Entrepreneurial Responses: Planning for Uncertainty

By Ana Sofia Almagro, Dale Murray

While most businesses are struggling, the pandemic has also been an opportune time for businesses to be bold and experiment with new ideas. At Founders Intelligence, we have a privileged position in being able to look to investors, start-ups and corporates to understand how they are planning their responses.

Entrepreneurial Responses is a Founders Intelligence series exploring how companies are responding to the crisis and how they can consider taking action to mitigate the impacts of the downturn and emerge stronger.

What could business reactions look like?

Companies are quickly falling into three categories: Vulnerable, Resilient, and Thriving. Unfortunately, much like the virus itself, in our highly interconnected economic ecosystem one vulnerable company in a value chain can have knock-on effects on what might otherwise have been resilient companies.

Vulnerable companies have suffered large decreases in demand due to both lockdown and lack of digital readiness — for a new reality where many buyers’ single connection to the world is now solely via the internet.

• Example: AirBnb announced a 25% cut of its workforce as global travel comes to a complete halt.
• Key Actions: Assess the damage, focus on the bottom line while identifying alternative revenue sources.

Resilient companies produce essential products and services but were often not entirely ready to cope with a digital-only reality or a huge surge in demand. Often with thin margins before the crisis, many are being forced to consider how to cope with sudden shifts in demand patterns.

• Example: Ericsson is now investing more in open-source software and engaging customers in open-innovation efforts to speed the adoption of its 5G kit as teleconference calls support the remote-enabled workforce.
• Key Actions: Implement scaling infrastructure, and prepare bold strategic roadmap for sustained growth.

Thriving companies were already digital-ready, are experiencing surges in demand, and generally are structured to rapidly scale more easily.

• Example: Chinese last mile delivery giants (Alibaba, JD, Meituan) are all now using autonomous delivery robots and drones, with analysts expecting what was forecasted to take years will be a reality in 12–18 months.
• Key Actions: Focus on operational excellence and capture opportunistic and future-proofing growth.

What could planning for uncertainty look like?

Immediate reactions amid a crisis are often just towards defensive and short-term plays, but research shows that companies that balance top-line and bottom-line growth across business conditions thrive through and beyond a downturn. Finding that goldilocks balance is easier now with flexible digital tools and a greater pool of potential partners, but still requires a measured approach: activate & identify, empower & plan, reimagine.

In the short-term, Activate. Activate digital quick fixes and begin identifying strategies to cope with a longer-term downturn.

• With demand high for digital quick fixes, identify partners who can help you scale solutions quickly and better cope with demand, keeping in mind that small, agile players may be in a better position to help you act fast.
• Begin reviewing areas of where digital can help with operational efficiency — these may have already been identified through digital transformation initiatives and are worth reprioritising based on the current climate, with a focus on long-term efficiency.
• Identify digital business models that provide access to new markets even if they mean investing in new assets.

In the medium-term, Empower. gain insight into your consumers and plan boldly and creatively with a vision for sustained growth.

• Form relationships with those you trust to provide you the right kind of consumer insight as consumer demand is slowly revealed.
• Activate your CVC and M&A capability as increased demand for partial sales and favourable investment opportunities increase for strong market cap companies.
• Empower your innovation functions to maximise impact through the ability to rapidly test new business propositions and go to market quickly.

In the long-term, Reimagine. Dare to reimagine your business around your company values and ideals.

• Align across a balanced downturn strategy to account for both measured defensive and bold innovation plays.
• Fully incorporate other strategic imperatives like sustainability which are often win-win strategies in the hunt for operational efficiencies.
• Leverage and scale partnerships who bring complementary, assets, talent, expertise, and market access — this will be the key differentiator in thee next five years.

Having taken stock of the impact of COVID-19 to date, companies who will thrive will be thee ones who activate immediate responses and identify sustainable opportunities, empower their teams to respond effectively, and reimagine a future suited to a new reality. Ultimately, we believe they key to manoeuvring uncertainty will be a balanced portfolio of entrepreneurial responses.

For part 1 of the series go here.

Founders Intelligence is a team of entrepreneurs and strategy consultants. We help corporates understand how digitally enabled business models are affecting their industries and what to do about it.

Our team has extensive cross-category experience, working with Fannie Mae, Visa Europe, Shell, Unilever, Diageo and numerous other FTSE 100 / Fortune 500 companies.