Author: Uwe Weinreich
A call for crisis management that fosters strategy.
The economy is cooling down under the constraints of the corona crisis. Unless you are producing respirators, toilet paper, food or antiviral drugs, your company is unlikely to be one of the winners of the crisis and negative consequences are looming. What needs to be done? As an entrepreneur, I myself have experienced the bursting of the dotcom bubble in 2000 and the financial crisis in 2008. I know very well what it feels like when the rules under which you used to run your business suddenly no longer apply. In 2008, we came very close to failure and I was barely able to sell the company, albeit at a great loss. The shock was deep and after that for years I spent time trying to find out and to learn how such threats could be managed better. I am happy to share my findings.
- Do what needs to be done and secure the financial existence
It is the standard and there is no way around it. The first duty of entrepreneurs and managers in crisis situations is to secure the existence of the company. The means to achieve this are known and are usually mastered. First of all, it is necessary to check the liquidity of the company over the next months, weeks or even days. In addition, avoidable expenses are reduced or eliminated completely. In addition, more active claims management can ensure short-term capital inflows and, if necessary, money may have to be raised from shareholders or banks.
Standards must be mastered but are not the subject of this article. There are more exciting things.
- Don’t trick yourself
In fact, economic crises are not fundamentally different from psychological crises. In psychology, they are defined as a process in which the situation continuously deteriorates despite active action. It is a repeated and progressive failure. Within a short period of time, the leeway for action becomes narrower and narrower and the acting persons feel trapped in a downward spiral. The self-efficacy, i.e. the feeling of being able to change something with one’s own activities, is lost. In addition, the perception becomes more and more constricted. You develop tunnel vision. At the end there is pure desperation.
Paradoxically, managers in particular are at risk of falling into such a downward spiral if they have perfect command of the above-mentioned standard for the handling of crises. They feel safe and continuously increase the measures according to the course of the crisis — sometimes up to a point that becomes a real danger for the company. Costs are capped to such an extent that production almost comes to a standstill. Employees are laid off, unfortunately sometimes exactly those who are needed most. Salespeople are forced to sell more aggressively and alienate more customers than this behavior would generate sales. How can this happen? It is an understandable and very human dynamic. Managers do everything to save the company. The worse it gets the more action is taken. The more the better is the motto and failure is not an option.
The motivation behind it is not wrong. However, if you chase after an unattainable goal with tunnel vision, you are leading the company into paralysis. The crisis is exacerbated by the approach “if it doesn’t help, we’ll take more of the same”. Even heart patients who are on digitalis do not get better if they take more of their medication — they simply die.
How can this be avoided? Pause for a moment and question the situation and your actions. Especially in a crisis, it is particularly helpful to redefine your own strategy. More about that later.
- Play your role proactively
The future is uncertain? Everything changes daily? You don’t know where things are going? Perhaps you are already sleeping restlessly. That might be so. However, if you are an entrepreneur, board member, managing director or even middle manager, your role is to give your employees as much safety as possible. The higher your rank, the more you are challenged. Communicate often and in a straightforward manner. Employees pay much more attention to what you are saying and not saying than you are probably aware of. Even if you are uncertain and in doubt yourself, this is no justification for passing on uncertainty to employees. On the contrary, convey as much confidence as possible. In return, you will get a team that will stick together and support your company, even if things get worse.
- Call people on the phone — but in the right way
for managers in crisis mode, there is unfortunately far too little time for this. But you should grab it. Pick up the phone and talk to important people from your economic ecosystem. This includes customers, suppliers, partners and people from your industry network. You’ll be amazed at how much important information about market trends you can get and how many ideas for previously unexplored opportunities are generated. Most people are actually pleased when such a serious discussion is held, in which the focus is not on a deal but on real interest for their own situation. By the way: e-mail is no adequate substitute here.
