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Coronavirus Business Interruption survival will need agility not pride

Agility is essential for business survivalArguably, all successful businesses need to exercise agility in a fast-changing world, but never more so than now in the midst of the Coronavirus pandemic.
While there is nothing wrong with having pride in your business, pride is also associated with sticking doggedly to a plan that is not working due to a change of circumstances. Just because you have always done things one way doesn’t mean that way is always right in normal circumstances, let alone in abnormal ones like the current situation. In a crisis everything you do should be challenged and often fundamental change is necessary if a business is to survive.
Business agility is therefore a key attribute for dealing with adverse circumstances, to be creative and adapt to the changing environment. This in particular applies to three main areas: staff, customers and processes.
Social distancing has meant that for some businesses their staff have had to work remotely while others are needed in the office to maintain systems. This has involved setting up new policies to protect staff who need to come into work, while at the same time making it possible for others to work from home and keep in touch. Equipment for remote workers, remote access to central servers, online security, new ways of working together and new forms of communicating have all had to be learnt very quickly. Better this than some companies who simply closed their doors when the big bad wolf began prowling.
There are terrific examples of firms that have adapted by changing their business completely such as restaurants that have switched to offering ready-meals for either collection or delivery, enabling them to keep going after they were forced to close their doors as part of measures to contain the spread of the virus.
Others, among them distilleries, have switched their production lines to manufacture such products as hand sanitisers and engineering firms that now make ventilator equipment for hospitals.
Some clothing manufacturers have switched to producing hospital protective clothing of various types.
A wholesale bakery client has had to replace its traditional hotel and restaurant market and now supplies market stalls, independent retailers and farm shops with its turnover nearly back at pre Coronavirus levels, all in six weeks and very different from their initial assumption that they should cease baking.
Another client, a plant and equipment rental company, now supplies the new Nightingale hospitals when it too had assumed it should close down.
A local pub now sells garden bedding plants from its front gate and has shown far more initiative than the local garden centres that have all closed down.
With consumer behaviour having radically changed as a result of the self-isolation rules, many retailers have massively increased their online presence, although it has to be said that when people are worried about their futures and their finances there will inevitably be a reduction in the purchase of non-essentials even online.
Perhaps the most agile and innovative have been the smaller SMEs, particularly tech support companies and gyms, who have taken their services online, producing regular teaching and remote IT problem solving services to help people. Many have offered a combination of part-free and part paid-for services, which are likely to be remembered by those they have helped once life has returned to normal, however different that “normal” may turn out to be.
As economies move out of the containment phase and some restrictions are loosened or removed altogether, your business will need to remain agile. There is some good advice from Accenture here.
It will not be a case of returning to the status quo-ante and it is too soon to be able to assess how customer and client behaviour will have changed in the medium term, so it may be that your business will have to develop a permanently agile mind-set in order to survive and remain resilient in the face of changes in both consumer behaviour and structural change in industries and the economy.
This may mean changing your business model and plan and paying much more attention to markets and demand.
A prerequisite to surviving a crisis is the ability to overcome the natural feelings that can overtake rational thinking. Emotions such as fear and anxiety relating to the unknown, the unanticipated event, a loss of control and unpredictable outcome are all natural but they need to be suppressed to allow rational behaviour and creativity to emerge as the way of finding solutions and new initiatives for dealing with the new circumstances.
It doesn’t matter that many initiatives won’t work so long as pride doesn’t get in the way and you acknowledge you were wrong and try something different. Paralysis and inaction are the real enemy.
For details and my free guide covering all the government Coronavirus Interruption Support initiatives check out the Online Turnaround Guru website.
While it is fine to have some pride in how you may have steered your business through the early stages of this crisis and survived, it is worth remembering the old saying “pride comes before a fall” so it is worth remembering the lessons we gain from experience. And, while we don’t know what we don’t know, we can always keep looking for answers and keep asking questions.

