Despite efforts to reopen local economies, business is far from usual for companies small and large and will likely stay that way for some time. During this critical transition, an organizational strategy expert at Washington University in St. Louis says businesses must be thinking about the appropriate mix of defense and offense if they are going to succeed in the long game.
It’s natural for companies to focus more on their defensive plan right now, according to Peter Boumgarden, professor of practice, strategy and organizations at the Olin Business School. Since the beginning of the pandemic, business owners have been consumed with the question of how to keep the shop alive and recover in ways that aren’t drastically disruptive to business.
“When it comes to defense, most organizations are asking how do you prevent the most recent shock from cascading your organization to failure,” Boumgarden said. “In this vein, many organizations are having to think very clearly about their cash flow and burn rate over the short run, often a very different kind of metric than they might have used previously. Over the last eight weeks, many organizations with a sizeable percentage of business that happens ‘in person’ have been having to deal with significantly limited revenue and some of that revenue being grant- or loan-dependent for the first time based on what they ‘take in book’ in terms of PPP (Paycheck Protection Program) support.
“Beyond metrics like their burn-rate of cash, other businesses also are having to wrestle through new questions of labor law. They must consider how they negotiate with their employees to come back on payroll in advance of a short-term window to increase the amount they get of their PPP as a grant,” he said. “Others are looking to generate short-term revenue alternatives when they aren’t open in a traditional way — chefs offering their services in the form of classes, restaurants pivoting to takeout.”
However, during this time, businesses also should be thinking about how they can adjust to be better positioned to sustain future shocks and react to new ways in which their industry might evolve.
“In many ways, the longer-term story is more interesting,” Boumgarden said. “Thinking about your offensive plan requires you to anticipate how the long-term demand for your product might vary in this new normal and how your strategy should adjust in kind.”
Consider the following examples:
- For a real estate group in New York, you might be trying to anticipate whether working from home will reduce demand for your space in ways that drastically change how cities use their office footprint. At the same point, perhaps there are a greater number of people who want to rent desks instead of offices to “work from home” while having some space away from home to do so.
- Restaurants should be asking whether changing social norms around eating in close proximity creates a short- or long-term effect on how comfortable people feel about dining in. If these norms have changed or policy prevents the same kind of capacity you have had in the past, you might need to consider strategies that differentially balance takeout versus in-restaurant dining to match customer demand. That might make takeout more and more high-touch to match what is lost by not being there in person.
- In the university space, leaders are trying to anticipate whether families will feel comfortable sending their students to live in the dorms in the fall or whether an online learning proposition can warrant the same financial sticker price. For many schools, the question is how you can adjust your strategy to provide for students who desire different experiences, all the while ensuring that robust social and intellectual formation we hope for in a college experience.
“For each industry, leaders are having to model different ways in which their market might adjust and then design solutions for this new reality,” Boumgarden said. “As retired Disney CEO Bob Iger said in his recent book, this is a time where we realize that all organizations must innovate or die. This reality is especially salient now.”