Are You (and your team) Prepared for 2021?
COVID19 has brought changes to virtually every business and industry. Some of the changes are small, but many are significant. Some are positive, most are negative. The changes happened in a relatively short period of time with weeks or less of preparation. It is a tribute to business owners and their employees that businesses adapted as quickly as they did. Most businesses were in a triage mode from March to June, reacting to daily changes with their customers, suppliers, landlords and everything else connected to their business. Since July businesses have stabilized into a “new normal”, adapting to the market environment as it stands today. As we begin the process of making business plans for 2021, we should consider how much of the “new normal” will be with us for the next 6-18+ months and how much is here to stay. Which customer needs are temporary, and which are permanent? Which activities previously done in person will return and which ones will not? Now is the time for you and your team to take a few steps back and consider whether you need to refresh your go-forward growth strategy.
What is Strategy?
At the highest level, strategy is about deciding what you are going to do, and equally important, deciding what you are NOT going to do. For businesses, a well-defined strategy allows you to answer and be aligned around key questions for your business. The critical questions are:
- Where will we play? — Which products or services will we offer? Which customer segments will we pursue? In which geographies will we operate?
- How will we win? — What is our value proposition? What are our competitive advantages?
- What capabilities must be in place? — What are our core competencies? Where are our capability gaps?
The answers to those questions must also sync and reinforce each other. For example, if you are selling the most high-end product on the market an unlikely competitive advantage would be the lowest cost of goods in the industry. More likely would be an outstanding engineering and design team.
Why is a well-defined Strategy important?
Having a well-defined strategy is a critical component of building a high growth company. A good strategy will give the company and the management team confidence that the organization is on a solid path toward company goals. Think of a good strategy as a map of the wilderness from one mountain peak to another peak at a higher altitude. With the map you can chart the course to navigate from where you are today to where you want to be on the higher mountain. Without the map, you may lead your team down a ravine that requires backtracking or to a river with no crossing. You may ultimately achieve your goals, but the path may be longer and riskier than it would have been with a good map.
A documented and communicated strategy is also very helpful for alignment. It helps align your team to where they are headed and how they will get there. It gives them something at a higher level they can reference as they lead their individual areas. Are their departments helping execute the strategy? A documented strategy is also an excellent lens for assessing company initiatives. If an important initiative does not support the strategy, the executive team should re-assess the importance or direction of the initiative. It is easy to be lured into continually focusing on the urgent versus balancing what is urgent with what is important. The strategy is the constant signpost for what should be important for the company.
When Should a Strategy Change?
A good strategy is connected to the environment in which it was developed. Customer needs and behaviors, competitor strengths and actions, organizational skills and capabilities, all influence the final go-forward strategy. Year-to-year things change incrementally and minor tweaks and modifications to your strategy are needed. Companies should do a full review of their strategy every 3-5 years as enough things may have changed to warrant a new strategy or a major revision. Strategies are dynamic, not static. The more things change the higher the chances you need to pivot or completely change your strategy. Using the map analogy from above, the right path from point A to point B is good for during the day in good weather. If the forecast calls for a rain storm, your strategy would need to evolve to account for these changes.
What about a Hurricane?
While a small “storm” in your business or industry may influence you to change your strategy, what about a full-on hurricane? While a “hurricane” may seem an apt comparison for the impact COVID19 has had on the planet, it really undersells both the speed and the lack of preparation for COVID19. The better analogy is a 7 day forecast for a hurricane to hit Minnesota. In the Gulf, there is a season for hurricanes and history and preparation to rely on. Minnesota has no experience or infrastructure to deal with a hurricane and 7 days is a very limited amount of time to prepare. COVID19 was our hurricane in Minnesota.
COVID19 has had an enormous impact on significant number of industries. The central theme driving these changes is a dramatic reduction in leaving the home to accomplish just about anything. And the related explosive growth in accomplishing things digitally and thru service to the home. This macro change in staying home has impacted all corners of the economy:
- Growth in e-commerce: from 2009 to 2019 e-commerce had a steady climb from 5% of purchases to 16%, or ~1% per year. In 2020, e-commerce has jumped to 34% of purchases or an 18% increase in less than a year.
