Functioning during a pandemic is the ultimate conundrum. While constant uncertainty, risk, and complexity complicates (and slows) every decision, the pressing need for immediate change, adaptation, and redirection never lets up. It’s a relentless balancing act between immediate survival and long-term success and the only sure thing is inconsistency. Amidst so many necessary adjustments, it’s difficult to know the best way to advance effectively as we are maneuvering through a pandemic. But, alas, advance we must.
Are baby steps the answer or is big change the way to go?
As we find ourselves maneuvering through a pandemic, on one hand, some baby steps are critical because problems continue to develop every moment that require urgent and immediate changes. While we are rushing to develop solutions, the nature and complexity of immediate goals has dramatically shifted. Safety must be at the forefront of every program and decision. Short-term financial constraints have become paramount while uncertainty is limiting most forecasting through 2021 at least.
Crises Response:
With forecasting unavailable in a rapidly changing business environment, instant flexibility and response are crucial. For example, work-from-home, online shopping, and crowd avoidance will continue to evolve over the next few months.
People management is requiring more quick decisions and administration. When, who, and how do you bring back staff? How do you make decisions and adapt the organization while considering factors like work-from-home, more volatility, and more uncertainty? Should you consider hiring creative types or especially skilled people who can offer new solutions?
Pricing strategies during a pandemic are critical both in controlling costs and generating volume. In particular, you need to recognize new costs and new customer preferences; which will require analysis and measurement using multiple small trials. Consider alternative pricing tactics as well as the entire pricing package. Online sales, measurement, and flexibility will make these rapid changes executable.
The latest trends in dealing with the crises also bias our decisions. For example, many businesses are executing 25% operating formats that most experts think will fail. Every business owner needs to continue to test a lot of alternatives that integrate expectations, uncertainty, psychology, culture, risk, quality control, consumer confidence, and values.
Planning ahead:
Short-term small efforts must be integrated and designed with long-term strategies and operational efforts in mind. Start with a quick assessment of who you are and where you are going with your business. Don’t worry about the details. Just take a half hour or so and write down key goals, challenges, and opportunities. Make it short so you can focus on priorities rather than overwhelming yourself with too much. You can (and should) come back and revise this list frequently.
Assess your potential profitability and financial needs. There are simple profit models that can help you easily determine your viability, key issues, and alternatives. In particular, the analysis should focus on the impact of various factors on your profitability and potential. One of the surprising aspects of this analysis is that growth and prioritization are frequently more important than cost cutting in business success.
Focus on what you do well and eliminate efforts that will fail.
Keep strategies and programs integrated. Issues like rent, supplier relations, marketing, operations distribution, etc. are critical and must remain flexible on a daily basis. And while finances may be tight, marketing could be the best opportunity for success. Additionally, collaboration with suppliers and landlords will be essential for success. Many tenants and landlords seem to avoiding each other, but I suggest negotiating new rent requirements and marketing efforts in order to survive and generate more business. There are also a number of marketing efforts that can be tested and purchased on a reduced or trial fee.
A lot of great discussions are taking place regarding working-from-home, office spacing, and communication. However, most of the talk revolves around physical settings to accommodate spacing and other requirements. We need to also examine the impact on structure, communication, social interacting, and decision-making.
The new normal must include tools that encourage informal communication in order to help develop relationships, build trust, encourage new ideas, and create safe feedback. Examples: some in-office meetings and social events, including part-time or other department staff, promote health and wellness, and develop community efforts to replace interactions that no longer exist such as “water cooler chats.”
“I just thought we should talk more.”
In general, I support developing confidence and taking more risk. In many cases, we overestimate the costs of failures and underestimate the value of success. Midst pandemic, constant uncertainty makes risk more prevalent in all decision-making. Make sure you understand the value, alternatives, and the probability. Similarly, analytics frequently ignores the potential of innovation and out-of-the-box-solutions. Adapt and be flexible. Most efforts won’t succeed on the first try, but practice integrating the positive components from each trial with some different approaches.
