This current crisis is so completely unprecedented; the world has never gone through so much pain across virtually every country at the same time. Even at the time of the Great Depression, the damage was primarily felt by the developed countries of that time. Sept 11 caused immense economic damage particularly in the U.S. but that was again temporary, and so did the financial crisis of 2008 which struck global markets but left many industries specially in poorer countries untouched.
But the current tragedy goes well beyond anything we have experienced. It cuts across borders, supply chains, financial markets, consumers in every part of the world and every aspect of humanity. Its impact is therefore bound to be profound and deep.
Every business in the world is trying to come to grips with the extent of the damage and their strategy for survival. It seems impossible to be able to forecast what this post Covid world might look like. Clearly there is no “normalisation” that we can expect over this coming year. And in the absence of any guiding posts for the future, how do you make your plans?
Only a few things are certain. The world will become even more online and digital. Consumer spending will take some years to get back to normal levels. Some of our habits will change towards a greater emphasis on healthcare, safety, and the family. And technology and innovation will quickly evolve to embrace powerful new ways of communication and collaboration. Proximity will be saved for family and friends and critical work and the role of office spaces will evolve very quickly. Working from home
should become a norm because it can drive productivity, improve work life balance, save commuting time, and really save costs. This movement to working from home was bound to happen over time, and has now gotten accelerated. Perhaps the work environment will become much less formal, much more humane and natural, and merge even more with our personal lives. And sadly, globalisation will take a backseat as will global supply chains which will get re-configured.
So how should a business react to all these various conflicting issues? Firstly, every business must rediscover itself. What that means is very sharply defining its core value proposition, and rethinking what the business needs to deliver that proposition. This is an opportunity to reset and redefine who we are.
Every business accumulates baggage as it expands, this is a time to shed that baggage. Secondly, for some period of time, focus only on preserving cash. There will be many liquidity crises as we lurch forward. Maintaining cash balances that allow you to survive many months of significantly lower revenues and perhaps no profits will be the key to survival.
Thirdly, take a very grim view of future revenues and work backwards to decide the cost base you need. This is not a time for precision, but perhaps taking a sledgehammer to the problem. Every business has to cut costs and they have to do that fairly drastically. There is no gentle way of doing this and only a top down approach can really work. Fourthly, this is a great time to have the entire team come together to fight a battle. Nothing motivates people more than a crisis and this is the mother of all crises. Teams that have a purpose and objective can come up with amazing innovative solutions. Engage with them constantly because they know what the market realities are and are best positioned to fight the problem at a granular, local level. And lastly, embrace technology—we must all learn to use it far more productively than we have in the past, because that is the new world which will accelerate much faster than we could have expected.
This will be a daily, weekly, monthly fight, both tactical and strategic. We will discover new realities about our businesses, market insights that we were not aware of or could ignore during better times, and the quality of our organisations. It is a time to look after our employees as well as we can—we will need each other. We can simplify our personal and business lives in ways that we could not have imagined earlier—and we must embrace this opportunity to change our business models, and sometimes throw the old one away and think of new ones.
And remember, there are no easy, quick fix answers. As events unfold and the crisis expands and touches all of us in ways that are bound to be tragic and sad, perhaps the central message has to be about human ingenuity and optimism. Along with enormous distress, we are bound to see amazing innovation and solutions across every industry. This time gives us a chance to think more deeply about what our businesses do, who we are, and how we can re-invent ourselves. And hope and optimism are the most powerful weapons humans have had to conquer every adversity.
The author is the chairman of Clix Capital.