We are living through a major health crisis that will have economic repercussions long after it is over. It will have revealed at all levels (political, health, economic, diplomatic, organisational, regulatory, etc.) how difficult it is to adopt the right strategy both to manage it when we are experiencing it and to get out of it and anticipate what will be what we keep hearing about as “the world of tomorrow”.
How many companies had anticipated this crisis? How many were able to react and at the same time modify their approach to face it? How many have finally filed for bankruptcy because they were unable to change their infrastructure and business model?
Of course, it is always easy after the crisis to say that we should have done this or that, or worse, to say “if I had known, I would have done it this way”. However, isn’t it said that to govern is to plan?
Some very large companies have more than pulled their weight, some have even increased their profits. Is it an effect of their financial strength that they remain particularly stable even in difficult times? However, other smaller companies have been able to react to the crisis, and in some cases have even anticipated it, and it has opened up new opportunities for them.
Paradoxically, it is sometimes during a crisis that we manage to develop, that we find solutions that we would never have imagined when the business was doing well, that we invent or improve products in order to increase our turnover. Many of the inventions that have advanced humanity and even revolutionised our societies were developed in wartime.
However, companies are like species on earth: those that do not know how to evolve are bound to disappear. A major crisis in its sector of activity, an obvious trend that a company did not want to voluntarily consider by hiding the dust under the carpet, or a technological evolution that the company either did not take seriously, or did not want to adopt because it did not believe in it, or sometimes knowingly ignored, have been the death knell of certain companies, sometimes of multinational or global dimension.
What can we say about global groups and/or brands as renowned as Compaq, which in 1994 became the leader on the European market and then the world’s number one? The company did not know how to update itself and seize the technological turning point at the approach of the 2000s, supplanted by Dell, it was bought by Hewlett Packard in 2001, the brand will soon no longer exist.
Polaroid did not know how to deal with the digital revolution: the brand’s specific silver films made it possible to print photos as soon as they were taken. Polaroid simply did not believe in it. In 2001, it went into receivership. Today, the brand exists only through an administrative entity.
Kodak was a multinational company with a global presence. Founded in 1881, the company established itself as the undisputed leader in film photography. At the height of its success in the 1960s, with more than 80,000 employees, it introduced the consumer camera. Although the company developed digital photography in 1975, it had difficulty adapting to the transition to digital and was hit hard by competition from brands, particularly Japanese ones. On 19 January 2012, the company closed its doors.
Lehman Brothers Bank, which was founded in 1850, was an international investment bank. It was a player in the fields of investment banking, stocks and bonds, market research, private equity and private banking. It was a major player in the US government bond market. From 2007 onwards the bank was hiding its debt. The former managers abused an accounting technique, Repo 105, which led to the presentation of false balance sheets. The managers refused to see that the
The managers refused to see that the market was going to collapse as the number of over-indebtedness situations increased and other credit institutions and banks continued, like Lehman Brothers, to run amok without any control. During the global financial crisis of 2008, known as the subprime crisis, the bank officially went bankrupt on 15 September of the same year for lack of a buyer. The film “The big short” released in 2015 tells the story.
And the list of leading companies or brands that have disappeared or whose dominant position has been eclipsed by a new innovative technology is still very long.
How can this be avoided?
Prevention is better than cure: the best AAA rating
In a world where crises now follow one another at a frantic pace, what strategy should be adopted when the future is most uncertain? How can we anticipate crises and/or seize the opportunities they offer when they occur?
The steps I recommend are threefold: Anticipation – Adaptation – Application.
1.Anticipation: “Hope for the best and prepare for the worst is the rule” -Fernando Pessoa.
Because the future is full of uncontrollable events and unpredictable changes, the company must identify trends and weak indications in order to potentially integrate them when the time comes and seize the opportunities they offer.
There are several solutions and formulas available to companies, regardless of their size:
- Prospective and strategic analysis of the management: at the strategic level, the use of the SWOT matrix (a business strategy tool which makes it possible to determine the options available in a strategic area of activity) at a regular and close frequency makes it possible to take stock of changes in the market, to identify new trends, to determine the methods of implementation thanks to the strengths available to the company and to identify weaknesses and risks in order to prepare for possible crises which would put the company at risk or even to use them as a lever for transforming them into opportunities and possible profits (crisis management).
