This is not the time to panic. While the coming months of the coronavirus crisis will be difficult for any manager, the issues businesses will face fall into clear categories and phases. Each one has its own imperatives, and going through them one-by-one creates a path forward. The crisis is addressable. This paper lays out distinctions from the most analogous management challenge many of us have faced – the 2008 financial crisis – and then explores four phases the coronavirus crisis will pass through as well as four types of issues to address during each phase to enable both immediate and sustained success.
Unique Factors To Plan For
This is not the financial crisis of 2008, and there are fundamental differences in how to achieve success. The 2008 event was driven by structural imbalances in the economy which took time to work through; the resulting decline in business and consumer confidence then took years to rebuild. There was no specific event to mark the financial crisis’ clear conclusion, and our emergence from it was as erratic as it was gradual. Moreover, recovery efforts were underfunded. 2 While the coronavirus crisis dwarfs the financial crisis in both human and economic terms, the good news is that planning for it is more straightforward.
Leaving aside the sickness and human dimensions of our current times, consider these economic issues:
We will pass through four distinct phases of the COVID-19 pandemic (depicted in the preceding graphic).
There are clear knowns and uncertainties associated with each of these phases.
The underlying financial system is sound and well-capitalized, eliminating a huge unknown that we had a dozen years ago.
In most advanced economies, fiscal and monetary policy are providing significant funding, for when we feel confident enough to use it. This creates a new and known factor to fuel eventual recovery.
Taken together, these factors help to make it feasible to plan through this crisis.
Planning Through Crisis
We face abundant uncertainties about how the coronavirus crisis will unfold, but not all kinds of uncertainty are the same. By sorting through four types of uncertainties, and the appropriate actions for each one, you can determine the major challenges faced at each phase of the crisis and what your appropriate risk management strategies should be.
As shown in our Uncertainty Matrix graphic (next page), these uncertainties are:
A – Known Knowns: We usually don’t think of these as uncertainties at all, but perhaps we should. This is the quadrant where you should question what seem to be “truths.” To see the need for this discipline, just look at how rapidly consensus views on the coronavirus threat and mitigation actions shifted in the first weeks of the crisis: it was an overseas problem, it was a domestic problem that we could contain, it was critical to test to slow the spread, it was too late to test, and so on. Consensus views will change, so think hard about their underlying assumptions and what they mean for your business. Equally, think about what you “know” about your business that should be questioned, such as how your customers are feeling, what customer loyalty means right now, what services can be virtualized, and more.
B – Unknown Knowns: In this quadrant, we recognize that organizations often know more than the individuals charged with decision-making do. Today, that may mean that customer-facing staff have a sense of market sentiment which is deeper and more real-time than what executives think. Facility managers may have a clearer view as to the risks of losing essential staff due to illness. Find new ways to gain input quickly. Also, embrace virtual collaboration for your teams; this is not a time to suspend key meetings, but to embrace them as important ways to keep communication flowing and to uncover hidden truths.
C – Known Unknowns: Here, get rigorous about listing your assumptions. The assumptions should correspond to the crisis’ phases, and they should cover categories including market demand, business model, operational capabilities, regulatory risks, and others. Figure out the impact of each assumption, how they inter-relate, how you might rapidly build knowledge to mitigate the risk, and what you might do if distinct events materialize. Consider fast research to understand how the market is shifting; while it’s tempting to cut out seemingly discretionary expenditures, in a crisis it’s unwise to be flying blind.
D – Unknown Unknowns: This is the most challenging quadrant. Just as the coronavirus surprised us, other shocks may lie ahead. However, you can build your visibility to these shocks by developing scenarios, “war-gaming” how they will impact different types of stakeholders, and determining how their reactions will in turn affect your position. This discipline is particularly important as you look ahead toward the resolution of this crisis and what the aftermath will be for your industry and competitive position. There are so many variables in play that it may be impossible to predict with certainty where things land, but you can determine distinct routes for how events will unfold, what to look for to know which path you’re on, what the impact will be on your business, and what you should do about it.
Applying The Uncertainty Matrix To The Phases Of The Crisis
Applying these principles to the crisis’ phases, you can gain a sense of what’s most pertinent for your business. Of course, every business is different, but below are some factors most firms should consider. We focus on the external environment, rather than internal management issues, but the approach applies equally to internal issues as well.
The coronavirus crisis is enormous, but its structure makes the swirl of events surmountable. By deploying the methods described in this paper, you can stay ahead of change and keep a clear view of what must be done. The world is falling on hard times, but your business can be up to the challenge.