This article originally featured on London First's blog.
The New Year ushered in a further wave of COVID-related restrictions, putting the brakes on businesses across Europe accelerating out of the pandemic in 2021.
Vaccination rollouts bring confidence that the world will eventually move to a more positive phase of recovery. However, mitigating factors including the impact of virus mutations on transmission rates plus the prospect of government financial support schemes tapering down to leave businesses fending for themselves means that the fog is unlikely to fully lift until 2022.
The critical question is: how can companies find the confidence to shift gears from such a heavy focus on immediate survival to more forward-looking value creation?
Of course, business doesn’t operate in a vacuum and stakeholder responses to these harsh realities will be critical in shaping the response. Will governments allow some business to fail, leading to larger insolvencies and how will lender behaviour change when the crutch of state support is eventually removed? Or will we see the implementation of carefully constructed extensions to combat maturities and liquidity shortfalls?
None of us know exactly how the recovery will manifest itself, but it is very likely that, within industries negatively impacted by COVID-19, the winners will be brave enough to recognize the lasting impacts, and plan and execute their transformations before the competition. By contrast, those who wait for perfect visibility or simply expect business performance to self-correct to 2019 levels will likely be behind the curve when conditions do eventually improve.
Switching boardroom planning mindsets from survival to a focus on long-term value creation will of course be practicable at different levels, depending on the anticipated recovery curve for a particular business sector and the unique dynamics of individual companies.
Given such unpredictability and volatility, moving away from a linear planning route to one that catalyses more flexible scenario-based planning approaches can help company leaders to:
- Identify challenges / opportunities and develop multiple scenarios to address these uncertainties
- Continuously iterate their strategy as conditions change
- Create stability that will ensure the long-term survivability and sustainability of their business.
Our new reality will likely settle somewhere between a reversion to prior norms (e.g. a significant return to office working) and a genuine “new normal” (e.g. fully remote working, heightened online dependence and more sustainability-minded consumer behaviour). However, the shades of grey between these two extremes reinforce the criticality of scenario planning, where the threats and opportunities posed by each can be analysed and prepared for.
Leadership teams may feel that now is simply too early to take long-term decisions on operational matters. Yet those who quickly find confidence in times of continued ambiguity and implement decisive planning actions in 2021 will be best positioned to take full advantage when recovery truly begins in earnest in 2022.