Due to the global shutdown caused by the coronavirus, business leaders are facing a crisis never seen during the past century. There are no parallels to what organizations are going through, and no prior experiences to guide them. The current environment is new to every business leader. Whether you have taken crisis management classes at an Ivy League college or attended the University of Hard Knocks, you have never prepared for this.
How do you even begin to fathom what to do at a time like this? Your revenues have dried up; your customers are staying home, and you have the painful task of letting employees go. And that’s not even the worst part. You don’t know when this will end. There is no visibility or certainty to when things will turn around, so you have no idea how you should plan. But one thing is sure, as you make it to the recovery phase, things will be very different than before.
One almost inevitable outcome of the coronavirus crisis is that as we emerge out of it, the business landscape will become more level. In most industries, except for a handful of mega-corporations, larger companies and market leaders will come down a peg. In contrast, many companies that are smaller or have lower market share will become more dominant. The marketplace curve will flatten.
If you are a smaller company in your industry, this is your once-in-a-lifetime opportunity to take advantage of the market shifts that will serve as an equalizer. If you are a larger company, you need to be wary of losing your leadership position as we come out of this crisis.
Every organization will enter a flatter business environment, and previous size, scale, or market share will not matter as much. If you understand the macro shifts that are likely to occur, you can take advantage of them. Going back to doing business as usual is not going to help you since cataclysmic events like the one we are going through now have a habit of creating a new breed of winners.
Wealth Destruction is Universal:
Coronavirus has brought every business to its knees, not just companies in the most visibly affected sectors like travel, retail, hospitality, manufacturing, or others in the daily news. It also includes every company’s downstream contractors and their entire ecosystems. It is even hurting sectors historically immune to any downturn. For example, no one would have envisioned a time when US medical practices would become financially crippled. Yet, even this is happening as physicians lose their income and lay off off staff because no one is visiting a doctor unless for the most critical reasons.
Huge corporations tend to survive significant downturns because they have the resources to get through a prolonged crisis, or often are the ones that get bailed out. After all, they are too big to fail. These companies, however, tend to be slow to keep up with the changing customer needs that will happen during recovery as they will have become either immobilized, defensive, or cautious.
The smallest and weakest businesses have already felt an immediate and jarring blow during this calamity. Small companies usually take an instant hit, something we are witnessing right now. However, they tend to turnaround and regain their lost income quickly as they are the ones who are most speedy and flexible during an economic recovery. Mid-size and relatively larger companies tend to get disproportionately hurt as they lose their revenue streams and are unable to control their costs expeditiously.
Consequently, every company, regardless of size and market position, is in the same boat. As the economy turns around, the ones with a forward-looking plan and desire to act with renewed vigor will come out ahead because past leadership is less relevant. Companies who are slow to react will become the most vulnerable, and bolder companies with business models aligned with emerging customer needs will become the new breed of winners.
The playing field will get leveled:
Global calamities often serve as an equalizer to society. Through centuries of pestilence, wars, revolutions, and other natural and human-made disasters, the weak have become strong, and the strong have become more vulnerable as the playing field for individuals and organizations had leveled. Stanford University professor and historian Walter Scheidel, who has studied the history of economic inequality, has seen this to be true for the past 10,000 years of human existence.
Income disparity in the US reduced after both world wars. The same happened in Europe after the Great Plague when the population of the continent became so decimated that working-class wages skyrocketed, creating class equality. Just about every major disaster has had a similar impact on business and society. Only during the past fifty years has wealth and power inequality risen to historic levels, perhaps because there have been no tremendous equalizing forces during that time.
When there is a powerful external force, like the coronavirus epidemic we are facing now, everything changes. And unfortunately, many companies will fail to plan for an emerging new landscape, and consequently, pay the price.
Companies that used to be robust and successful pre-calamity will naturally try and revert to their old revenue streams. However, since consumer needs, preferences, and expectations will have shifted during the crisis, they will miss out on new opportunities during their rebuilding phase. Just doing what you’ve always done is no longer good enough when there is an influx of new ideas and capital wanting to ride the inevitable growth we will encounter when this crisis is behind us.
Agile companies who are ready to pounce on new opportunities will benefit because the rate of innovation is usually the highest after a calamity. Wars and disease bring change and new ideas. There is a very long list of innovations that have emerged in every sector after a disaster, and you can read about why coronavirus will stimulate innovation here.
Embrace the shift
You have a rare opportunity to be able to compete on an even footing against competitors that you had no chance of beating before. The fact that there used to be more dominant players in your space who you could not match in the past does not mean much when everybody is rebuilding. The next set of winners will be the ones who make decisions for the future, and not rest on the momentum of the past. You have an opportunity not just to survive but emerge exceptional.
The grim reality of the current situation is that nothing about the future matters if you can’t withstand the downturn. You have to be fit enough to weather the current storm and come out out of it in one piece. And to do that, you have to make changes to how to operate today. If you haven’t already, start by revisiting every part of your operating model with a fine-tooth comb and determine which processes you need to maintain and which ones you need to alter or eliminate. This is hard for business leaders to do by themselves as they are too attached to specific activities. Have someone help you take an objective view. Going through this exercise will be the start of the new way you operate.
How you lead at a time like this is critical. Your leadership during this extraordinary crisis will demonstrate your character, and the actions you take now influence how strong you emerge from this pandemic and whether you are ready to take advantage of the new opportunities that will inevitably arise.