Your organisational success relies on your ability to grasp and adapt to your ‘next normal’, and by understanding the implications of Covid-19 on your organisation. It is imperative to take cognizance of both your internal and external business environment, impact on your customer needs and expectations. They help to reduce uncertainty of salient organisational matters, as they provide clarity to the state of your organisation in the new normal.
Organisational Diagnosis & Anticipating Changes
To begin, a rigourous diagnosis of your organisation is a pre-requisite. The purpose is to identify key organizational challenges, prospects, customer expectations and needs, that have been impacted over this continuing disruptive phase.
The diagnosis needs to be empirical, systemic and systematic. The objective is to capture a fact based and comprehensive analysis to make educated decisions with. It pays to take sufficient time to conduct a good quality diagnosis, prior to taking action. At later stages, this helps to avoid treating symptoms rather than problems, or worse, addressing the wrong problem!
This could serve as your primary diagnosis and represent a baseline. It pays to design a diagnosis that can be utilised iteratively, given the constant changes occurring in the new normal environment. The design has to be flexible, possibly modularised, easily understood and easily deployed. Outcomes from subsequent iterations, could then be compared to the primary diagnosis
and baseline. This is in order to ascertain differences in changes, for later appropriate corrective actions to be taken.
Changes in the external business landscape that impact your organisation, require to be captured as part of your diagnosis. This is important because external environmental changes implicate the type of actions to be taken by your organisation eg. sourcing from out of approved vendor list due to extended lockdown period that shrinks inventory due to irregular supply from usual vendors.
Changes can occur in real time or can be anticipated in the future. Changes in the future can be predictable or non-linear. One way to anticipate predictable change is to look at emerging trends that can cause tectonic changes in the industry. 4 types of trends(BrainMass, 2020) which are predictable are as follow:-
• Trend systematic – Overall or persistent, long-term upward or downward pattern of movement eg. Changes in technology towards digitalisation, demographics, wealth
• Seasonal with regular fluctuations eg. increase in umbrella sales due to the rainy weather,
• Cyclical i.e. up and down swings from peak(prosperity to contractions (recession) to trough (depression) to expansion (recovery or growth) eg. 10 year stock market bubble
• Irregular that can occur due to unforeseen circumstances, which are short in duration and non-repeating eg. flash floods.
Non-linear changes that occur are often abrupt, unexpected and difficult to predict. In our case, Covid-19 is unprecedented in the way that it became so quickly widespread across the globe. It was unparalled in the way that it fast forwarded anticipated changes from the past 3-4 years, to today eg. technology trend and digitalisation.
Framework for scenario building
Outcomes from your diagnosis, can be used to build various scenarios. Based on a spectrum from best to worst case, you could build various scenarios that help you to make educated decisions with. Key assumptions must be accounted for because they are reliable variables that prognosticate a specific scenario that could play out. Therefore, key assumptions must be well thought through for the scenario building exercise to be meaningful and useful.
McKinsey(Smit, S., Hirt, M., Buehler, K., Lund, S., Greenberg, E. & Govindarajan, A., 2020) published various scenarios of the spectrum and extent of Covid-19 on the economy. Their study illustrated in Diagram 1, relates ‘public health intervention’(y axis) to ‘effectiveness of gov. economic policy’(x axis). What we do hope to see are the scenarios shaded on the top right, where there are effective public-health intervention and effective government economic policies.
Diagram 1 illustrates what-if scenarios that include the spectrum from best and worst case scenarios eg. bottom left corner, where the pandemic escalates and there is prolonged economic downturn. Spelt out further, this means huge and many more clusters of red zones, further bankruptcies, credit defaults and potential banking crisis.
Diagram 1: GDP impact of Covid-19 spread, public-health response, and economic policies
As an example and in the context of Covid-19, you could super-impose outcomes from your diagnosis on to Diagram 1. This can help you to reflect on what-if scenarios for your organisation i.e. implications on your organisation in a worst case scenario as in the pandemic escalates with extended lockdown periods eg. indefinite periods of work-from-home setting. Or in a best case scenario i.e. pandemic has been effectively curtailed and government policies are revised to aggressively stimulate the economy eg. double labour force and run 24/7 production shifts that anticipates a triple fold in sales volume.
This provides a structured framework, to build various internal organisational scenarios with. Scenario building forms the basis for you to establish different options for your organisation. It is by undergoing this exercise that your confidence levels can increase – you can clearly reflect on different projected states. In short, it helps you ‘see’ various types of future that could play out for
your organisation…they are all important steps to take Prior to revising or devising commiserating strategies.
References
• BrainMass. (2020). 4 types of trends: trend, seasonal, cyclical and irregular. Retrieved from https://brainmass.com/business/business-management/4-types-of-trends-trend-seasonal-cyclical-and-irregular-120459
• Smit, S., Hirt, M., Buehler, K., Lund, S., Greenberg, E. & Govindarajan, A. (2020). Safeguarding our lives and our livelihoods: The imperative of our time. McKinsey & Company. Retrieved from https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/safeguarding-our-lives-and-our-livelihoods-the-imperative-of-our-time