“It’s not going away, and we have to face that reality.” That’s what the CEO and founder of a high-tech manufacturing startup with 180 employees told the leadership team in early July to convince them of the need to do a strategic pivot to address COVID.
Previously, the startup’s executives treated the pandemic as a day-to-day issue. They took things one step at a time, putting out the various fires that flared up: disruptions to its supply chain; cancelled orders by clients; marketing generating fewer and fewer leads; salespeople failing to meet quotas; plummeting employee morale and quickly-growing burnout.
Seeing more of the broad picture, the CEO realized the company was going in the wrong direction. One of the members of the Board recommended my recently-published book on strategic pivoting to adapt to COVID and plan for the post-pandemic recovery.
After a quick read, the CEO recognized the need for a serious re-evaluation of the company’s current business model. He felt shocked by the evidence that leading scientific authorities predict we may be dealing with COVID into 2024 and beyond.
Clearly, treating COVID as a day-to-day issue did not make good business sense; with its long-lasting impact, the pandemic represented a serious strategic threat, as well as a potential opportunity. The CEO convinced the other leadership team members that the company needed to do a strategic pivot to address COVID. He overcame reluctance from those battling the fires by pointing out the need to address the cause of the fire, rather than the symptoms.
He then had his executive assistant contact me and arrange for a facilitated strategic retreat dedicated to addressing COVID, which became my sixth of nine such engagements thus far. This article summarizes my experiences helping a range of companies – five startups, three established middle-market ones, and a business unit of a Fortune 300 company – pivot for our new abnormal reality.
Challenging Business Model Assumptions
Invariably, in all cases the first step involved reassessing assumptions about the organization’s business model. That meant an initial couple of brief meetings with the leadership team where we discussed the kind of fires they faced recently. The goal of these meetings involved pinpointing the underlying systemic assumptions, threats, and opportunities that might be revealed by such issues.
For example, the manufacturing startup faced a new challenge in selling its high-tech products. Known for their high quality, the products were flying off the shelf previously; the company had trouble keeping up with demand. It competed with lower-quality low-cost providers, but experienced operations people strongly preferred quality over quantity, driving adoption of the startup’s products.
Now, the startup’s salespeople reported that the decision-making process changed. Accounting put much more pressure on operations managers to prove that the quality of the products they purchased truly mattered to the bottom line. Couldn’t they get by with lower-cost options? What was the ROI?
While the manufacturing startup invested into innovation to ensure the quality of its high-tech products, it didn’t have a clear measurement of ROI for the innovation. After all, operations people focused on quality, not ROI. As a result, some of its customers, with apologies, chose to buy lower-cost alternatives.
An insurance company with over 1300 employees established before WWII faced a different sort of selling challenge. Its salespeople found that both existing customers and prospects responded strangely to the pandemic. Previous marketing materials pitches no longer resonated well. But customers still seemed willing to make (virtual) appointments, and at least some of the insurance sales reps fulfilled quotas, even overfulfilled them.
Other companies faced a range of similar problems, in sales and other areas. Often, the news came as a surprise to other members of the leadership team, even the CEO; all were busy fighting fires in their own areas.
Further questioning on my part revealed specific assumptions underlying all of these tendencies. These ranged from the unquestioning focus on innovation over measurement for the high-tech manufacturing startup, and the confidence in the effectiveness of its long-established marketing materials for the insurance company.
Gathering Internal Information
With more awareness of the business model assumptions challenged by the pandemic, the next step involved gathering internal information for a revised strategy and business model.
Each of the top leaders who led a department and would be present at the strategic retreat gathered feedback from their direct reports on how to revise each department’s goals, structure, and relationship to customers (external or internal) in light of the challenged assumptions in either of three scenarios (the CEO talked to the Board of Directors).
- In the first scenario, a vaccine with over 90% effectiveness would be found by Spring of 2021, and the pandemic mostly over by Spring of 2022.
- In the second, this vaccine would be found by Spring of 2022, and the pandemic mostly over by Spring of 2023.
- In the third, we would never find a vaccine more effective than 50%, just like we haven’t found a vaccine more effective than that for the flu.
