The breadth of ideas, processes, and data that have been added to our collective knowledge base shows that late into 2020, we continue to evolve in realtime to accommodate both disruption and unforeseen opportunities. It’s a brave new world as companies of all sizes and industries must nimbly adjust to the rapid pace of change and embrace an experimental approach to include a “range of potential bets.” Even after we have weathered the storm and made it out on the other end of the pandemic, there will be irrefutable lasting changes for companies, employees, and consumers. Some of these remnants will be integrated with new ideas into traditional business models, while some will take shape as complete overhauls.
The challenge here is where company leadership should focus their time, energy, and attention when assessing the various avenues of opportunity to pursue. The article “Adapt your business to the new reality” by Michael G. Jacobides and Martin Reeves for Harvard Business Review, encourages readers to take a “fresh, careful look at the data” and process three core areas when deciding to how to pivot, which include how companies can reassess their growth opportunities, reconfigure their business models to better realize those opportunities, and reallocate their capital more effectively.
The shock of globalized events teaches us two things, write Jacobides and Reeves, which are:
- Even in severe economic downturns and recessions, some companies are able to gain an advantage.
- Crises produce a plethora of temporary change (i.e., short-term shifts in demand), as well as lasting ones.
Here is how companies can iteratively move through a successful evaluation and pivot:
- Reassess growth opportunities. Sequential lockdowns in countries lasted long enough to significantly change the foundation of supply and demand, requiring companies to emerge with a systematic understanding of changing habits.
To develop a new process for detecting and assessing shifts, the following steps are recommended: Map the potential ramifications of behavioral trends to identify specific products or business results that will likely grow or contract as a result. Categorize demand shifts using a 2×2 matrix that analyzes whether the shift is likely to be short-term or long-term and whether it was an existing trend before the crises or has emerged since it began. The matrix’s four quadrants distinguish between boosts (temporary acceleration), displacements (temporary shift), catalysts (lasting acceleration), and innovations (new trend). Dive deep into the data and sleuth out anomalies (e.g., granular and/or high-frequency patterns, and take multiple perspectives. By understanding where opportunities exist, you can shape your business model to capture them.
- Reconfigure your business model. Your company’s business model is undoubtedly shaped by industry supply and demand shifts. Examine whether you can take the value you offer online. And if so, what platforms are most advantageous to work with that can also help shape a value proposition. The choice of platform should be driven by its ability to help develop the strategic digital capabilities and resources needed to provide value.
In addition, it also helps to consider whether a customer niche can be expanded with the new value proposition and offerings. Be prepared — responding to customers’ demands will require a level of digital transformation. Finally, your business model will likely already be shifting due to staffing and remote work influences as more employees have adjusted to working remotely and collaborating via video conferences.
- Reallocate your capital. While it may seem counterintuitive – because of psychological and cash flow stresses – now is an ideal time for taking some well-considered risks. The crisis provides an opportunity to carve out a new competitive position.
However, to avoid the trap of “peanut-buttering” new funding across the business and making horizontal cuts, take time to evaluate capital investment projects along two dimensions: 1) Estimated value tomorrow after taking account the impact of demand impacts and 2) Amount of money needed to keep them alive today in light of often constrained operational cash flows.
There is no turning back or likely full returning to traditional information sources or business models. Therefore, the companies that embrace the potential of change and competitively position themselves in a new global landscape will be the ones that have the best chance of thriving now and after the pandemic. Despite the occasional step backward – by reassessing, reconfiguring, and reallocating – companies’ progress will march steadily forward.
