More and more businesses are waking up to the grim, post-COVID-19 economic reality. The current downturn is a black swan event, but it’s most certainly not unprecedented. Economies of almost all countries have declined; India’s shrunk by about 23.9 per cent, the UK by 21.7 per cent, and the US by 9.1 per cent.
Economies globally have seen downturns earlier too, but how does history remember them, the Great Depression in the US, India’s 1990 balance of payment crisis, or the 1997 Asian financial crisis?
During the Great Depression, the US economy shrank by 50 per cent between 1929 and 1933, the 1997 Asian Financial Crisis setback economic growth in a number of ASEAN countries by nearly a decade. What are the lessons we can learn from the past are how can we mitigate the long-term economic impact of the current downturn?
It is evidently clear and well-documented that all financial crises result in large-scale human suffering, affecting both the rich and poor. Unemployment rate shoots up, businesses shutter, while vital sectors such as construction, retail, and agriculture suffer adversely.
Eventually, almost all economies recover, major sectors get back on their feet. However, this doesn’t mean all companies within those sectors make it. Some organisations survive, some rediscover themselves, and a few new ones spring up to capture a big share of their sector or create a niche.
Whatever the future is, organisations reach there not merely by luck but through perseverance and in-depth planning. But one thing that precedes both is the mindset of its leaders which in turn decides the fate of the organisation. The two common paths during this crisis are survival or revival.
Let’s take a look at these two options and explore why the current downturn could foster structural changes in the way businesses work. Great leaders often have a knack of reviving their organisation from the worst possible crisis, let’s look at their mindset and unique decision-making process.
Restructure or re-engineer? Adapting processes for efficiency
Businesses that merely try to survive see the economic downturn as an additional cost imposition. When work volumes come down, the easy, survival-oriented option is to restructure: cut the workforce, reduce hours, or to drop output levels. While this can help to offset the cost of the downturn in the short-term, the loss of capability profoundly impacts long-term business sustainability.
Process re-engineering provides businesses with an alternative approach that transforms the downturn into an opportunity. Rather than cutting output to keep costs down, businesses need to find more efficient and cost-effective ways to create products or to deliver services. Existing supply chains, especially those originating in East Asia, might be broken at present.
This creates an opportunity to tap into domestic lines of supply. Service-oriented businesses need to look at video and audio calling solutions to deliver value to customers in a cheaper and more flexible way than before.
Implementing a work-from-home policy will also enable continuity, particularly for businesses in the digital sector.
Vision and culture: where do you see these changes going?
COVID-19 and the economic downturn are also key inflexion points forcing businesses to do some serious thinking about who they are, in terms of business culture and vision. In the longterm, survival-oriented strategies only serve to highlight systematic issues with culture and vision.
Braver organisations willing to grapple with these questions will be able to align their continuity plans with a broader vision of who they are and what they’re doing. This can mean embracing digital solutions, not as stopgaps, but as core aspects of processes to follow post-COVID-19.
It can also mean committing to social responsibility, taking care of the workforce and the local community at a time when help is needed.
Survival or revival? The choice is yours
All businesses have been substantially impacted by the pandemic and subsequent lockdowns. When it comes to long-term resilience and sustainability, the question of survival versus revival becomes key. Businesses that focus just on short-term survival might get through the initial situation.
However, they’ll be in a far worse position to compete when things settle down than those businesses that see the pandemic as an opportunity for revival and reinvention. The entire Asian economy, on the whole, has been facing headwinds well before the pandemic started.
This could well be a key inflexion point dependent on how businesses across the country choose to respond.
Source: e27
