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‘SET’ - The essential 3-stage business guide to emerging stronger from Covid

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Leoron press service

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August 20, 2020 August 20, 2020

The recent announcement of 7000 job losses at UK retailer Marks & Spencer graphically illustrates the challenges currently faced by
businesses in all sectors as they grapple with the massive uncertainties of the global pandemic.

Whilst retail was already a challenged sector before the pandemic, the emerging swathe of redundancies can only serve as a reminder of the seismic shifts which the majority of industries are about to experience. However, we must all realise that at the, as yet undetermined, endpoint of the immediate crisis, businesses will be emerging to a ‘new normal’ – quite different from our previous experiences – where there will be both losers and winners. This will reshape our business world in a way only previously seen during the agrarian and industrial revolutions of the 17th to 19th centuries. It will require businesses to rethink their positioning in a changed societal landscape, and accelerate their leverage of already existing technology shifts in ways that may not have been considered prior to the pandemic.

A daunting prospect perhaps – but one that business leaders must embrace if they are to carve out a successful future in this new world.

So where to start? This article proposes a 3-stage planning and action programme which can act as a checklist for business leaders to chart their journey over the months and years ahead. It is not prescriptive but should serve as a series of markers for the journey which will need to be flexed with an agility of action to both anticipate, shape and respond to the changing dynamics that will be encountered. The timeframe for each of the stages will vary industry to industry and country to country. This is where the skill of the management team will need to overlay onto the 3-stage model and will ultimately be the determinant of future successful emergence to the ‘new normal.’

The ‘SET’ model is based on 3 distinct and time-bounded activities – ‘survive’, ‘envisage,’ ‘transition’. The challenge for businesses is to understand the boundaries of these three stages and not to confuse actions needed specifically for one of the phases as being an overall solution that will suffice as a total emergence strategy into the ‘new normal.’ For example, a rapid staff downsizing may be an appropriate response to ‘survive’, but is not necessarily sufficient to ‘envisage’ a new future business model, and must be planned for in the context of the potential service and reputational impact that this may have during the process of ‘transition’.

So, let’s look at each phase in detail.

Survive – This is to some extent the easiest of the phases! Most organizations have already taken steps to ensure that their businesses are able to continue against a backdrop of shrinking markets and potentially high fixed costs. Those organizations that are yet to develop a plan for survival are unlikely to emerge into the new normal as a credible business force. Actions in this stage are varied and appropriate to the need, but normally resort to traditional cost reductions such as people and asset lightening, spending freezes, and elements of financial reengineering in terms of loan restructurings, lobbying for governmental financial support or enhancing lines of credit as appropriate or feasible within various industry types. Additionally though, for some businesses, the ‘survive’ stage has also encompassed an element of prosper and grow, particularly where more agile businesses have been able to rapidly address immediate market needs through implementing different (typically online) fulfilment options for immediate needs left unserviced as traditional business models have collapsed or been shut down through government restrictions such as lockdowns.  

Envisage – ‘Envisage’ represents a separate and discrete stage in the process. Elements of planning for ‘envisage’ may take place in parallel with both ‘survive’ and even ‘transition’ but should not be confused with the actions of these other stages. ‘Envisage’ in essentially the reimagining of the business for the ‘new normal.’ It is a planning stage requiring a high level of innovative thought. It should not be seen as a reactive process – responding to likely changes in the business landscape - but should be taken as an opportunity, where possible, to shape the future for the benefit of the organisation.

A number of factors must be incorporated in ‘envisage’ planning. The visual below sets out four key elements to be addressed:

Business strategy recalibration

It is unlikely that most organizations will be able to continue in the ‘new normal’ with strategies developed previously. Organizations must ‘re-assess’ their existing strategy and envisage the future based on imperfect knowledge of likely market sizes and changing customer needs. Once again, the dynamics of each industry and marketplace will determine this thinking. It may be that a more realistic assessment of future revenue potential will be necessary, and timings of prior strategic milestones may need to be altered.

