10 March 2020
When I help organisations develop strategy I always tell them that we are plotting a strategic direction which will last 3-5 years, unless something significant changes. That final caveat often passes without comment, but the recent coronavirus outbreak places it front and centre.
The ways coronavirus will affect our society and economy in the coming months are uncertain. This is precisely the type of significant change which should trigger a resilience check of your strategy.
So what checks should you be performing on your strategy right now to boost your organisational resilience? What have we learnt from previous economic and social shocks which can inform this process?
Read on to find out:
How to analyse the new external environment you’re working in;
The importance of spotting new potholes and silver linings early; and
Tips on building a strategy which combines cost cutting and innovation.
First, however, we’ll look at what we can learn from economists about this type of shock.
An economist’s view of shocks
The coronavirus outbreak is what economists call an ‘exogenous shock’: an unexpected development from outside the economic system that has a significant impact.
Economists subdivide these shocks into two groups:
Those which have a temporary impact before everything returns to the way it was before.
Those which cause a ‘structural shift’, where the way the economy operates changes permanently.
Predicting what will happen over the next few months is virtually impossible. However, because coronavirus is unlikely to change the underlying economic system we are probably looking at a temporary negative economic shock, with robust debate over how temporary and significant the impact will be.
It’s too early to say for sure, but we might see a permanent social ‘structural shift’ in attitudes to things like flexible and remote working, video conferencing and risk management, among others.
It’s important to understand the different strategic responses to these two types of shock: A temporary negative economic shock requires a strategy to ride it out. A shock which triggers a social structural shift requires a strategy to explore and make the most of the new opportunities that arise.
These three resilience checks will help you determine your best strategic response to the economic and social shock triggered by coronavirus.
Resilience check 1: How has your external environment changed?
When you determined your strategy you (hopefully) analysed the external trends which influence your organisation. Given the external environment is changing fast, now’s the time to revisit this analysis and see what’s changing.
A great tool for this is PESTEL analysis. Each letter stands for a different part of the external environment: Political, Economic, Social, Technological, Environmental (e.g. climate change) and Legal.
Work together with your team or senior leaders to ask the following questions for each part of the external environment:
How might coronavirus impact this part of the external environment in ways which could affect us?
How will this impact on demand for what we offer?
How will it affect our suppliers?
Do we think these changes will be temporary or permanent?
How might these combined trends impact on each of our core activities in the short, medium and long term?
Example: New external trends affecting schools
For example, part of the PESTEL analysis conducted by an independent school might be:
"Ability and inclination to travel will fall in the short term, and this may continue into the medium term (political and social trend). We are, therefore, likely to see lower attendance at, or cancellation of, school open days and international pupil recruitment events. To offset this we will explore ways that technology such as video conferencing and live streaming on social media can allow families to experience the school in novel and innovative ways. Due to short term changes in working patterns people may become more willing to trial these technologies (social trend). We should harness this trend."
Resilience check 2: What are your potholes and silver linings?
Review your PESTEL analysis to identify which of your activities will be most affected – which has the most potholes in the road ahead? How can you avoid these? This will inform both your contingency planning and your strategy development.
Also look for silver linings. I don’t want to down-play the seriousness of this outbreak for the families who are directly affected by coronavirus. Plus I certainly don’t advocate unethical profit-making schemes feeding off people’s concerns.
However, there may be some permanent trends in the external environment which will be beneficial to your organisation in the longer-term. The earlier you spot these opportunities the better.
Example: Schools have new opportunities to harness the power of video conferencing
One silver-lining could be a permanent increase in the use of video conference technology. I’ve seen schools make great use of video conferencing technology, but there is scope for much more extensive and creative use. For example:
School heads hosting live Zoom webinar and Q&A sessions for potential new families
Sixth form pupils hosting Facebook Live tours of sixth form centres and open Q&A sessions for potential new sixth formers
Live online panels of university students answering sixth formers’ questions about university life
Live video feeds of careers talks by alumni based all over the world, with an archive of these recordings available to future sixth formers
All of these present short-term solutions to the restrictions imposed by coronavirus. They also present opportunities for staff to learn new techniques and innovate in ways that could be useful in the longer term. This is a form of what academics call ‘organisational learning’.
Resilience check 3: Do you have an ‘ambidextrous strategy’ that combines cost-cutting and innovation?
Research has found that in the face of recession the most effective strategies balance both efficiencies through cost-cutting and investing to explore new opportunities. These are called ‘ambidextrous strategies’.
An ambidextrous strategy will also position your organisation well to ride out a temporary negative economic shock and to explore and make the most of new opportunities that arise from a social structural shift.
We are already seeing economic growth forecasts come down as a result of the coronavirus outbreak. So it is worth exploring what an ambidextrous strategy might look like for your organisation.
Here are some questions to get you started:
How might we reduce costs to survive a possible economic downturn?
If you’ve already been reducing costs: Which areas have responded as hoped? What didn’t go to plan? How can we further reduce costs while maintaining quality? Does our organisational culture support or hinder these efforts?
When the upturn comes, what new opportunities might open up as a result of changes in the external environment? (build on your PESTEL analysis in resilience check 1)
What would we need to change now to be ready to take advantage of these new opportunities later? What strategic investments in innovation would place us in the strongest position?
In summary
It’s reassuring to know that although no-one can predict the outcome of the current coronavirus outbreak, strategy research and best-practice contains useful advice based on previous economic and social shocks.
The strategic response to these challenges will be different for every school, charity and business. So conduct these three resilience checks on your strategy to put your organisation in the strongest possible position despite uncertain times.
Like some free help?
I’m offering free 30-minute video calls with any organisation that wants to confidentially conduct these three strategy resilience checks.
This offer will only be available for a short time, so get in touch now to schedule your free 30-minute video call.
Agree? Disagree?
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Juliet Corbett is an experienced strategy consultant working with schools and fundraisers to help them achieve their vision faster.
