Rajeswar Rao . Mar 20 . 3 min read

Navigating growth post the crisis

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.

The economic effect is significant and estimated to beat the recession of 2007 sub-prime crisis .

Mckinsey predicts that enterprises should Prepare to scale the recovery away from a -8% to -13% trough.  

 

However, the hope is that since the negative growth is not fundamental the rate of recovery is expected to be faster and more secular however muted recovery. This recovery cannot be termed as Growth at all rather it’s the navigating the crisis to safety and restoring the status quo before the crisis. Market capitalization has dropped significantly with a significant erosion of public wealth. With the hardest hit sectors very unlikely to restart quickly. The impact is deep, lengthy and long drawn recovery.

Multiple research on resilient systems shows that they generally have a few common characteristics which should be reflected in crisis responses.

  • Commitment: Identify the immediate challenges that COVID-19 crisis presents to the key stake holders -employees, customers and partners

 

  • Fortitude: Build internal fortitude-emotional, financial, process and compliance

  • Re-imagination: It’s going to be a new normal with no precedence to replicate. Re-imagine the “next normal” – what a discontinuous shift looks like, and implications for how the institution should reinvent in terms of skill sets, technology, the way one looks at customers and their risks, entire new risk management framework. regulatory and reporting environment would be drastically different

  • Reform: Be clear about how the environment in your industry (regulations, role of government) could evolve, new rules, tariffs, trade zones, Political, economic barriers

 

  • Redundancy: 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.

 

  • Diversity: 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 Every organization need to set up a cognitively diverse crisis management team that will have more ideas about potential solutions. Corporate cultures need to change quickly to encourage expression of and respect for diverse perspectives. Beware of treating the crisis in one-dimensional manner — as a financial or logistical problem only, and staff your crisis team accordingly.

 

  • Modularity: 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. Every organization need to ask itself on how they can rewire their supply system into being more a modular both in the short and longer term.

  • Evolvability: 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. Organizations which evolved over a significant period of time have accumulated multiple layers of decision making, have become more bureaucratic and less decisive. Responses to dynamic crises like Covid-19 put a premium on evolvability, and speed of decision making. There is no knowable right answer, and any predetermined answer is likely to be wrong or to become obsolete over time.While many lessons will be learned in retrospect, doing something now, seeing what works and re mobilizing around the results is likely to be most effective strategy in the short term.

  • Prudence: No one can predict the course of events or their impacts for Covid-19 but can envision plausible downside and worst-case scenarios and test organization resilience under these circumstances. This is where the robustness of the risk planning, coming up with multiple scenarios and testing under various crisis conditions from moderate to severe to critical at highest levels of uncertaining. Its good be pessimist sometimes. It would be prudent for companies to take a fresh look at worst-case scenarios and develop contingency strategies against each.

  • Value driven business: Crisis is secular and does not pick and choose when it hits. No organization is spared be it big or small. 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.  The challenge lies for smaller companies which either cannot invest in building robust risk models, or donot have deep cash reserves to tap in or even the human capital which can stay long enough to sail through. The market and competition would be brutal during the recovery stage. A key element of dealing with economic stress is to live one’s values precisely when we are most likely to forget them.

 

  • Nerve center: Mckinsey Managing across 5Rs (Resolve, Resilience, Return, Re imagination and Reform) requires a new architecture: Nerve Center “Team of teams” with clear roles, responsibilities, and decision authority

 

The road to recovery will be long, tedious. The crisis will leave some permanent scars in the organisations be it cultural, processes their business models and the way they get along their businesses. Its time to shed some old ways, hold on and fortify the value systems and rebuild an entrepreneurial and animal spirit for a new normal and for new world order.