MARCH 4 ― After more than a year of the Covid-19 pandemic and with the roll-out of mass vaccination, it looks like the right time to think about a positive model of recovery and a strategic plan for businesses to come out strongly on the other side of the pandemic.
To think about a positive strategic plan we first need to look at specific strategies that companies can adopt to sustain their business even if they are currently “burning” money.
The “burn rate” is the rate at which the business is spending money each month and helps determine how long this is sustainable or feasible.
Next we need to look at how the company can maintain some form of business momentum. This will require re-imagining the business model and perhaps repositioning the business to suit the needs of the “new normal.”
Finally we need to look at the future through a positive filter which emphasises the expected recovery in most business sectors around the world over the next 36 months.
Accentuating the positive does not mean that we ignore the challenges, risks and uncertainties but if we are to get out of the pit we must look at the sky, not at the floor.
To help keep our ideas focused, we can think about these issues using a simple conceptual model with three components Survival, Momentum and Planning (SMP).
Surviving the current crisis
The first component addresses the issue of how companies can survive and continue working along their existing business footprint in a market with decreasing revenues.
If revenues are down due to factors beyond your control, then the business needs to be able to take a long hard look at the cost structure.
Most businesses, especially those which have been around for more than five years, have costs that are non-critical and avoidable.
Businesses need to take a critical look at these costs and drill down to a granular level, even a ground-zero based management approach.
This is the time for businesses to determine those costs which are either critical or unavoidable or costs that have strategic significance.
These costs need to be well-managed and minimised. However, there are several fixed costs often already fixed by contract where firms need to make long, hard decisions to see what can be renegotiated and what can be repositioned.
It is clear that several of the parameters that apply to a brick and mortar business will become less relevant if we move towards digitalisation.
Several studies show that one of the immediate benefits of digitalisation is cost saving while improving efficiency. The financial resources released can then be used to reskill and retool staff in digital competences to work in the much touted new normal.
Maintaining momentum
The second component focuses on maintaining business momentum. This is a people centric component which often requires businesses to reinvent themselves and reimagine their business model in a changed market environment.
This may require facing some harsh truths internally as well while looking at the external market challenges ― not the least of which are staff costs.
There is therefore a natural tendency to reduce costs by laying off the workforce, or by cutting back salaries or working out some form of fractional employment in times of market downturn.
Yet, putting together a great team is also a very critical component of business success and sustainability.
Keeping talent within the business will therefore be one of the key factors that would allow any business to maintain momentum and rebound once adverse market conditions have blown over.
Planning for the future
The third component of the SMP model relates to strategic planning and is about the business need to organise business resources to prepare for an upswing beyond Covid-19 concurrently in light of the maxim ― “This too shall pass.”
Preparing for the upturn involves making decisions today that would have an impact on business cash flows into the long term. This is a critically important strategic planning activity that businesses need to look into almost immediately.
The two key components of this are identifying the key variables that will impact the external environment in the future and based on this, determining the specific internal initiatives to take advantage of the emerging business situation.
Plotting the key variables that would impact the immediate external environment of the business over the next 36 months or so is essential to understand how the business environment has changed.
Each factor can be given a score based on the impact on cash flows multiplied by the probability that the factor will have an effect. This provides a good scan of potential opportunities and risks that need to be addressed.
Based on the findings of the environment scanning, the business would then have to determine the specific initiatives that it would consider implementing in the areas of branding or rebranding, operational efficacies, marketing and sales, finance administration and process, people related issues and the compliance framework.
With this the business should have in hand a comprehensive strategic road map that will allow it to be ready for the upswing beyond Covid-19 in an effective, efficient and structured manner.
* Associate Professor Dr Harwindar Singh is Dean of the School of Business at the Malaysia University of Science and Technology (MUST) and Academic Director of the International Supply Chain Education Alliance (ISCEA), Malaysia Chapter. Professor Dr Geoffrey Williams is an economist in the Business School at MUST and a member of the ISCEA-Malaysia Advisory Board. Both are based in Kuala Lumpur. The views expressed here are their own.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
