new normal means new opportunities
There has never been a more important time for business leaders to take a positive strategic and transformational approach to the new opportunities that exist in the new normal.
Defensive strategies may offer survival today, but possibly decline in the future. Passive strategies risk leaving businesses exposed, and less able to thrive in the increasingly fast changing world.
The businesses that will be most successful in the future are those who see the new normal as new opportunities, and those who invest in business transformation for their future success.
What is the ‘new normal’?
The term ‘new normal’ has been an often used and occasionally misused term in recent months, it is useful therefore to establish what it really means and how the term has been relevant in the past.
A new normal is a state to which an economy, a society, or an environment settles following a crisis, when this differs from the situation that prevailed before the crisis.
During the COVID-19 pandemic, the term has had an increasing use to refer to the fundamental changes in human behaviour we have seen during and after the pandemic peak, and describes the emergence of a dramatically different new prevailing situation, and one that is expected to remain.
We have experienced ‘new normal’ before, such as following the great depression, the second world war, and more recently the disruption caused by the financial crisis of 2008. Each of these events creates a new world shaped by massive disruption, bringing unforeseen impacts to everyday life and to the relevance of businesses strategies that were shaped in a past environment and by previous assumptions.
Businesses and sectors who struggled in the old normal are those today with the most exposure and least resilience to weather the storm. Already many have not survived the crisis, and failures will continue, further adding to the impact of disruption and the world of the new normal. Even successful and resilient businesses today must review their paths for growth, understanding that the environment that previous strategies were formed in has changed forever.
Businesses already are recognising the fast-changing new demands and trends forming from such a period of crisis. During the height of the pandemic, many businesses were forced to change through rapid cost reduction, innovation, and the agility necessary to survive and remain relevant.
This disruption still exists and continues to develop in a fog of uncertainty, making it challenging to set clear strategic directions, and to form secure foundations that businesses can rebuild from. Large enterprises often have the internal capabilities to act with resilience, but for many small and medium sized enterprises these capabilities can be less so, and therefore the need to act is greater.
So how can businesses today already start to adjust and thrive, growing their value with the opportunities the ‘new normal’ can bring?
Denial is dangerous
A deep understanding of the ‘new normal’ reality is the first step.
No matter the potential opportunities, it is wise to build a positive approach to them by being clearly grounded in the reality of the current situation, the new normal itself and of the areas of uncertainty that still exist. Things are forecasted to be worse before they get better – readiness for that is an important first step to build future growth from.
I doubt there is anyone, let alone any business that have not already experienced significant impacts brought on by the covid pandemic. Everyone is aware of aspects of the new normal – especially those that have already brought tangible impacts.
However really understanding the situation, its future uncertainties and the many other significant changes which have been temporarily shifted away from the front pages is a cornerstone of any foundation to build success upon for the future.
The UK itself has been one of the countries most affected by the pandemic. Our heavy reliance on service industries and globalisation such as in lean global supply chains for our economic success, has brought a disproportionate effect to the UK, and increased our exposure and propensity to future risks such as second waves or high spikes of covid transmission.
In the UK there are already strong indicators that highlight a rapidly changing and challenging future ahead as a direct result of COVID -19.
Disrupted economic activity
Globally there are very concerning forecasts of likelihoods, which provide clear indicators to the UK as one of the world’s major economies. The World Economic Forum predicts a likelihood of prolonged global recession of 68.6%, with 55.9% of industries failing to recover. Seven of the top ten biggest impacts post COVID 19 in their recent analysis are economic.
The office for budget responsibility recently announced that there will be at least a 12% shrinking of the UK economy, the greatest decline for 300 years. We are however only seeing the tip of the iceberg, over Q3 and Q4 we will see the ending of the furlough scheme which has protected 9.3 million jobs, where the real consequences in terms of unemployment level and consumer confidence will be more visible.
Disrupted consumer activity
Deloitte's consumer confidence index highlighted strong pessimism of the UK consumer with falls of 18.3% in Q1 and 17.4% in Q2. This pessimism is fuelled by economic concerns where confidence has reduced by -88%, a 60% decline since Q4 2019.
Disrupted business activity
Already businesses are acting on their existing strategies and initiatives. Consultancy UK reported that over 57% of companies surveyed reported either postponed or cancelled projects because of COVID-19. with only 22% of companies stating no impact on project work today.
