Business is opening up again following the end of the lock-down. But the reality is, it is not going to be easy for some time. There are going to be economic shifts, unpredictable changes and the risk of further lockdowns. Markets and customers have changed beyond recognition. So, how does a business face all this? By making a massive transformation is the answer – the business equivalent of Clark Kent’s change to Superman. Unrecognisable.

Innovation and agility are going to be critical to survival and long-term business success and we are seeing the start of dramatic innovation in businesses worldwide. It is those that use this opportunity to get ahead of the competition that will survive. The businesses that can move quickly, transform, restructure and reinvent themselves are going to be the winners.

We have to change the way we think. We have never been here before, and those that do the groundwork for a less predictable future, prepare for rapid change and create a different kind of business security, will succeed. This innovation is changing both the way we work and what we do.

The way we work

Getting the business foundations right will need as much innovation as taking the business forward. Everything has to change in order to work in this new landscape. But if you get it right, then you will be flexible enough to protect your business, whatever the world throws at you.

Flexible financial modelling is going to be essential. Current models often lack the flexibility to make the kind of quick changes for scenario planning that will be needed to cope with further impacts from COVID-19. Being able to see the impact of potential problems quickly will allow you to deal with your current finical situation and prepare for anything to come. You will be able to make decisions and plan with evidence, as well as negotiate about, and manage, any debt you have built up during this period.

Financial modelling will allow you to see where:

• You may need to reorganise funding and debt.
• Other structural changes may be needed.
• Costs are likely to be too high.
• Products need to be abandoned and where you need to create new ones.

The people factor

The COVID-19 imperative of social distancing is forcing many companies to innovate, in terms of both working arrangements and customer interaction. Modelling the future and acting now, rather than reacting later, is going to save you.

In office-based service industries, working from home (WFH) has suddenly become the new normal. For most firms, productivity has not suffered, and in some cases has actually improved, according to Gartner analytics and three quarters of such firms plan to make at least part of this switch permanent*. Half of all employees are expected to be spending at least part of their time on WFH, compared with less than one-third before the crisis. **

With so many people working from home, there may be changes required to employee contracts and staffing levels. This all has to be thought through and, if necessary, new solutions need to be found. Firms are experimenting with the use of technologies for the remote monitoring of employee activity.

According to Gartner, around one in six firms are now passively tracking staff activity through techniques such as virtual clocking in and out, tracking work computer usage, and monitoring employee emails or internal communications/chat. Ensuring adequate productivity levels in the long term while maintaining staff morale will be a challenge and will take invention and imagination.

The property problem

It’s probable that the demand for office space is going to be permanently reduced. The impact for business may be dramatic cost savings. The impact for landlords and the owners of property is frightening. However, with the dramatic growth in home deliveries and online shopping, out of town warehouse facilities could rocket in price. If you are changing the way you deliver your product, you may need to innovate in terms of types and use of property. Good financial modelling will help you evaluate the impact of these types of changes and innovate your solutions.

The web impact

WFH is facilitated by existing web-based technologies, notably in the area of video conferencing. Platforms such as the spectacularly successful Zoom have existed for some time, but during the current crisis, their use has increased exponentially. Businesses have quickly learned how to use them effectively and have discovered that, for many purposes, they are a perfectly adequate replacement for face-to-face meetings. And where they eliminate the need for travel, they mean that meetings and conferences are a lot cheaper to organise and far more time efficient. More importantly, it has also created access to new markets and ways of delivering or demonstrating products to new targets and customers. This is going to impact on customer expectations and, therefore, your marketing structures, supply chain and delivery mechanisms.

The sectors with the most challenges

Retail

In the retail sector, high street businesses have obviously been hard hit by the crisis. Consequently, there has been a rush to step up online marketing and sales propositions. Big retailers have long had an online presence, but many small traditional retailers have now realised they must embrace e-commerce – innovate or perish. There has been a rush to integrate stock management systems with web-based sales channels.

Hospitality

The hospitality sector has also been hard hit, with businesses recognising that the road to recovery will be slow. Innovation in that sector is focussing on providing more personal space, accompanied by tighter sanitary regimes. Air conditioning systems are being urgently reviewed, given that the COVID-19 infection route is thought to be primarily airborne. Customer confidence will be key to rebuilding occupancy rates, with hotel chains keen to show guests that their safety is paramount. It is going to take some clever thinking.

Manufacturing

The COVID-19 crisis has posed many problems for manufacturers. In particular, it has demonstrated the fragility of just-in-time global supply chains, with most major manufacturers now reviewing their arrangements with a view to making them more robust. Innovations may well involve a move back to the past, with a greater reliance on local suppliers, and more stock holding close to the manufacturing base. Clearly, that’s likely to have cost implications, but against that, some manufacturers have discovered during the crisis that they’ve been able to maintain or even increase production despite a significant proportion of staff being off sick or self-isolating at home. There could be opportunities to shrink staffing levels permanently.

The innovation challenge

The bottom line is that everyone is facing challenges. We need to look at the structure of our businesses and test them to see if they can withstand rapid change and have the flexibility to adapt as quickly as we now need them to. If they do not meet these criteria then we need to restructure and transform our businesses. We need to innovate. We need to reinvent what we offer and how we do it. But if businesses can’t do it themselves, they must seek professional help. It is going to be essential to create the solid base upon which to innovate through this crisis and stride ahead into a bright future. So, get out your cape and become your own business’ superhero.

For more information, contact:

Greg Palfrey, Partner
Smith & Williamson
E: greg.palfrey@smithandwilliamson.com
W: www.smithandwilliamson.com