Founder's Mentality Blog
If we’re lucky, the kids are stir-crazy, relationships are being tested, binge watching isn’t as exciting as we thought it would be, we’ve found stores that won’t let us down, and we’re pretty good at virtual brunches and movie nights with greatly missed friends. If we’re unlucky, someone in our house has been ill, someone has lost a job, or we’re mourning the loss of a friend, a friend of a friend, or someone a bit more distant who left us too soon. Either way, we’re all in the tunnel of the coronavirus pandemic.
Business leaders are navigating a disrupted world, with lockdowns slowly expanding and taking different forms. As the crisis unfolds, we’ve been summarizing weekly lessons from CEOs who are deftly leading their organizations through these trying circumstances. Even though we’re still in the tunnel’s shadows, the lessons are focused on the light at the end of the tunnel. Why? Because we think that light provides the best direction for the actions you take now.
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If CEOs are lucky, they’re able to take the long view. Of more than 130 CEOs in India polled on April 2, 70% report that they are balancing communications about what they are doing to protect the business with what they are doing to prepare for the new world (see Figure 1). Global leaders are thinking about urgent actions (how to keep their people and customers safe while ensuring business continuity), recovery (how to restart normal operations when lockdowns are lifted), and retooling (how to adapt to a new reality). We’ve heard the best CEOs share three messages about creating balance and preparing for a post-coronavirus world.
Most CEOs are balancing urgent crisis communications with post-crisis planning
Reintroduce yourself and your people to your customers
During the crisis, most companies will inadvertently let down some of their most important customers. Some will still love your company, in the words of Billy Joel, “Just the Way You Are.” Others, in the words of David Bowie, will demand “Changes.” Some will appreciate your messages and actions over the last several weeks, feeling you’ve shown your “True Colors,” as Cyndi Lauper sings. Others will feel your propositions are tone-deaf to a transformed society.
While personal journeys and relationships with individual companies will differ, the pandemic will result in some changes. In several industries, when consumer behaviors change, there is no going back. The organizations that acknowledge and prepare for these shifts will be in a better position to survive (just think of how some US companies fell into decline after they expected the same customer to emerge post-World War II).
So, when this is all over, you and your customers will have some catching up to do. It will take time. You’ll need to throw away old assumptions: The raw customer needs that will define your industry may be dramatically different. You’ll need to avoid any discussions about the “average customer”: Insights will emerge by market, by category, and by cohort.
To uncover these insights, leading companies will not only conduct fresh market research. They will talk directly with their most valuable customers. Based on those conversations, they’ll make some tough decisions about customers’ needs. Don’t expect to perfectly predict what they want the first time around. It’s a learning journey: Be resilient and adapt as you go, responding to your customers’ evolving needs. And beware of new entrants that could leapfrog you to meet those needs faster and better.
Ask difficult questions about your strategy and organization
The best CEOs see the coronavirus crisis as a dress rehearsal for a new normal: a world of climate change, accelerated digital disruption, radical shifts in national alignments and more. They know they can’t return to the way they were before Covid-19. Instead, businesses must retool to emerge stronger and more resilient than before. To get there, CEOs should address four important strategic questions.
What is our new definition of “risk management”?
A lot went wrong here. But if we break down the problem, we can solve it correctly. Risk management requires three things:
- Prediction: Have we identified the right scenarios and assigned the right probabilities?
- Adaptation: Are there built-in checkpoints so we can adapt as the scenarios and probabilities change?
- Resilience: Is our decision-making process resilient to unanticipated shocks?
Running future-back scenarios for your company and your industry could change your business forever (and you should do it now). But even with the best prediction models, you can’t predict your way to a no-risk world. This means you must become far more adaptable. During this crisis, we’ve seen founder-led organizations retool in a matter of days or weeks, thanks to highly adaptable teams. We’ve also seen large incumbents, with vast prediction capabilities, seem paralyzed as the virus spreads. These organizations can improve their agility and speed by learning what worked and didn’t work over the past few weeks.
Most firms can also become more resilient by reflecting on the Covid-19 outbreak. Organizations have global supply chains based on low costs and just-in-time production. Yet they found themselves without supplies. Moving forward, leaders can ask: “Which parts of the value chain do we manage for costs? Which do we manage for redundancy?” And let’s make sure to get “redundancy” right next time too. Many companies had outsourced call centers across multiple countries to guarantee redundancy. Yet they found themselves without support, when employees didn’t have access to laptops or broadband at home. Multinational redundancy didn’t survive a single day of multinational lockdown.
Leading companies will also build resilience into the balance sheet. In asking the tough questions now, CEOs can help CFOs create a stronger balance sheet and set of cash flows. They can find a way to not only withstand the next supply and demand shocks, but also help the company recover and retool to become stronger than competitors.
How will our strategic priorities change?
Industry landscapes will look vastly different than before. Although many trends have been around for a while, the pandemic accelerated outcomes. Think of retail: Any companies that were slow to move online during the past decade could soon be gone. Sadly, for many, Covid-19 is writing the final chapter of the e-commerce story.
