As businesses are slowly but surely emerging from the economic brunt and disruption that COVID-19 (Coronavirus) has dealt to the economy, we will begin to see the ways in which creative business owners adapt to the changing business world.
In my previous article, I discussed the various ways in which you can transform issues into opportunities. I’d like to use the philosophy behind that post (and the points therein) to describe my prediction for the future impact that COVID-19 will have on the business world.
With 99% of U.S. businesses being classified as “small” businesses, and which employ roughly half of the U.S. workforce, the coronavirus situation has dealt great impacts on the economy due to the lack of scale and security that smaller businesses need in order to make it out alive.
Pair the shutdowns with the subsequent 2.4 Trillion dollar funding program (the U.S. alone), which will inevitably be trickled down into business and personal taxes, and we are likely set for decades of a financial burden that, otherwise, would never have been if not for COVID-19.
So, let’s begin to dissect the impact of COVID-19 based on some more specific criteria before we learn how to take advantage of the situation in order to make your organization stronger and more resilient than it was even before the quarantine had begun.
The Impact of Coronavirus
In change management (which is relevant, given the instability of the situation), impact severity consists of two main things: Complexity and Coverage.
Complexity is the difficulty of change based on an individual basis, put simply, how hard will the impacts of COVID-19 hit your organization alone. This can be a result of the industry you are in, the environment in which you operate, and your organization’s inability to operate in non-remote environments.
For example, an online marketing agency will not be affected nearly as severely as a restaurant will. The marketing agency does not rely on non-remote environments as much, it also is protected by constant demand (due to the need for sales) and an almost infinite marketplace (b2b) in which it can operate. Restaurants operate only locally.
This is why the complexity of change efforts needed to adapt to the times we are in will differ for every industry and location.
Coverage, on the other hand, is how widespread an effect is. In this case, consider the variety of services or products that your organization provides. An organization that provides only non-remote services or products (i.e. restaurants, etc.) will be impacted more severely due to their inherent lack of adaptability.
For example, let’s say you own a local restaurant AND your own marketing agency. You will still be affected in one area of your business, yet you have the option to funnel resources into the other in order to lessen the impact.
On the surface level, COVID-19 has made a big splash in businesses that rely on non-remote environments to operate, this is obvious. What is LESS obvious is the secondary impacts that are going to hit EVERY business as a result.
Businesses are built upon a web of relationships and cash flow. Similar to the 2008 housing market, when a situation arises with such a large economic impact, the results will be felt throughout the rest of the business world.
That restaurant that shuts down due to the severity of the impact of COVID-19 now cannot purchase or pay for marketing services from the online marketing agency! This is a secondary impact. Although the marketing agency may not be directly affected, it is indirectly affected instead.
According to Market Watch, the most affected industries include:
Obviously, travel bans and the fear of the virus cause the tourism industry to weaken. especially when you consider the nature of people to tour places that are traditionally visited by large groups.
“Global airlines could lose no less than $113 billion in sales if the virus continues to spread at its current pace.” – MarketWatch.com
Another obvious industry to be affected due to its inherent crowds and population densities. I suppose packing 100,000 people into a single stadium during the midst of a global pandemic might not be a great idea. subsequently, the 2020 Tokyo Olympics have been rescheduled for 2021, dealing a blow to the economy of Japan which had spent billions in preparations.
Apart from sports, any organization that relies on in-person entertainment has also been at a standstill. This includes live music, plays, movies, galleries, etc. which have been dealt a great economic impact.
Retail and Restaurants:
Any place that thrives on crowds and non-remote environments will be hit. Theme parks, malls, shopping centers, restaurants, and more have all been at the center of the Covid-19 impact. Many restaurants have been implementing contact-less delivery to try and lessen the burden of immediate financial withdrawals, this includes retail environments such as best buy with their “parking-lot” delivery.
How to Take Advantage of The New Opportunities:
Given the current economic issues and pressures of changing environments, it is necessary for any successful business to adapt and change to market characteristics and needs. This is a lot easier said than done, but it is certainly possible.
The key to making a negative situation work for you is to break down the systems, practices, or procedures that don’t provide you value, and to use those resources in ways that strengthen the organization. In other words, make the best use of a broken system by making it stronger.
When a human bone breaks, it grows back stronger than before in order to avoid the same disaster, your business must do the same in order to maintain relevancy in the marketplace and overcome adversity like we are seeing now.
After all, there is no better time to build than when things are already taken apart. Use these times as the catalyst for the necessary organizational changes that must occur to your organization.
Below are just some of the creative solutions that other businesses have come up with. Whether they relate to you or your business is not the point, but if you’d like to learn HOW you can make the best use of these times to strengthen your business, don’t be afraid to give me a call or contact me for a free strategy session!
Home-Cleaning industries that had been affected by COVID-19 have adapted to provide sanitation areas at the front of buildings that are still in use, thereby expanding its market to provide similar services to different consumers.
Restaurants have adapted to provide curbside pickup or contact-less delivery as mentioned earlier. A business model that traditionally relies on in-person transactions will need to adjust to provide value on a different front.