In parallel with the re-assessment comes a process of ‘new opportunity identification.’ This is where organizations can imagine or even attempt to shape the future landscape for their business, looking to the emergence of potential new opportunities. These may come from two main sources. Firstly, there may be opportunities to leverage on the challenges of others in their industry. Additionally, they may stem from identification of new market spaces that have, or are likely to, emerge as a consequence of the impacts of the pandemic. An example of the latter might be the exponential opportunity for providing secure communications to support remote workforces now operating through a multitude of home wi-fi connections independent of the organization’s existing security systems.

A third, and critical, element of business strategy recalibration is the need to review how best to leverage new digitisation opportunities. As a potentially new business model emerges, those who can accelerate the incorporation of technologies around digital and potentially AI, will be able to respond to changing market pressures with innovative new strategic delivery methods. A digital technology ‘strike team’ should be established to uncover and evaluate all such opportunities and establish milestones for rapid deployment as an integral part of the recalibrated strategy. This will form a key part of the ‘transition’ stage.

The outcomes of the iterative steps set out previously within the business strategy recalibration activity should be integrated into a clearly articulated new strategy. For those organizations using strategy mapping, this is an ideal tool to bring together this work in a way that clearly reinforces and communicates the updated strategic direction for the organization.

Finally, within business strategy recalibration, there needs to be a thorough assessment of the workforce impact of implementing the new strategy. Again, this will be key to a successful ‘transition’ stage. Workforce planning here will encompass two key elements – workforce sizing and workforce skills planning. In many instances the new strategy may be based around a smaller future workforce (but not necessarily so). If any downsizing is required, remember that this is a discrete activity from the downsizing that may have taken place during the ‘survive’ stage which was fundamentally reactive to immediate needs.

In the Marks and Spencer downsizing announced recently in the UK, it would be interesting to know if it is purely a ‘survive’ response – or something more fundamental and based on a different future strategy (‘envisage’) away from the largely ‘bricks and mortar’ history of their current business model. If implemented merely as cost cutting within ‘survive’, and without any parallel and immediate attempt to downsize their bricks and mortar retail stores, it will most likely lead to a reduced level of customer service. The result could well be a poorly executed version of their existing business model which further downgrades the reputation of the business in its customers’ eyes. If this becomes the reality, then they will have failed to properly address the ‘transition’ stage of the ‘SET’ model and will have confused the discreteness of each of the stages of ‘SET’. 

Whatever the direction of future workforce sizing, it is likely that the new business strategy will require different skills and in different proportions to the configuration of the current workforce. Certain historic skills will become less important, whilst other existing skills may take on an increased importance - and completely new skills may also be required.

The workforce planning activity will require close liaison between HR and the strategy team to develop a right sizing and right skilling ‘transition’ plan.

Business strategy recalibration will form the cornerstone of expectation for future achievement. It will be part of an iterative planning process encompassing many of the other activities to be described below.

Business continuity planning

One factor to emerge from the current crisis has been the lack of effective risk management and business continuity planning in many organizations. The severity of the current crisis may be offered as an excuse for some of this, but this does not adequately explain some exceptionally poor planning in this area. Under ‘envisage’ risk and business continuity planning takes on an extremely important new dimension. Strategy must be evaluated for downside risk using risk heat mapping approaches, and each of the components of the business model must be evaluated for potential business continuity impacts. As an example, long held and much vaunted business approaches such as lean, just-in-time, and indeed even aspects of globalisation must be re-examined in the light of Covid 19 experience. We will need to consider building in more ‘redundancy’ in our business models. Just as utility companies build in network redundancy to ensure that an acceptable level of supply can be maintained in the event of an unexpected failure in a part of the network, so our business models may need greater redundancy to limit our overdependency on inelastic supply chains, single route to market strategies etc. The consequences of this may see an increase in business costs and this will have to be factored into new financial modelling for our businesses within our ‘financial sufficiency planning’ work (see below).

As a minimum within this planning activity, risk heat maps should be used to uncover strategic risk and to develop acceptable risk appetites and risk mitigation activities. A further recommended approach is the design and description of a new business model to support the strategy recalibration exercise. A strong contender for this work is the use of the Osterwalder business model canvas. Once developed it can form an effective nine-point checklist against which to further look for potentially compromising aspects of business continuity in areas such as supplier, partners, customer channels etc.

