In May 1932, as he campaigned for the presidency during the depths of the Great Depression, Franklin Roosevelt called for “bold, persistent experimentation” to address the crisis.
As the economy re-opens amidst what will likely be the greatest recession since the 1930s, business leaders would do well to keep FDR’s exhortation in mind. The same spirit of boldness and experimentation can help businesses survive the crisis and contribute to the recovery.
Different businesses will, of course, face very different challenges. But I’ve run more than a dozen companies, many following periods of serious upheaval, and there are a few core approaches that are applicable to all firms in the present crisis.
Navigating these volatile conditions will be an exercise in critical thinking. Consider the situation a high-stakes case study in improved reasoning.
Lori Loughlin Pleads Guilty. Will The Judge Send Her To Prison During The Covid-19 Outbreak?
Many College Students Included in HEROES Act Stimulus Checks
Lori Loughlin and Mossimo Giannulli to Plead Guilty in College Admissions Scandal, Will Serve Time in Prison
For one, businesses should engage in advanced scenario mapping in order to be prepared for uncertain times. After the 2008 financial crash, then-Obama advisor Rahm Emanuel famously said, “never let a crisis go to waste.” The principle applies just as much to business as to politics. Crises are times when leaders have more opportunity to effect change than usual. But to do so they need to have clear plans to leverage changed conditions.
No doubt, things look rough right now. Revenues are tanking. Employees are struggling to deal with the crisis on both personal and professional levels. And although states are beginning to reopen, stable conditions are still a long way off.
Given this ever-evolving situation, leaders should look to make quick but informed decisions. If the economy opens up faster than expected, businesses need to be in a position to take advantage. At the same time, if things go slowly or — worse, there is a second wave of infections — businesses need to be able to either find new sources of revenue or ramp down without having to shutter completely.
To prepare for this uncertain set of circumstances, smart leaders should map out possible scenarios as well as effective responses to those scenarios. A highly effective strategy for improved reasoning, scenario mapping should be driven by data as well as counterfactuals, while potential responses should be stress-tested by a variety of colleagues both within and outside the field.
While there are a seemingly infinite number of factors in play right now, only a subset are worth paying attention to when considering different ways in which the economic situation plays out. Identifying those factors while scenario mapping are key to a nimble response. Specifically, leaders should keep the Pareto Principle in mind. An important critical thinking tool, the principle states that 20 percent of causes determine 80 percent of results.
It’s crucial, then, that leaders develop plans that hone in on the 20 percent of factors that will have the greatest impact on their business — whether they are the course of the virus, the government’s response or changing consumer desires and demand.
Beyond using scenario mapping, business leaders can be agile in this uncertain time by keeping cash on hand. In these volatile times, liquidity is powerful. It gives leaders the flexibility to experiment, respond to new developments and leverage uncertainty.
As they plan, business leaders will naturally look at China as a model, since it is ahead of the U.S. in terms of reopening. And while there’s some evidence of a recovery in China, consumer demand seems to be returning very slowly. Spending at restaurants was actually lower in March than in February. In other words, even though aspects of the situation are looking better in China, at least from the outside, there remains a profound level of uncertainty.
Firms should also be thinking about new opportunities, even amid the crisis. Some firms have already shown signs of success in responding to the new environment. Sysco, a food-distribution firm, thoughtfully pivoted on the fly, reorganizing itself to serve grocery stores instead of restaurants. Others are trying to take advantage of long-term opportunities that have emerged from the crisis. Lysol, for example, is planning to work with Hilton hotels to develop new cleaning regimens to put customers more at ease.