When money is tight, there's a pretty obvious solution: stop spending so much. Cutback, reduce, stop buying $4 coffees (even though they're delicious).
In the household, generally, income is fixed. There's no way to increase the money at the bottom of the balance sheet without cutting out expenses at the top of the sheet.
However, in business, it's different. There's no set amount a business will bring in each month. The point of capitalism is that the number should be going up pretty much all the time. Greater growth means greater returns, which means a bigger slice of the pie for everyone involved (at least in theory - but let's not get into economic policy right now).
The point is, frugality, while a sound fiscal policy in the home, isn't necessarily so in business. Sad as it may be, spending $400 on coffee a month will never convert to a higher household income at the end of the month. However, spending $400 a month investing in staff well-being is likely to translate to greater employee well-being, in turn, increasing productivity. In other words, in business as in Vegas, you've got to spend money to make money.
You get in what you put out, which is why, even in the middle of a recession, the best fiscal policy may be investment and innovation.
It's not about supply and demand; it's about access
Rohit Deshpandé, a professor at Harvard Business School, has recently written that the recession caused by the coronavirus crisis is more accurately described as a "deaccession."
In contrast to past recessions, the problem isn't that supply and demand are reduced, but rather, customer access to supply is restricted. Restricted access is caused by lockdowns and social distancing, making it physically harder for customers to access businesses. Further, customers' fears for health, safety, and the future make them more reluctant to go out to the places they would typically make purchases.
This means shouldn't be focusing on increasing supply right now, because nothing's happened to supply. Nor should we focus on demand, because people's wants and needs are more or less the same. Instead, it's access that's the problem, so we need to focus on how to get what people want to them in these new conditions.
(You may be thinking, "Courtney, travel demand has definitely gone down," to which I say - yes, but also no. People still want to travel; they just can't because of restrictions. Therefore, the problem is still access. Suppose anyone could figure out how to get travel back to normal in the middle of a pandemic - they'd be a billionaire in 0.08 seconds.)
There are, broadly, two solutions to the access problem: investment and innovation. Let's talk about both.
Investment
The customer is king; it is as simple as that. The customer can't (or won't) come to you, so you have to go to them. To game the deaccession, we need to invest in our customers, so that in return, they invest in us. Some simple strategies to invest in customer experience include:
- Prioritising customer service: whatever customers you have around you, hang on to them. Treat them right, acknowledge their needs and wants, and ensure that every interaction is treated as an opportunity to delight them. The problem isn't supply; therefore, no product you provide will distinguish you. Rather, to stand out from the pack, you need to provide outstanding service.
- Reward loyalty: Now is an excellent time to introduce incentives to reward repeat customers. Acknowledge the extra effort required for customers to buy from you right now, and reward that effort. It can be as simple as thanking them for their repeated patronage, or as extensive as a reward program. The important thing is that loyalty is acknowledged.
- Keep it human: Every second television ad is another company saying they're "here for you in these trying times." Blanket statements can come across as lip service and remind us that companies are only "here for us" when it's profitable to be. That doesn't mean you shouldn't acknowledge what's going on - quite the opposite. The trick is to be genuine and not just whip out one statement and call it a day. The best way to invest in your customers is to create a relationship with them. So make sure that every interaction your staff have with customers is genuine. When you do mention these "trying times," it has to be from a position of genuine care, not the marketing department looking to capitalise on a trending topic.
Innovation (aka pivoting to meet new needs)
These are the fun stories! Lately, you will have seen companies you see on the news who put their business model down, flipped it and reversed it, and started a whole new business strategy adapted for the climate. Companies who do this are inherently innovative, as they're unafraid to pivot their business models to meet current climates and needs.
Here are some examples:
- StageKings - Before COVID, StageKings specialised in custom-designed stages for the events industry. However, on 13 March 2020, the government announced restrictions that effectively shut down their whole industry. Determined to keep going, StageKings quickly pivoted from designing a massive set for Formula 1 to designing the IsoKing - flatpack, easy to assemble home furniture perfect for every person now working from home.
- Detmold - an Australian company who usually produces packaging for companies such as the sandwich chain, Subway. However, when the crisis hit, they quickly pivoted to manufacturing masks for in-need medical professionals.
- AirBnb - Travel is another of the many industries effectively shut down overnight. Nevertheless, Airbnb didn't hesitate to jump into the rescue boat: online experiences. Airbnb now allows hosts to offer online classes in cooking, art therapy, meditation, and much more.
The common thread of these pivots is that they're a lateral extension of a company's pre-existing capabilities. As such, they embed rather than detract from the strategic intent. Pivoting can be difficult in practice - it requires strong leadership and incredibly clear and precise communication between all areas of a business. All this can be made even more difficult if your entire business is currently remote. However, the reward is equally great. When the requisite leadership and communication practices are in place, pivoting effectively COVID-proofs your business. You'll no longer be merely hoping to outlast the crisis, but rather floating on its waters.
Moving from resilience to anti-fragility
Our MD, Lachy, has been spearheading our internal move at Yarno away from wading through the COVID-crisis, toward being completely anti-fragile.
In times of difficulty, we often focus on resilience - the ability to withstand and get back up after falling down. However, the uncertainty of COVID is not a fleeting affair: we're in it for the long run. As such, we're choosing to move beyond resilience toward anti-fragility, which we define as more than merely withstanding change, but adapting and thriving on it.
Cutbacks are measures made to weather the storm; they're a pause button. Pausing can give relief, a breather to plan the next move. But eventually, you have to press play again and pick up where you left off.
Unfortunately, none of us can skip COVID. Instead, we need to adapt to our new way of being. You can't change the world, but you can change your business. Invest, innovate, and use the tools at your disposal. Change isn't something to be tolerated; it's something to embrace. Or, as Bear Grylls has been urging us for years:
