Be more strategic – Strategy in a post-Covid19 worldPosted on: July 21, 2020
I recently ran the popular “Be more strategic” session with PM Forum in a modified digital session. It seemed to go well and there was a good level of interaction with delegates who were mostly from law firms but with representatives from the accountancy and actuarial sectors. Not surprisingly, everyone was keen to know about strategy in a post-Covid19 world – for their own firms as well as for their clients. So I have summarised some of the leading thinking from McKinsey, Boston Consulting Group and Insead on strategy in a post-Covid19 world.
Summary of key strategic thoughts
From studying these and other contemporary strategy writers I would summarise the key ideas as follows:
- Survival and resilience before profit – Creating resilience and sustainability is more important in the short term than profit enhancement.
- Extended environmental analysis – Redefine your environment and look beyond competitors to consider threats from political, health and climate issues. Take a more collaborative approach to working with Governments and other agencies.
- Weak signals – Establish the necessary information and intelligence systems to notice, assess and adapt to weak signals in your environment.
- Scenario planning – Build detailed scenarios and know the leading indicators and be ready with an appropriate plan
- Protect your brand – Review your values and ensure you are being true to them in how you respond to this and future crises. (Re)building customer trust is a priority.
- Digital transformation – The change will continue and accelerate but attention must be paid to human-AI interaction
- Organisational learning – Organisations and their people must constantly learn (and unlearn). The need to support continuous organisational learning will increase.
- Be bold – Reinvention and innovation are needed. Now is the time to take bold action – the followers will be left behind.
Most delegates were aware of the crisis management process that had been implemented at the start of the Covid19 pandemic. We are now looking at the recovery phase:
- Taking fast action and responding
- Rebuilding relationships, reputation and revenue/profits
We spent some time considering what weak signals had appeared before the Coronavirus pandemic and which were emerging now as we face post-Covid new reality.
I referred to the work of George S Day and Paul J H Schoemaker in “Peripheral vision: Detecting the weak signals” and their eight key questions which were useful in assessing the current business landscape:
- What have been our past blind spots? What is happening in these past blind spots now?
- Is there an instructive analogy from another industry?
- What important signals are we rationalising away?
- Who in our industry is skilled at picking up weak signals and acting on them ahead of everyone else?
- What are our mavericks and outliers trying to tell us?
- What future surprises could really hurt (or help) us?
- What emerging technologies could change the game?
- Is there an unthinkable scenario?
I reminded delegates that long before the Covid-19 crisis we had a model to help us think the unthinkable. The 2007 book “The Black Swan: The Impact of the Highly Improbable” by former financial options trader Nassim Nicholas Taleb focuses on the extreme impact of rare and unpredictable outlier events—and the human tendency to find simplistic explanations for these events, retrospectively.
His 10 principles:
- Let what’s fragile break early, while it’s small “Nothing should ever be too big to fail”
- Do not socialize losses and privatize gains “Whatever needs to be bailed out should be nationalized”
- Don’t let people wearing blindfolds drive buses ever again “The economics establishment should be ignored [forever]”
- Forbid people with ‘incentive’ bonuses from managing your financial risks “Odds are they will cut corners to show ‘profit’ in order to gain the bonus”
- Compensate complexity with simplicity “Complexity is a form of leverage. Avoid it”.
- Do not give children dynamite sticks “Ban complex financial procedures that nobody understands”.
- Governments should never ever need to ‘restore confidence’
- Don’t give addicts more drugs if they are in withdrawal “Using leverage to cure excess leverage is pure denial. The debt crisis is not temporary, it is structural and requires rehab”
- Citizens should not use financial assets as a repository of value and should not rely on fallible ‘expert’ advice for their retirement “Economic life should be definancialized”
- Make an omelette with broken eggs “Remake the system before it remakes itself (through crisis).”
In April 2020, strategy consultancy McKinsey suggested that the strategies for getting ahead of the pandemic crisis were:
- Consider your views on the depth and length of disruption and the likely shape of recovery (e.g. u, v or w recession)
- Identify your most relevant regions (where there is the biggest workforce or largest market share) and identify the leading indicators
- Create a Crisis Nerve Centre and operational Project Management Office (PMO)
- Consider what lies ahead
- Create scenarios – with red and blue teams taking opposing views
- Identify the triggers for the different scenarios and how to respond (strategic actions)
The McKinsey model covers the following stages: Resolve, Resilience, Return, Re-imagination and Regulatory
Boston Consulting Group
In April 2020 there was an article by Rich Lesser and Martin Reeves from BCG on “Leading out of adversity”. They argued that the basis of competitive advantage is shifting – technology and declining growth rates require accelerated innovation and for companies to increase their rate of learning.