Collectively the outcomes of work in both ‘business strategy recalibration’ and ‘business continuity planning’ can then feed into the third factor within ‘envisage’, namely ‘financial sufficiency planning.’

Financial sufficiency planning

At this stage in ‘envisage’, we need to check the financial validity and viability of the emergence strategy. This article does not propose to delve into a detailed description of financial budgeting and planning techniques. Most organizations have these skills! However rather than getting embroiled in historical detailed budgeting, a more high-level approach should be deployed to support financial sufficiency planning. During this emergence from Covid 19, access to cash - whether through sales revenue generation, existing cash resources or available borrowing facilities - will be key. Cost planning based around the new business strategy should supersede traditional approaches to incremental budgeting and the mechanisms for cash allocation should follow those approaches traditional reserved for start-up operations of a new company – which is essentially what emergence from Covid 19 will mean for many of our organizations. 

Cost modelling will be required to understand the impact of the combined effects of strategy reassessment and business and risk management imperatives. This will ensure an acceptable level of future financial return is attainable. Care should be taken to factor in specific one-off costs likely to be incurred during the ‘transition’ stage.

Given the agility required moving forward, a more flexible ongoing approach to dynamic budget allocation should be adopted, and good guidance on this type of thinking can be achieved by referencing the many articles and publications of the Beyond Budgeting advocates. Anything by Bjarte Bognes will provide a source of inspiration for more enlightened budget thinking to support ‘transition’ and beyond.  

 Workplace operating design

The recent months have forced organizations to develop new workplace operating models. As restrictive lockdowns were imposed, many organizations have had to resort to distance working for their staff. Generally, this has delivered unexpected benefits. Productivity has improved for many and the loosening of restrictive command and control procedures has enabled unexpectedly positive outcomes to be achieved in days and weeks rather than months and years. Although there are some concerns on issues such as mental health and also the lack of social and emotional connections associated with the workplace, generally it is now accepted that even after the pandemic crisis reduces, a more flexible approach to workplace operations will result.

This therefore requires the fourth component of the ‘envisage’ stage of our ‘SET’ model.

Workplace configuration planning will involve the design of the organization’s future workplace to support the planned strategy. Most typically, this will involve decisions regarding onsite and remote working and the development of new employee guidelines for managing their work outputs. It will also involve the development of technologies to support remote or semi-remote working with sufficient, adequate and secure modes of communication including decisions on training for their implementation during ‘transition.’ This is likely to have implications on emergence costs as well as requiring consideration of increased costs of employees who are now maintaining a home office on behalf of the organization. It should also be integrated with longer term decisions on the likely reduction in the size of the physical fixed infrastructure needed by the organization, particularly in terms of office space.

An integral part of workplace operating design will be a revamp of governance processes. Most typically this will involve the relaxation of historical command and control mechanisms in favour of flatter organization structures, more devolved authorities and the increasing development of self-managing teams. It will have implications for employee performance goal setting and employee performance management systems and should be used as a stimulus to move away from the overly complex and costly frameworks that have been deployed by many organizations in this area. 

An additional component that will require serious planning is that of employee health and welfare. This goes far beyond just planning for a socially distant workplace. It must look at the impact of the workplace operating design referred to above and consider its implications for mental health and wellbeing. New procedures need to address the potential for ‘online bullying’ or ‘harassment’ in a devolved workplace, and the organization should consider what employee support systems will need to be instituted to allow for wider health management issues, both physical and mental. Some useful insights may be gained here by investigating the social and mental wellbeing processes that have been put in place to support ‘home-schooling’ in various countries around the world.

Finally, in workplace operating design, there will need to be clear guidelines around a new form of employee communication. Communication is poor already in many organizations. As staff work remotely, it will be even more important that effective communication takes place. A communication strategy needs to be developed that identifies the nature of critical communications and the various organizational stakeholders who should have access to these. Communication may take many forms and will span both organizational wide updates on business together with individual departmental and team update sessions. Training departments should identify communication as a vital skill set for development across all those within the organizations – not just those with staff management responsibilities but also intra team communication between work colleagues. 

Transition – ‘Transition’ represents the implementation of the multifaceted plan developed during ‘envisage’. As with all strategy implementation, this is the hardest part of the entire exercise. Every transition process is different as each organization’s outcome from ‘envisage’ will be different and therefore require a different set of actions.