Traditional organizations will most likely fail in the wake of the “new normal” because they are inflexible, hierarchical, and change too slowly. Walter Isaacson’s book, The Innovators, illustrates how commitment, diversity, collaboration, and friction among diverse participants such as Jobs and Wozniak or Gates and Allen led to success. The structural key to change is the need to be open to measurement and feedback. Looking at, understanding, and sharing financials, operations reports, and sales reports are the first step. Simple research studies and social media can be additional tools.
As we find ourselves maneuvering through a pandemic, the solution seems to be found in a paradoxical combination of immediate change and big baby steps. Inarguably, the slate needs to be wiped clean and new paradigms are a necessity. This will include immediate crises and opportunity management as well as long-term strategic considerations. A focus on cooperation, open collaborative systems, and trying to keep in mind that “smaller can be better” may offer hope for organizations as they restructure. Finding a way to stay afloat and, ideally, thrive during such a transformative time requires nuanced decision-making. You’ll need to find a balance between small steps, immediate action, gradual shifts, and drastic change while determining which approach works where and deciding if it’s a short-term response or a long-term solution. Sure, it sounds complicated, but that’s the nature of business. And you already knew that.
At some point, through everything COVID, we’ve all wondered: when will things return to normal? The short answer is: never. Things won’t (and can’t) return to the way they once were. And, despite extensive planning and attempts to reopen the economy, there will be change and it will usher in a new normal.
Nowhere is this more evident than with the economy. Every day we hear success stories like Peloton and Papa John’s Pizza who are absolutely thriving. However, this drowns out the noise of businesses like Hertz, JCPenney, J. Crew, and Wework who have gone (or are in the process of going) out of business. Everyone is touting the need to preserve and support small businesses with absolutely no idea how to save them. The reality is that hundreds of thousands of small business are no longer viable and will be gone. Industries such as airlines, travel, gyms, hotels, recreation, sports, and restaurants will need completely revamped models in order to survive.
The economic issues are compounded by the integration of social circumstances. Social distancing is the elephant in the room and it’s completely disrupting many industries: 25% to 50% restaurants, hotels, airlines, and theaters cannot function (profitably) this way. Simultaneously, we are learning to like and, perhaps even enthusiastically, incorporate certain aspects of the current situation into our daily lives. Working from home, delivery and take out, and Zoom meetings are all becoming preferred activities.
An obvious game changer would be a vaccine. However, the uncertainty of when and how that might happen leaves us with no choice but to forge ahead with the information we have and the circumstances in which we currently we find ourselves. So, let’s examine some obvious changes that need to be managed to get to a new normal:
Office space, rush hour, lunchtime eating, and traffic will reduce by at least 15-30% as working from home becomes largely preferred.
Entertainment, sports, restaurants, and travel will reduce by 15-30% as patronage drops due to capacity limits / spacing requirements, cleaning protocols, and other restrictions.
2020 is and will continue to be a chaotic disaster. There is already overwhelming uncertainty regarding a vaccine, the virus itself, the economy, unemployment, education, the upcoming election, and increased social unrest in the form of protests.
Many forms of stress release have been taken away or changed due to the stay-at-home order (i.e. entertainment, exercise, visiting with friends). Unmanaged stress can lead to depression, unhealthy behaviors, and increased instances of family abuse.
Other major concerns: absorbing shutdowns, 10% unemployment rate, 100,000 virus deaths, -5% GDP decline, and a few more government stimulus programs.
As states start the process of reopening the economy and more businesses and schools startup again, we might expect a second wave of the virus followed by another (full or partial) shutdown.
Therefore, amidst all of the uncertainty and change, it’s absolutely necessary to focus on stabilizing, developing alternatives, and accepting that a new normal is inevitable.
In contrast, 2021 could offer some huge opportunities and a turnaround in regard to many of the things above. The election, fewer deaths, 4-7% unemployment, 2-5% economic growth, and a gradual relocation / increase of public activities are fairly reasonable predictions.