Echoing the message of Greg Orme in “The Human Edge” they suggest “Combine both AI and human ingenuity, a more effective approach to change, leveraging human diversity for resilience and innovation, and the creation of trusted, purposeful organizations”.
They outline five imperatives for leading out of adversity:
- Sustainably flatten the Covid19 curve – There’s no death-dollar trade off and the lack of vaccines or treatments means movement of people and goods is limited. Greater collaboration between governments, health systems and businesses is required.
- Win (back) the new customer – The health and social crisis has shifted attitudes. Businesses will need to discern crisis-induced short term changes and more permanent shifts (back to weak signal analysis). Businesses need to pivot from crisis management to a more creative and imaginative mind set. Two key trends are emerging – the shift towards digital platforms and channels and to restore consumers’ trust.
- Accelerate digital transformation – Challenging large-scale change programmes that are holistic, focused on value creation and not predominantly technology driven or constrained by existing processes and offerings will be required. The human side of new ways of working will be critical. Businesses need to compete dynamically on the rate of learning – combining human ingenuity with machine learning.
- Create advantage through resilience – Systems built to maximise efficiency tend to be brittle under stress. Shorter supply chains need to be rebuilt with more decentralisation, resilience and self-sufficiency. Cost reduction to preserve cash. “The key characteristics of resilient systems are redundancy (buffers), diversity, modularity, prudence, adaptivity and “social embeddedness.” A biological rather than a mechanical mind set is needed – focusing on adaptation and longevity.
- Mobilise purpose in the common interest – Corporate purpose and social relevance, multi-stakeholder capitalism and sustainability will become more important.
Insead Business School
In May 2020, Quy Huy at Insead offered a new definition of strategy in a paper on strategic development post-Covid19: “The purpose of strategy is to steer companies towards sustainable sources of growth and profit”.
Whilst advocating that we do our best to anticipate disruptive events and be agile and adapt, four new priorities were outlined:
- Aim for survivability and resilience before economic efficiency – complete contingency planning and assess essential and transactional alliances to increase reliability
- Quantify and plan for ecological and environmental threats – move from scenario analyses to creating quantified AI/ML simulations
- Build a strong organisational immune system rather than maximise short term profits. Spot and report problems early (weak signals and culture)
- Integrate government politics rather than focusing only on business economics – Arguing that globalisation has had a good run and that home grown innovation capability, rising patriotism etc will have a bigger impact
He adds: “Strategy after COVID-19 will be less about beating your economic competitors, and more about how businesses can contribute to combating a larger, shared enemy”
Selected strategic themes from the workshop
The key themes that delegates valued during the “Be more strategic” session included:
- How we define strategy and explain it to our colleagues
- Ensure that the firm’s overall business aims remain uppermost in all strategic discussions
- Think about the bigger picture
- Strategy necessarily involves making a choice and sticking to it
- Allow ourselves and our partners time to reflect and think about strategy – scheduling regular “strategic thinking” time
- Remember the importance of the marketing audit
- Undertake analyses of the external environment (eg using SLEPT)
- Ensure you understand your competitors and your competitive advantage and are positioned correctly
- Take stakeholders on the strategy development journey (you should build-in your buy-in by facilitating the strategy process)
- Have a range of mental models to draw on – to avoid GroupThink or over-reliance on “the way we’ve always done things”
- Be bold – this was a theme I mentioned at the start of lock-down (see May post on “Dare to be different”) Interestingly, three leaders from Professional Service Firms marketing identified “being bold” as a key strategy at a webinar in late June
Retuning your practice
On 8th January, at one of the regular Friday morning sessions of the Managing Partners Forum they shared seven strategies for re-tuning your practice post-Covid (adapted from Alena Kudzko of GLOBSEC Policy Institute):
- Think big – believe six impossible things before breakfast
- Think small – focus on angles that resonate with the key audience
- You are the power of your relationships – remember to reciprocate favours
- Do a campaign not a one-off – convert communications into a community
- Drop convention – go for new ideas and services
- Speed is of the essence – articulate and market test your assumptions – if they prove invalid, amend them and pivot in a new direction
- Be entrepreneurial – keep listening and keep innovating