Time for market leaders to build a legacy
Nandu Nandkishore, Professor, Indian School of Business, opines that in the midst of the Covid-19 crisis, companies must work towards the broader issues facing society and offer consumers genuine solutions, while maintaining a leadership stance.
The Covid-19 pandemic and resultant lockdowns that have engulfed most parts of the world presents both serious challenges and unforeseen opportunities for companies. The first thing to understand is that demand is not down across the board. There are winners and losers. Many product and service categories are being consumed at home, as people are locked down. Categories where the out-of-home has shifted physically to in-home like food, hygiene, pharmaceuticals, business and demand are actually up. But correspondingly, out-of-home consumption of categories like food and travel have actually declined. Then again, there are categories where out-of-home has shifted to in-home virtually. Platforms like travel channels, Netflix, TV channels, Discovery, etc have seen demand grow because people are doing everything virtually now. So there has been a significant change in business models from three months ago to now.
Considering that the impact is different for businesses depending on where they operate, the response also has to be tailored accordingly. As we move ahead in the crisis, it is very important for companies to analyse how it impacts their specific sector, where their capabilities lie, and what is the most practical course of action going forward.
Are you in reset or fast forward mode?
The challenge is different if you are in a business where actually demand is growing today, or you are in a business where demand is declining. For the former, the problem is that of scaling supply, particularly when many factories may be shut. In addition, we face a scenario where many supply chains may be international and they have some constraints. Therefore, the challenge for these businesses is how to keep supplying demand. How do they find alternate supply chain routes that compensate current routes that could be closed or stressed? How do they achieve this in a manner without sacrificing quality and continuing to build trust for customers, employees and other stakeholders including shareholders?
For the ones whose business is affected, there are two primary challenges. The first is how can you control the cash bleed to ensure that your business stays viable, and is ready to come back when the lockdown is eventually lifted? So you need to ensure that you don’t go bust in the meantime because you don’t have cash. These businesses have to work very hard in renegotiating contracts, cutting down costs, and even asking employees to take voluntary cuts.
This should start from the top and go all the way down. It has to be positioned and packaged properly again in a manner that actually enhances trust of their employees. If presented properly, employees will understand and try to cooperate to the best of their ability. You will need motivated and competent employees when the business comes back.
The second priority is if you can do something to pivot your business model to turn the crisis into an opportunity. I have come across cases like alcohol companies that have shifted to make sanitisers; industrial companies that have shifted to making ventilators; apparel companies that have shifted to making PPEs and masks; restaurants that have shifted from on-premise consumption to delivery at home. I have also come across people who have shifted their on-premise business model to start offering grocery, as grocery stores are allowed to reopen.
The idea is to keep the cash flow going by operating in those categories where demand is still steady or growing. Depending on the business model and how your business is affected, these are going to be affected differently. Businesses also must not resort to price increases, as this is a time to build trust and keep supplying the product. You should utilise whatever distribution channels are available, be it the traditional kirana store or e-commerce, which are opening up.
Understanding the post-Covid-19 customer
Consumer behaviour is a key question here. The first thing we have to consider is whether the lockdown is going to be lifted completely in one go or will it be an ‘on-off, on-off’ model until such time that a vaccine comes to the market. At this point, nobody knows.
So businesses have to do some scenario planning based on various possibilities. In each of these scenarios, the way consumers behave will be very different. If it is an ‘off-on’ scenario, the consumers will very quickly figure out and there will be a sudden increase in stocking up of essential goods at home. There will not be a significant increase in out-of-home consumption in the initial phase.
Moreover, I think that there will be some behaviours in each of these three scenarios that will have changed permanently, and some that will revert. One of the behaviours that has probably changed permanently is the way people consume information, entertainment and education. We have probably shifted to a new paradigm where online will not go away. These sectors may not become 100% online, but they will not be 100% offline either. That is a big change in fundamental behaviour.
Travel is another thing that is not going to come back with a switch. Airlines will take a long time to scale up. Social distancing ensures they cannot have the same rules. What will this do to airline occupancy rates or hotel occupancy rates? Businesses have discovered, for example, that you can do meetings on Zoom and you don’t have to travel. Therefore a lot of business travel between airlines and hotels and taxis will actually be significantly reduced. Businesses will realise that this is not only a time saver, but also a money saver. So fundamental consumer behaviours will change.
People were already doing online browsing and offline shopping or vice versa. In the US for example, People are going to dealers to drive BMWs to get a touch and feel; eventually buying the BMW on e-commerce, because there was a better price available. So this culture of omni-channel kind of browsing and shopping was already happening earlier. Now it will accelerate even more. That is the shape of the new reality. Eventually the crowds will come back with some social protocols like how you cough, sneeze, etc. The mask may well become the fashion accessory of this decade like ties were fashion accessories earlier!
Communicate like a conscientious leader
When it comes to promotion, what is fairly obvious today is that all companies are cutting down on short-term sales promotion. Such promotions don’t make sense in today’s environment, because the focus is on the other three Ps : Product (quality), Price (stability), and Place ( ensuring availability).
At such times when you do communicate, the question of media mix certainly crops up. A lot of traditional media that people used like mass media, sports channels, IPL, etc are all gone. But there are other new high consumption channels emerging like news, Youtube, etc. So it’s just that viewership is shifting to different kinds of media. So you have to be careful what media you pick.
However, it is an opportunity for leading brands to take a leadership stance when it comes to brand-building. Lifebuoy is a brilliant example. The company’s communication tells customers to ‘wash their hands with any soap’. It takes a leader to be able to say that, and it builds trust from a consumer point of view. The leader is telling you to adopt the right behaviour by washing your hands properly, and use any soap. This just illustrates how there is a role for communication, provided it is targeted towards the broader issues that society is facing today and offering consumers and customers a solution to those issues with a leadership stance.
What is your legacy?
The present crisis is a moment, when there is a discontinuous change; where consumer behaviours are unlikely to go back to what they were before. Therefore, this is also a moment where the winners and losers will be long term. Companies that can adapt their strategies and cater to these new behaviours of customers will be the winners.
This will be the point where the new stars of tomorrow will be born. And a lot of stars of yesterday will disappear because they did not adapt fast enough. Thirty years from today, B Schools will be studying this crisis to tease out successful responses.
At the individual level and also at the brand level, a big thought should be about your legacy. How do you rise beyond yourself and actually do something that creates sustainable value for your brand and also at the same time, to help society to sustain, survive, prosper… thereby building loyalty.
Professor Nandu, Professor, Indian School of Business, has almost 40 years with commercial organizations including 26 years with Nestlé and leading businesses all over the world as a CEO. Nurturing innovation as an Intrapreneur as well as a Venture Capitalist, he has helped people and businesses grow and realise their potential.
A noted keynote speaker, and an author of several articles in HBR, he is now a Professor at the Indian School of Business. His client list as a consultant includes Essilor, The Coca-Cola Company, JW Marriot, Banco Commercial Romania, Standard Chartered Bank, and several other global companies. He continue to mentor startups like Livinguard AG, Vyn, the Mom’s Co Ltd, Global Gene Corp Ltd, MPharma and others.