Business trends and challenges for the 'new now' after coronavirus.
A ‘new now’ is upon us, and Australian businesses are facing a dynamic environment. Prepare for the future with our coronavirus predictions for businesses.
- Ask the right questions to lead with confidence.
- Use data and analytics to inform action.
- Continue to manage cash pressures.
- Make sustainability part of your new now operations.
- Maintain organisational agility.
- Continue your operations with confidence.
The pandemic has been difficult for businesses across the country and for their customers. The Lowy Institute described the coronavirus economic impact as, “the most abrupt, savage and frightening economic shocks in the lifetime of most Australians. But the jolt was also short and unexpectedly shallow.” Economic activity that ceased was centred on hospitality (including restaurants, clubs and pubs), discretionary retail, local and international travel, entertainment and sport. The Treasurer announced in November 2020 that, “the lower-than-forecast take-up of the JobKeeper Payment extension in October is further evidence that Australia’s recovery from this once-in-a-century pandemic is well underway.”
Customers movements have been restricted and businesses have seen customers increasingly go online to buy goods and services. We’ve seen businesses change their operating models to adapt quickly, for example by embracing cloud technology to collaborate internally or by embracing digital and social media channels to engage customers.
Now, there are signs that confidence is returning. In November 2020 Roy Morgan Business Confidence saw a jump of 10.5% to 109.1 – the highest monthly reading for 14 months. There are state by state variations, South Australia, Western Australia, New South Wales, and Queensland all have business confidence in a positive territory whilst Victoria and Tasmania lag below the national average.
Quick and agile thinking has helped many businesses survive the pandemic so far. Continuing to respond to the business impact of COVID-19 requires organisations to navigate disruption and adapt. In May 2020, BCG suggested, “What we need to think about is not a “new normal” but a new reality, a “new now”. In this “new now”, Australian businesses are facing a dynamic environment. To help, we explore six areas of immediate focus to respond to business challenges and prepare for the future.
1. Ask the right questions to lead with confidence.
Inherent in accepting the new now is an acceptance that we can’t return to the “old normal”. A pitfall to watch for is asking the question, “How can we return to what we had before?” Instead leaders should consider the opportunity and ask, “How can we reimagine the business?” To help you find the solutions for your own context, it helps to find the right questions. Questions to help you navigate this time could include:
- How resilient are we, as individuals and as a business?
Organisational wellness begins with people being at their best. It’s been ten months since the first lockdown in Australia. It’s an uncertain time and we’re not sure how long the pandemic will last. In times of uncertainty, resilience is key to ensure we can continue to lead, plan and act. Individuals and organisations need to find ways to foster resilience.
To find ways to boost your:
- Have we got a comprehensive strategic plan and are we clear about our priorities?
Whether you are still adapting or want to recover and build back better, your organisation needs to have a plan that includes options for the short, medium and long-term. Whilst we may talk of a new now, precisely what it will mean for different parts of the country, businesses and industries is still unknown. To cater for this, we recommend that your plan should cater for different scenarios.
- Should we adapt our products, services or business to suit our customers?
There is one clear way to know the answer to this question. Ask your customers. By contacting your customers and having conversations with them/gathering insights from them you’ll be better placed to understand their immediate needs. What’s more by being customer centric, and demonstrating care, you’ll help build long-term loyalty.
To help you think broadly about the current and potential value you could bring to your customers, you’ll need to understand the problems or pain points they’re facing that you can help to address. Next, you’ll need to think about how you can reimagine your service or product offering to bring greater value to your customer.
During the year we’ve seen innovation in business which has focussed on COVID-19 related priorities and opportunities, for example gin distillery, Manly Spirits switched to producing hand sanitiser. As we move into the new now organisations need to harness their workforce and partners to find innovative business ideas and potential growth opportunities in a rapidly evolving marketplace.
Pivots whether large or small, should emerge from a clear understanding of what is working and what is not. Using data and insights as a guide to help decide on whether it’s right to pivot can ensure that you pivot in the right direction. The data may come from your existing customer relationship management systems, be derived from stakeholder surveys or feedback from focus groups. To make informed and effective decisions, the right insights then need to be accessible, interpretable, and actionable. This can be enabled by technology and a culture of making data easily available.
To help you, have a look at this resource from the Government: How to research your market.
2. Use data and analytics to inform action.
The pandemic has highlighted the importance of up to date data, analytics and insights to inform action. Going forwards, for a brighter future, consider being a data led business. A data-led business incorporates AI (artificial intelligence) into its decision making to have personalised conversations with customers and connect with them in the right way, in the right channel and at the right time. According to the Australian Government’s Department of Industry, Science, Energy and Resources, ‘there are considerable opportunities for Australian businesses in all industries that recognise the value of the data they hold and use it to create value for themselves and their customers while protecting citizens’ privacy and confidentiality.”
With these opportunities comes great responsibility. Foremost, customers need to see that their data is being used to help them, throughout their lifecycle from sales to services in order to have a trusted data relationship. This includes addressing concerns in a transparent way about how personal information will be accessed, shared and used.
To help you further consider this paper from Accenture: Data driven reinvention.
