When news of COVID-19 spread, companies began considering how it would affect supply chain access, product launches, employee well-being and business continuity and their financial survival. But many failed to consider the importance of a resilient business model.
Business resilience is often missing from traditional business continuity plans. Companies plan for disruptions to resources and processes, but don’t recognise that business models can be just as big a threat to continuity of operations. The key is to ensure that your business model is as resilient to outside disruptions as the rest of the business.
Companies need to look critically at their current business practice to ensure that they are robust enough to ensure their ongoing operations.
ICON recommends a five-phase approach to ensuring business resilience.
Phase 1: Define the current business model
Start by identifying the core customer base that is essential to the business and its core needs. Then expand that thinking to value propositions, capabilities and financial models. For example:
- Customers: Who are the key customers?
- Value Proposition: What do we offer to fulfil their key needs?
- Capabilities: What partners are needed to deliver the value propositions?
- Financial Models: What financial models do we use for our core customers?
Phase 2: Identify uncertainties
Gather a diverse group of people from across your business to help you identify uncertainties that are the most likely to be detrimental to the business. This is not an exact science, and the format can vary, but the goal should be to identify potential disruptions of known COVID-19 factors.
For example, for a retail store, this would include scenarios in which fewer customers can come into the store or where customers don’t want to have physical contact with employees during payment.
Phase 3: Assess the impact
Once you’ve identified the uncertainties, consider how each one would impact the business. A Business Impact Analysis is a separate framework outside of business model resilience that consists of six parts:
- Developing impact categories
- Developing impact time frames
- Defining cyclical impacts
- Defining business impact scales and scoring
- Weighting impact parameters
- Identifying and assessing risk dependencies
Phase 4: Design changes
Consider what would need to change to address potential impacts. Don’t be discouraged at this point by feasibility. Record any potential solutions and assess them later. For example, when governments close physical spaces or people aren’t willing to come into a brick-and-mortar retail shop, the potential impact is high. A change strategy would focus on changing how the business uses the physical space.
In China, retailers converted areas of stores into warehouses and distribution centres. This both limits the impact of the closed physical stores and increases storage and operations for online retail. For IT, the challenge would be supporting increases in e-commerce solutions. Establishing plans for such changes in advance is vital to organisations, where quick reactions and flexibility make a huge difference.
Phase 5: Execute changes
Ultimately, decisions will be made by the senior leadership team, but phases 1 through 4 of scenario planning will act as essential input for those decisions. Ensure all your staff are kept aware of changes. This will help achieve business and IT alignment and result in speedy delivery and results.
As the phases of the COVID-19 pandemic progress, invest your lessons learned back into the enterprise to reset strategy and build resilience.
We would recommend that business leaders view their pandemic response in three phases. The duration of each phase will vary by industry and enterprise — and even by business unit, product or service. The phases are defined primarily by what’s happening at each stage:
Immediate actions focused on keeping people safe and essential business functions operating. This relatively short period is marked by high effort and potentially chaotic activity. Key activities:
- Temporary fixes to stop the bleeding.
This phase was described in more detail in the recent article ‘Returning to Work After Lockdown – A Programme for Safe Return’.
More organised/coordinated effort to stabilise operations. Medium duration. Key activities:
- Create a plan to restore a scalable state.
- Identify capabilities you need to strengthen, rework, reopen, rehire, re-budget, resupply.
Extended period marked by strategic, durable execution across the company. Key activities:
- Learn to conduct operations processes and workflows in new, repeatable, scalable ways.
- Use lessons learned and emergent patterns from prior phases to help guide and inform future decision making.
As you weed out weaknesses in your business and operating models, you will be better positioned to weather the next disruption.
That’s especially important now. The overriding imperative is to absorb lessons learned quickly and build sustainable changes into business and operating models.
But first, you need to determine exactly where and how the crisis has stretched and broken your existing models — and where the risks and opportunities lie as a result.
It is also a good time to be self-critical about the skills and resources you need to do this successfully. If you don’t feel that you have the necessary expertise in-house to carry out this analysis, then now would be a good time to get in outside help.
ICON can support you in terms of helping you identify significant uncertainties and evaluate them in terms of their importance to the future of your business.
We can also work with you to make strategic planning a continual activity so that your business is much more resilient and better placed to any future challenges.
Here are just a few examples of areas where you could look to diversify:
- Diversify supply chain:
- Build-up subscription business models, e.g. monthly paid maintenance plan, or payments into wine club;
- Speed up credit control – invoice faster;
- Move production more towards a ‘just-in-time’ model;
- Move to direct to customer;
- Deliver contactless commerce;
- Focus on the best-selling and most profitable sales items;
- Optimise pricing;
- Build dynamic feedback loops for optimisation;
- Use digital technology where possible; and
- Drive up automation.
Reset for a sustainable future
The most plausible post-pandemic pathways are typically described as rescale, reinvent, return, reduce and retire.
For some, the pandemic has stressed business and operating models to the point of breaking. Companies will ultimately reduce or retire those activities permanently. This could include subcontracting some business activities or removing a product or service entirely. In some cases, retirement is long overdue.
Some organisations may reset by reinventing themselves for the long term. Likely examples are manufacturers that have switched production facilities to create new product suites, or retailers that have found new ways to reach customers who can’t visit their physical locations.
This crisis has created an opportunity to reset some of your goals and ambitions; it’s time to ask: “As we recover from this crisis, do we want to be different — and if so, how?”
Your first step is to contact your Icon advisor – all businesses are different.