So, how do we move forward effectively?
Hope for a vaccine should not be discarded, but it also shouldn’t be counted on.
Don’t get distracted looking for quick solutions rather than attempting to implement new paradigms. Drive-in movies and restaurants may be nice temporary activities, but they are not long-term solutions. Meanwhile, opportunities to work-from-home and Zoom calls are providing whole new structural alternatives. The problem, however, is that we need to maximize their potential rather than just settling for their existence.
The pandemic has shed light on the fact that many of our institutions (such as schools, health care, social services, and retirement homes) are extremely broken and require structural change. We need to learn to focus on developing great programs rather than simply putting Band-Aids on problems. For example, nursing homes should be smaller and more patient-centered instead of resembling an overstocked warehouse. Many nursing homes have very diverse populations grouped together with little hope or expertise to service individual needs.
Many other businesses and industries (like post offices) are changing as well. Discussions generally focus on close, fund, or shrink, but alternatives (such as changing models, merging, adding programs etc.) should receive more attention. For example, I have an apparel client who is now making masks and safety equipment. Shifting needs requires shifting business models.
Remote efforts, technology, and innovation are the key trends to keep an eye on. Activities and services that require crowds and/or physical contact will continue to be problematic. I think much of the discussion to follow will be about the technologies regarding issues like social distance in public (i.e. elevators) and how to improve working from home. We have the opportunity to create new work environments and should start by considering the goals, strengths, and constraints. For example, it’s easy to advocate only allowing half the people in an elevator at a time, but that doesn’t get thousands of people up the elevator of a 30-story building in a timely manner.
Everyone tries to discount politics in forecasting, but it is critical during this period. I believe the Democrats will have a landslide in all areas including state and local government. This would certainly embrace climate change, infrastructure, education, health care, taxing the 1%, immigration, and social rights. Less of a landslide or loss would bring about very different changes. Either way, we must incorporate our assumptions into our actions and not ignore politics simply because it’s an uncomfortable topic.
While we’re still not sure what exactly the new normal will require, we do know many of the opportunities and challenges that will come with it. Avoid engaging in obsolete or doomed activities and, instead, embrace innovation, testing, and new paradigms. All cultural change starts with openness, includes a focus on infrastructure and measurement, and requires an awareness of biases. And, ideally, those steps lead the way to cultural change that ends in positive progress.
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies. This combination has been the key to client success. We welcome comments, suggestions, and questions. You can write him at: bshlensky@startupconnection.net or call at: 914-632-6977
The pandemic is rapidly teaching us that personal, organizational, and structural change is going to be tougher and faster than expected. Consequently, we must accept that dramatic solutions are necessary to manage, what is now, an entirely new landscape. We all need to be adapting to the pandemic.
There are several significant changes that have already occurred (and are not going to disappear in the near future) that are worth taking into consideration:
We are implementing financial deficits at local, state, and federal levels that, prior to this, were never considered acceptable.
Health care and service workers are receiving (long overdue) recognition and appreciation. Experts are also saying practices like home care and virtual appointments, which are eliminating marginal procedures and improving efficiency in medical care, will become a more permanent standard.
Social distancing policies are forcing behaviors such as hugging, kissing, and shaking hands to be revolutionized and avoided.
The magic word seems to be “remote.” Tele-doctors, homeschool e-learning, working remotely, food delivery and pickup are becoming the new normal, but standards, expectations, and productivity are still unstable and unsustainable. Adjustments will need to be made to accommodate shifting trends and other obstacles. For example, many pizza parlors are experiencing dramatic increases, but the volume is mostly at dinner rather than a steady all-day flow. Parents are finding it difficult to work while simultaneously caring for their children. And, teachers are struggling to manage students and cover the same amount of material in a virtual classroom.
On one hand, we need faster and more dramatic change. On the other, we need more science, testing, and technology to ensure success. Imagine how an increase in things like control groups, curves, models, and logistics could improve our effectiveness and efficiency as we are adapting to the pandemic.