Definition of the SWOT matrix*: The SWOT matrix is a multidimensional strategic analysis tool:
- On the one hand, it makes it possible to distinguish between the internal factors of an organisation (strengths and weaknesses) and the external factors linked to the environment in which it evolves (opportunities and threats);
- On the other hand, it enables the factors identified to be sorted according to their expected impact, which can be positive (strengths and opportunities) or negative (weaknesses and threats).
The matrix or SWOT analysis is an acronym for Strengths, Weaknesses, Opportunities and Threats. More specifically, it encompasses
- External factors: elements related to the environment in which an organisation evolves, on which it cannot directly have an impact.
- Internal factors: elements over which an organisation has control. It can therefore influence and/or change them.
- Strengths: internal factors held by the company that strengthen the competitive position of an organisation.
- Weaknesses: internal factors that weaken the competitive position of an organisation.
- Opportunities: external factors that influence or could positively influence the competitive position of an organisation.
- Threats: external factors that negatively influence the external environment of an organisation.
Once this analysis is done, the final objective and added value would be to build on the strengths and opportunities to develop and to transform the weaknesses and threats to create new strengths and opportunities from them.
- Brainstorming: In order to anticipate potential changes or trends as early as possible, it is advisable to identify them on the basis of elements such as the following and ask the corresponding questions
- Demographic changes: How will the population of my target country change? What age groups should my product or service address? What will be the impact on socio-professional categories?
- Customer tastes and needs: How will tastes change? What trends will fashion follow? Who will my customers be in the future? What priorities will they have in mind?
- Technological advances: What technological developments are taking place? Where are they leading? What disruptive technologies would open up new opportunities and markets? What new applications could I use in the future in all aspects of my business (Big Data, Artificial Intelligence, etc.)?
- Economic outlook: Is the target economy strong? Is it in a period of growth or recession? How is its currency doing? Its debt ratio? What is its repayment capacity? What are the employment rates? How are the financial markets behaving locally? What impact do other stock markets around the world have on the target economy? What is the ownership structure of its largest companies? Who will I be competing with in the future and on what basis? Is my marketing channel still relevant in the light of these different elements? How can I change it to make it more rational and operational?
- Environmental developments: what are the trends in environmental matters and will the company be up to standard (carbon footprint, energy consumption, use of renewable energy, possible pollution to be avoided, etc.)? What new regulations have been introduced locally? Internationally? How can I change my habits and procedures to keep up with trends and regulations without burdening my production and/or influencing my service?
- Regulatory provisions: In what direction are the regulations (professional, salary, legal, social…) in the target country moving? How should I react if the company is already operating there? If it is a prospecting market, what provisions should I have in mind in order to move forward smoothly? What impact can regulatory provisions have on my company’s social policy? What regulatory reforms should I expect?
- Political measures and situation: What is the political colour of my target country? Does the political situation promise to be stable or are major changes to be expected? What measures will be put in place and what reforms can be expected? How can the company benefit? Is there local support available? Is it appropriate to invest or outsource my business?
- Health situation: In the light of recent events, this section should be considered. What impact can an epidemic/pandemic have on my business? Depending on its nature, is the company sufficiently equipped to deal with it? What steps can I take to limit the impact on my business? Is my business model adequate to address the various issues that may arise in order to maintain my business, performance and profitability?
As everyone can see, there are many elements to consider – some of which did not immediately come to mind in the past! – In addition to the density of these headings, the difficulty also lies in the weight that each one will represent in the foresight and therefore in the overall strategy.
The development of conjectures based on the analysis of these data also makes it possible to address market sectors that have not yet been explored or even to create completely new markets. Brainstorming will therefore make it possible to determine which ideas will be the most profitable for the company.
Nowadays, and given the last few months in the midst of this health crisis with unprecedented economic repercussions, the question must now be asked in real and virtual terms.
But these elements can also be refined by drawing on other company resources.
- Adaptation: “To hope for the best and prepare for the worst is the rule” -Fernando Pessoa.
This term could be associated with Agility. Indeed, the company will have to be particularly flexible and reactive when the crisis occurs.
Beyond the strategic aspect mentioned above, in the ever-changing context of our world, in terms of management, the leader will have to find a delicate balance between the stability of his strategy and the inconstancy that he will have to adopt in order to react to the events that arise in the evolution of the crisis.
He will therefore have to pay particular attention to his communication in order to inspire confidence over time by displaying the image of someone who knows exactly where he is going by keeping control in the storm, while at the same time knowing how to question himself and radically change direction to adjust his aim, even more so when he understands that the company is going in the wrong direction by continuing along the original path.
