The life of firms in post Covid-19 era?
All markets and all economy stages are attractive for growing business, and often the problem does not lie in the external environment, as often, the best opportunity to build for success is during a period of adversity
Ideally, life-post/pre/during a crisis should all be similar in principles – the ‘WHAT’ does not change, merely the ‘HOW’ changes.
The core objective of all companies is to grow and, that too, in a predictable, profitable, and sustainable manner while ensuring they meet all their shared responsibilities towards all stakeholders - namely, first the Employees, then the Customers, and finally the collective community, regulators, bankers, vendors, partners, media, consumer groups, etc. In my experience and view, all markets and all economy stages are attractive for growing business, and often the problem does not lie in the external environment, as often, the best opportunity to build for success is during a period of adversity. In fact, while it may be difficult for most to accept, the solution mostly does NOT lie in focusing on right market, or right timing, or trying to find the right strategy, but on focusing on the BASICS.
For GROWTH…ANYTIME is a right time, ANY MARKET is a right market
In my view, ANYTIME is a right time, ANY MARKET is a right market, and strategies do not change irrespective of crisis/no-crisis. Mostly companies fail at different economic stages because they try to over-complicate the opportunity/competition assessment, or over-engineer the value proposition and strategy, and try to find solutions with consultants who often don’t have any commitment to executing the strategy that they sell to clients.
It is important to realise that the solution ALWAYS lies WITHIN. The mantra to GROW in any situation, (and especially in tougher times) is by simplifying matters, engaging more with all key stakeholders, in leading from the front, and not being over-awed by the belief that ‘times are tough’. Success is never easy, but the human mind over-complicates the concept> In reality, the truth is that ‘Times are never really tough (like the Protagoras paradox), but just that nothing good comes easy”.
What is then the solution to sustainable long-term growth?
In my experience, in most situations, the solution lies on factors that are largely first internal to organisations and not only on those that are external. The secret of growth in organisations lies in being close to the front-line which deals with the clients and is aware of the market. Without this, front-line people rarely develop a sense of ownership with the mission/vision of the business. The communication channels get fogged up and people don’t feel empowered, as organisational bureaucracy and internal processes strangely encourage people not to take initiative.
Even though the intent is the opposite, such organisations then unwittingly end up creating a culture of zero accountability, order-taking and one with excessive bureaucracy. The reason often is that the people at the top do not know the people at the front-line. Such leaders tend to assume the front-liners are not as capable and so insist that decision-making is centralised. This leads to the process becoming robotic and distant. In the bargain, the front-liner employees who are critical for success are precisely the ones who get short-changed.
Do we need ‘failure-free’ free OR ‘safe-to-Fail’ organisations?
No CEO or business leader should ever try to build an organisation which is failure-free, or where success is guaranteed, because that is fundamentally prone to stifling initiative. In fact, organisations should build a culture where it is ‘SAFE TO FAIL’ and where people at all levels, especially at the front-line, understand the importance of taking initiative within acceptable boundaries to serve the stakeholders in line with the firm’s mission/vision set. We have to remember, that a diverse team comes with the strength of ‘diversity in thought and actions’ and so a ‘one size fits all’ process mandated from the top is too rigid, and is almost always prone to failure or to creating dissonance.
Organisations need to create a culture where objectives are internalised
Ideally, a culture needs to be nurtured where smart people are hired and encouraged to use their own creative minds on how to achieve those objectives to address the unique requirements that each customer has, with simplicity. Such latitude, within the broader sets of rules, helps people at all levels to have an ‘owner mindset’ and people with such a mindset always creatively try to do what is right.
This is no different from how most people behave as ‘first time parents’. There are no training schools for parenting, but it is a quality that is intrinsic to our being through nature. It is this unique attribute that inherently defines the ‘mission’ of each parent to do the best for their child. Nature has ensured that each parent has the inherent vision to see their child succeed. However, the processes are left to each parents’ own judgment within parameters that are safe to fail. This works as a universal truth in nature, as only each parent can take the best care of their kids, and each parent is closest to the child’s needs, and each parent relentlessly focuses on the child’s well-being through a combination of care, occasional indulgence, and sometimes through sterner action. There is no prescribed formula on how to parent but it comes naturally to humans as a core instinct, even as people sometimes err within acceptable boundaries.