However, there are some general guidance rules that can be set out.

Organizing for ‘transition’

We have seen how many different, but interrelated, components of an organizational plan are required to achieve a successful emergence from the pandemic. ‘Transition’ is itself a major exercise in project management and requires the skillset associated therewith. It requires a formal project plan with critical path analysis and project tracking. It also requires the proactive involvement of many different functions and a considerable flexibility and 80:20 approach to getting things done.

Intransigence in anyone involved is not an option!!!

Certain guidelines for organizing this project can be established within a broader context of a robust project management methodology.

Firstly, overall responsibility must be vested at the highest level of the organization with someone capable of exercising the authority necessary to ‘knock heads together’ where necessary – a COO level minimum should fill this role

A project management office (’PMO’) should be established (if not already available) to ensure the appropriate project management disciplines are applied. The PMO is not there to take responsibility for the project, merely to ensure that the necessary project implementation and reporting frameworks are available to support the ‘transition’ which itself may take several years.

Senior ‘transition’ project team members should be seconded. They should be empowered to take decisions rapidly on behalf of their functions. As a minimum they will include experts from finance, strategy, human resources, corporate communications, health and safety, sales/marketing and operations.

External support should be considered, both to act as an overall ‘sounding board’ on decisions taken, and to supplement internal areas where sufficient skills may not be readily available e.g. risk management and business continuity planning.

A physical ‘war-room’ environment should be established.

Other critical factors

As stated previously, each plan will be different. However, the success of any change plan is always based on the engagement of, and acceptance by, the wider workforce. For some organizations, ‘transition’ will challenge their whole concept of the organization that they work for. It will be a time of great uncertainty and concern. It is likely that existing roles may change, new skills will need to be acquired and people will be retrenched. Manging the people component during this time is vital.

Two clear directives must be part of any ‘transition’ implementation:

Firstly, the new organization design must be put in place rapidly and where this implies job losses, these should be done as early as possible in the process. It is key to give the remaining workforce certainty that they no longer have to fear for their positions and can therefore positively contribute to the change process even with all its uncertainties. It’s not necessary to seek perfection in the organization design. Be prepared to be flexible and apply 80:20 approaches. The key is to remove the most critical of uncertainties – ‘is there still a job for me?’

With a secure structure in place, the second rule is: communicate, communicate, communicate! Communication is not just about positive soundbites. People must be treated honestly and can handle uncertainty proved they have good communication. The key to the success of ‘transition’ is gaining the trust of your workforce.

Some final observations

‘SET’ seems a daunting prospect. It is, of course, a lot of work and in larger organizations will consume significant resource. However small to medium size organizations can still take the key elements of this and apply them in a version of ‘SET LITE’ using the different items identified as a checklist to ensure all aspects are covered.

A ‘new normal’ will emerge. And in this new normal, there will be big winners and big losers. The role of executive management is to position their organization in the winner’s category. The ‘SET’ framework will provide a structure that ensures that decisions are always made in the context of the end to end process of emergence from the pandemic and that all necessary elements are adequately considered and addressed.

Author’s Bio

Nigel Penny is a leading global expert on strategy, performance and leadership techniques. His focus is to ensure the sustainable future success of clients through effective strategic management processes.

Nigel provides virtual consulting, facilitation and training in all aspects of the ‘SET’ programme. 

Nigel has over thirty years international experience implementing consulting solutions encompassing all aspects of business and people management. Between 1996 and 2002, he worked closely with Dr. David Norton and Professor Bob Kaplan, the co-founders of the Balanced Scorecard approach, and was Vice President of the Asia practice of Balanced Scorecard Collaborative. Nigel was also partner in charge of KPMG’s performance management practice in Australia, and a member of their team developing global methodologies for Balanced Scorecard development and implementation techniques.

Nigel has facilitated strategy and business performance improvement programs in food, manufacturing, financial services, retail and utility industries, as well as working extensively with governments and not-for-profit agencies. He has worked in UK, USA, Europe, Asia and the Middle East and has lived in UK, USA, Singapore, Malaysia and Australia.

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