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6 lessons the pandemic has taught us in making practical business improvements
3 September 2020
Flavio Pietrocola, Oliver Wight Partner
Whilst the economic crash of 2007 – 2008 taught individuals (such as myself) and organizations alike the importance of being financially and operationally knowledgeable and keeping a reasonable, if not totally healthy, cash flow, the coronavirus crisis is reshaping us in a different way. Impacting the daily lives of people across the planet, it has forced us to rethink the way we live and work in order to ensure survival and, hopefully, continuing future prosperity.
In this blog, I outline six lessons that I have learnt and suggest we should all consider to ensure a successful adjustment to the ‘new normal’, which I guess will be forever changeable in itself.
1. Accept the power of online interaction: Let’s admit it, for the majority of us, hosting online conference calls has typically taken second place next to meeting with our colleagues in person. But the pandemic left us with no option but to become accustomed to web conferencing and socializing as it quickly positioned itself as the primary way of working. With more than two billion computers in the world and over three billion people owning a smartphone, virtual connectivity is here to stay. Research suggests that the video conferencing market share is expected to grow to $50 billion by 2026. We must accept just how cost-effective and productive using connectivity software is - to say it does not work is to accept our ignorance of its potential.
2. Integrate smart working where possible: If your role is focused on the physical elements of a given process such as manufacturing, maintenance, or construction little to nothing will change about where you work. But for those who can work virtually, ‘at home’ or ‘smart working’ should become a requirement within your role. Some organizations are even setting it as the default way of working or making the move to go entirely virtual with only occasional face to face meetings when necessary. This level of flexibility and work/ life balance has been a sought after perk, especially amongst millennials and Gen Z employees. Research by US-based analytics organisation Gallup found that 54% of office workers would be willing to quit their job for one that allows them to work remotely. Oliver Wight’s own research concluded that 69% of respondents relied on existing processes and technology to make the transition to remote working easier, and 54% said working from home allowed more focus on the important issues. This change has been a long time coming, so if you can effectively implement smart working into your business model, do so and help planet earth in your stride.
3. Increase your supply chain visibility: The pandemic certainly highlighted an increased consumer interest in buying local produce, with many people opting to break away from their typical supermarket shop and support local businesses instead. Organizations are looking to make their supply chains shorter and leaner to connect small producers with local consumers. Having fewer links in the chain allows organizations to develop an end to end approach with increased product awareness – something which is increasingly valuable to the modern-day consumer.
4. Think circular: On some scale – big or small - Covid-19 forced businesses to re-evaluate the way they operate. But even before Covid struck, this readjustment has been long overdue. Concern over climate change, shifting consumer behaviors, and new laws on everything from recycling to emissions targets have made it impossible for companies to ignore their environmental impact. Standing in the way of letting go of a linear economy model - and moving towards a circular one instead - has typically been short term financial benefits vs. a longer-term total cost of ownership perspective. An effective circular model requires supply chain changes and potentially a new vision. Now is the time, whilst you are already assessing your supply chain, to make sustainability an integral part of the way your run your business - you should use end to end supply chain costing models to understand the drivers but also the benefits before you make a decision and as you move to a circular model, make sure your customers and consumers are aware as it will become an increasingly powerful message to bolster your business.
5. Restore robust links between business fundamentals and shareholder value – revert to traditional value add approach vs financial engineering. We have all experienced how in the past years there has been a progressive distancing between what business are truly worth in terms of consumer added-value products and services, and their financial valuation (often associated to the value of their shares when publicly quoted). It almost felt as if there were parallel worlds: the physical one vs. the financial one and that what was once defined as ‘added value’, that is essentially labor, was being replaced via the Internet of Things (IoT), among others, by ‘arcane’ and exotic criteria with a doubtful connection to everyday life. The sharp market corrections in March 2020 should have taught us a lesson on how speculation and short-termism can blur the distinction between a healthy business and an unhealthy business.
6. Strengthen your balance sheet. A ‘cheap’ government loan still needs to be repaid. In my previous business, I saw the shift between profit to cash just before the turn of the millennium whilst tougher regulations were imposed in all major countries to avoid the excesses of ‘creative’ accounting. Since then I have observed in many businesses that the temptation remains. Speaking with several people in industry I believe there is a new impulse to assume that governments will provide endless support to transit economies and businesses, alike to a post-Covid era in an almost painless way, which there is no concrete proof of. Therefore it is now more important than ever to focus on your business (and personal) true strengths and invest in them. But be equally ruthless with those areas of weakness and non-competitiveness which will become non-affordable. Never mind whether ‘cheap money’ is made available to support them.