A company is no different…… the challenge of each CEO is to make the company be every employee’s child, and each employee to be made to feel culturally as its owner or parent. This mindset instils a clarity of purpose, and leads to a relentless customer centric focus that is the secret-sauce to ensure growth and success in any market condition.
The above is important for ‘sustainable growth’ but most companies find the above principles hard to accept, because short-sighted senior employees often believe these employees are less capable, and so end up being controlling and stifle their natural instinct to creatively do the best in a given situation.
Company boards and shareholders can help influence better results
The problem also lies in the fact that often company boards and shareholders reward ‘short term or point-in-time growth’ versus ‘sustainable long-term growth’… even though in their own lives they have a longer term approach with their own children’s education/training/nurturing or with the trees in their garden. The strongest trees grow over a long time, but once they do, they are hard to bring down. The more your nurture a child to learn and grow, the more they gain confidence. Such confidence ensures that they become more capable and develop stronger wings to fly. Such children grow as adults to deliver long term returns that are hugely accretive to their parents, families and to society.
Our world constantly changes, and businesses too must adapt
CRISES are a mere reflection of the process of change, expect that they tend to be more intense and harder to avoid. However, in this constant change, what is needed is to build enduring businesses that can sustain themselves and grow in a healthy manner – i.e. those that are able to absorb the losses, and survive, each time they are faced with adversity…. And also able to grow faster, or thrive, when the environment is more conducive and the businesses face tailwinds. Organizations that are built with such ‘wings’ and ‘isolators’, to use an aviation example, will always ‘thrive, survive, and thrive’ and show sustainable growth on a repeated and predictable basis. To achieve this, especially at the time of a crisis, an organization should engage closely with its above three main stakeholders, and remain committed to its mission/vision - which if chosen right and once set, should not be easily changed.
Reacting tactically to a crisis is dangerous for a business
CEOs and business leaders should not be tempted to try and ‘dramatically change their strategy in response to conditions created at the time of an adversity’. This confuses employees, customers and other stakeholders…..an organization behaving like this loses its sense of purpose. An organization that easily, in crisis, discards its business model that has been designed in line with its purpose and along customer focused needs, ends up creating confusion in the minds of all employees and other stakeholders. However tempting it may seem, such a drastic change or reaction is never recommended in the times of a crisis. In fact, in a crisis, the need for simplicity, consistency and a continued commitment to customer centricity actually goes up in the time of a crisis.
So it is very important to not react in a knee-jerk manner and to not easily discard business models, or rapidly change key staff members, or blame the environment, or to be over-imaginative and super-inventive in creating new strategies in response to a crisis. This creates sudden complexity, which is the opposite of what is needed in the midst of a crisis. Such hap-hazard reactions create fear and a feeling of being unsettled in employees which is contrary to what is required to nurture and sustain an owner’s mindset. This risks creating distrust in the minds of customers and stakeholders, leading to the perception of the business going awry and of the values of customer-centricity and stakeholder-centricity being rapidly lost.
Strangely, even the smartest people often make not-so-smart decisions in a crisis
The problem is most smart people believe the solution lies in changing things, rather than in keeping things simple, and remaining firm and committed to the original purpose by not succumbing to the urge to change tactics or processes in the midst of a storm. A repeatable and predicable business, requires consistency of response and consistency of tactic even in the midst of a storm.
Such businesses that remain focused on the ‘basics’ and follow predictable actions always show repeatable and predictable growth, as the ingenuity of the owner mindset leads intuitively to a set of improvements continuously as they navigate through crisis and smartly adjust to the changed conditions which continues to support survival and a positioning for growth as soon as conditions settle and improve.
Just as the human body needs to rest for working hard, even successful businesses need to pause in a healthy manner to be able to absorb the excessive stresses built and be prepared for fresh flight. This is no different than the benefits of a sound sleep-at-night in preparing people to be more energetic for the challenges of the following day. In the absence of enough rest at night, the mind becomes confused and stressed, making the person listless and devoid of energy during the day. So, if seen in proper perspective, the crisis that organizations experience periodically are important pauses in the cycle of businesses to pause, restore energy and make a faster flight forward. Like in nature, in organisations too, this is the basis of continuous and predicable growth.