Many service-based organizations are taking the most advantage of the situation by moving key functions online, which is something they were likely considering regardless of the COVID-19 setback, and which will save them money and time in the future.
There are a litany of ways in which businesses are adapting to the changing environment, the most important consideration, however, is what you plan on doing to shift your business from it’s current state to an optimal one.
Don’t plan for re-emergence, plan for a new beginning.
Don’t waste the opportunity that is in front of your organization right now. Every business does one thing and one thing only, and that is to solve a problem. Therefore, logic dictates that in the face of great adversity, the opportunities arise also.
The only questions is whether you will see them and make the best use of them going forward.
Preparing For The Future
So, what are some of the key considerations to make in order to increase your resistance to adversity, become a stronger organization, and make the best use of the current crisis? I’m glad you asked.
Here are some of my top tips on how to use the crisis to stabilize your organization and set yourself up for growth.
Regulate Cash Flow
Cash flow is not profit/loss. This is a common misconception that can harm your business practices. Just because your organization is making money, does not mean you are being set up for success in the long run. What you DO with that cash is much more important.
Why do you think that 90% of lottery winners go bankrupt despite being given millions of dollars? It’s because they didn’t know how to manage cash flow. They may have had great “profits” (if you can call it that) but their cash flow was poorly mismanaged.
The key to improving cash flow is to plan for growth in advance and make the necessary adjustments now. To regulate cash flow to the best of your ability, you must make the process of receiving cash as streamlined as possible. This will help stabilize your organization in the current moment, but leave you room to grow for the future. Consider these points.
Centralize Banking: With centralized banking, your deposits and withdrawals can be managed more timely, as well as pre-authorized payments in order to decrease clearing times for funds.
Attract New Customers: Obviously, markets impacted by COVID have already had to make this necessary step to increase cash flow. Ask yourself, “Is there something I can do to provide value from what I have in a non-remote environment?”
Tighten Credit Requirements: Consider tightening credit requirements to ensure that payments can be made in their allotted timeframes. There is no use providing a service for free, after all.
Assess (and Prioritize) Critical Business Functions:
Now that you have stabilized your organization by managing cash flow, it is time to ensure your organization is primed for success in the future. One way you can do this is by analyzing your critical business functions.
We’ve all probably heard of (and are sick and tired of) the Pareto Principle, which states that 80% of the effects are a result of only 20% of the causes. Put simply, 20% of your actions will produce 80% of the results. 20% of your products/services will produce 80% of the income, etc.
During this time, it is extremely important to cut costs and focus your revenues in order to increase the resiliency of your organization. There is no point in providing products or services that have the potential to take away from the things that make the largest difference in your organization’s success.
Consider what Jack Welch said about cutting funding to much of the product lines of GE.
“If we aren’t #1 or #2 in an industry, we aren’t in it.” – Jack Welch
What Jack Welch described was specialization, put simply, specialization is the nature of business to consistently improve upon the strengths that provide most of the value, while minimizing truly critical weaknesses.
Truly critical weaknesses, in this case, include weaknesses that affect your ability to maintain or properly manage abundant cash flow. Or at least cash flow that meets your minimum requirements for the time being.
Probably the biggest question we can ask in the coming years is, how are businesses planning on preparing for a similar situation if one were to occur. It is the mark of a fool not to learn from experiences and mistakes, after all. Therefore, preparing your organization for this kind of situation is now a necessity.
What kind of procedures are you designing for a similar event? What kind of systems are you going to use to manage remote teams? How much money in contingency do you need before you can produce sustaining cash flow?
All of these considerations and more need to be put into place in order to increase the resiliency of your organization and decrease the effects of COVID-19.
Traditionally, consumer preferences revolved around business-centric environments. But now, the tables have turned and businesses are having to provide value to consumer environments.
For example, it used to be that, if I was hungry, I’d go to a restaurant. But now, restaurants have to provide value to where I am through things such as delivery and whatnot.
How are you planning on strengthening your organization to thrive in such a changing business word?
Ultimately, it is the obvious verdict that business will NOT be as usual after COVID-19 has disappeared. In fact, now more than ever, we will see an insurgence of creativity and adaptation to this changing business world.
This adaptation and creativity will have been a result of forced change. External motivators for change will have to be the cause of internal efforts made by organizations that wish to thrive in a changing environment.
It’s simple, as the environment in which a business operates is shifting, so too must that business adapt alongside it. There is no other way for a business to remain relevant in the midst of shifting consumer preferences, competition, and times of crisis.
The single most important question that you can ask as a business leader is, “How can I turn this crisis into my strength moving forward?” With the considerations in this article, you very well can!
Leave me a comment and let me know what YOU are doing to convert issues into opportunities. I’d love to read them and get more creative ideas!
Thanks for reading!
Work With Austin
-Austin Denison is a management consultant and coach from Southern California and founder/CEO of Denison Success Systems LLC. He is the author of The Essential Change Management Guidebook: Master The Art of Organizational Change as well as The Potential Dichotomy: The Philosophy of a Fulfilling Life.