Leading Your Business Through Pandemic
The COVID-19 pandemic and the resulting societal and economic shutdowns are delivering a shock to the global economy and to the broader fashion industry.
Date: 28 May 2020
Retail businesses are temporarily closed, brands are adjusting to declining customer spending, and workers in countries like India, Bangladesh, and China are furloughed because of reduced or cancelled orders. And an impending economic crisis is expected to wipe out more than 30% of the fashion industry’s business in 2020 alone.
Many companies are feeling their way towards understanding, reacting to, and learning lessons from rapidly unfolding events of COVID-19.
Here is a guidance for responding to unfolding events, communicating, and extracting and applying learnings:
Events are unfolding with astounding speed, and most of the news sources communicate updates every 72 hours, but they moved to a daily cycle, for updating data.
News organizations often focus on what’s new rather than the big picture, and they sometimes don’t distinguish between hard facts, soft facts, and speculation.
When exposed to fast changing information, we have a systematic tendency initially to overlook weak signals, then to overreact to emerging issues before we eventually take a more calibrated view. Critical thinking is crucial about the source of the information before acting on it.
Leaders might reasonably conclude that there is so much information and commentary available externally that they don’t need to do anything additional.
Creating and widely sharing a regularly updated summary of facts and implications is invaluable, so that time is not wasted debating what the facts are - or worse, making different assumptions about facts.
Employees will likely be exposed to conflicting information and feel anxious or confused about the best course of action. Be sure to communicate policies promptly, clearly, and in a balanced manner. Furthermore, communicate contextual information and the reasoning behind policies so that employees can deepen their own understanding and also take initiative in unanticipated situations, such as employee holidays in a restricted location or how to handle contractors. Make sure that travel policies are clear in terms of where employees can travel to, for what reasons, what authorizations are required and when the policy will be reviewed.
Acting on Information:
A Chinese proverb reminds us that great generals should issue commands in the morning and change them in the evening.But large organizations are rarely so flexible. Managers often resist disseminating plans until they are completely sure, and then they are reluctant to change them for fear of looking indecisive or misinformed, or of creating confusion in the organization.
A living document, with a time-stamped “best current view” is essential to learn and adapt in a rapidly changing situation.
Assembling a small trusted team and giving them enough leeway to make rapid tactical decisions is critical. Overly managing communications can be damaging when each day brings significant new information to light.
Use the clock speed of external events as a guideline for pacing the internal process, rather than starting with the latter as a given.
Attempt to stabilize supply chains by using safety stocks, alternative sources, and working with suppliers to solve bottlenecks. Where rapid solutions are not possible, co-develop plans, put in place interim solutions, and communicate plans to all relevant stakeholders.
It’s likely that the crisis will create unpredictable fluctuations. Put in place rapid-reporting cycles so that you can understand how your business is being affected, where mitigation is required, and how quickly operations are recovering.
A crisis doesn’t imply immunity from performance management, and sooner or later markets will judge which companies managed the challenge most effectively.
As a corporate citizen you should support others in your supply chain, industry, community, and local government. Consider how your business can contribute, be it in health care, communications, food, or some other domain.
Efficiency reigns in a stable world with no surprises, and this mindset is often dominant in large corporations. But the key goal in managing dynamic and unpredictable challenges is resilience - the ability to survive and thrive through unpredictable, changing, and potentially unfavorable events.
Access to additional manufacturing capacity can help smooth supply-chain fluctuations. In the short term, companies may need to look beyond normal sources for solutions, but in the longer term, redundancy can be designed in.
Having multiple approaches to fulfillment can be less efficient but more flexible and resilient in crisis situations. Equally a diversity of ideas can greatly enhance solution development. Put together a cognitively diverse crisis management team that will have more ideas about potential solutions, especially if the corporate culture encourages expression of and respect for diverse perspectives.
Highly integrated systems may be efficient, but they are vulnerable to avalanches of knock-on effects or even total system collapse if disturbed. In contrast, a modular system - where factories, organizational units or supply sources can be combined in different ways - offers greater resiliency. Ask how you can rewire your supply system in a modular manner both in the short and longer term.
Systems can be built for optimization and peak efficiency or they can be built for evolvability - constant improvement in the light of new opportunities, problems, or information.
There is no knowable right answer, and any predetermined answer is likely to be wrong or to become obsolete over time. But it is possible to iterate and learn towards more effective solutions. While many lessons will be learned in retrospect, doing something now, seeing what works and remobilizing around the results is likely to be most effective strategy in the short term.
We cannot predict the course of events or their impacts for Covid-19, but we can envision plausible downside scenarios and test resilience under these circumstances.
We can run scenarios for a widespread global epidemic, a multi-regional epidemic, and a rapidly contained epidemic, for example. Now that the focus has shifted from containment of the Covid-19 epidemic in China to preventing its establishment in new epicenters overseas, we have arrived at another inflection point, with very high uncertainty. It would be prudent for companies to take a fresh look at worst- case scenarios and develop contingency strategies against each.
Companies are stakeholders in wider industrial, economic, and social systems which are also under great stress. Those who fail to look at their supply chains or ecosystems holistically will have limited impact. Solutions that solve for an individual company at the expense of or neglecting the interests of others will create mistrust and damage the business in the longer term.
Conversely, support to customers, partners, health care, and social systems in a time of adversity can potentially create lasting goodwill and trust.
A key element of dealing with economic stress is to live one’s values precisely when we are most likely to forget them.
Preparing for the next crisis
Covid-19 is not a one-off challenge. We should expect additional phases to the current epidemic and additional epidemics in the future. Organizational responses to dynamic crises indicates that there is one variable which is most predictive of eventual success - preparation and preemption. Preparing for the next crisis (or the next phase of the current crisis) now is likely to be much more effective than an ad hoc, reactive response when the crisis actually hits.
Many companies run scenarios to create intellectual preparedness for unexpected situations. Scenarios must be updated and customized, however, in the light of the most material risks to a business at any given time. A war room set-up, with a small dedicated team empowered to decide and execute, can cut through organizational complexity.
Rather than heaving a sigh of relief and returning to normal routines when the crisis subsides, efforts should be made not to squander a valuable learning opportunity.
Even while the crisis is unfolding, responses and impacts should be documented to be later reviewed and lessons distilled.
Rapidly evolving situations expose existing organizational weaknesses, like an inability to make hard decisions or an excessive bias towards consensus, which constitute opportunities for improvement.
We should expect that the Covid-19 crisis will change our businesses and society in important ways. It is likely to change how companies configure their supply chains and reinforce the trend away from dependence on few mega-factories.
When the urgent part of the crisis has been navigated, companies should consider what this crisis changes and what they’ve learned so they can reflect them in their plans.