Healthy growth trends are mostly non-linear…..Obliquity is natural
Like the branches of a tree, the growth of companies also do not follow a linear path. Therefore, companies and business leaders must first create a successful business model using the owner mindset, and then ‘scale’ it up by launching/implementing the same model in newer markets where they transplant a successful proposition and style it to local needs. The ‘WHAT’ doesn’t change, but the ‘HOW’ does.
However, in markets where the model is sustained and established, to grow further, companies should listen to client needs and imagine additional new products/services that they can provide to the same customers to up-sell/cross-sell to them or to provide for the additional evolving needs that they seek from the relationship. Such a process of ‘scoping’ up in markets helps build stronger bonds with stakeholders and customers, provides employees with new learning opportunities, and helps create an enduring relationship with clients, thereby enhancing lifetime customer earnings for the business.
For companies, PURPOSE is not a buzz-word….but is essential
A parent never disconnects from a child, even when they become adults and set up their own families and home. So, it is equally important that companies provides each employee with a purpose to remain connected with it, while empowering and enabling each to be customer-centric so as to enrich the resulting customer value proposition.
It is well-proven that customer needs are simple, and that they hate complexity. However often companies, in their desperate search for radical innovation, love to thrust complex solutions at customers, only to the disenchantment of tenured customers and employees. This is the biggest mistake a company can do, as any process of change should not only be in line with the prime purpose set and keeping an owners mindset, but also by ensuring that any new initiative or process should not hurt/disenfranchise existing staff/clients.
Care should be taken to ensure that any enhancements only add additional propositions that serve the evolving needs of a newer wave of clients, over the passage of time. The process of radical innovation should not be to thrust changes without a segmented customer approach. For example, digitization should not be forced down the throats of older clients who are tech-aliens just because the younger generations, who are tech-natives, prefer digital channels. Mistakenly, organizations often like to force change in customer habits for self-serving reasons like ‘expense or headcount saves’. This is when the sense-of-having-a-purpose FAILS, and leads to both employee and customer remorse.
For success, we must recognise that no two customers are alike
To meet the challenge of such diversity in customer-needs and the evolving needs of a generational mix of clients, it is always important to simultaneously look at the third arrow of growth, other than the first two arrows of ‘Scaling up’ and ‘scoping-up’, to one where growth is done by gradually transforming and evolving to leverage strategic adjacencies. This can often be achieved through use of newer processes, technology, and other disruptive ways to serve the changing client needs while remaining fundamental closer to the firm’s core proposition, purpose and customer promise.
It is important to ensure that, in such a process of evolution, the existing processes and channels are not eliminated for self-serving reasons but that the much-needed enhancements are grown adjacent to existing channels with a view to enhance the proposition and choices of each of the generationally evolving linkages and client needs.
Human behaviour is episodic….and to forget is purposeful
It is important to remember that the behaviour of stakeholders during crisis does not sustain and, fortunately, the world has more ‘periods of stability’ than of ‘incidences of crises. All human beings are episodic in their mind and naturally programmed to forget once the stimulus of crisis is over. Almost inevitably, some behaviour reverts to the mean, and some changes forever. This is a natural process of progression and evolution of customer needs
Therefore, it is important always to keep an owners mindset, so that each employee does for a company, how a parent would do for their child. It is always the wisest to avoid hobbies and to not pursue any initiative of growth simply because it seems like the logical easy thing to do during the crises or even when it is over.
Any change must be done with a lot of thought and after the crisis has passed. In the midst of the crisis, it is absolutely essential to remain firmly committed, just as a motorist would do in continuing to hold the steering wheel even more firmly if suddenly a very bumpy road is encountered. In fact, during such a roller-coaster bumpy ride, it is not wise to try using the time to re-imagine or re-design strategy, as such a shaky uncertain response will surely will cause an accident. In fact, such times are when it is important to be firm on purpose.
Once the turbulence of crisis is over, and stability returns, mostly people get calmer and often their behaviour and ‘WHAT’ they seek does not materially change. Even ‘How they seek it’ may not materially change right after, except the trends that had developed pre-crisis but were yet to be adopted, just get adopted faster – as we are seeing with the use of technology and digitized solutions in protracted Covid-phase. While largely behaviour may revert, but a significant part may also permanently alter.