3. Continue to manage cash pressures.
Managing cash is critical for businesses at all times – whether during a pandemic or beyond in the new now. We’ve identified seven key considerations for businesses looking to improve cash flow, cost management and profitability:
- Understand your current financial position: Armed with that knowledge, you are better able to make information led decisions about your operations.
- Manage capital expenses: If you can pivot your business strategy or create a future competitive advantage, you could use this time to accelerate capital investment in new equipment. Otherwise, it may be worth considering delaying any investments in capital equipment until the current situation improves.
- Reduce your overheads: Consider if your costs can be structured differently or whether more costs can be variable.
- Manage your stock and inventory: Consider if your expenses can be structured differently or whether more costs can be variable.
- Manage your creditors: Consider contacting your creditors, including your suppliers and landlord, and asking for payment extensions.
- Manage your debtors: If your debtors, including tenants, are experiencing cash flow difficulties themselves, consider negotiating periodic payments.
- Review your strategy and adapt: Consider pivoting your business strategy to serve a different market which your equipment and people can quickly adapt to.
With this in mind, we’ve put together a handy checklist of cash flow and cost management strategies to help businesses.
4. Make sustainability part of your new now operations.
In recent years, the rise of ESG (Environmental, Social and Governance) concerns, has meant an increasing focus on evolving "business as usual" by recognising that effectively managing environmental and social issues is key to the long-term sustainability of both business and society. Being proactive in responding to ESG matters is becoming more pressing for businesses of all sizes and across sectors, to help achieve the Sustainable Development Goals.
It’s possible that COVID-19 may accelerate this trend. Many of the important questions that businesses have had to answer during the crisis, are ESG questions including:
- How should we ensure more resiliency in supply chain for essential goods such as food and medicine?
- How might a sustained period of “social distancing” bear influence on the adoption of AI and robotics and affect employees whose jobs cannot be done remotely including those in end to end waste management and distribution?
- How will consumer behaviour change in the long-term and what will this mean for the retail, hospitality and entertainment sectors?
- How can businesses be ready to respond to future crises that may occur and ensure business continuity in uncertain times?
In the new now, the impact of ESG on how businesses operate may open opportunities to differentiate operating models and their interaction with customers and partners and may also have material impacts on financial performance. Taking action on ESG can enable businesses to meet customer expectations, realise growth targets, reduce their operating costs and be better prepared for regulatory challenges.
Two reasons why an increased ESG focus can be good for business are:
i. Systems thinking enables resilience. System thinking helps businesses to navigate the complexity of the world after coronavirus and become more resilient to withstand shocks and stresses in their value chain. System thinking can enable businesses to catch unplanned consequences of innovations before they occur so they can be better managed.
ii. Creating value for the long-term. Making decisions and investments with the long-term in mind, can create more value, more jobs and contribute to growth than a narrow short-term approach. A long-term mindset which connects sustainability to business strategy requires a change in mindset. With a change in mindset we can ensure that we can shift to a system where we design out waste and pollution, keep products and materials in use and regenerate natural systems – the circular economy. Visit CSIRO to find out more circular economy and waste management.
5. Maintain organisational agility.
Businesses that survived this year have had to think and act fast. They adapted with less bureaucracy and people who were empowered. Their approaches to delivering services, collaboration internally and working with their suppliers changed. Many of the changes, including launching new business models, deploying new services/products, enabling people to work from home and shifting operations across geographies both locally and internationally, were successful despite not being an outcome of a long period of planning.
To sustain the benefits in the new now, agility is key and needs to be hardwired into new operating rhythms, operating models and be enabled by technology. Your business must decide how it will maintain velocity and performance, by evaluating how to empower people, enable them to collaborate and creating an agile organisation:
- With an increasingly distributed workforce. Working from home is here to stay and new norms will be needed. To help you review and adapt your working from home practices, consider this information for businesses from Safework Australia.
- Collaboration tools have enabled distributed workforces to maintain their operations during the pandemic. Transitioning to use these tools across businesses in the new now can help contribute to a more capable, empowered and even happier workforce. Inclusive use of collaboration tools is your business’ responsibility. To learn more about leading practices for collaboration in your business consider these tips from Digital NSW.
- Agile organisations with networks of teams operating in rapid learning and decision-making cycles differ from traditional organisations with hierarchies and risks of silos. Businesses are increasingly undertaking agile transformations. To learn more about agile organisations and what is needed to survive and thrive in a fast moving world see McKinsey & Co’s Agile Organisations.
6. Continue your operations with confidence.
Many businesses have become adept at crisis management this year. Whilst we are entering a new now, the role and importance of crisis management shouldn’t be diminished. Having a dedicated team to manage the response to the pandemic and other crisis that may occur, enables other leaders to focus on other parts of your business, including strategy, people, supply chain and financial management. To help, your crisis management team may wish to consider our continuity planning checklist.
In summary in this new now, businesses need to decide what actions to take to go beyond survival. The pandemic has no doubt been a strain on many businesses, but it has also presented opportunities. Businesses have adapted to the times, demonstrated their resilience, and found ways to maintain connection with their employees, customers and suppliers. Our guidance is to begin considering the actions your business can take now to emerge from this crisis stronger and build back better. To help Westpac has developed tips and tools to help keep your business running during the crisis and to help strengthen your recovery.
Content current as of January 2021.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. ©Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.