In March, almost every company responded to the pandemic and economic disruption by ducking into a defensive posture. Now, it’s time for many companies to play offense — not because the pandemic is over, but because it has created new opportunities.
That initial caution was completely understandable. Covid-19 was fatal to economic forecasts and business plans. Like many individuals and families, companies instinctively responded with spending cuts. That was especially true of many software startups, which didn’t have cash reserves or a base of customers established over years in business.
On a macro level, the pandemic precipitated historic collapses of GDP worldwide. But tough times or not, businesses scrambled to work, sell, and deliver products and services remotely.
The hope of a V-shaped recovery was overly optimistic; we’re not going to go back to the pre-Covid landscape any time soon. Many of the operational changes companies have made will prove permanent. So there’s both a need for new strategies and time to implement them.
Every recession speeds the adoption of new technology. The suddenness and non-economic origin of this one have made it a special test of flexibility and responsiveness.
Since many software companies’ fiscal year ends are January 31, we’ve now seen results for the first full quarter operating in this new Covid reality. Some companies have flourished.
If you have cash, or even better are one of the companies made even more relevant by the pandemic, now’s the time to go on the offensive. You can use this opportunity to acquire the talent you need to level up, solidify customer relationships, help your customers’ digital transformations, and make strategic acquisitions.
Strengthen your team
Some of the ways that businesses have adapted to the pandemic will become permanent. Remote work is here to stay. This means you can look for talent in other parts of the country, and even in other countries.
Companies based in tech hubs like Silicon Valley pay more for local talent because they’re in competition with rival employers, and employees have no choice but to live in places where costs are high.
Having access to more potential hires, or people happy to work for less money, are big advantages to remote work, but they may not be the most significant advantage. The lack of diversity in key talent positions is a chronic problem across tech.
Even if your company has worked hard to eliminate explicit bias in HR, work that is done on site and in person almost inevitably places a value on “fitting in”. Many people progress in their careers in part because they share similar backgrounds and interests with other employees.
Increasing diversity and fighting implicit bias — whether on the basis of gender, age, race, disability, sexual preference or non-conformity — is not only the right thing to do but many companies would benefit from having a more diverse set of perspectives.
When you eliminate the need to work on site, old commonalities become irrelevant. Employees’ progress is based only on the impact they make in the company and their output. Remote work can help unlock the talent in people who have been marginalized in Silicon Valley.
Hard times are the best times to build customer loyalty
This is a great time to strengthen customer relationships.
When a phone call begins with a customer saying, “I can’t pay you today, can I pay in 60 days?” it’s an awkward call to say the least — especially because you may have little choice but to say yes.
Your DSO’s may expand, but don’t consider the situation from a purely transactional point of view. Take this opportunity to listen to your customers and learn more about their challenges. If they’re under financial stress, is it an expense issue or a revenue issue?
New customers may be hard to come by, but you may be able to go deeper in helping the ones you already have. Many companies are trying to consolidate vendors; this means there’s an opportunity to do more for the customers you have, and become a strategic partner, not just another vendor.
Help in your clients’ digital transformation
Nike CEO John Donahoe recently told investors that despite a significant reduction in Q1 revenues, Nike’s apps had been downloaded millions of times during the recession; 30% of sales that quarter were direct-to-consumer — a goal that Nike had not expected to reach until 2023.
The suddenness of this recession, and the structural changes imposed by social distancing, forced Nike to compress years of change into a few months, all while facing pressures to minimize financial damage.
In another recent earnings call Satya Nadella pointed out that Microsoft Teams now has more than 75 million daily users. “We’ve seen two years’ worth of digital transformation in two months,” Nadella said.
This is your opportunity to provide value to customers by helping their digital transformations. Figure out what your clients need to evolve past this downturn; create and offer new products and features; target new segments and grow your addressable market. This is your opportunity to become more essential to your customers, become a platform play, and dig a deeper moat.
Bear in mind that customers are more focused on the bottom line. You may need to reframe your own narrative and position your product or service as a solution to the problems that customers have right now. Six months ago, Zoom was a video conferencing service. Today it enables remote work. Those two sentences may mean the same thing, but the second one’s a lot more powerful right now.
Consider expanding into new sectors or countries, and strategic acquisitions
You should consider repositioning resources to areas that are doing well, such as EdTech, telehealth, collaborative software, or e-commerce.
Many foreign markets, which appear to be rebounding faster at the moment, will continue to engage in practices intended to limit the spread of the virus. Covid will influence business everywhere for the foreseeable future. If you have a solution that works in your home market, now is a great time to look for customers internationally or seek strategic partnerships that will help you to gain access to new markets.
No less an investor than Warren Buffett said, “Be fearful when others are greedy, and greedy when others are fearful.”
Buffett is, of course, best known as an investor in equities, but his philosophy holds that you pay a high price for cheerful consensus and that good buys can be made when others are pessimistic. In our world, some startups have come to the end of their runways; investors have run out of patience or nerve.
That makes this a good time to consider strategic acquisitions, either of competitors — digging that deeper moat — or of complementary businesses that will allow you to provide a more essential or comprehensive suite of products or services.
The pandemic forced established companies to rethink some of the most basic aspects of their business models. Although there’s encouraging news about vaccines, it will shape the business environment for the next year at least; too long to make “waiting it out” a viable strategy for most companies.
Startups faced challenges too, but economic disruption inevitably speeds the adoption of new technology. Covid and the ensuing recession will thus create opportunities for companies that are flexible and responsive.
If you have some runway ahead of you, use this moment to strengthen your relationship with existing customers, help your customers’ digital transformations, and prove your value as a real strategic partner.
If you can afford it, consider expanding into new markets or economic sectors, and consider acquisitions. This is also the moment for strategic hiring, and a great time to tap the talent and new perspectives of people who have hitherto been underrepresented in tech.
If you’re a founder ready to shift from defense to offense, we’d love to hear from you.