Avoid re-imagining what doesn’t need to be re-imagined
We have all at some time experience feeling unsettled mid-flight when a plane hits turbulence and, most often, when smooth flight conditions return we soon get back to normal. We must learn from this in understanding that a predictable and advancing business needs no more. All it needs is the belief, trust, discipline, the latitude to navigate within acceptable boundaries, and the strongest faith in the front lines to ensure high responsiveness to the needs of stakeholders and the maturity to understand that such occasional turbulence is inevitable.
CRISES are an opportunity to pause, re-energise, reinforce
Most, smart and predictably growing companies view CRISES as an opportunity to pause, re-energise, and reinforce faith down the line as they commit to staying the course on their original purpose. Such businesses and teams always believe that the basic customer opportunity/need does not go away, and that any crisis is not to stay forever.
At such times of external uncertainty, it is smart to also look internally and build trust and support with an environment which is ‘safe to fail’ ….and, if in good times, a firm has invested in building its organizational strength with the right people hired and those with the right level of resourcefulness and initiative, then ‘GROWTH IS INEVITABLE, AND WILL AUTOMATICALLY PERPETUATE’. In fact, once the crisis passes, such a culture will help ensure that the business grows only faster and with greater predictability.
To achieve this winning streak, companies must be staffed right and the roles of each layer carefully understood. This can be best achieved by ensuring that businesses are rightly staffed with statured people at each of the level of the company.
The role of boards and shareholders is extremely critical in a crisis
The role of boards is especially critical in a crisis. Effective boards are those with with strong seasoning, experience and a collegiate culture where each member has the ability to express independence of mind. Such boards succeed in ‘facilitating management and in perpetuating strong oversight and governance at board and shareholder levels’. This provides confidence and assurance to all internal and external stakeholders, while empowering the management to confidently steer the bumps and pressures of the roller-coaster ride of any crisis.
Sometimes, boards are indifferent or wrongly staffed by shareholders. Such weak boards then often make the mistake of allowing all powers to be unhealthily centralized singly with the CEO and, without check and balance, CEOs may unknowingly influence shareholders to nominate board members with little/no knowledge of business complexities or those with reticent personalities who are unable/unwilling to exercise independence of mind. This kind of lax governance is a recipe for disaster , as such a board invariably lack competence in providing effective oversight over management. Such red-flags may sometimes be ignored by shareholders, leading to such a board repeatedly failing to execute against its fiduciary responsibilities to investors, community, employees, regulator, and minority shareholders.
Practicing good governance must be a theme and not a check-list
For health growth which is ‘repeatable, predictable and sustainable’, an organization must engage productively across all three organizational layers and build a culture of ‘sound governance’ which increasingly, in the modern evolving world, will carry a premium and is essential for promoting new growth on a sustained basis.
Therefore, it I important to start understanding that ‘Corporate governance’ involves more than just ensuring minimum compliance with legal and regulatory requirements. While such adherence is the minimum standard, for sustainable growth it involves a 'broader/overall shared responsibility’ by each - i.e. of the ‘Shareholder to ensure competence and independence in the board composition’, of the ‘Board to ensure effective oversight over the CEO and management team, and also of ensuring the proactive process of selection of a competent Management team', and of the 'Management to exercise independence of mind at the execution level’.
Organisations must never compromise on DOING-RIGHT
Effective controls need to be in place to ensure that board/management incumbents do not risk losing their positions for ‘doing what is right’. Only then can we be assured of fair business practices, prudent and transparent accounting, and sustainable value creation on a risk-reward balance basis. Only then can we also be sure that all these important layers have a common purpose, and are committed to a common mission/vision, while being committed to relentlessly supporting their front lines to nurture each to have an owner-mindset.
Only when all of this achieved holistically, can there be total RESONANCE with all participants resonating on purpose and action…. and then GROWTH is guaranteed!
Rajeev Kakar is a banker, board member, founder of Dunia Finance, global co-founder of Fullerton Financial Holdings and former Citibank CEO of the Turkey-MEA region. Views expressed are his own and do not reflect the newspaper's policy.
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