How to Navigate the New Normal: Adapt.
The spring of 2020 ushered in numerous unexpected shocks. The COVID-19 pandemic, business shutdowns, civil unrest, high unemployment, and a volatile stock market are coalescing events that point to a highly uncertain business outlook. As we head into the summer and the second half of 2020, many ask once again: where do we go from here?
To navigate through this indeterminate period, executives must anticipate what their new normal will look like and how it will impact their business; use these insights to adapt, and take action to accelerate critical initiatives to drive success. As discussed in our previous article, the first step is to anticipate trends that impact your business. The next step in this journey is to adapt your strategy.
Insights gained from anticipating and thoroughly evaluating your new normal are the ingredients that will help you rethink, re-imagine and reset for the future. An important tenet of this step is to adapt your strategy, not engage in a wholesale strategic makeover. While some B2B business models will require more change than others, in most businesses former fact-based, solid strategies will remain resilient through this period and will only require adjustments, modifications and enhancements. In the commercial vehicle industry, for example, OEMs and Tier 1 suppliers previously anticipated a downturn in new vehicle orders and developed strategies based on these lower demand levels. However, the recent increase in last mile deliveries from online buying during the stay-at-home period suggests that last year’s strategic assumptions require a relook. Should this trend continue or even accelerate, leaders in this industry must alter their strategy to address the growing need for enhanced last mile delivery methods promoting the use of smaller vehicles, e-bikes, and/or drones.
A strategic update must consider how previously well-understood variables can fluctuate in the new normal. These variables include changes in expected market demand, shifts in your competitive landscape, and your current position within your ecosystem. Appreciating the degree of intensity, certainty, and speed in which these variables are changing will help you prioritize which dimensions of your strategy require reexamination.
Where to Play? New opportunities can be found with a refocus on different segments and/or new spaces that have emerged out of the shifting business-to-business landscape. For example, a supplier of power equipment which previously expected growth with oil & gas, hotels, and casino customers must now pivot to focus on market segments with better growth prospects such as data centers and healthcare. In addition to targeting different market segments, you must also consider changes underway with different applications — how your customer and your customer’s customer use your products and services. Underlying trends in your marketplace that previously signaled further disruption such as electrification, automation, additive manufacturing, and others could either be delayed or accelerated in your new normal.
A relook at where to play in your new normal must answer the following related questions:
- How should we revise our outlook?
- What markets and segments should we prioritize?
- Who should we partner with/acquire?
What to Bring to the Table? Lessons from past recoveries bode well for this period. OEMs and their suppliers, for example, should adapt their strategies to boost their aftermarket parts and services capabilities to mitigate the inevitable drop in customers’ new capital equipment investment. And, their offer and value proposition must accompany this approach. Solutions that promise near-term operating savings and efficiency based on subscriptions, leases, and minimal upfront expense will likely triumph over a large capital expenditure proposal.
As you think about altering your strategy, consider another important new macro trend —rapid adoption of digital tools. This spring, businesses worldwide were forced to quickly deploy work-on-the-edge digital devices and software which encouraged rapid adoption of digital tools. Unlike the tried and true approaches used during past recessions noted here earlier, the magnitude of digital adoption must be recognized and intertwined into your business model touching dimensions such as how to design and engineer new advanced solutions, how to go to market, and how to service your customers.
Your new normal will likely usher in both opportunities and challenges. To successfully navigate through this period, help your customers and their customers by bringing your organization’s best to the table. To do so, make sure these related questions are answered:
- Where are we advantaged and disadvantaged?
- What existing and new offerings should we invest in?
- How should we transform our business model?
What Time Frame? Change in demand expectations and the intensity and speed of market disruption underway are important indicators of how quickly you must adapt your current strategy. For example, some leaders in the residential home improvement market have already witnessed new customer behavior during the recent stay-at-home period, anticipated sustainable upcoming changes to their customers’ buying journey, and are well on their way toward altering their channel strategy to include new delivery models that enhance their customers’ experience. These leaders aim to move forward rapidly over the next 3-6 months with new initiatives to take 2-3 points of share by year end 2021.
Degree and Difficulty? As the business world moves faster, leaders are faced with an uncomfortable ultimatum—move quickly, keep up, be agile, and stay vigilant. Even as these pressures mount, it is just as important to recognize that not all organizations have the established capabilities, best in class tools, and/or cultural cadences to meet these challenges at a fast pace. Alterations to your strategy must therefore be pragmatic. As you modify your strategy to harness opportunities you must also avoid risk caused by overestimating your organization’s ability and culture to grapple with change.
Change is constant. We encourage you to think once again about where to play, and what to bring to the table. When refreshing your former strategy, you must also consider your time frame and risk appetite in order to be positioned for success in your new normal.
In our next article we will discuss the third component of the playbook: Accelerate.
This article is a continuation of our thoughts on the impact of the COVID-19 pandemic and the key strategic decisions B2B companies should be focusing on. You can find our other articles here:
How to Navigate the New Normal: Anticipate.
Where Do We Go From Here? Anticipate. Adapt. Accelerate.
Where Do We Go From Here? Get Ahead of the “New Normal”
Where Do We Go From Here? Go Where Your Customers Are: Online
Where Do We Go From Here? Prepare for the Next Wave of COVID-19 Disruption
Where Do We Go From Here? Protecting and Growing Revenue in the Short Term
Where Do We Go From Here? Preparing to Capture Demand
Where Do We Go From Here? What We Are Hearing…