With the gradual re-opening of businesses across Europe, the possible return to normality is becoming a reality. This also means that companies can now move beyond reactive steps, and start thinking about how they will navigate their future.
During the past few weeks, COVID-19 has left many companies struggling to understand the impacts of this crisis. As business leaders consider what decisions to take amidst an evolving situation, how they overcome two common biases-short-term focus and avoidance – will be key.
In a recent article, my colleagues and I explored how to overcome these biases by mapping out possible short- and long-term effects of the COVID-19 crisis.
During crises, people have a tendency to reduce their attention towards the short-term. In business, this manifests into a “survival mode” where companies make radical cuts to strategic programs in favor of operational priorities. In addition, the degree to which a company perceives it can control its outcome is important. When faced with high uncertainty, people usually tend to avoid the situation and “wait it out.” It’s important, however, for business leaders to actively engage what they can control.
Business leaders should ask themselves the following questions:
1. What immediate short-term effects are beyond our power of control?
2. Which short-term consequences are controllable, and how?
3. What effects will the crisis have on the long-term business environment?
4. What actions can we take today to remain competitive under different future scenarios?
The questions above enable companies to develop their planning, both short-and long-term, during the crisis. Some short-term effects are controllable, for example. Shifting to e-commerce and home delivery has helped some retailers and restaurants keep their cash flow alive. And some companies’ ability to leverage technology and analyze masses of data allows them to generate possible future scenarios on which to base their planning.
Aside from planning itself, executives may also be eager to embark on immediate proactive strategies to COVID-19. According to this recent article by IMD Business School colleagues, significant opportunities can be captured by companies that are agile enough to adjust their infrastructure, their product/service portfolio, or their route to market. Authors Wade and Bjerkan encourage executives to reflect on the following three questions:
5. Can we offer a version of our products and/or services through an online channel?
6. Can we use our existing infrastructure to produce products and/or offer services that are in demand?
7. How can we rapidly increase our capacity to produce and distribute products and/or services?
Examples include companies such as ExxonMobil who have pivoted to make hand sanitizer, as oil companies face a drastic reduction in demand; as well as retailers moving online while their physical stores are closed.
While there is no magic bullet to help companies navigate their way out of this crisis, answering these seven generic questions provides a stepping stone to transition back into the driver’s seat.