Find below a fun, insightful and right-on body of advice from Bill Wade. Bill is a career consultant, operator and writer for (most narrowly) the heavy-duty-truck parts and automotive parts channels. Known him for years. (Personal bias alert.) He is an excellent value-added editor of my stuff and others.
We are all in for tough times, but your competitors will really suffer if not disappear, IF you execute on Bill’s advice.
‘New Normal’ Is a Complete Fantasy
First, let’s look at our terminology. We need to define “normal” – before and now.
2001- 2019: “Average” … “the usual”
- conforming to a type, standard, or regular pattern
- according with, not deviating from a norm, rule, or principle
- relating to, involving, or being a normal curve or normal distribution
- the usual form, state, level, or amount
- expected state, level, amount
2020- 20xx: “Extraordinary” … “novel”
- nonconformist, odd, offbeat, unconventional, unorthodox
- unexampled, unprecedented, singular, unique, unparalleled
- abnormal, exceptional, strange,
- unusual, anomaly, deviation, rarity
In my pea brain, there is simply no way that the forces being unleashed by the infinite number of virus-induced changes…from wildlife patterns to human psychology…will suddenly stop emerging. My idea is that since entropy is the probable course, the best direction is simply to LEAD. The best synonyms here are initiate, define, incite.
Interestingly, in both Chinese and Japanese, the word “crisis” is written with two symbols signifying “danger” and “opportunity.” The truth is that every crisis, while deeply unsettling, also contains the seeds of opportunity.
So, What’s Up Doc?
Understand, until we have a complete understanding of testing and a vaccine or treatment, tough times will persist. So, have at least three, adjustable, downsizing plans for the best-, likely- and worst-case scenarios. Your preparation should address:
- How do we cope with this crisis now?
- What opportunities does this crisis create?
- What can be done to anticipate similar scale crises?
According to the Wall Street Journal, the emergence from the virus crisis will be fitful, fragile and partial, and a bit dystopian… with frequent temperature checks, increased monitoring of employees and customers, and, potentially, blood tests to determine whether workers have likely immunity to the virus.
They further predict, parroting the CDC and ‘interviewable’ business leaders, that operations won’t fully restart until an effective vaccine hits the market (Fill in your time estimate here!)
Initiate a Constructive Patience-to-Panic Ratio
Because we can’t know how long this uncertainty will last, we want to balance the panic and the patience. We can transform the crisis into chances to spot new opportunities if we creatively address people’s fears, uncertainties and lack of trust. Get as many key players as possible to concentrate on redesign for future:
- Value Creation… the three sides of the value triangle: inventory stratification, customer stratification and supplier stratification;
- Value Capture… your pricing and sales management strategies;
- Value Innovation… analyzing and innovating the customer experience (aligning voice of customer and your responses).
It’s a big ask to flip the patience-to-panic ratio, as there are so many unknowns.
The obvious primary cause of panic is the realization that some sort of ‘right-sizing’ will be (at least for the short or reopening time) part of the plan. One technique to encourage these key players to plan creatively is to outline two competing, logically opposite downsizing methods:
The Ancient Formula
We all have fallen back on financials to do what has worked in the past… even though present challenges are unique. Hardly a candidate for any leadership awards! This ‘chainsaw method’ taught to me years ago by my dad, Jim Moss, Bud Reese and some finance profs at Northwestern, couldn’t be simpler: cut all discretionary spending, delay all forward investment and other operating-costs as fast as the sales, margin dollars and profits fall.
Then, just sell harder (the same way) and be tough with channel “partners” in the zero-sum, win-lose concession struggles. Don’t forget to call out employee laggards, all of whom suffer from lack of any plan transparency or training on use of new tools.
The New Enlightenment
Start with results from net-profit analytics… you know that I push WayPoint Analytics …with a cost-to-serve model at the line/pick/sku level. Until this granular data is readily available on an ongoing, consistent basis, little can be done to change directions as fast as situations continue to morph.
- Measure the big, profit-loss cross-subsidies that exist among both customers and SKUs.
- Fix the losers to free-up personnel. Either lay off or Focus on most, net-profitable customers. Service value effectiveness improves for core customers – those that matter.
- Decide how aggressively to Downsize. Payroll costs drop faster than margin-dollars.
- Aggressively Pursue your competitors’ most profitable accounts – the ones that match your key account criteria. Your Chainsaw competitors will be under-staffed and delivering declining service to all customers. Use your multi-functional team focus to steal the ones you want. It will become second nature.
- Finally, Reinvent digitally with increased free cash-flow, agility and ‘can-do’ spirit. Let your most net-profitable customers (and suppliers) guide you in co-creating new, all-win, digitally-enabled, business models.
So, there you have it…
Tons of opportunity… a knot of challenges… an untested playing field…no fixed rules, no history book for guidance… tech advances at warp speed. Still, we have seen tougher business and medical problems before.
As in 1918 and the Spanish Flu… the 1930’s cataclysmic worldwide financial collapse… 1945 and the Free World reset to soar…Inflation of 21% with 13% interest rates in 1979… the Salk polio vaccine in 1954 and the worldwide smallpox eradication in 1980… all share one storyline.
That common thread…the idea that the United States has a set of characteristics that gives it a unique capacity…resources, resolve and responsibility… to help make the world a better, safer place. COVID is another chance for the US to shine.
Shine we will.
Note: Our friends in the press have done loads of helpful, insightful analysis… especially Modern Distribution Management (MDM), Industrial Distribution and Bruce Merrifield. I used their insights freely, as they tend to be much clearer on a number of aspects of the newest distribution situations. Don’t be surprised if you feel that you may have read some of this before.
*The word “normal” comes from Latin ‘normālis’ which means “made according to a carpenter’s square, forming a right angle, from norma for carpenter’s square”) Who Knew?