Now is the Time to Reassess and Reset
It is unlikely that any of us will ever forget 2020. Our personal lives have been thrown into disarray, business has been disrupted, and long-simmering tensions have become headline matters. There are no clear answers but several things are becoming clear in this disrupted economy:
- Businesses are now moving into the new normal
- During the second quarter of 2020 we saw the immediate impacts of the Pandemic Fracture, but the disruption is still with us and our future is different
- Business in 2021 will not look like business in 2019
- Now is the time to reassess and reset your business strategy to create value for your business – be deliberate, focus on your customers, understand your capabilities, create a new Vision for your business, and start to implement a plan that will get you there.
While middle-market business leaders have made it through the initial shock of the pandemic fracture, the disruption is still with us.
- We know that social distancing is here to stay for at least the rest of this year; a “mask” culture will significantly affect social and business interactions.
- A new social compact for work with a new set of needs and expectations on the part of employers, employees, and the government is being created and integrated into our culture and business system.
- There is rapid acceleration of digital and e-commerce trends.
- We think differently about the advantages and risks of global vs local activities.
- Agility and resiliency have become new watchwords.
- A prolonged recession will strain our financial and business system; the “V” recovery may have been an overly optimistic projection.
The National Center for the Middle Market reports that middle-market business leaders are striking a cautious path forward in unprecedented times. Many middle-market leaders expect weak revenue growth and no meaningful employment gains over the next 12 months. Business confidence is now significantly lower than at the beginning of 2020, yet these same business leaders do expect economic conditions to improve. Those mixed signals indicate that we are beginning to turn our focus from the immediate disruption to the “new normal” future.
For many companies, what worked for your business in 2019, likely won’t work in 2021. That means now is the time to reassess and reset your strategy. Here are four key insights to guide your activities as you map the path to capture the opportunities created by the disruption, create value for your business, and ensure long-term success and resiliency.
Revisit Your Strategy
First, avoid random acts of strategy. When you are already swamped just trying to keep your business running, it’s easy to have a great thought and then act in a one-off fashion. But that is, at best, a random act of strategy, and it might just be a random act. Don’t confuse good ideas with strategy. Strategy is a deliberate set of organizing principles that guide everything a business does. It is comprehensive, based on the facts at hand, and actionable. While the principles of a strategy usually remain fixed, the actions, tactics, and details of the strategy must be adaptable.
Middle-market business leaders face two challenges in revisiting strategy. First, the tyranny of the urgent prevents you from stepping back and working on the business – all of your time and energy is tied up working in the business. Second, most business leaders are too close to their business to have an objective perspective. One solution to these two challenges is to retain an outside advisor to help you reassess and reset your business strategy. Independent advice from someone who truly understands how to develop and implement strategy is an invaluable asset. An extra resource that can bring fresh perspective, focus, efficiency, and a bit of structure to the process is well worth the investment.
This strategy reassessment doesn’t have to be a huge process, but it does have to be deliberate, comprehensive, and based on the facts of the “new normal”. The future is indeed very different. Ideally, the advisor you use to help you revisit strategy is someone who can work with you to implement the changes that will be needed.
Focus on Your Customer
Second, focus on your customer. Revisit the traits and needs of your ideal customer. Ask hard questions about:
- Demand – How can you grow your business in a world where both consumer demand and confidence are falling? Do you have the right products and services? Are changes needed to your go-to-market approach?
- Customer Experience – How can you meet customer needs and create a great customer experience? How do you measure and benchmark customer experience? Do you have a digital strategy that addresses customer needs and helps create that great experience?
- Competition – How will you do these things better and more profitably than your competitors?
The purpose of these lines of inquiry is to understand your market – where you need to aim and how you need to pivot.
Understand Your Capabilities
Next, understand your capabilities. That means take a hard look at your:
- Products – Consider existing and future products and how these can change to meet evolving customer needs.
- Operational Capabilities – Re-evaluate the systems and processes you rely on to carry out your business. Make sure these are current and up to the task in the new normal. Consider whether some activities are better done outside of your organization. Revisit your performance indicators to ensure you are measuring the right things and responding to what those measures tell you.
- Supply, Sales, and Distribution Channels – These have likely been disrupted over the last few months, so think carefully about what change is temporary (for how long) and what is permanent. Adaptability and resiliency should be watchwords here.
- Human Capital – Your employees are critical to your success, and your investment in people is one of the most important investments you make. New expectations around workplace health and safety as well as new needs for training and development for a more virtual world should be key elements of your revised strategy.
- Technology – This area is rapidly changing. Many of the companies who have fared the best in 2020 have had, or quickly created, a strong digital strategy that leveraged technology advances, work process efficiency, and customer experience. Now is not the time to be behind.
- Financial Resources – Your business still runs on cash. Nothing has changed here. Understand what resources you have and how you can create efficiencies for working capital and liquidity needs.
Overlaying these specific points is your company’s culture. Culture is an essential factor in success and resilience. Those companies that have been best able to adapt to the incredible disruption so far this year likely have a strong culture that encourages flexibility and adaptability while remaining respectful of employees and customers and stays focused on success. Pay careful attention to your culture. Whether you admit it or not, your company has one and it does make a difference. Leadership matters.
Through this part of the review you should be focused on the question: Where are the strengths and weaknesses?
Here is where an independent advisor can be especially helpful, but regardless of who leads the review, it is important to be brutally honest in your assessment. And remember, it is unlikely that we are going back to 2019. You should be focused on what the customer wants and needs in 2021, all the alternatives to you that the customer has, and how you are going to meet those customer wants and needs.
Create Your Vision and Set Out to Achieve It
Finally, create a specific vision for where you want to be at the end of 2021 and map out an implementation plan. Know what success looks like and what it takes to get there. Be realistic, keep a relentless focus on execution, and prepare to measure and celebrate success.
A strategy focused on 2021 might seem like a short-term focus, but in a world with incredible uncertainty, it is better to set intermediate goals and make sure you can be flexible and adaptable to achieve those than to worry too much about 2025.
Remember that this insight has two parts – creating the Vision and then implementing it. The Vision can be created in a short period of time. Just make sure you have the right people to get a comprehensive view and be open to diverse views of the future. It is also important to make sure that you articulate your Vision in a specific enough manner that you can measure progress.
Implementation is something altogether different. Implementation will take time, but it starts with clear and concise communication of the Vision as well as a reaffirmation of your business values. It is often helpful to break the implementation plan down into smaller steps. Some of these can be implemented in parallel, and others can be executed in series in a way that reinforces the sense of progress. A dedicated change resource can be an asset to help you both keep your business on track on a day-today basis and keep the business headed in the right direction.
As you guide your business through today’s disruption, use these four insights to capture opportunity and create value despite challenging economic conditions.
Lynn Lednicky is a partner in the Houston office of Newport LLC.