- Radically change your perspective
Conversations with people in your teams, calls with business partners and the study of analyses on the course of the crisis will help you to understand the situation. You will need to take the time to do so. Here, too, the investment is worthwhile. Only if you manage to gain the necessary distance from the daily crisis management mode you will be able to question and change your view of the future. Isn’t there a chance to make customers particularly happy right now? How will society and the economy change after this crisis? How can you react to it and prepare yourself to be as well positioned as possible when the crisis slowly passes? Conduct a brainstorming session in which you radically question your point of view and consider what you can do so that you can later say: this crisis was the best thing that ever happened to the company. This is easier to achieve in a team, sometimes it helps to call in an external coach.
- Tidy up
There are certainly processes that have not been running optimally for a long time, as well as initiatives that were once acclaimed but never finished. Perhaps it is just a small flaw in your product or service that you have long wanted to eradicate. Now is the time to tackle these things. Tidy up. As soon as the first chaotic mountain of work to deal with the crisis has decreased and a certain amount of idleness occurs because production has been halted, you will have time to do it. Investing energy here makes much more sense than playing hectic crisis theatre without any result.
- Launch innovation initiatives
The world changes with every crisis — maybe just a little, but it is enough for new market opportunities to emerge and old models to become obsolete. If you’re one of the lucky companies that have built up a whole portfolio of potential innovations and business models over the years, now is the time to examine which of these can be attractive during or after the crisis. In any case, it is worthwhile to get one or more teams together for innovation workshops to consider how customer needs change and how the company can respond with new or changed value propositions. The current corona crisis is triggering a gigantic change in corporate communications, with more and more communication and collaboration being shifted to the digital world. This is not the only effect. Check which market-changing effects can be attractive for your company and with which products and services you want to react to them.
It may sound crazy, but it is really not the worst time to invest for the future. There are quite a few companies that have built up enough buffer in recent years to tackle new projects now. If this is the case for you, it helps that suppliers will probably make special offers that have never been seen before and that the company will have the capacity to integrate the investments into the production process in a reasonable way.
- Hire the best people
While most companies in your industry will respond to the challenges of the crisis with layoffs, there emerges a great opportunity for future-oriented companies. I experienced it myself when the dotcom bubble burst. At one point, developers and other professionals with great expertise became available at a price that you couldn’t even get mediocre people for in the past. Hiring them is a wonderful investment, because it strengthens the company’s technical capabilities and the human motivation of the whole team.
If the measures mentioned so far take effect, you will be well prepared to attack the market with exciting new offers while the competitors still keep a low profile. Just as a racing car accelerates out of a curve, you can succeed in achieving an outstanding market position while others are still in crisis mode. This requires that you have correctly understood the signals of the times and prepared for this step during the crisis. Bringing outdated offers to the market in a new way will not help. Instead, you need products and services that are adapted to the changing zeitgeist. Is your offer already attractive during the crisis? Then invest at an early stage in effective marketing measures. Now you will get them cheaply. Will your offer only be convincing when the crisis ends? Then prepare everything now so that you can start at the right time.
- Make your business robust
I admit it, when you are in the middle of a crisis it is very difficult to take this perspective, but crises are the most instructive episodes in the history of a company to see how the company can successfully deal with difficult and uncertain situations in the long term. Maybe it is the special composition of its employees, maybe it is the values shared within the company, maybe it is the special nature of its products and services. Take the time to review what you have experienced during the crisis and draw conclusions from it on how to make your company even more successful and resilient for the future. Experience has shown that the following aspects are always included in the list of what should be kept strong: the competence and qualifications of employees, the innovative ability and activity of the company, the supporting elements of the corporate culture, sufficient financial resources and appropriate management behaviour and leadership.
I wish you a successful overcoming of the crisis, so that you emerge from it more prosperous than you have been before.
Uwe has founded three digital companies himself and, after selling the last one, works as a consultant, coach and facilitator for innovation, digital and agile transformation. https://coobeya.net/team/uw