There are several key areas where dramatic and structural change will be necessary to adequately adapt to a vastly changed environment:
The most dramatic (also evidenced in the 2008 financial crises) is that the big will survive much more effectively than the small. In the last few decades, the number of banks and public companies has reduced by over 30 percent. In contrast, the number of restaurants (about 600,000) has remained the same for years. It’s estimated that 10-20% of those and other small businesses will not survive this crisis. That will significantly alter the opportunities and challenges of small business.
We need to focus more on efficiency and restructuring over simple cost reduction. Amazon and other tech companies have become the main targets of criticism regarding questionable practices. However, we should also recognize their contributions in expanding things like communication, home delivery, cloud sharing, etc. For example, I have a consumer products client who has lost much of her retail business. However, she has more than offset it (via sales on Amazon and on her own website) with higher margins and lower prices.
Better management of increased risk and uncertainty is required. Companies are unwilling and unable to forecast 2021, which makes 2022 equally uncertain. Thus, capital, operations, personnel, and marketing decisions are basically on hold. However, we can look at history, industry, and probability models to provide a little more predictability. In particular, looking at alternative scenarios and their probable outcomes can be a valuable effort.
Technology will be king. Amazon, Google, Facebook, and Apple will survive and grow as they become even more innovative and efficient. Traditional retailers with large real estate platforms and margin requirements are at great risk. Consumers are enjoying many aspects of the work-at-home, delivery, virtual lifestyle. These conveniences will be expanded and must be integrated into our systems.
We need to face tough decisions in maximizing our success. While the specifics may be uncertain, most organizations require more technical and analytic skills. Can you provide challenges and opportunities for your best people rather than drowning them in bureaucracy? Can you retrain or replace staff who are less effective? How can you create a supportive culture that values risk-taking, innovation, diversity, and embraces the importance of learning from mistakes?
Learn to prioritize. What is working, what is failing, and how do you devote more resources to the successes? Sometimes our fear of change limits our effort to understand that opportunities, not challenges, have the greatest impact.
The most important aspect of adapting to the pandemic that we’re currently experiencing is to recognize its significance and aggressively find solutions. It does require an openness and willingness to test new ideas. Don’t let emotion or bias affect you. Remember that passion, energy, and commitment are strong determinants of success. Take comfort in the fact that risk can be reduced greatly with testing, research, and analysis. And embrace integrated approaches that incorporate new strategies and activities. As Sheryl Sandberg said:
Dr. Bert Shlensky has an MBA and a PhD from the Sloan School of Management at MIT. He is the President of the New York-based consulting firm, The Startup Connection, where he uses his 30 years of high-level business experience to guide his clients toward maximum sales and profit. For a free consultation, please visitwww.startupconnections.net.
The coronavirus crisis has caused a plethora of financial issues that businesses must now face. All of my clients are dealing with dilemmas concerning customers, credit, future sales, financing, planning cash flow, forecasting, etc. when it comes resolving financial stress.
For the most part, we still live in a world with an old system of small business financing. Most financing (including institutions like banks and the SBA) is based on antiquated businesses, such as manufacturing and retailing, where financing was handled mostly through asset loans, guaranteeing debt via family assets, and personal savings.
However, things are very different today. Most new businesses are service or technology-based, and require much less investment.
Many clients start the financing process by asking the age-old question, “How do I raise money?” That’s an outdated way to start and I believe it’s a mindset that needs to be changed in order to be more successful. For example, traditional style advisors often recommend raising as much money as possible. In contrast, I suggest minimizing to reduce costs and risk, keep equity, and avoid excessive financing charges.
Some of the biggest changes that need to take place involve utilizing alternative techniques to minimize financing needs and marketing opportunities to accelerate growth. I recommend a more comprehensive and flexible approach to the process which focuses on key issues like: How much money do you need? How and when will you pay it back? Why should someone invest or partner with you?