The leadership team of a late-stage SaaS startup with over 500 employees discovered that the large majority of their direct reports reported feelings of work-from-home burnout and “Zoom fatigue” among employees as one of the most serious problems. They felt surprised by the extent of this problem, which wasn’t even mentioned as a potential issue in the CEO’s lengthy report.
Next, go on to the strategic retreat, which should be a two-day event, with one day for broad strategy and another for operationalizing the strategy. You can do the event in-person with appropriate social distancing or virtually. Having done both, I can say that the virtual one, while safer, loses out in your ability to connect to and read people effectively. Doing so is really important in the more heated parts of conversations about broad strategy shifts.
Avoid doing hybrid events, with some people inside the room and some present by videoconference, or even worse by phone. Having done a couple, I’ve seen those outside the room be completely left out of the more heated and emotional discussions that rise up when fundamental strategic pivots are on the table. I now refuse to do anything with hybrid elements, insisting on either all in-person or all-virtual.
Make sure to devote a whole day to the overarching shift in strategy for the business model. I’ve seen too many teams try to jump into the weeds of operations too early, without spending enough time on the broad strategic vision. It’s much more comfortable to talk about the pragmatics of operations – what executives do every day – rather than dealing with the uncertainty and ambiguity of revising a previously-functional but now-shaky business model.
Case in point, the high-tech manufacturing startup’s team had to struggle extensively with accepting the reality of changing marketplace demands. Its operations team established a sense of identity and team spirit around innovation as a core value; its marketing and sales made innovation a fundamental element of their pitches. They kept veering away from the reality of the need to shift from innovation to ROI measurement, and jumping into the weeds.
The CEO and I kept steering them back. I had to use the full range of my facilitation skills to keep the conversation on the right track, an especially challenging task since this was a virtual retreat.
The insurance company’s Chief Marketing Officer felt defensive about what she perceived as attacks on high-quality marketing materials. It took some time to help her realize the problem didn’t lie in the marketing itself, but in changing emotional motivations for purchasing in the pandemic. Previous marketing messages no longer resonated, but people still wanted insurance; they gravitated toward various sources of safety and control over their fates. Some of the more savvy salespeople who grasped this overfulfilled their quotas, while those who stuck to existing marketing materials underperformed. It was the pace of change that threw off the marketing department of this well-established, traditional insurance company. The next step involved an in-depth market research revision, informed by interviews with the most successful salespeople.
An area of concern shared by almost all companies dealt with work-from-home burnout and “Zoom fatigue.” In this area, as an expert in emotional and social intelligence, I could provide substantial support. It’s key to realize that the issues stemmed not simply from burnout, but from much more. These include dealing with:
- Pandemic-related mental health challenges such as anxiety/depression/trauma/grief
- COVID-related pragmatic challenges, such as kids staying home
- Social isolation from friends, family, and community events, as well as our previous outside hobbies and entertainment
- Poor work-from-home environments with inadequate home office setups
- Lack of skills in effective virtual communication and collaboration
- Being deprived of the fulfillment of those basic human needs – sense of connection, tribe, meaning and purpose – that we naturally get from wor
Even worse, the vast majority of us don’t realize we aren’t simply experiencing work-from-home burnout, and don’t recognize what we’re missing. To address this requires not simply financial support for home office setups or flex time to address pragmatic pandemic challenges. It also requires professional development in effective virtual communication and teamwork. Moreover, it requires professional development in emotional and social intelligence, to enable employees to recognize and address the emotional and social gaps left by the pandemic.
The next day should be focused on operationalizing the strategic changes in the business model. You need to address potential threats and opportunities in a variety of future scenarios, and revise the previous day’s strategy if needed. These scenarios need to include at least the three different COVID futures described above, and several different potential economic recovery scenarios (K, U, W, V, L).
A quickly-growing fintech startup of over 240 staff with offices in San Francisco, New York, and London struggled during strategy to determine its future culture. Allowing employees to work 100% remotely during COVID until a truly effective vaccine, the company found they had reasonably good productivity. Still, they decided to retain their office culture and go back to the office once COVID ended, aiming to hire only those around their offices.
