Ready to rebound - A business leader’s toolkit for growth during uncertainty
Business leaders need to play a proactive role in addressing the biggest challenges of our time, collaborating with all stakeholders and moving from discussion to pragmatic action. COVID-19 will challenge many companies, but a few will emerge stronger—competitively and financially. Leaders who leverage lessons from previous downturns, as well as attending to the unique features of today’s environment will be in the best position to succeed.
There is opportunity in adversity for every business. It may seem callous to stress opportunity in the midst of a humanitarian crisis, but leaders have an obligation to look ahead, to anticipate and meet new customer needs, to evolve their strategies and organisations, and in so doing sustain the prosperity of their enterprises.
To date, over 140 countries and territories have reported cases. Even as the number of new cases in China is falling (to less than 20, on some days), it is increasing exponentially in Italy (doubling approximately every four days). However, in positive news, China’s share of new cases has dropped from more than 90 percent a month ago to less than 1 percent today.
As can be expected, the COVID-19 outbreak is shifting industry structures and supply-chain resilience will be at a premium. The global defence sector is feeling the impact of the coronavirus, with companies limiting travel, defence trade events postponed, or even cancelled and contingency planning is underway.
Stocks continue to fall sharply on a combination of coronavirus fears and plunging oil prices, defence firms around the world are preparing for the worst and looking to governments for guidance. This comes shortly after spread of the coronavirus forced the week-long closure of two F-35 facilities in Italy and Japan ― a sign the outbreak had begun to impact operations within the global defence industrial base.
“Buy-Domestic” regulations and other controls mean defence supply chains may be less susceptible to disruption than some consumer sectors, where reliance on China-made components is more widespread. However few, if any, supply chains are as globally linked as the F-35’s, said U.S. Chamber of Commerce’s Defence and Aerospace Export Council’s president, Keith Webster. “If this continues across the F-35 partner nations, with their industrial sharing, one could see an impact.”
It may sound impossible, but now is the time to prepare your business and dedicate the time and effort to responses focused on the longer term. Businesses must attend to short-term issues during a downturn to make sure their business remains solvent. But substantial competitive opportunities await the leaders who can also keep one eye on the long-run picture.
Only a few months after the initial outbreak, China appears to be in the early stages of recovery. Congestion delays have reduced, meaning that the movement of people and goods is resuming. Similarly, coal consumption appears to be recovering from a trough of 43% to currently 75% of 2019 levels, indicating that some production is resuming. Confidence appears to be coming back as seen in real estate transactions, which had fallen to 1 per cent of 2019 levels but have since bounced back to 47 per cent.
While the depth and duration of the economic impact in other countries is impossible to forecast, China’s experience points to a scenario that companies should prepare for. Considering the time it takes to formulate, disseminate, and apply new policies within businesses, recovery planning needs to start while you’re still reacting to the crisis. Many companies will be focused on defensive moves, but experience shows from one of the more recent global slowdowns, the Global Financial Crisis, that those who innovate and have a strategy fare best.
A rebound of demand is inevitable. Given the complexity of rebooting companies and supply chains at different speeds in different places, the time to begin preparing a rebound strategy is now.
An “opportunity in adversity” mindset is required. Prudent companies will prepare for this possibility. Analysis from the Harvard Business Review shows that 14% of companies across all sectors actually grow top and bottom lines during recessions and downturns. They take a long-term view and place growth bets when competitors are retrenching.
Understand the situation in your industry, consider multiple scenarios, and plot out both immediate actions and longer-term steps to lay the foundation for a strong recovery. I will endeavour to go into more detail on each of the below actions in future blogs.
Operations leaders should act immediately to respond to COVID-19 supply chain disruptions.
· Establish visibility to supply risks through a risk-register/matrix
· Enact immediate stop-gap measures to preserve supply chain functionality
While immediate action is paramount, preparation requires substantial changes to supply chain capabilities that need to be developed over the coming weeks.
· Adjust capacity and geographic sourcing in response to evolving conditions
· Build transport and logistics flexibility
· Review current contract obligations and Force Majeure clauses
· Plan for the short-term recovery phase in impacted regions including monitoring effects on partners, competitors, programs etc to identify opportunities
COVID-19 has brought into sharp focus the extent to which regions of the world have become tightly interconnected. As global risks evolve, companies must adjust their supply chain strategy.
· Evaluate the option of sourcing from multiple regions to mitigate risks
· Monitor inventory through detailed digital supply-chain mapping, including components and sources
· Transport and logistics risks needed to be understood
The first priority must be to keep your people safe and to implement immediate supply chain stabilisation measures. Then, by understanding the scenarios and taking the appropriate actions, companies can build resilience against the short-term shocks and lay the foundation for a strong recovery. The coronavirus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic. We should expect that the Covid-19 crisis will change our businesses and society in important ways and those businesses who are best prepared will emerge stronger.
While all this may seem incredibly daunting, there are people that are able to provide the advice, support and services to implement the above strategies. Feel free to get in touch with any questions.