Albert Einstein said, “in the midst of every crisis, lies great opportunity.” Indeed, this is true. The word crisis stems from the Greek word “krino” which means to separate, judge, or decide. Normally, a crisis portends a parting of the ways from a point of uncertainty before events move on. The way a crisis ends depends on the way we treat it—as an opportunity or a threat.
The Covid-19 pandemic is touted as a crisis of unparallel ramifications. Inarguably it has impacted the way we live, work, and interact with our socio-economic ecosystem and precipitated a transformation across economies and businesses. This affords companies an opportunity to examine the status quo and redesign their existing strategies to emerge as stronger leaders in the next normal.
From crisis springs opportunity—and innovation
Throughout history, crisis triggers shocks and permanent shifts in the socio-economic environment but also fuels transformation through invention and innovation. Companies that recognise the opportunity in adversity and act on it without delay generate new ideas and innovations, while others struggle.
In the aftermath of the global financial crisis, a minority of companies across diverse industries worldwide did just that and went on to enjoy sustained superior performance.
The examples of invention and innovation that sprang from crises are impressive and include companies that have since become industry icons. Notably, the high performing companies come from a broad range of industries, thus showing that in the longer term, a company’s individual transformation efforts supersede the sector performance.
As of Nov. 30, 2020—nine months into the Covid-19 crisis—the impact on average total shareholder return (TSR) was far milder (+1%) than that of the global financial crisis nine months after it struck (-28%). And unlike the financial crisis, the Covid crisis has fueled winners in biopharma, medical technology, healthcare providers, tech, telecom, and fast-moving consumer goods.
The benefit of hindsight can be very valuable in creating a robust future path. There are significant learnings from companies that were able to successfully surmount the challenges of the past crisis, rebuild their business strategies, and transform their businesses. Our analysis uncovered five key practices that contributed to their success.
Five Key Practices
Move proactively: Deal-making and acquisitions are a key strategy of companies that seek opportunity in adversity. The top performers effectively managed their liquidity. In addition to implementing immediate cost-saving initiatives, they proactively invest in strategic acquisitions, applying the preemptive philosophy of “fix it before it breaks.” Tech giant Oracle, awash in cash before the global financial crisis, scooped up key investments at a discount following the financial crisis—a move that enabled the company to expand its portfolio and services.
Streamline the organisation: Top performers prepare their organisations for tough times by streamlining core operations, redesigning processes to capitalise on digital, and generating efficiencies so that they are well-prepared to run a lean ship in the time of crisis. This forward-looking approach contrasts with the reactive approach many organisations take—cutting budgets and reducing headcount—moves that often leave them weaker and less able to withstand the ongoing pressures of adversity.
Increase vitality: Amid increasing volatility, businesses need to be agile and recognise that no winning strategy can last long. Despite having a successful business model in place, the top performers in 2008 resisted the temptation to simply ride out the crisis. Instead, they increased their vitality: they enhanced their ability to explore new ideas, innovate, and renew their strategy. Amazon is a prime example of weathering the most severe downturns and continuing its growth trajectory. Following the 2008 financial crisis, Amazon transformed itself from bookseller to seller of almost anything that could be sold online. The next few years brought the most inspired innovations to date: Kindle, Amazon Echo (and Alexa), and Prime Video, which opened the door for Amazon to create its own video entertainment content.
Set a clear vision: Even as they seek new sources of growth, the top performers have had a clear, overarching vision. The individual projects to support those objectives needn’t always be successful, but the objectives remained steady, giving each organisation clear points of focus. Closer to home, the new generation of promoters at Ajanta Pharma pushed the company to abandon its legacy OTC drug business and instead focus on the specialty generic drug market. This focus gave the company a global orientation, helping it cultivate the specialty pharma market in India and eventually shifting ~70% of its portfolio to specialty drugs, most of which were launched (in a new formulation) for the first time in India.
Build resilience: It’s impossible to avoid future disruption. Therefore, top performers cultivate organisational resilience, not simply to withstand such shocks, but also to anticipate them. Most of these companies have a well-developed scenario-planning function, supported with talent from a wide range of backgrounds, to scan the horizon for emerging trends and potential disruptions. Consider Salesforce.com: the company has consistently won clients over, largely through its high-quality product releases. In addition, innovation is in the company’s DNA, a trait reflected in its reign among the Forbes’ list of Most Innovative Companies continuously for several years over the past decade.
Judging by the response—and as vaccines begin to be rolled out—it is probably cautiously optimistic to say that the worst of the Covid-19 crisis is over, at least in economic terms. Economies will stabilise and companies can once again focus on growth.
Today, as companies ruminate over the past year and the ramifications of Covid-19, they must also identify opportunities to re-write their growth playbook. Those that have followed the five key practices described here have a starting advantage and are poised to emerge stronger. Instead of playing catch up, they are already innovating new products, processes, and ways of working—as they plow the savings gleaned from efficiencies into their future growth. Will your company be among them?
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