In times of uncertainty, how do companies respond and recover?
The way you respond today will define the way you recover and reinvent yourself tomorrow
We are living in exceptional times. As if trade conflicts, Brexit, or climate change weren’t enough, COVID-19 cases continue to rise rapidly, creating uncertainty regarding how long the pandemic will influence the current business environment.
The COVID-19 outbreak is global, impactful, and complex. Financial impacts on most businesses are severe and no one knows how long it will take to regain control. No country or sector, and no company, executive team, or individual leader will be immune from COVID-19’s impact and consequences. No strategy will survive fully intact. Moreover, it is likely that the choices organizations face will only get tougher and more complex as we collectively anticipate the post-COVID-19 environment.
As uncertainty rises and financial impacts become more visible, businesses must be proactive in assessing their ability to stress-test the impact of the current disruption on their business models. Some companies will have a growth mindset focused on reinventing their business and will seize on opportunities to create a smart competitive advantage.
Companies now, more than ever, need to be agile and respond quickly to changing situations, understand when to stay the course and where to adapt, and be able to restart swiftly once the situation improves. However, the speed at which the COVID-19 crisis is still unfolding may require organizations to adopt new tools and capabilities, such as real-time decision-making solutions and scenario-based forecasting. This will allow them to quickly model the changes they are experiencing and devise a likely recovery plan, and in the longer term, a reinvention plan.
The need for scenario planning and the aggregation of all available data (internal and external) has never been more important than now. It’s critical for an organization to be able to identify priorities while preparing a number of scenarios. Being able to rapidly simulate and assess the impact of various scenarios is crucial, not only across financial metrics (revenue, OpEx, CapEx, balance sheets, and cashflow) but also operational measures (related to lines of businesses, product lines, customers, workforce, inventory, etc.)
The power of scenario-thinking to enhance decision-making
Turbulent times, such as the ones we are in, require a blend of courage, clarity, and humility. The biggest enemies of good decision-making in times of deep crisis are neither uncertainty nor ambiguity; they are over-confidence, procrastination, and incomplete or biased data. Intelligent scenario-thinking, when executed well, can mitigate the risk of falling into the trap of over-confidence when anticipating future possibilities.
At Deloitte, we look at problems with three different timeframes in mind:
Respond > Recover > Thrive >
- Respond (Act): Real-time decision-making and scenario modelingThis is all about looking at the new event and adapting with agile planning enabled by real-time data points. We observe internal and external trends in real-time, assess options, and look at impacts and interventions that can help in the short term.
- Recover (Rethink): Run recovery scenariosThe recovery phase, a medium term of around 18–24 months out, is where we think about the best and worst case scenarios, and everything in between. The objective of these scenarios is to understand the impact of new buyer and seller preferences, realign the business value proposition, and test the realigned proposition while reallocating the right people to the right place. The opportunity here is to chart the new landscape, reassess options, re-evaluate what is being done, and look at different business models.
- Thrive (Reinvent): Connect and reinventThis phase has a longer time frame of around 3–5 years, and focuses on defining the new normal, and reimagining what we do and how we do it. We look at new, dynamic, connected, and predictive planning modules across the organization and link them with strategy. The key questions we need to answer are:
- What is my value proposition?
- How do I deliver it?
- Who are the most important buyers and sellers?
- What are my critical success factors?
- How can I create a competitive advantage by leveraging data and insights?
How do response and recovery look in real life?
The way we respond now will dictate how we recover in the future. A great example of response into recovery is a French restaurant near where I live in Australia. It’s a traditional brick-and-mortar restaurant, only open for dinner. The pandemic could have meant the restaurant’s demise but the owners chose instead to move to a delivery service model where meals are packaged not to individuals but to families. It has since expanded its offering by partnering with other businesses and selling baked goods to the local community. This is the restaurant owners’ response and hopefully, their medium term recovery will be to deliver a mix of traditional restaurant with an online business when they reopen their doors. Longer term, they may choose to reinvent their business by creating a franchise model at scale that they can roll out to Australia and beyond.
We need to reimagine what we do and how we do it. Agile planning combined with scenario-based capabilities leveraging real-time external data sets will help organizations with the flexibility they need to drive better decision-making in uncertain times. The way you respond today will define the way you recover and reinvent yourself tomorrow. Act now to define who you are going to be!
|For more insights, view our full webinar Finance & Supply Chain Planning under uncertainty: How do companies respond and get ready for the recovery?||Watch webinar|