Consolidation will happen across industries. New insurgents will also emerge, born ready for the new world. They could be your best partners or your worst nightmare. To adjust to the new landscape, companies should identify critical capabilities and determine how they will acquire them if opportunities arise. CFOs, working hard on the balance sheet, must become vital in planning for a fast-moving future. And Engine 2 businesses, originally founded to test and incubate ideas, could help you thrive in the new world.
CEOs also must consider that globalization may contract. While many companies have operated with a global mindset for decades, recently the world has been shifting away from globalization. Just consider the US-China trade tensions. And the fast-spreading coronavirus pandemic only threatens to accelerate polarization. Will brands be able to operate seamlessly across the US and China markets? Or will incidents like the NBA’s rift with its Chinese business partners become more common? Some of us lived through CoCom, a set of regulations around exports to Eastern Bloc countries, which started after World War II and expanded under President Reagan in the 1980s. Could governments impose similar controls on technology and data, making it harder for CEOs to run global companies? Watch this space.
What does our operating system look like?
We believe leading companies will rally around a big idea and reimagine everything about how they work and compete. This happened after World War II, as companies completely retooled to capture the full potential of mass production and a global mindset. We think that one aspect of today’s big idea will be a new operating model, with a redefined global center and a more widely dispersed set of local and fast-moving entrepreneurial teams. This could be the perfect time to capitalize on your virtual work experience.
Many new founders have pointed out that in a post-coronavirus world, your technology backbone will matter more than ever. But they believe that it will be as important—if not more important—to have a technology mindset. The best leaders will think about their company as a core operating system with a whole set of plug-and-play applications that supply incredible business-building freedom. This is Amazon: A core platform, Amazon.com, supported by Amazon Web Services, with a set of small insurgent businesses, inside and outside the firm, that rely on the core.
There are a few non-negotiables for the center: No one can tinker, no one can deviate. This is your operating system and you should run it the same everywhere. Once it’s established, companies can determine where they need fast entrepreneurs. These teams leverage the operating system, but they are otherwise free of bureaucracy. They adapt to win with local customers and channels. And what happens with the rest? You know, that horrible set of middle things that aren’t a globally agreed way of working and aren’t entrepreneurial? Well, do you need the rest?
How can you become a winning firm of the future?
Companies that hurry back to old ways of working may very well stumble in the decade to come. The pandemic has given you and your team the opportunity to transform for a more turbulent world. You can start by fully reimagining the boundaries of the firm. What do you want inside vs. outside? We believe the next generation of leading companies will be defined not by assets, but by partnerships. They will shape an ecosystem of winning customers, channels and industry profits.
Winning firms of the future will also kill the myth that companies can’t be big and fast and close to their customers. They will compete on the basis of scale and speed. The best CEOs understand that their speed during the crisis will redefine the cadence of the company. Make good, careful, value-based decisions. But act fast. Choose to be a firm of the future.
In the face of Covid-19, CEOs are acting swiftly to protect employees, customers and businesses. But leading CEOs are also planning for the "Great Retooling"—a time to make their organizations fit for purpose in the world that emerges from the pandemic.
Recognize that every single action is a communication
Wise CEOs are already talking about their new customers, strategies and organizations. Very wise CEOs are also aware that every action they take, big or small, during and after the crisis sends a loud message. It signals the leadership team’s values and priorities to every employee and customer.
Of course, as businesses try to survive the pandemic, every leader will face difficult decisions. They may stop discretionary spend, lay off employees, slow recruiting, cut SKUs and business building pipelines, or put backlogs on the backburner. But how these decisions are made and communicated will show employees and customers who you are and who you aspire to be. One CEO shared, “My people don’t expect to know every step I take, but they want to believe we are moving with the same compass, in the same direction.” Have you based your decisions on clearly defined values and leadership principles?
As you reintroduce yourself to your customers, retool for the new world, and communicate through actions and words, prepare for moments of truth that will define your company. Tomorrow you might speak to your China team as they say hello to customers—maybe face-to-face and hopefully without a handshake. What will you say to them? How will you let them know that your company is ready for the future? On Wednesday, you might lead a conference call with your next-generation leadership team, reassuring them that while “we got this,” there will be hard decisions. How do you share the leadership principles that will inform these decisions? How do you explain the actions that you’re taking in the darkness of the tunnel? And how do you communicate what it will all mean when you emerge into the light at the end of the tunnel?
Of course, you’ll start every conversation by checking on the safety of your people and their families. Everything communicates. And this is your moment.
The global Covid-19 pandemic has extracted a terrible human toll and spurred sweeping changes in the world economy. Across industries, executives have begun reassessing their strategies and repositioning their companies to thrive now and in the world beyond coronavirus.
James Allen is a senior partner in Bain & Company's London office and coauthor of The Founder’s Mentality. He formerly led Bain's Global Strategy practice and helps lead our CEO Forums and Founder Summits, all of which have moved to virtual support.