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Banks, Lenders & Investors Finance Insolvency Rescue, Restructuring & Recovery

Two examples that justify agility when pursuing a retail turnaround

retail turnaround to prevent extinctionThis blog contrasts the fortunes of Majestic Wines with those of Debenhams as arguably examples that show how retail business can survive a rapidly changing environment.
There have been efforts by many struggling High Street retailers to improve their businesses by using an insolvency mechanism called the CVA (Company Voluntary Arrangement).
The most recent of these is Debenhams, which, having secured £200 million in new loans in March and followed with a pre-pack administration sale in early April, effectively wiping out its shareholders including the vociferous Mike Ashley who also owns Sports Direct and BHS.
It was acquired by new owners, a consortium of banks and hedge funds, who almost immediately launched a major store closure programme ultimately to involve 50 stores, in conjunction with a CVA aimed at persuading landlords to reduce the rent for remaining stores by up to 50%.
Debenhams’ sales had dropped by 7.4% in the previous six months but it has been argued that the store chain’s problems were more deeply rooted in its dinosaur-like lack of adaptation to the change in consumer buying habits.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “As an investment, Debenhams is a tale of woe from start to finish.
“The strategy since float was out of kilter with the changing habits of consumers. But even before the float [in 2006], its private equity owners had put the department store under financial pressure, by selling off a number of freeholds in favour of leasing them back.
“Hindsight is a wonderful thing, but the road to Debenhams’ ruin has been paved with poor decisions, as well as a dramatic shift towards digital shopping.”
Richard Lim, chief executive of Retail Economics said: “We should not understate the significance of this collapse. Debenhams has fallen victim to crippling levels of debt, which has paralysed its ability to pivot towards a more digital and experience-led retail model.
“Put simply, the business has been outmanoeuvred by more nimble competitors, failed to embrace change and was left with a tiring proposition. The industry is evolving fast and it paid the ultimate price.”
By contrast, a restructure announced by Majestic Wines demonstrates a fine example of retail turnaround agility, where the key word is “pivot”.
In 2015 Majestic bought Naked Wines, a subscription-based online business founded in Norwich by entrepreneur Rowan Gormley in 2008, and appointed Gormley as its CEO.
In March this year, he announced plans to close 200 Majestic stores and to rename the company as Naked Wines. According to Majestic almost 45% of its business came from online with a further 20% from international sales.
The Majestic business model had been to locate its outlets on cheaper out-of-town sites with parking and to sell wines sourced directly from producers in bulk only, in multiples of 12.
But with the change in consumer behaviour Gormley took the decision to restructure the business by pivoting it to online sales only – a potentially more lucrative option as it will release capital from the physical stores to invest in attracting more customers.
Mr Gormley believes that Naked Wines has the potential for strong sustainable growth and has said “We also believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.
His innovative restructuring may prove that his prediction of sales reaching £500m and of an increase in regular customer payments by 10-15% this financial year may well be correct.
There is no need for retail businesses to become dinosaurs but survival in a changing world requires vision and bold decisions.

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Business Development & Marketing Finance General

Climate change is an opportunity for SMEs

climate change effectsIn December 2018 the world’s leading scientists warned that there were only 12 years to get climate change under control with warming kept to a maximum of 1.5C or there would be significantly greater risks of drought, floods, extreme heat and poverty for hundreds of millions of people.
Such warnings often seem to fall on deaf ears, when it comes to economists and businesses, and even some politicians, notably US President Donald Trump, who has denied that climate change is a serious issue.
However, at December’s UN Climate Change summit in Katowice, Poland, the message seems to have struck home with some of the world’s largest investors, including pension funds, insurers and asset managers, who issued a Global Investment Statement warning that without urgent action there could be a financial crisis several times worse than the one in 2008. They demanded urgent cuts in carbon emissions and the phasing out of all coal burning.
All this may seem a long way from the day to day concerns of SMEs and larger businesses, especially amid the current worries of Brexit, the latest ONS (Office for National Statistics) figures for UK economic growth was near-stagnant in the last six months of the year and amid warnings from the World Bank that the Global Economy, too, was facing significant problems in 2019.
This theme was picked up in an article by the economist Ken Rogoff in the Guardian where he outlined the main risks which included a significant slowdown in China, “a rise in global long-term real interest rates and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.
The elephant in the room in both World Bank warnings and in Rogoff’s analysis is the assumption that there can be perpetual growth and that it is essential to both global and national economic health.
This ignores the fact that the earth has finite resources and that sooner or later they will run out.