Such figures may demonstrate direct impacts for the business sector, but the underlying insight is of a stop and stagnation in planned activities in most businesses. Over 73% of companies stated their earnings will be negatively impacted in the coming 3-4 months.
Disruption beyond the pandemic
Beyond the direct impact of COVID -19 there are several other uncertainties and changes ahead in the new normal, that businesses will need to understand and prepare for in their strategies and scenario plans.
Brexit – at the time of writing both the EU and the UK government have raised their concerns in reaching agreement on the future trading status in a timely way. Such a situation is creating clouds of uncertainty and increased risk by pushing back the ability for business to prepare and plan.
Geopolitical – Our economic relationships with other countries such as China and the USA is made even more important through Brexit. However, our relationship with China is becoming increasingly strained, and political and social uncertainty exists in America at least until the end of this year.
Uncertainty of tariffs and market access in both cases compounds the fragility of global trade and supply chains that we already have experienced.
The future of the UK itself also may bring further considerations to take in the longer term. New elections to be held next May, are expected to strengthen the call for a second Scottish independence referendum, this time set against a backdrop of COVID – 19 handling, and a Brexit which was not voted for in Scotland. Many commentators believe Scottish independence is inevitable, not just a possibility.
The importance of a positive leadership mindset to the ‘new normal’ and new opportunities.
Business leaders have incredible demands placed on them today both in navigating their businesses through this storm, but also in leading their teams forward to calmer waters where businesses can thrive.
One critical factor that I want to highlight for business leaders and their approach, that has not been commented upon often, is the need to address ‘fear’ in an organisation early and directly.
It is understandable that fear is endemic today amongst people and throughout the business world. Fear brings several behaviours into play, and they are generally not favourable or sustainable to get the best from your teams and your business.
Fear is one of the greatest inhibitors of potential in both people individually but also on an organisation level. In a state of fear the natural behaviour is to be risk averse but avoiding risk may prevent acting on the potentials and new opportunities of the ‘new normal’.
If a ‘new normal’ situation is not so new, then there can be valuable lessons to take from the past and how others acted successfully when faced with a similar situation.
"a crisis brings out the best in us" Ingvar Kamprad – founder of IKEA.
During my many years working with IKEA which included during the last financial crisis, I am constantly reminded about the words of its founder Ingvar Kamprad. He was an entrepreneurial genius, who took the positive approach that ‘a crisis brings out the best in us’.
The meaning is that crisis forced the business to improve, be more efficient and to take a long-term view of growth. As a private company he always had the benefit of no shareholders to provide dividends to, and therefore was able to create huge reserves to face such crises and ensure the eternal survival of his beloved company. When a downturn emerged IKEA always viewed it as an opportunity to increase market share for example. Perhaps there is a lesson in that - to look more to building resiliency for long term success from your strategy, with the support of shareholders and other stakeholders in the current climate.
He also believed that ‘only those who are asleep make no mistakes’ and that ‘making mistakes is the privilege of the active. It is always the mediocre people who are negative, who spend their time proving that they were not wrong’. These wise words highlight that success will mean that it is necessary to make mistakes on the way to success – be positive, make mistakes and act quickly to correct when one is made.
In these times leaders need to concentrate on being visible to their people, communicating openly, honestly and with empathy so that others understand the challenges and the why behind the approaches being taken towards the new normal. In tough times people are looking for information and leadership, without this a negative information vacuum is created opposing the positive approach necessary to embrace the new opportunities.
Delivering improved business value - starting with your strategy
Understanding the current situation, also involves understanding what has changed for good in the new normal as part of a strategic review. These changes can offer new strategic opportunities and directions to generate increased business value.
The new normal will mean different things to different businesses based on their sectors and to an extent geography. There are clear movements and indicators that are relevant to all business in the ‘new normal’.
5 new normal movements
Moving towards affordability and improved value for money
With such economic challenges and heightened unemployment rates, affordability and value for money will drive customer behaviour for a considerable time. McKinsey has reported the expectation that consumers will continue to cut back on spending except for groceries and home entertainment, with big ticket purchases postponed.
Moving towards security and health
As the pandemic disruption was fuelled by concern for health, the continued uncertainty and risks will continue to form a movement towards low risk and the protection of health. Such a behaviour change will continue to strengthen online shopping and reduced travel.