If the previous hypotheses have been well laid out and at a close frequency (a regular SWOT of once a quarter or even more if the crisis has already started), the company will not need to be passive and therefore act reactively only when the crisis occurs. The earlier the potential problems that could arise are considered, the more agile the company is and the less difficult it is to manage change internally.
It goes without saying that the smaller the structure, the greater the reactivity, because communication is faster, decision-making is concentrated on a small number of people, execution is easier, and control of operations is easier. However, the strategies deployed following decisions taken upstream must be more carefully selected, as it will be more difficult for a small structure to implement the decisions taken financially without a fatal risk of bankruptcy in the event of failure.
A larger structure will have more financial ease and the stakes will not be the same in the event of a strategy error, the company will not necessarily be in peril.
For example: Google ensures research and development through failure by creating different entities in charge of solutions and deciding after testing the profitability of the solution, even if it means abandoning the initial idea and closing the entity if it fails. Development is therefore based on successive trials of all kinds of solutions, and the financial strength of the holding company allows the company to make mistakes without risking the collapse of the entire structure.
However, these huge structures are by definition unresponsive and it is all the more difficult to implement new solutions in response to a crisis. The more intermediaries there are between the base and the top management, the less responsive they will be.
In this respect, some companies set up internal platforms for collecting ideas and encourage all employees to express themselves in order to report any changes in the sector that they may notice. Following the first phase of anticipation at the strategic level, tactical and operational considerations are then brought into play in order not only to involve the whole company – and therefore the value of each individual since his or her opinion is taken into account and potentially applied – but also and above all to ensure that the execution of the solutions is accepted and implemented by everyone. It is easier to manage change when the solutions chosen are understood and validated by everyone.
Real-time feedback from the field on comments, remarks, complaints or proposals from customers, for example, makes it possible to modify the approach in order to meet the needs expressed at the time.
On-going training in the company is also key because the company must provide its sales people (and all the resources that must have only sales in mind!) with the means to identify the new needs that a crisis could create in the customer.
Having the agility to respond to customer demand is the hallmark of companies that resist, or even grow, in times of crisis.
But the next phase remains crucial to the success of the strategy.
- Application: “Laws that are clear in theory are often chaos in application” – Napoleon Bonaparte
Once the strategy has been established and accepted by all, the solution adopted must be implemented. This brings us back to the issue of selling: You can have the best product or the best solution on the market, we can have thought of the best strategy if we don’t know how to sell it, we will have nothing and we will fail.
The same applies to the implementation of the strategy in response to a crisis. Saying, as Charles De Gaulle did, “l’intendance suivra” (logistic will follow) is not enough to get things done. Taking a theoretical decision without involving the logistics of implementation is a recipe for failure.
In the strategic thinking phase brainstorming, while it should not prevent itself from thinking, as this is how revolutionary ideas are born and how creation takes place, must include feasibility in its expression. If the strategic, tactical and operational levels cannot be confused and speak in unison, it would be a serious mistake not to involve them as early as possible. In fact, involving as many departments of the company as possible allows for a smooth transition and better implementation with the involvement and support of all.
If necessary, calling on external entities or consultants can be a solution both in terms of strategic thinking and practical and operational application. Other solutions may arise in terms of strategic options (temporary organisations that join the existing company, exploratory acquisitions or disposable factories for larger companies**).
In conclusion, as many resources as possible should be involved internally and communicated widely and transparently, providing all possible data. It is also necessary to combine the strategic dimension with the operational and tactical. Make people understand that in a difficult period, major investments in the short term will have a significant impact in the long term and that everyone must adopt these strategic considerations.
In times of crisis, if the organisation could not foresee it, developing other skills internally or even acquiring new ones (new resources, new activities) can pay off. Changing the regular and forward-looking orientations to focus on anticipating and assimilating risks via a SWOT is also key.
Finally, as the saying goes: “every cloud has a silver lining”, so there is always a positive side to a crisis, we can always take advantage of a crisis situation and sometimes this has the virtue of implementing solutions that we would not have thought of beforehand.
However, it is better to have foreseen a possible crisis, once again, governing is about foreseeing.
“It is not enough to be a great man, you have to be a great man at the right time.” –
Georges Pompidou
Sources :
*La matrice SWOT de Christophe Speth 50Minutes.fr Editions
** Harvard Business Review N°21 June-July 2017
