We are in unprecedented times. The uncertainty can be paralyzing. What should you do now to position your business for the best outcomes? Given immense complexity and unpredictability, how does a business even think about what to do to not only survive the chaos, but eventually to thrive?
Let’s bump two strong models up against each other, one for evaluating our complex circumstances, and the other for making the best resourcing decisions we can accordingly.
Step I (Applying the Strategy Under Uncertainty Model): Determine the level of uncertainty you would ascribe to your business and your industry right now. Brainstorm scenarios and corresponding alternative strategies based on analyzing factors you can predict. (Hint: Right now, it’s probably not Level 1 or even Level 2)
Level 3: Range of Futures
Identify a limited range of of potential scenarios. Even with uncertainty, there is value in exploring alternative outcomes and focusing on the trigger events that would suggest that the market is moving toward one or another scenario.
Consider the risk of pursuing a status quo strategy. At minimum, consider what you might do to ”reserve the right to play,” positioning yourself for the most likely outcomes.
Level 4: True Uncertainty
This stage of total ambiguity is temporary. With intersecting areas of great uncertainty – political, economic, healthcare – situation analysis at level four is highly qualitative. Yet, managers should avoid the urge to act on instinct alone.
Gain valuable strategic perspective by systematically working through what it is possible to know. Identify variables that determine how the market will evolve over time in order to adapt your strategy as new information becomes available.
Step II (Applying the Post-Recession Approaches Model): Now given a range of scenarios and potential strategies, you can craft a “Progressive” resourcing approach with the right mix of moves for your business. Results below reflect companies that made adjustments significantly more than their peers in 6 levers: # of employees, CoGS, SG&A, R&D, CAPX and PP&E.
A. Prevention-focused companies: Cut back further, on one or more of the six, and didn’t increased expenditures on any of them more than their competitors. 21% became leaders post-recession
B. Promotion-focused companies: Increased expenditure on at least one of the six and also did not decrease expenditure on any of them by more than peers. 26% became leaders post-recession
C. Pragmatic companies: Adopted both a prevention focus, by reducing CoGS and employees more than peers, and a promotion focus, by increasing SG&A, R&D, CAPX, or PP&E more than competitors. 29% became leaders post-recession.
D. Progressive companies: Reduced CoGS but didn’t cut employees more than their peers. Also allocated more resources, relative to their competitors, to market-related items such as SG&A and R&D and to asset-related items such as CAPX and PP&E. 37% became leaders post-recession
What kind of SG&A and R&D will have greatest longer term ROI? Focus on what brings you closer to your customer. Think relationship-building rather than sales. Invest in research to better understand customers and create (or harness existing) a Voice of Customer program to drive innovation.
Wrap-up: Decades of analysis offers collective wisdom for what has worked as businesses positioned themselves to succeed after previous recessions. By combining a deliberate and thorough assessment of risks and various uncertainties with a roadmap for optimized resourcing levels and types, you may maximize your chances at positioning for success as we all emerge!
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Models and frameworks can help CEOs, leadership teams, and Marketing teams organize their thinking by creating a common vocabulary and implementation longevity. The right framework can serve to vet new ideas, ensure that resources and investments remain aligned to an organization’s strategic priorities, and generally keep everyone rowing in the same direction.
In Marketing Model #1 on Growth CMOs vs Brand CMOs here, we talked about how the Marketing function is broadly shifting from a tactical to a strategic focus, with new titles like Chief Growth Officer and Chief Revenue Officer. In Marketing Model #2 here, we looked at how upstream strategic marketing rigor can reduce start-up failures. And in Model #3 here, we looked at important lessons that Seinfeld has for B2B Strategic Marketing.
Contact Allison Berey to explore a Fractional CMO relationship or for a Re-Emergence Calibration Diagnostic Allison@mcalibrate.com, www.mcalibrate.com 4/10/20