Small is beautiful, sustainable growth and the benefits for SMEs

Clearly, there needs to be a change in thinking on many levels and we may be seeing the first signs, for example in consumer behaviour, which resulted in significantly lower spending in the run-up to Christmas.
This has been variously attributed in the UK to worries over jobs and Brexit, and to rising costs of such basics as energy supplies and local taxes.
A related influence on spending, however, has been the growing awareness among consumers of the environmental impact of goods they buy. Customers increasingly demand that goods be made from recycled, sustainable or natural materials and that their repackaging and transport-related impacts are minimal.
This underlying change is perhaps also exemplified by the woes of the motor manufacturing industry where sales of new cars and in particular diesel engines have been plummeting for more than a year.
While this tends to be attributed to uncertainty about the future of diesel-powered vehicles or rising raw materials costs given the low value of £Sterling, is it also possible that people are beginning to think harder about their need for and use of cars in the context of climate change? Equally, are people beginning to question the wisdom of constantly updating their wardrobes and their pursuit of the latest new “thing”?
In recent weeks there have been several interesting and thought-provoking articles in Wired, an online publication focusing on all things technological. They include one in November on Carbon Capture technology, which was greeted enthusiastically ten years ago, but whose development has struggled for funding since because although feasible, developing the technology for it to be useful at scale is difficult and it is hard for governments to justify the upfront costs.
In another article in January, there was a discussion of the potential for using AI (Artificial Intelligence) to help in the more efficient use of energy by predicting the demand peaks and troughs and adjusting supply accordingly in order to meet sustainable development goals.
Perhaps the most interesting article of all was by Bernice Lee on the theme of “small is beautiful”, an idea first proposed in 1973, by EF Schumacher. It was largely ignored by big businesses wedded to economies of scale as defined by Adam Smith, in a model that argued that scale and the division of labour lowers costs and increases efficiency.
However, Lee argues that the downsides of Smith’s model are more obvious today in that many traditional business giants have kept real wages low despite soaring profits and have benefited from offshoring, opaque supply chains and the short-termism of investors.
Big businesses also suffer from an inability to change their business models quickly or to be agile in meeting changing circumstances, not least those relating to climate change.
She argues that SMEs, on the other hand, have the advantage of agility, especially given the growth of such things as AI, cloud computing, of outsourcing back-office functions.
As a result, SMEs can be more creative, more innovative and are increasingly attracting the notice of larger businesses.  Therefore, there is more potential for SMEs to grow but also to lead the way to a more sustainable form of economic growth that does less damage to planet Earth.

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Business Development & Marketing General Turnaround

SMEs have the agility to win customers where big businesses fail

The latest quarterly analysis of consumer complaints from Ofcom, the telecoms regulator, has BT at the top of the list for the most complained-about broadband provider. Others in the top ten for the first three months of 2017 included Virgin Media (2nd) Plusnet and EE (3rd and 4th), while Vodaphone was most complained about mobile company for the second quarter running.
Yet, nothing seems to change, although it is hardly likely that such large companies either welcome the adverse reactions or fail to try to improve.
The explanation may lie in their very size but more likely it will be down to some level of complacency and a lack of customer focus.  Big corporations can be very complex structures with strictly laid-out chains of command and processes but they don’t like change, especially when they are booking profits.
Like an ocean-going super tanker that needs something like a mile to alter course to avoid a collision, their size, their segmentation and their systems and processes make it much harder to change their work practices sufficiently to make a visible difference.
If action has to be determined at senior level, passed down a chain of command to the front line and communicated as a new message to customer services it will take time for any changes to be effective or to be perceived by customers.

Agility offers flexible SMEs an advantage over large ones

man demonstrating yoga agilityThis presents huge opportunities for SMEs.
By their nature SMEs tend to be less hierarchical and the likelihood is that there is more direct communication between CEOs, managers and front-line team. Initiatives and new ideas can be rapidly implemented, and quickly abandoned if they aren’t working.
The SMEs’ strength lies in their ability to respond quickly if a problem arises.  If a change in a process needs to be addressed, providing they are nimble enough, they can implement change promptly and communicate it to everyone in the business.
Arguably, SMEs are always looking to improve their products or services and therefore open to new ideas without being hamstrung by a rigid hierarchy or processes.
This gives them an advantage in trying to win new customers, when their bigger competitors repeatedly fail to deliver.