By the time that you read this eZine, our national lockdown will be well and truly integrated into our daily lives and schedules, with some light at the end of the tunnel with the government’s announcement of a R 500 Billion stimulus package to get our economy (and companies!) running again.
I’ve read a lot of publications in the last few weeks where the current global pandemic is compared to the financial crisis of 2008 (The Great Recession). It too, led to millions of jobs being lost, GDP drops in the double digits and a massively volatile stock market.
On the positive side, we have never seen such a rapid adoption of remote working capabilities and teleconferencing by companies in South Africa. There is a popular meme circulating these days that asks: “Who is responsible for your company’s digital transformation?”
Humour aside, what is important to remember though is that our current situation is fundamentally different in that it is the result of an external, biological factor and not owing to vulnerabilities in the financial system. Our ability to successfully restart our economy thus hinges on our ability to control the C-19 virus going forward thru a combination of social distancing and hopefully a vaccine in the next 12 months.
There are however universal lessons that can be derived from the financial crisis in 2008 which may be beneficial to business owners and executives to survive the current global situation that we find ourselves in. Businesses that successfully navigated the previous global financial crisis adhered to two overarching approaches:
Promotion Focus: Where companies made offensive strategic moves to provide upside benefits.
Prevention Focus: Where companies employed defensive strategies to avoid losses and minimize risk.
In a recent Harvard survey of 200 companies that successfully navigated the 2008 storm, it was interesting to note that the primarily offensive strategy was successfully utilised by more than 60% of companies as opposed to the defensive play. At a granular level, there was of course no magic bullet or path to survival for businesses, but rather a blend of both strategies in order to survive the crisis.
Breaking it down in percentage levels looked like this:
Cutting fat/operating lean (25 %)
Pivoting business model (18%)
Buying competitors/expanding (15%)
Customer loyalty /increased marketing (11%)
Strategic partnerships (10%)
Emergency Cash flow reserves (6%)
Diversification of revenue streams (5%)
Personally, I think focussing on business innovation at this point in time would be a clear focus for the future. Innovation of course can be segmented into Sustained vs Disruptive Innovation.
Sustained innovation is where gradual and continuous improvements to the existing products or services that you provide to your current client base are made. These innovations are just a little better than the previous version of the product or service and has only slight variations on an existing product formulation or service delivery method.
A good example is how hotels are currently offering “quarantine zones” to a range of essential services workers around the world.
Disruptive innovation is the introduction of a product or service into an established industry that performs better and, generally, at a lower cost than existing offerings. This then displaces the market leaders in that space and transforms an industry. It also happens to be what most people refer to when they mention innovation. Disintermediation has hit most industries hard in the last decade.
The opportunities for disruption often don’t just hurt a particular business but disrupt the market on the whole with a completely new product or service. Think of companies such as Uber, the Apple iPhone and Netflix amongst others.
To conclude, bear in mind that the two most important qualities required during this Covid-19 epidemic is empathy and decisiveness. Our ability to be decisive will ensure our financial survival, but our ability to empathize with staff, clients and our key relationships will ensure loyalty and support thru these challenging times.
Be safe out there and thank you for your continued support of First Technology.
Johan de Villiers
First Technology Western Cape