Additionally, we live in an environment with low interest and inflation rates, and lots of capital to invest. The rest of this article will discuss financing suggestions that take into consideration new trends and current events. For example, the government has instituted $2 trillion of relief programs for salary, unemployment, and investment that must be considered.
Operational Financial Resources
The simplest source of funds is to reduce the need for funds through regular business tactics. This can be accomplished with strategies such as outsourcing, contracting services, utilizing sharing resources, and testing. While not all of these strategies may be appropriate for every business, consider the ones that have most potential to save cash:
Plan and manage inventory to maximize return: focus on the 80-20% rule that states: 80% of your sales will come from 20% of your products. Additionally, manage inventory and services for seasonal and market changes.
Consider direct shipping from your facilities or organizations like Amazon.
Minimize investment through strategies like renting or sharing. For example, warehouses, cooking facilities, and manufacturing can all be outsourced. One caution: doing things in your home will frequently result in long-term, operational, and legal issues.
If asked, suppliers are often willing to help a business with things like financing, holding inventory, reducing production times, and direct shipping.
Use services for internet management, warehousing, and programming.
Understand and minimize complexity. For example, there’s a big difference between selling a shoe (with various sizes, colors, widths, and styles) versus selling food products (which have a few ingredients that can made into a number of items.)
Analyze why you are really spending and what you will get from it.
If the business is profitable and growing, you can frequently finance the growth with working capital from profits. This also means giving up less equity.
Expanding Marketing Efforts
Don’t wait for business to come to you, but consider the rule: you have to spend money to make money. Analytics, internet marketing, and outsourcing programs provide numerous opportunities to grow and make money faster:
A website and a simple marketing statement provide basic information for potential customers. These can be inexpensive through programming tools like WordPress.
Amazon is the fastest growing retailer in the country and controls about 30-50% of most internet sales. It is easy to set up and relatively inexpensive.
Paid search through organizations like Google and Facebook are underestimated. These options can be inexpensive and fast, and the results can be measured.
There is nothing as productive as Networking, Networking, Networking!
These tactics must be tested and measured. Kill or modify the ones that fail and expand the ones that succeed.
Non-traditional Sources of Capital
Crowdfunding was initially used by “social entrepreneurs” to fund their projects, films, books, and social ventures. It’s becoming more popular as it allows small investors to back your business through organizations like Kickstarter.
While credit card interest can accrue (at a high rate) if not paid off right away, some credit cards do offer a 30-day free program, or zero interest (for sometimes up to 18 months) with a new account.
Bartering, alliances, and exchanges are viable methods to get both excellent services and save cash.
Community based lenders (such as non-profit, independently financed, or private organizations) often make loans to small businesses or entrepreneurs who do not qualify for traditional commercial bank loans.
Traditional Sources of Capital
Equity from yourself, friends, and family. This is the amount of money you can put into the business on your own, and you don’t have to pay it back until you see profits. It may include sweat equity or contributed assets. It also provides other investors with more confidence in your commitment.
Outside equity has the same properties except it involves giving up at least some of your own equity in the company. It can come from a variety of places such as partners, venture capitalists, private equity dealers, private offerings, and private investors.
Traditional banks and loan institutions are focused on reducing risk and making certain they get paid back. These are usually asset-based loans or are combined with equity contributions.
Raising capital is a two-way street that requires honesty, understanding, and communication. Understand your needs and the risks involved in order to find the right type of investors.
Don’t overestimate your potential or what is needed to meet your goals.
Develop plans, measure results, and satisfy investor requirements.
Significant changes are occurring in financing. There will be more risk, more volatility, more uncertainty, and more focus on profit and cash flow. Thankfully, there are numerous tactics to manage these shifts. As these changes progress, consider including more alternative methods—especially cost reduction, analyzing goals and strategies, and focusing on the dynamics of the financing rather than just how much money you can raise.
