying or, possibly, simplifying what you produce may lead to less risk in challenging times.
Supply chain resilience: Knowing about a second source for materials is good. Using that source regularly so that you establish yourself as a customer is better. Don’t wait to determine whether and how materials from different suppliers affect your production.
Second-sourcing everything, devising plans for continued physical distancing, opening omnichannel sales and diversifying product lines all sound expensive, and some of this will certainly require new spending. But the payoff will be worth the effort.
To a degree, this is a lesson of the new normal — by not regularly going through the exercise of rethinking your business with an eye toward resilience, you were taking on more risk than you knew.
One last example: For those of us who grew up in the mall culture, it’s hard to imagine a world without Macys, Nieman’s, Bloomingdales and Saks. But there’s a good probability that at least one of them will be gone, along with other mall stalwarts . Gen-Z on the other hand, probably won’t notice, except for the big empty space where the anchor department store once was. They’ve been experiencing retail differently all along.
Retailers will find a business that’s at least a little like theirs in this list of omnichannel success stories . But the thing you can’t count on is consumers finding retail goods exactly like they did last year. I recommend you give our feature on ruling the new retail normal a read.
Kelly’s team had to imagine that the Bell System had changed in an instant. Like it or not, COVID-19 gives us a real-world instance of that kind of disruption. What can your team imagine?
You won’t know unless you ask them.
Art Wittmann is editor of Brainyard. He previously led content strategy across Informa USA tech brands, including Channel Partners, Channel Futures, Data Center Knowledge, Container World, Data Center World, IT Pro Today, IT Dev Connections, IoTi and IoT World Series Events, and was director of InformationWeek Reports and editor-in-chief of Network Computing. Got thoughts on this story? Drop him a line.