- Increase in work from home: ~15% of the workforce worked from home in 2019. By summer 2020 50% of the country was working from home.
- Increase in telemedicine: Medicare recipients using telemedicine for appointments grew from 10k people on March 15, 2020 to 1.7M using telemedicine by April 25, 2020.
- Reduction in business and personal travel: Airlines are down 55% and hotels are down 50% year over year.
Like ripples in a pond, each of these changes flows thru to other parts of the economy. For example, increased working from home has the following effects: lower fuel consumption, lower use of public transportation, lower purchase of new clothes, higher purchase of home goods, lower consumption of food at restaurants, lower need for commercial office space, increased need for office space at home. So while your business may not be directly impacted by COVID19, you have likely gotten caught in the one or more of the ripples. Are you surfing on the new waves of opportunity or are the waves crashing around you?
What Stays and What Goes?
From our point of view, the dramatic changes wrought by COVID19 will drive more innovation across the entire business landscape than anything that has occurred in the last 30 years save the invention of the internet itself. Above we listed several current trends (ie lower fuel consumption, etc). In the next several years we will start to see second and third order effects: Homes and apartments designed with 2 home offices, knowledge workers fleeing high cost metro areas creating growth and change in smaller markets, supply chains mitigating the risk of their global footprint with more on-shoring, online learning shaking the foundations of kindergarten thru university educational systems, and many more we cannot yet envision.
Even in our small part of the world, COVID19 has brought challenges and opportunities to Maven. In a portion of our business we facilitate annual planning and strategy meetings. Before COVID, 100% of those meetings would be held in-person to facilitate collaboration, focus and communication within the executive team. We are adapting by hosting those meetings online in Zoom and eliminating the constraints of travel. And while we lose some of the benefit of an in-person meeting, Zoom is helping us innovate everything from how time is blocked (mulit-day vs single day) for different topics to using digital tools for brainstorming to bringing in specialists for some sections (no travel required) and recording meeting video for post meeting transcription. As one door closes, another opens.
How has COVID19 changed your business?
Most businesses have already made COVID19 related changes to their business, both in their strategy (new customer needs, different competitive landscape, pressure on prices, etc.) and in their operations (headcount reductions, different work processes, working from home instead of the office, etc).
What leaders should question is whether they need to take a further few steps back and look more thoroughly and long term at their business and industry. The decisions and changes that were made to get to the “new normal” of the last few months, may not serve the organization best for the next 18-24 months. We think it is imperative that organizations do a fresh in-depth review of their current strategy and operations to be prepared to have success in 2021 and beyond.
For a thorough strategy review we recommend, at a minimum, a 1-2 day executive meeting to reconsider the answers to the strategy questions posed above.
- Where will we play? What new products or services should we offer? What should we change about current products or services? How have customer needs changed? Should we change which customer segments we focus on? Where are the new opportunities?
- How will we win? Is our value proposition as compelling as before COVID19? Should we modify our value proposition? Should we change prices? How has the competitive landscape changed? Do we have new competitors? Have current competitors gained strength or weakened? Are we in a better or worse competitive position to win?
- What capabilities must be in place? What new core competencies are needed to succeed?
Operationally companies have made many changes to function in the new environment. New workplace safety protocols and working from home are the biggest changes most companies experienced. Both of those have current and long-term implications for how companies operate. Offices expense are significant for many businesses. What is your plan for operating when people are able to come back to the office? Do you need as much office space as you now have? When will you have the opportunity to reduce your office space? What will be your work from home policy? How will work from home change your compensation structure? How will competitive pay rates change when significantly more people are given the choice to continue to work from home? How will the competition for talent change?
Are you and your team prepared for 2021?
If your team is not prepared, now is the time to begin making those plans. If you have questions on how to make 2021 a success for your company set up some time with our team to talk about your goals. Contact us at email@example.com