As a result of the COVID-19 virus, businesses around the globe have been caught unawares and have been significantly impacted, scrambling for solutions belatedly. This serves to highlight the importance of having a robust and dynamic strategy in place to manage your business during times of unexpected uncertainty and crises.
A sound and dynamic business strategy helps your business to achieve its desired goals, to navigate unforeseen circumstances and to use its limited and expensive resources in the most profitable way especially during unpredictable times, such as we face today.
The right strategy will help guide the actions of a business.
Understanding the role of Uncertainty and Risk in Dynamic Strategy creation
According to Frank Knight, risk can be calculated and therefore allows management to plan strategically to mitigate risks based on the probability of their occurrence. On the other hand, uncertainty cannot be calculated and therefore, cannot be planned for.
A certain level of uncertainty will always exist within the business environment and while uncomfortable for the business, it can push management to use new insights and innovation.
The second point made by Knight is that real opportunities for profit only exist in the face of genuine uncertainty.
A business can use uncertainty and risk to its advantage by reacting quickly and appropriately to the environmental factors. Strategy helps to turn uncertainty into risk, and risk is easier to manage over the long term.
How to create a dynamic strategy to future-proof your business
After understanding the differences between risk and uncertainty and identifying the types, or levels of uncertainty that exist, management will be armed with the information needed to establish a dynamic strategy for the business.
Understanding the impact of an established or emerging crisis on a business over the short-, medium-, and long-term and what can be done to save not only the company but its brand is key to informing a dynamic strategy.
Your strategy should be based on the following pillars within the organisation:
- Below we provide four steps you can use to create and implement a robust and dynamic business strategy.
- When times are tough marketing budgets are usually the first to be cut; this is a mistake as marketing, especially social media marketing is the direct line of communication between the business and its customer base. Closing down this avenue of communication can have serious knock-on effects on the business, its brand and lead to a loss of revenue due to reduced sales down the line.
- Creating a dynamic marketing strategy means being smart and analysing the unique environment your business now finds itself in, understanding the implications of the changing environment and the opportunities that may present themselves. Just because others are panicking and shutting down communication with their target audience doesn’t mean that this is the right course of action. Remember you want to create a business that has longevity and that may mean providing your customers with the value they aren’t getting elsewhere, especially during a time of crisis and uncertainty.
- In our article, how to future proof your business by going digital, we provide tips and detailed steps on how to maintain and nurture your customer relationships by going digital.
HR Strategy empowered though Tech solutions:
- Can you let your offices go and work remotely?
- Do you need as many employees or can you work with freelancers?
- Can you negotiate to pay freelancers who were previously on a retainer for ad hoc work?
- By providing your workforce with digital tools to up their productivity it will give them the security and control they need to perform.
- Digital tools such as:
- Slack – is a perfect application for collaboration and discussion on projects and tasks where all your communication and information is readily available and in one place.
- Asana – Is a useful project management tool where you can keep track of projects and tasks.
- Toggl – Time tracking tool which is useful to track employee productivity and billable hours.
- Are just a few examples of tools that can help you and your employees remain productive and get the support they need to continue working effectively from home.
- Are your apps and systems geared for remote working? It is imperative you understand the cyber security risks associated with a remote workforce and the possible weak points an unsecured home network can have on an organisation, to best prevent malware and data breaches.
- Hacking attacks increase in a time of uncertainty – make sure you are prepared by running drills – what would you do if hacked? Phished? Data compromised?
- Read more about how Shift ONE’s approach to remote working during COVID-19.
- During a time of uncertainty and risk, it is critical that you cut costs and preserve cash flow.
- Act quickly and analyse your business’s financial situation as it is imperative to its survival.
- Negotiate with suppliers and try to turn fixed costs into variable costs where possible.
- Develop a financial restructuring plan, get key stakeholders on board and include a post crisis section to be ready for expected changes.
- Identify good revenue customers those who are loyal and consistent versus bad revenue customers who always try to drive down prices and expect more for less.
- Renegotiate payment terms and retainers with your loyal customers as some money coming in is better than no money coming in and you want them to come back once things return to normal.
- During the crisis try to bring in as much outstanding money as you can – even offering ‘improved’ terms to sticky customers, as cash is kind during a crisis and those with healthy cash reserves will survive the longest.
- Implement your plan and newly set financial requirements, track progress, and refine when and where necessary.
- Understand that sales may be slow but commit to a long-term sales strategy and create bite-size offerings as many may be interested in once off or assisted services during a crisis.
- Does the crisis present an opportunity for your company to service clients globally?
