Covid-19 has reshaped the strategy development process

The ‘new normal’, or the emerging Covid-19-induced economic environment, has changed the way companies must conceptualise and strategise their business. This is according to experts from management consulting firm Kanvic.

It’s hard to get an overview of what has changed since Covid-19 swept across the world early this year. Senior leaders at Kanvic Consulting Deepak Sharma and Gehan Wanduragala have tried to break the effects into four broad trends that highlight the unprecedented nature of the current crisis, as a backdrop for what businesses need to consider when going into this ‘new normal.’

One is the impact on health, evidenced by exceptional infection and fatality rates. Second is the severe economic impact, which is significantly harder to quantify. Reduced workforce due to illness, leakages when transitioning to virtual working, and trade disruptions all add up to a gargantuan burden for the global economy.

Leading on from this, number three is the sheer uncertainty that comes with this scenario. The world has been through wars in the Gulf and Iraq, a global financial crisis, a sovereign debt crisis and a trade war, all without reaching the levels of uncertainty that have emerged under this crisis.

The reaction has been to internalise – trend number four. Trade wars, anti-immigration laws and rehashed trade agreements even before the crisis were signs of what Kanvic describes as “slowbalisation.” The crisis has only accelerated this process, with the World Trade Organisation expecting global trade contraction of nearly 15% this year.

This is the reality to which economy has opened up. According to Sharma and Wanduragala, pre-crisis business strategies are simply not equipped to deal with these conditions. Underlying each shortcoming is that businesses are attuned to moving much slower than they need to in today’s world.

“The existing tools of strategy development and execution were designed for a stable and predictable environment. As uncertainty rose, the assumptions about the real world inherent in this approach increasingly came unstuck. This weakness was already exposed during the last global financial crisis and the rapid rise of digital disruptors,” explained Sharma.

Market research, forecasting, capability assessments, customer insights and competitor evaluations are five tools traditionally used to inform strategy. The authors point out that: Market research is conducted once every few years; threats and opportunities are predicted over long term horizons; strengths and weaknesses are seen as set in stone; customer understanding is perceived as satisfactory; and competitors are regarded as “known and stable.”

“The way these five common strategy tools are currently used ignores the new reality. The market landscape is in continuous flux and must be continuously scanned. Opportunities and threats emerge rapidly in unpredictable ways. What are considered strengths or weaknesses today can be transformed tomorrow. Customer needs can change overnight. And new competitors can appear from unexpected quarters,” explained Wanduragala. 

If the tools are out of sync with developments, so too are strategies. Be it planning, budgeting, resource allocation, team building or performance reviews, each of these strategies follows the same drawn out timelines that are used in measuring business context.

Five strategies for resilience

No doubt, such a scenario is far from sustainable, and the Kanvic experts laid out a five-pronged strategy that businesses could adopt to stay competitive. Number one is to strategise based on three separate time horizons rather than one. With the pandemic as an example, the immediate horizon would deal with business continuity, the medium horizon would examine cash preservation and business survival, while the third horizon would examine how to “reimagine your business model for the new world that will emerge on the other side.”

The second element is having a Covid-19 steering team – an agile, multifaceted task force that can respond quickly and decisively to changes in the market. Element number three is enhanced peripheral vision, which entails awareness of factors in every aspect of life that could affect your business. The advent of a vaccine, shifts in consumer sentiment and policy changes are all factors that must fall within peripheral visions.

The fourth element is to shift from a traditional strategy to an adaptive one. Strategies should be flexible and responsive to each market development, rather than laid out as an underlying framework. “This is a shift in mindset as much as process and requires leaders to think of strategy as a process of continuous iteration,” explained Sharma.

The last element in the Kanvic-recommended strategy is a “visual wall” – an information dashboard of sorts that gathers data from a vast range of business operations and displays them in real time to inform business decisions. These five elements, according to the researchers, are key to competitiveness today.

“By adopting the new framework for strategy development and execution leaders are able to act with speed and agility in an environment of persistent uncertainty. Enabling them to gain clear and decisive lead over competitors who are still wedded to the traditional strategy process,” concluded Sharma and Wanduragala.