Yet as they explored potential future scenarios, the leadership team realized that, in over 90% of the possible futures, they would not be going back to the office for two years or more. Given that the hiring plan meant most employees by that time would be virtual, never seeing their colleagues in person, the company’s culture would be mostly virtual. It would be much cheaper to hire people outside the areas around their offices; if the recovery did not go well, the company needed to save its dollars.
As a result, the company changed its strategy to permit hiring outside its office areas, but in time zones no more than an hour different from their three offices. In the future, it decided its management would need to come to the office, and other employees may choose to do so, with obligatory meetings once a quarter. It would also decrease its real estate footprint by 60%, due to decreased need.
An enterprise data analytics startup with over 120 staff recognized an unexpected opportunity. It had long been trying to get some lucrative client accounts held by several competitors. The startup’s CEO knew that most of the competitors’ leaders had a dismissive attitude toward COVID.
The startup decided to adjust its marketing and sales to demonstrate the steps it took to be pandemic proof. It would then have its salespeople call on the competitors’ client accounts and tell them about these steps. Then, it would offer to provide support if the pandemic lasted longer than the most optimistic predictions and the competitors couldn’t uphold their previous high standards.
Next Steps and Follow-Up
At the conclusion of the operations day, determine specific next steps for each new initiative that you discussed. Decide on approximate resources required and metrics of success. Choose one member of the leadership team accountable for implementing the initiative, with others potentially involved in the effort. Finally, prepare a report for the Board of Directors on the retreat, highlighting how the strategic pivot will help the company adapt to various scenarios of COVID and the economic recovery.
Follow up on all the next steps in the weekly leadership team meeting or whatever other leadership team forum your company already uses. Then, in a month, have a half-day event where you assess the strategy shift and make any corrections to strategy and/or implementation as needed. Do the same in three months.
Remember, the first step, always, is challenging assumptions. Second, gather internal information; don’t skip this step, assuming your leadership team knows what’s truly going on. Third, spend at least a day on revising your external and internal strategy. Fourth, operationalize your strategy, addressing threats and seizing opportunities in a variety of potential future scenarios. Fifth, commit to next steps, determining resources required, metrics of success, and who will be responsible for implementing each step, with a report to the Board on the event. Sixth, follow up regularly on all steps once a week, with a one-month and three-month half-day follow-ups revising both strategy and implementation as needed.
While nothing can guarantee success, I can guarantee that taking these steps will maximize your chances of not only surviving but thriving in these troubled times.
A strategic pivot will enable your company to survive and thrive during the COVID pandemic. Start by challenging assumptions about your internal and external business model. Then, revise your strategy and determine next steps to operationalize these changes…> Click to tweet
Questions to Consider (please share your answers below)
What are some of the assumptions that most need to be challenged in your company?
What might be potential revisions to your business model that will help you survive and thrive in the pandemic?
Which next steps will you take based on reading this article?
Image credit: pixabay/jamesoladujoye
Bio: An internationally-recognized thought leader known as the Disaster Avoidance Expert, Dr. Gleb Tsipursky is on a mission to protect leaders from dangerous judgment errors known as cognitive biases by developing the most effective decision-making strategies. A best-selling author, he is best known for Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (Career Press, 2019), The Blindspots Between Us: How to Overcome Unconscious Cognitive Bias and Build Better Relationships (New Harbinger, 2020), and Resilience: Adapt and Plan for the New Abnormal of the COVID-19 Coronavirus Pandemic (Changemakers Books, 2020). He published over 550 articles and gave more than 450 interviews to prominent venues such as Inc. Magazine, Entrepreneur, CBS News, Time, Business Insider, Government Executive, The Chronicle of Philanthropy, Fast Company, and elsewhere. His expertise comes from over 20 years of consulting, coaching, and speaking and training as the CEO of Disaster Avoidance Experts. It also stems from over 15 years in academia as a behavioral economist and cognitive neuroscientist. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, Twitter @gleb_tsipursky, Instagram @dr_gleb_tsipursky, LinkedIn, and register for his free Wise Decision Maker Course.