- Maybe it’s time to identify the markets and countries, perhaps in the same time zone and that speak the same language, and reach out to them, creating online ads and social media and websites targeting these countries.
- Build a strong referral system and provide ‘free’ sessions to help instil trust in new or potential customers.
- Educate new and existing customers through weekly communications by providing helpful tips they can use within their business or day-to-day life to make their lives easier during the crisis, this will keep your business top of mind during and post crisis.
- The crisis may present an opportunity to restructure operations. Such as setting up a global organisation by employing freelancers in different regions to service international clients while your headquarters remain local.
- Who are your backup suppliers? What happens if your suppliers can’t deliver? Are you aware of the risks your company is vulnerable to through its supply chain to manage your supplier security risk?
- What if your suppliers become sick, or locked-in?
- Is it possible to set up a flexible supply network?
Approaches to creating a dynamic business strategy
Below are the 5 steps management can use to establish, or amend, its current business strategy, based on the OOD loop which was developed during war as a method to adjust, update and implement strategies in a changing, high-risk environment.
STEP 1: Triage or emergency actions
Your strategy should detail the areas of your business where you can quickly pull, push or pause outgoing cash flow until you are able to adequately analyse the current business environment and put a strategic action plan in place to safeguard your business. This constitutes your business’s crisis plan which must be ready to implement in case of an unforeseen crisis. Your business should follow this crisis plan to make informed decisions, streamline operations, and cut unnecessary costs which are detrimental to the survival of your business.
STEP 2: Analyse and observe the business environments
After you have implemented your business crisis plan, the next step is to understand the impact of the crisis on the environments in which the business operates.
It is important to perform a thorough analysis of both the macro and micro environmental impacts to create a strategic plan that is likely to succeed.
Make sure to collect as much information as possible from unfolding events and gather relevant information from a variety of trustworthy resources.
It is critical to ask the right questions so that you can make informed strategic decisions on how to handle the uncertain environment in which your business now finds itself.
Below are some examples of the questions to address, micro/ market environment questions:
- How will this crisis disrupt my business operations?
- Is there a way to limit the impact?
- Can I change my business structure to lessen the impact? (i.e. convert my traditional store to an online store?)
- How likely is that the crisis will lead to new consumer behaviours and is the change in consumer behaviour short-term or long-term?
- What does the immediate short-term future look like for my business?
Macro environment questions:
- How has the crisis impacted the economy?
- How long will the current situation last?
- How fast or slow is the recovery period likely to be?
STEP 3: Forecasts and scenarios
Based on your analysis of these environments and having established the level of uncertainty your businesses face, you must create scenarios based on what you expect the impact of this crisis to be, to provide your business with options and give your strategy flexibility.
Below is an example based on the identified level of uncertainty as well as information collected in step two.
- Level one: A clear enough future.
Based on this level of uncertainty, you can create one or two different strategies based on the analysis you performed and the probability of risk occurring again.
- Level two: Alternative futures.
If the situation could result in alternative futures, you need to create solutions for each of the possible scenarios. At this level key stakeholders need to understand how and what actions they should take based on the scenario that plays out.
- Level three: A range of futures.
With an uncertainty level of three, a range of possible futures, you should create a response based on a set number of variables. The easiest way to plan for a range of futures is to focus on the probability of outcomes based on ‘trigger’ events or scenarios that may create the projected future outcome.
- Level four: True ambiguity.
When faced with too many uncertain variables to forecast the number of potential outcomes, the best solution is to apply a thorough situational analysis, use earlier market indicators or, those of similar markets or situations, to predict and inform your scenarios, strategies, projections and actions.
STEP 4: Consider and implement
Once you have created your possible scenarios, understand the level of uncertainty you face and have established how to best remedy each scenario according to a well thought out strategy or strategies. It is time to analyse each one and implement the best strategy to remedy your current situation.
Armed with this information and strategy to guide your business’s actions, you can take the necessary steps to safeguard your business.
It is important to remember that in times of volatility and uncertainty the market may present many unique opportunities and if your business is able to provide value or a unique offering during a time of turbulence, it can boost your market share.
For example, the COVID-19 virus pandemic and subsequent lockdown rules implemented by governments around the world, has presented a unique opportunity for a business to establish a strong digital presence, to convert from a traditional business into a fully-fledged digital business or to expand its offering digitally. The lockdown has also enabled the acceptance and has created innovation around employees working remotely, leading to possible cost efficiencies for a business.
STEP 5: Feedback loops to improve strategy
It’s important to review and improve your strategy continuously to strengthen its weak points and create remedies for future unknowns – that is what makes a strategy dynamic, relevant and useful.
Contact Shift ONE today!