4 Steps to Keep Your Business Healthy During COVID-19
Author: Jonathan Feffer, Innovation Strategy Expert
In a mere three months the COVID-19 crisis seems to have challenged and changed our business and private lives. An unexpected force pushed us into what is known in my field as a VUCA situation - typified by great volatility, uncertainty, complexity, and ambiguity. Based on my work with startups, multinationals, and accelerators and my research on managing under VUCA, I’d like to offer 4 pieces of advice. These highlight both best practices to adopt and traps to avoid when making sense of our new business environment and leading your startup through it.
Information is not enough. You need the devil on your side.
The question on everyone’s mind now is when will we hit bottom and start climbing out of it. Which recession are we in? L shaped, V shaped, or U shaped? We’re all looking for any information that can shed light on that and help us prepare for the future. But, while data is important, it is not enough. The process of drawing meaning out of data is a human process and as such it is susceptible to human error - specifically, confirmation bias. Confirmation bias is our tendency to look for information that confirms our past choices or preconceived notions and discount information that challenges them.
To paraphrase Anais Nin, confirmation bias is the reason you do not see the business landscape as it is - you see it as you are. If you’re an optimist you will be preparing your organization for business as usual in a few months’ time (a V shaped recession), if you’re a pessimist you’ll prepare it for a long harsh winter (an L shaped recession). The risk is not only misinterpreting the information and constructing the wrong strategy but also that, once set in place, you will be biased toward finding more and more data that confirms that strategy - starting an escalation of commitment spiral.
As time goes by and the data becomes clearer, rather than adjusting your strategy to it, you will be digging your heels deeper in place. Confirmation bias makes organizations stiff when they should be at their all-time most flexible. The key to coping with this phenomenon is first to be aware of it and then based on that awareness to purposefully look for disconfirming information. One effective way of doing so is to enlist the devil. Appointing devil’s advocates - people whose explicit goal is to gather and present information supporting a dissenting view to yours - is a great way to keep your biases in check. In fact, the Israeli army has a unit precisely for that. Its role is to look at the reports the Intelligence produces and write dissenting views based on the same information. Moreover, the Knesset’s latest report on readiness for COVID-19 type crises speaks directly to that, citing the need for a ‘devil’s advocate’ forum whose sole purpose is to provide disconfirming information to challenge consensus among decision makers.
TIP #1: Appoint a devil’s advocate to challenge your assumptions about the crisis and your coping strategy.
Don’t wait and see - now is the time for proactive management
An oft heard advice is to “wait and see”. After all, we’re in uncharted waters and the risk of mistake is high. While there’s nothing wrong with a “wait and see” approach in principle, I’d like to suggest that many times managers choose it for the wrong reasons and that now is the time not to wait and see but rather to be proactive and ramp up information gathering, decision-making, and implementation. Managers’ tendency to ‘wait and see’ when faced with volatility and risk is often the result of a flaw in judgement called omission bias. Professor Dan Ariely demonstrated it beautifully by asking people which is worse: (A) getting stuck in traffic after trying to take a shortcut in your usual route to work or (B) getting stuck in traffic because you did not take a shortcut and kept your usual route. Even though the harm in both options is exactly the same, most people tend to judge option A as worse. That is because, under omission bias, we tend to view harmful actions or decisions as worse than equally harmful omissions. I am not recommending to always act without waiting but rather to be aware of the danger of waiting too long and missing opportunities due to this basic flaw in judgement. It’s important to recognize and internalize that keeping your pre-COVID-19 plans is just as much a decision as it is to change your plans. Given the pace and size of changes we are seeing now, it is advisable to increase the frequency of assessment and decision making. If you’re used to doing this quarterly, now is the time to do so weekly.
TIP #2: Don’t wait and see. Increase the frequency with which you assess the marketplace, your opportunities and risks, and be ready to act on your analysis.
Plan to plan, then plan again.
