25 June 2020
That Covid-19 is the globe’s Black Swan event is hardly news. After all, the pandemic has all the hallmarks of being one – extremely rare, severe in its impact with some pundits claiming it was predictable, in hindsight.
However, being able to name it such does not make this super virus any less devastating to many individuals and businesses.
As with Black Swan events, many companies may also be looking back and positing that, perhaps, a crisis such as this was predictable and could/should have been prepared for.
It was alarming to read last week that 65% of New Zealand's company board haven't discussed their crisis management plans in the past 12 months. That means nearly two thirds of businesses in this country have had their crisis plans gathering dust in a bottom drawer, and that assumes all businesses had a plan to begin with.
Many of these plans are for natural events, like earthquakes and floods, for which New Zealand has plenty of experience. And while Covid-19 is a rarity, is it really that different in its impact?
While many businesses have been completely blindsided by the current crisis, some unlikely winners are already emerging.
One such winner in an industry that’s been brought to its knees by recent events is Wimbledon Tennis Club. As a result of crisis planning following its concern at what it saw unfolding in Asia a decade earlier during the SARS outbreak, the club added pandemic insurance to its general policy and is now set to see a payout exceeding £100 million or around half of what it normally make from its tournaments.
Clever crisis planning is not about immediately having all the right answers. It’s about asking the right questions. What would we do if this were to happen? How long could we go without cashflow? What would it mean for staff? What would it mean for customers? What do we need to communicate and when, how often?
It’s hardly revelatory to note that businesses that were well-prepared will emerge stronger than before the recession and will likely operate in a market with reduced competition, as their less prepared competitors downsize or even fold.
Interestingly, amongst the corporate tumult caused by the country’s response to Covid-19, a common mantra is being chanted by those in marketing and related industries. It is a plea to businesses not to turn off the marketing tap.
The call goes something like this: “Historically, businesses that are able to spend more on marketing in recessionary periods come out ahead of the competition.” The view is informed by Tellis & Tellis‘s influential research paper which details investment in a recession, analysing 10 independent reports on the matter spanning a period from 1920 - 2005.
There is no disputing the findings but we need to remember these five key words: businesses that are able to. The real conclusion to be drawn from Tellis & Tellis’ analysis is that for businesses who went into this crisis in good shape there is a huge opportunity to be gained. But, and this is a big capital ‘B’ But, to capitalise on the opportunity now presented, businesses actually needed to be in good shape to begin with.
The key to riding out market downturns – even recessions - and being able to take advantage of the opportunities presented is resilience. And the first step to business resilience is operational and communications crisis planning and management.
Nassim Taleb, the statistician who popularised the concept of Black Swan events, wrote in his book Antifragile: Things that Gain from Disorder, that when coping with such events the key is organisational resilience. Simply put, he opines that if you bake in robustness to your business, when others lose you will win.
For those businesses who were less-than-ideally prepared for the immediate impact of Covid-19, it’s not too late to build additional resilience into your operation. We are all together currently in the first phase of a journey with clear milestones helpfully flagged by government. Are you anticipating what challenges you will experience under alert level 3? Or a protracted period of alert level 2? What if it lasted three months, or six, or twelve? Are you asking the right questions?
Simon McGrath, Chief Operating Officer - Pacific, Accor Asia Pacific, suggested using smaller crises as trial runs for the big one, like a pandemic. When asked about managing the current crisis, as part of the Trans Tasman Business Circle webinar series last week, McGrath said; “Be ready in advance with good processes [and ] have a playbook. Every crisis builds your process.”
For those in advisory roles, it’s your duty to encourage business leaders to embed resilience into and throughout their organisation, to prod them to keep checking and testing their business reliance and to remind them to tell their people, their customers, suppliers and shareholders about its importance as a founding principle and a critical driver of business confidence. These are the businesses who will be ahead of the game and whose brand will shoot up immensely as the recessionary incident begins to devolve, dwindle and, in time, disappear.
The chorus of wishful marketers is not wrong: the opportunity in this fraught moment to play your cards correctly and achieve powerful business success is very real, but don’t forget the true lesson from history – if you’re going to win the game, it helps if you had a gameplan to begin with.