Moving towards business with a purpose – people, society, and planet
Many - including the World Economic Forum - view the new normal as a time to reset the way business is done. For example, the competition for customers will bring increased importance to meeting their increasing desire to associate their spending with positive purpose.
Moving with an accelerated level of digitalisation
The pandemic has reportedly brought forward by five years the use of digitalisation, speeding up an already fast developing trend. Long term views of the future of how people work for example increasingly show what is possible through digitalisation, and how it can enable businesses to operate in a climate of physical disruption. These effects will be seen most in key areas of businesses value chains, with acceleration seen in automation and in strengthening supply chain capability. The value of digital transformation leadership has also been highlighted as a value generating capability essential for future success. Research by EY indicates that digital transformation leaders are 45% more likely to unlock annual revenue growth of more than 10% and are 50% more likely to see EBITDA increase by more than 15%.
Moving towards localisation
The disruption caused by the pandemic exposed the fragility of global supply chains and the resilience of lean manufacturing. This has brought a movement towards localisation at least as a part of a supply strategy to many businesses, which with uncertainty about tariffs in the future will continue to be present.
The ‘new normal’ however is not a static world – change is the only constant in life, and the increasing speed of change will also be a characteristic that will strengthen in the ‘new normal’.
Successful strategic approaches to consider and act upon
Invest in positive strategies to unlock the new opportunities
Often the best time to invest in bold and positive strategies is at times like these when your competitors are weak and exposed to disruption. This will place great demands on leadership, company culture, resources, and business agility. When bottom lines are pressurised, it is easy to look to cost reduction, but this alone can have a detrimental effect on value growth, and is unlikely to enable a business to take advantage of the new opportunities in the ‘new normal’. It often takes investment to grow value successfully.
Focus on your customers and their behaviour
Especially important in the world of the ‘new normal’ is to recognise that customers behaviours are changing and will continue to change at an accelerated rate.
Investment in market research, research and development and product development will provide a competitive advantage to enable you to identify and respond better to creating improved value by better meeting customers’ needs. Indeed, in a prolonged downturn, such insights can also go beyond new product innovation and lead to value added changes to your business model.
Strengthen your use of advertising and marketing
Often the best time to invest in the power of advertising and marketing is at times like these when your competitors are passive, and where you can secure greater long-term value growth through increased market share. During such downturns advertising costs tend to fall, meaning that the companies who can afford to invest in advertising aggressively, gain greater brand attention at a reduced price than following a downturn.
Look to long term success through forming partnerships, mergers, and strategic divestments.
Numerous consultancy studies have identified that M&As completed during downturns when premiums are lower and opportunities richer, outperform those completed during upturns significantly. Similarly, opportunities to merge or form strategic partnerships with suppliers or vendors can lead to increased value growth through new cost synergies and value generating activities, that are achieved through a larger value chain.
Take bold game changing strategies
The new normal is an opportunity to reset business culture - old ways of working and relationships are disrupted for ever. It is also an opportunity to fundamentally review and develop or reinvent your business model - for example shifting from supplying products, to supply services or outcomes.
Invest in people
Already many businesses have had or will have to adapt their costs, and inevitably this involves people. It is important therefore to consider this fully in the context of your ‘new normal’ strategy and opportunities, for example the retention and development of the talent needed to ignite and sustain your success for the future. Innovative approaches are needed in the new normal, to new ways of working, people’s development and in providing a sustainable and healthy work life balance.
Having a strategy is one thing but delivering the transformation to achieve it is another.
EY recently reported that ‘for transformation leaders, the pandemic will serve as the great accelerator to long-term value creation’. The pandemic has highlighted the importance of people to business and the economy, and why long-term value performance needs to be seen beyond just financials to incorporate and leverage the human factors of customers, employees, and society.
Our next evolvereia blog focuses on how you can translate your strategy into a transformative approach to deliver it, and how you can utilise the grassroots in your organisation to transform your business successfully.
#BusinessTransformation #ChangeManagement #People #NewNormal #StrategicLeadership #Strategy #Consumers #BusinessInsights #IKEA #Evolvereia
Paul Glass - Founder of evolvereia
evolvereia Blog - The New Normal
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