Even in normal times forecasting is a tricky business. Let alone under current conditions. So what is the value of plans right now? Dwight Eisenhower answered this beautifully when he stated that plans are useless, but planning is indispensable. That is, the value of planning comes from the fact it both forces you to assess your assumptions about the market and structures it into a clear process. This reassessment is exactly what we need at this time. Four important steps to include your planning process at this point in time are: (a) identifying the aspects of the business environment that are most relevant to your market and business plan (e.g. customers’ buying habits, customers’ pain points and ‘jobs to be done’, small business survival rate, social distancing policies, expected time for vaccine, and more) (b) putting together different scenarios based on possible changes in these aspects over time, (c) devising action plans for each scenario and (d) setting a time frame for when you will examine the data to see which of the scenarios they indicate to. Then you can implement your pre-approved action plan for that scenario. This way rather than venerating one master plan (the proverbial ‘eggs in one basket’) you build the uncertainty into your planning process by devising several scenarios and action plans and setting specific times to re-evaluate them.
TIP #3: It’s hard to plan ahead with so much uncertainty. Rather than gamble on one master plan, construct multiple scenarios with uncertainty ‘baked’ into them. Set a time to assess the uncertainty and plausibility of each scenario and update your strategy accordingly.
Never let a good crisis go to waste
It is only natural to be focused on survival during a crisis. But what about opportunity? There’s much we don’t know but what we do know for sure is that the crisis will affect different players differently and therein lies opportunity!
A 2013 study from the journal of technological forecasting and social change that reviewed the state of innovation during the economic crises of the last few decades showed that incremental innovation - the type of innovation that focuses on improvements to existing products and services - diminishes while disruptive and radical innovations - the types that focus on bringing new business models, products, and services to market - rise. Indeed, during some of the worst economic crises inventions like the light bulb, the radio, the helicopter, nylon and more were first introduced. So there is a silver lining – the crisis will create opportunities for disruptors.
The reason for that is that incremental innovation is the darling of big established firms. It allows them to continue investing in highly profitable, well-proven products and services. These represent a low risk investment which goes well with the risk averse nature of corporate management. Disruptive or radical innovation on the other hand is the bedrock of small startups. At their core, startups are formed by entrepreneurs who enjoy imagining things differently, uncovering hidden opportunity, and taking on risk to capture it. They are also backed by VCs whose business model is based on a high risk-high reward business approach.
While big corporations have much more cash to burn through during the current crisis, they are also the most invested in the current ecosystem. In fact, the reason big corporations are profitable is that their business model is so well adapted to the current ecosystem but that is also precisely why they are both hit harder and find it harder to adapt and adjust.
On top of that, big established firms have big entrenched bureaucracies and big financial obligations that do not allow them to act quickly to changing circumstances and take advantage of unexpected opportunities. Startups and smaller companies, in comparison, enjoy flexibility and speed, thanks to their smaller size and their founders’ cognitive flexibility (they are not beholden to the traditional way of doing business). This enables them to adjust quickly, take advantage of opportunities and advance their own vision for a new, post-COVID-19, ecosystem. In fact, many of them were founded exactly for that - to disrupt their industries.
Churchill once said we should “never let a good crisis go to waste” and indeed the current crisis, while hard to navigate, is also full of opportunity. It lays the groundwork for new ideas, products, models, and services. It makes everyone rethink their assumptions about the market and more willing to try new business models. Moreover, it exposes and creates new ‘jobs to be done’ by customers, redefining what is valuable in the market. These are all opportunities. So use this crisis not only to ask yourself “how will we survive” but also to think about which opportunities it creates and which you can take advantage of.
TIP #4: Crises are like forest fires – devastating to many but full of opportunity to some. Don’t focus solely on survival, rather ask yourself what are the opportunities this crisis brings – will the market, customers, or partners be more amenable to your new business model or product? Did the crisis uncover new markets? Has customers’ definition of what is valuable changed such that you align with it better than before? Are there certain tactics you can implement quickly that incumbents will be hesitant to take or will take too long to copy?
Don’t just survive, lay the groundwork for exponential growth post-COVID-19!
Jonathan Feffer is an innovation strategy expert, helping companies identify their creativity barriers and implement a clear innovation strategy. He teaches innovation and entrepreneurship at Tel-Aviv University. His expertise is used by such institutions as Harvard University and the IDF, as well as C-suite executives and entrepreneurs the world over. For more tips, tools, and guides follow him at JonathanFeffer.com and on Facebook.
Start-up Mentor, Harvard University
Mentoring Supervisor, 669 Special Forces, IDF
Innovation Board member, Israeli Air-force
Adjunct Professor, TAU
MBA, Columbia Business School