Strategy Life Cycle impacts post Covid-19

Jim Collins wrote a book on good being the enemy of great that I commend to readers. The three guiding questions he posed upon observing high performance were as follows:

1. What can we be the best in the world at?

2. What drives our economic engine?

3. What are we deeply passionate about?

The Coronavirus pandemic has forced boards to interrogate many items over the last few months including whether the business they thought they were in is still relevant as a "new normal" begins to emerge. Starting with the "why" helps drive both the "what" and the "how". The "what" might be a very different "what" to when financial control budgets were prepared this time last year however the "why" should be basically unchanged.

Businesses that are nimble to change management, recognize where their true north lies and have moved to that emerging validated model before they have to will outperform those that aren't. Nurturing new business models even if they cannibalize existing ones to some degree will ultimately work the same way it always has. Anyone doubting this need only read up on Kodak and what happens when the incumbent doesn't embrace structural change. We are seeing good operators constantly assessing risk and opportunity in a dynamic environment. As people movement tentatively increases and borders seek to reopen around the world there will a moment for business to put the foot down in order to take advantage competitively before others recover.

Strategic foresight involves turning minds to functional views of the future. Raising the gaze beyond the immediate mire enables capital expenditure decisions to be contemplated rationally alongside analysis of cash flow management and a revised ideal gearing ratio. I don't think anybody could have conceived the extent of stimulus that programs like jobkeeper and the instant asset write off provisions will ultimately cost even after deducting the "oops" of $60 billion between friends. Inevitably the quantum of stimulus will trigger renewed taxation reform agenda's and inflation rises once we get to "the other side of this". Planning for higher tax rates and substantially higher interest rates in sensitivity budgeting is a sensible step for CFO's over the medium term.

Tough decisions may need to be made. Human resources perhaps now regard employment as being something to be cherished which may relieve the never ending pressure of wage inflation. Rising nationalism may also act to change the way the consumer behaves. Will we see a return to buying local instead of lowest global producer for any given product. As consumers, are we able to see "community" in our consumption habits?

This country has not seen a major blip on employment nor an extended conflict situation in my working lifetime which is unusual by historical standards over centuries. Seeing the big picture and being aware of the forces for change be they geopolitical, climate change or closer to home with health has never been more important for the strategic board. Making strategy and planning an ongoing activity rather than a periodic activity is imperative in dynamic moments in history which surely we are now living through. Every pandemic that has gone before has structurally changed how business has occurred after the pandemic subsided. This one will be no different.

Innovators generally achieve a first mover advantage but suffer from inefficiency. Early adopters is where our business has tried to exist. Sometimes you think you are an early adopter only to find yourself innovating. All this will happen again and is probably going on in boardrooms right now. The process of identifying a new idea, growing it into a commercial undertaking, seeking cost efficiency once at critical mass and building marketing output to value add into differentiated or segmented markets is a well worn path. Doing so with what you thought was a mature product is part of the "new normal". Recognizing that nearly everything is "at risk" requiring either adaption or exit is uncomfortable to say the least. At the very least a cost base realignment and repositioning in the marketplace to sustain the life cycle is seemingly required. Failure to do so can and will lead to an increase in the probability of decline and insolvency. Retaining the smile on your face and the energy to push for excellence requires passion. Do you love what you do?