Dr. Bert Shlensky has an MBA and a PhD from the Sloan School of Management at MIT. He is the President of the New York-based consulting firm The Startup Connection, where he uses his 30 years of high-level business experience to guide his clients toward maximum sales and profit. For a free consultation, please visit www.startupconnections.net.
Seems
a bit like an oxymoron, no? Well, that’s exactly what analytics have become
these days: an oxymoron. A real conundrum. On one hand, data helps us predict
change and plan for the future. On the other, that data can be wrong or
misleading and, therefore, really screw things up. So, I say, take it all in,
but then let (most of) it go.
There’s an ongoing debate regarding the roles of data and entrepreneurship. In particular, the increased availability of analytics data and tools is making planning, scheduling, and analysis much simpler and more accurate. Amazon is one of the best examples of using analytics to improve logistics (i.e. more one-day shipping).
In contrast, the argument stands that these tools are less effective than originally expected. The most significant instances are incorrect data, method, and change. If the data is wrong, access to more data does not improve analysis. Mistakes like Boeing, Afghanistan, WE WORK, G.E. and retail stores represent diverse examples where people simply focused on wrong information. The existence and use of the phrase “alternative facts” supports the unnerving idea that it’s easier to make up lies than it is to refute those lies. That alone does not bode well for analytics and data.
Data can also be misleading when a dramatic change occurs.
Disrupters like E-Commerce, ride share apps, and food delivery dramatically
affected markets and parameters. Consequently, significant shifts in culture,
politics, and buying habits also make economic forecasting much less reliable.
Additionally, analysis is dependent on using the right
tools and methods. Many assumptions and approaches may not be appropriate. For
example, investment advisors frequently tout their individual excellence while
changes in the overall market are usually the largest factor in investment
success. Mathematics shows that the more history one has on a topic, the more
accurate the analysis. However, if parameters change, history may become
irrelevant.
This is why we take it all in. Think on it. Absorb it. Let
it all sit for a bit. And then throw most of it out the window.
You should absolutely consider what they teach on the first
day of a statistics course (Validity, Reliability, and Accuracy) rather than
ignore it.
A recap in case you need a refresher:
Validity is simply focusing on whether
your methods are valid. While sampling, correlation, and other tools can improve
performance, the analysis must be valid. For example, many of us predict that
our team will win. However, the odds in most professional leagues are that
about 3% of approximately 30 teams will actually win.
Reliability is the repeatability
of results. Differing results in political polls or verifying results of
medical tests are examples of reliability issues.
Accuracy is just the correctness of
the measurement process. The most violated rule of accuracy is that you are
only as accurate as your least accurate number. There is a famous story about a
museum guard answering a child’s question about how old a dinosaur was. He said
280 million years plus 39 years and 20 days. When asked where the number came
from, he said, ”When I started, they told me it was about 280 million years
old. I have been here 39 years and 20 days.” While this number certainly seems precise, it probably isn’t very accurate.
I would add a fourth factor to this list, which is probably
the most important: Bias. On one hand, bias is a complex mathematical
term correlated with sampling, randomness, analysis, and other things. On the
other, it is how our culture, background, gender, age, and preconceptions etc.
affect our attitudes and decisions. For example, many studies have shown that
we form an opinion about a presentation within 90 seconds of it starting. I
highly recommend that, in dealing with bias, you manage its existence rather
than trying to deny it.
Finally, tools as well as methods of reporting are
dramatically changing. A colleague of mine recently challenged my website saying
it was “too dependent on PowerPoint and Excel.” While these are both great
tools and are the most dominant analytical and presentational methodologies,
they can have many limitations: The information can be old, longitudinal
analytics is frequently lacking, they are not interactive, they are not visual
enough, and they can be very boring and/or misleading. Nothing is worse than being
forced to sit through a PowerPoint presentation that is too long and loaded
with endless Excel sheets.
In summary, analytical tools offer great potential for success, but they need to be utilized properly and in conjunction with intuition to be effective. So, gather all that data and pay close attention to it, but don’t be afraid to toss it all out.
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
