Dr Peter Zamborsky is a senior lecturer in Management and International Business at the University of Auckland Business School.
Succeeding despite the Covid-19 uncertainty
How can businesses succeed despite the unprecedented uncertainty following the global covid-19 pandemic? In my forthcoming Journal of Business Strategy article entitled “A blueprint for succeeding despite uncertain global markets”, I outline three core capabilities for thriving amid global uncertainty. While currently the emphasis in most organisations is understandably on the short-term crisis management (including assuring business continuity), it is time to devote attention to mid- and long-term scenarios and strategic moves to prosper in the post-covid-19 next normal.
The first core capability that organisations might consider building is the capability of sensing the changing context. It starts with facing uncertainty and confronting it, not ducking it. Even before the covid-19 crisis, organisations such as Huawei and IKEA that I studied identified they were in a ‘live-or-die’ moment and responded to what they saw as a rising (future) uncertainty with bold strategic actions. It is also important not to be paralyzed by unpredictability (the “deer in the headlights” syndrome), but instead collect information to reduce the negative impact of uncertainty and understand the nature and degree of unpredictability of the business environment. Finally, there is always some degree of market malleability, and now more than ever it is important to understand how (much) one’s actions can shape the market.
Practically, the capability of sensing the context can be implemented by developing discrete scenarios (at least four so that you are not biased towards the middle one) for multiple time horizons (one month, 1-2 quarters, 1-2 years ahead and the next normal). Forget five- or three-year plans. It is a good idea to set up a more mid- to long-term oriented “plan-ahead team” in addition to the crisis management team. Agility and speed will be crucial to strategy formation and execution in these testing times, and dedicated resources will be needed for identifying which scenario is emerging. Key employees can be co-opted and resourced for this effort to help with building the sensing capability, such as at Huawei where they established “commando squads” to identify new business opportunities following the heightened uncertainty the firm has been facing since 2019.
Small companies need to be agile during the Covid-19 crisis, and should use the temporary government subsidies and the last free resources for making no-regret moves and other strategic bets that are likely to position them better for the next normal of a less physically globalized and more virtually connected
The second core capability for thriving amid global uncertainty is the capability to drive the market. The covid-19 crisis has an impact on both customer behaviour and business models, and companies will have to consider adjusting their strategy in terms of both of these factors and match them to the scenarios they developed as part of sensing the context. The most important of the strategic initiatives are the “no-regret moves” that benefit the company in any scenario. Developing e-commerce and digital products, for example, is likely to be beneficial for many firms, as consumer behaviour will shift following the unprecedented “home economy” period, and many consumers will be more comfortable with and demand digital solutions at an increasingly high quality and low price.
Microsoft’s swift reaction to the rise of teleconferencing (and to Zoom’ security problems), with a relaunch of an improved Microsoft Teams product, is an example how even established companies can be agile and make quick strategic moves that are likely going to yield not only short-term but long-term benefits. My research on Microsoft showed that the company has been particularly adept at recombining its resources (across borders), with R&D efforts and supply chains diversified beyond one region to reduce vulnerability to shocks such as the one we are living through in 2020.
Small companies are particularly pushed to be agile during the covid-19 crisis, and they need to use the temporary government subsidies and the last free resources for making no-regret moves and other strategic bets that are innovative and are likely to position them better for the next normal of a less physically globalized and more virtually connected world. New Zealand’s Nanogirl Labs, for example, is an education design SME firm creating opportunity through science, technology, engineering and maths. Within a few weeks of the covid-19 crisis it pivoted from live shows and plans to “go global” via physical means (theatre productions in Australia, Middle East and the UK) to a digital offering.
The third core capability for addressing the covid-19 uncertainty is the capability to redesign the business. Every strategy in these times of uncertainty has to be approached as a design-lead exercise, imagining the next normal’s consumer behaviours and redesigning the company’s business model. This needs to match the industry’s and business environment’s predictability and malleability. While some companies may be able to persevere and sustain their current business model and aim for restoring operations, most companies will have to retrench or restructure (such as Air New Zealand, whose new CEO Greg Foran made it clear the company would likely emerge from the crisis as a domestically focussed airline with a strong international cargo component).
However, persevering or retrenching are not likely to be very effective strategies for the long run. Companies should reinvent what it means to innovate, and if the extent of business model disruption and/or depth and length of industry-demand disruption are high, use their remaining slack resources for shifting and redesigning their business models or shaping a new business through eco-systems and partnerships. In the next normal of the post-covid-19 world, many businesses will have to reinvent their business models and redesign their business while still staying true to a coherent and consistent mission.
Unfortunately, many companies will also have to consider exit (from a country, product line etc.) as a strategic option (as German Bauer Media did with divestment of their New Zealand operations recently). An exit may be the starting point of a new venture, one that is able to do justice to the changed business environment that the covid-19 crisis is likely to create. There is no way to sugar coat this: we are entering an era of an unprecedented disruption and likely also a structural reshaping of globalization and of many political-economic systems.
The financial stimuli from governments may prevent a global multi-year depression (a global recession in 2020 is now a certainty, according to the IMF), but they are also going to be enormously costly and their benefits (and paying for their costs) will have their winners and losers. Some trends will continue (such as the rise of China and of the digital giants such as Google, Amazon, Facebook, Netflix, Alibaba and Tencent), while other trends will emerge (such as possibly a bigger government, more frugal economy, and less globalised supply chains and sales). It will be hard to thrive amid global uncertainty during and after the covid-19 crisis, but building the three capabilities outlined above should increase your chances to do so if implemented effectively and swiftly.
Dr Zamborsky’s Journal of Business Strategy article on succeeding despite uncertain global markets will soon be available at: