Tuesday, April 28, 2020

Restart, Then What?

Restart, Then What? 

[Editor's Note: We are all consumed by questions. It seems that every newscast and article is littered with questions...but no answers, because no one really knows. Anxiety and uncertainty abound. Some folks hope for the best; some fear the worst. It seems that asking many questions is a positive - as long as we plan to be adaptive as the future plays out. I hope you find the following article useful.        -dpm]
 
We are consumed by questions.
  • How pervasive will the Covid-19 pandemic be. Will it persist or resurge into the fall and flu season? Will it persist in 2021? Will there be definitive antigen tests to show who is resistant? When will a vaccine arrive?
  • Will my family and employees be able to stay safe and healthy?
  • How do I navigate my business through the health guidelines of social distancing, remote work? How will I need to configure the work space?
  • Could I take advantage of PPP and loan programs? How can I continue to conserve cash? Can I hold on to my key employees if they are furloughed?
 
These are questions every person and business person is asking and rightly so. Many small and lower middle market - even a number of larger - businesses are concerned with survival
 
What will the future look like? As we move through the coming weeks, we need to be looking at different views of what the future will look like. Everyone is focused on a restart. How we do that is critically important, but then what?
We wrote in 2009 that the economy was not going to "come back," because after each major recession, there are changes to behavior, expectations, and how we do business. And there were changes, regulations, etc., that impacted our business life. We adjusted. In many cases, it took several years to fully recover.
Because this pandemic has affected our health, our sense of security and safety, and our social habits - in addition to extreme damage to our economic health, it is much different than previous economic downturns. What will be the impact?
  • The recovery - will it be V-shaped, U-shaped, L-shaped .... or "Bathtub-shaped" (that is, a long U)
    • How fast will the recovery be? What will be the lingering effects?
    • How will the effects of the pandemic affect the way products and services are delivered?
    • What will our workplaces look like?
    • How will your business and your industry be changed?
      • Customers that once thought nothing about gathering at meetings, conferences, sporting events, restaurants, theatres, dealerships, etc. will now be less willing to assemble. How long will this last?
      • What will be the condition of your customers financial health, your suppliers financial health? How will it affect their spending habits?
        • Even if your products and services are B2B, what about the customers of your customers?
    • How will the sales process change?
  • With multiple trillions of liquidity into the system, what will be the impact on inflation?
What are the opportunities? Yes, there will be opportunities.
  • Opportunities to acquire companies that bring new business lines, new products.
  • Opportunities to bring in talent
  • Opportunities for new products and services that will accommodate changes in lifestyle, workstyle
 
Beware of unintentional changes to your culture. Many company cultures changed during 2008-2012 - they became "risk averse." Organizations rewarded those who were adept at cutting costs, avoiding risk, inwardly -focused.
 
In 2014, we were sitting in a client executive team meeting where the company was discussing a possible acquisition. This acquisition was a company that offered a complementary product line, had strong financials, a solid management team - and the price was reasonable. A great fit and the timing could not have been better.
One after another, the members of the executive team went around the table and each expressed doubts and reasons not to make the acquisition. The company culture had changed over the previous several years. They missed an incredible opportunity. A competitor made the acquisition and over the next several years emerged as a dominant player.
 
Need for Scenario Planning. Organizations need to be developing different scenarios of what the future might look like. We cannot predict the future - whether it be the balance of 2020, 2021, or the longer term. We need to evaluate different views of the future so that we can plan to be quick to adapt as a possible scenario unfolds.
Mitch Daniels, president of Purdue University just announced that he wants to open the university for the fall semester with a variety of scenarios and plans for doing so. Whether you agree with his logic or not, he said that we cannot afford to wait to see what happens; we need to put plans in place so that we can be prepared.
 
Hope is not a strategy. Waiting for things to pan out will leave us unprepared and behind the curve. Good leaders are planning out multiple scenarios so that their organizations can move as things evolve.
_________________________

We can help The Mead Consulting Group has been helping companies with scenario planning for many years. Prior to the 2008 downturn, it was mostly our largest clients that did scenario planning. Since the 2008 "black swan," many more of our lower middle market companies began to see the benefits of scenario planning.
We are conducting complimentary introductory meetings about scenario planning. If you would like to discuss how we might help your team, please contact Dave Mead at (303) 660-8135 or meaddp@meadconsultinggroup.com

Stay safe and healthy!
Best regards,
Dave Mead 

Monday, April 27, 2020

Getting the Restart Right: How to Lead When Nobody Has a Map



This article in Saturday's Wall Street Journal has some interesting insight for leaders trying to negotiate the "new normal."



Getting the Restart Right: How to Lead When Nobody Has a Map
After a sprint of crisis management, the real leadership test is what comes next. Returning to the familiar would be a mistake.
By Sam Walker
Updated April 25, 2020 12:46 am ET
Wall Street Journal, Saturday, April 25, 2020

For business leaders, the coronavirus pandemic has been a baptism in crisis management; an exercise in making gut-wrenching choices, staying calm, projecting confidence and providing comfort. Deep down, however, we all know that the real leadership test is yet to come.
In addition to the staggering human toll, this crisis has upended everything we thought we knew about finance and the global economy and exposed glaring operational weaknesses across business. Early predictions of a “V” shaped recovery have softened to a “U,” or possibly an “L” if we’re not careful.
When the Great Restart begins, many leaders will fall back on an idea once espoused by Machiavelli, who wrote: “The great majority of mankind are satisfied with appearances, as though they were realities.” They will try to reduce the anxiety in the air by restoring familiar routines, procedures and traditions. The problem is that business, as we knew it, cannot be recovered. It will need to be reinvented.
Before the pandemic, every company had problems. Many of them were negligible, so we lived with them. Whether it’s the robustness of the supply chain, the culture of meetings or the criteria we use to hire and promote, everything’s on the table now. The value may be difficult to extract, but there has never been a better opportunity to create positive, productive and lasting change.
Very few modern leaders have ever successfully navigated something like this. There is, however, one very useful example. And it’s not one you might expect.
The first indication of what Deng Xiaoping had in mind for China came in April 1974, when he flew to New York for a special session of the U.N. General Assembly.
When Deng Xiaoping, center, visited New York for a U.N. meeting in 1974, he made a special outing to Wall Street. He was already working on a plan that would redefine his country.

At the time, Mao Zedong was still in power and his Cultural Revolution—a brutal, top-down, ideologically driven reform campaign—had left the economy in shambles. Deng would not be formally installed as China’s paramount leader for another four years, but he was already working on a plan.
On April 14, Deng’s handlers booked a limousine to take him sightseeing. When they asked the 69-year-old Communist what New York landmarks he’d like to see, he had only one destination in mind.
“Wall Street,” he said.
Deng’s pilgrimage to the seat of American financial power didn’t come to light until a Harvard professor, Ezra Vogel, learned of it from Deng’s interpreter. In retrospect, however, it made perfect sense.
In the years that followed, Deng began a long, methodical program of free-market reforms that overturned decades of socialist dogma. In time, the move turned China into an economic power and helped millions lift themselves out of poverty. Against all odds, Deng reinvented the way China does business. To do so, however, he had to redefine China.
It may seem incongruous, given Beijing’s initial response to the coronavirus, to look to China for leadership guidance. But if you look closely, Deng Xiaoping has a lot in common with other leaders and executives who have overseen successful reinventions.
Added together, they offer an interesting playbook for the present.
Substance Over Style
Deng Xiaoping was a chunky man with melancholy eyes who stood 5 feet tall, smoked incessantly and spoke Mandarin with a heavy Sichuan accent. Unlike the charismatic Mao, he was easy to underestimate.
When Henry Kissinger met Deng for the first time in 1974, he found him “acerbic” and somewhat lacking in self-assurance and diplomatic refinement. (He later admitted he’d been wrong).
Deng made no attempt to spellbind people. In his 2011 book, “Deng Xiaoping and the Transformation of China,” Dr. Vogel noted that Deng didn’t talk very much. Instead of focusing on appearances, Deng perfected the subtler arts of leadership. In person, he was famously direct and blunt, but always engaged intensely and listened closely.
In the wake of the pandemic everyone, including leaders, will have work through grief and trauma without letting it affect their performance. Marc Andreessen, co-founder of the venture-capital firm Andreessen Horowitz, once wrote that the most difficult skill he had to learn as a chief executive “was the ability to manage my own psychology.”
Under Mao’s regime, Deng had been “purged” on occasion, but always made his way back. He trained himself to never show anger or frustration. He wouldn’t hesitate to remove people from power but he wasn't vindictive.
Deng’s modest, reserved approach isn’t one most business leaders prize, although it compares favorably to other leaders who’ve navigated uncertain times. During the pandemic, many leaders who share those traits also became trusted figures.
In his 2001 book “Good to Great,” Jim Collins found that most executives who led super-growth companies were, much like Deng, quiet, reserved and self-effacing. They possessed “indomitable will” but directed their ambition toward the organization and its goals, rather than themselves.
The lesson seems to be this: In moments of radical uncertainty, nobody cares about your God-given eloquence and magnetism. Your leadership is a function of how you behave. And behavior can be modified.
Revolution, Gradually
Deng knew full well that returning to the status quo was not an option. But he also understood that in an upended world, meaningful progress comes haltingly.
Rather than opening China’s markets by decree, Deng moved only as fast as practical and political realities allowed. He gradually gave local managers more freedom and encouraged indirect investments in light manufacturing. He didn’t dwell on setbacks or focus too much on the way things got done. “It doesn’t matter whether a cat is black or white,” he once said, “as long as it catches mice.”
When Hubert Joly took over as CEO of Best Buy in 2012, he faced a monumental turnaround challenge. There were scores of urgent planning decisions to make that might take months to fully judge. To limit paralysis by analysis, he decided to avoid launching big initiatives and begin by making lots of small plans and decisions that could easily be undone.
Hubert Joly faced a monumental challenge at Best Buy. He began by making lots of small plans.
“Instead of making some plan for the next six months,” he told an audience in 2018, “we’d get together to plan a week’s worth of work.” If his team wasn’t satisfied with its progress by the following week, they changed course.
Mr. Joly once likened his strategy to riding a bike for the first time. You don’t want to go too fast, but it’s a lot easier to make course corrections once you’re moving.
Pandemic or no pandemic, most business leaders are wired to take action. They assume that dramatic challenges demand equally dramatic remedies.
A better approach may be to think ambitiously but advance patiently.
Firing Snoopy
When Steven Kandarian became CEO of MetLife Inc., the company was bogged down by ultralow interest rates. Mr. Kandarian believed that a federal regulatory panel formed in the wake of the 2008 financial crisis might move to impose strict new requirements that could force him to break up the company.
So he beat them to the punch.
Mr. Kandarian made a “difficult” and “emotional” decision to spin off the bulk of MetLife’s U.S. life-insurance business, a unit that dated back to 1868. “There was a lot of attachment to that business in our company,” he said.
Then, MetLife made another painful decision. It decided to fire Snoopy, the company’s beloved longtime marketing mascot. In a statement, the company said Snoopy had served his purpose, but was no longer necessary since the company would no longer be selling much to consumers.
Severing these ties didn’t spook investors or customers. MetLife’s share price rose nearly 25% in two months, and net income more than tripled the following year.
As MetLife’s CEO Steven Kandarian made the difficult decision to spin off the company’s storied life-insurance business.
Deng Xiaoping wasn’t afraid to break sentimental attachments, either. He believed that Confucius, the highly influential conservative philosopher, had handcuffed China’s thinking and progress for 2,000 years. He quickly repudiated the Cultural Revolution and in 1982, described Mao as “seven parts good, three parts bad.”
In a time like the present, when the past has failed us, leaders don’t have the luxury to cling to sentiment. You can’t move forward unless you’re willing to break strong attachments to the past.
The Churchill Method
History has shown that periods of turbulence are sometimes necessary. But the leader who really matters is the one who comes next. Deng couldn’t have reformed China if Mao hadn’t broken the economy.
The tricky part for these leaders is figuring out how to motivate people.
In his new book, “The Splendid and the Vile,” Erik Larson describes how Winston Churchill quickly changed British public opinion about the looming prospect of war with Germany. His rhetorical strategy wasn’t complicated. He simply spoke hard truths, then ended on a note of optimism.
In May 1995, Bill Gates sent a long, impassioned memo to Microsoft employees, declaring an end to the company’s primary focus on software. “The Internet is a tidal wave,” he wrote. “It changes the rules.”

In 1995, Bill Gates sent a sobering memo to Microsoft employees.

The internet had to be elevated to “the highest level of importance,” he wrote, and every facet of Microsoft’s business needed to be rethought.
At the end of this sobering message, however, he inserted a Churchillian note, describing the shift as an incredible opportunity. “We enter this new era with some considerable strengths,” he wrote, that “position us very well to lead.”
Deng was also blunt about China’s challenges. He urged the Chinese people to “seek truth from facts.” But he also gave them hope by promising them a better future. “Socialism does not mean shared poverty,” he once said.
Most historians agree that Deng introduced relatively few new ideas. He tried to set a general course and create the right conditions for innovation, but he allowed others to work out the details. If local managers came up with promising innovations, he rewarded their initiative by expanding them. He knew that a search party of thousands beats a search party of one.
As business leaders prepare their employees for the possibility of more lockdowns, more layoffs and many abrupt course corrections, they shouldn’t sugarcoat the size of the challenge. But they also need to remind them of the strengths they’ve already shown, empower them to act, and above all, show some enthusiasm.
This crisis, like any crisis, is a once-in-a-lifetime opportunity to make significant, lasting changes.
Setting the Compass
In 2008, Howard Schulz returned as Starbucks CEO. He’d grown concerned that the company had lost the “essential magic” that had made its caf├ęs so popular. His agenda turned heavily on restoring the “emotional attachment” with customers and making stores feel like the “heart” of a neighborhood.
As the global financial crisis deepened and the company posted a 53% annual decline in net income, Mr. Schulz doubled down on those values. Starbucks retrained staff, opened forums where employees could share ideas, added music to stores, poured into social media and donated money to social causes.
The following year, this purveyor of $6 lattes saw its net income grow 21%. By 2012, it had more than tripled to $1.4 billion.
In this phase of the pandemic, people are still questioning everything. In light of this, any organization’s mission statement might seem like a disposable relic. But when the real work of rebuilding begins, people need something to believe.
The Great Restart
At some point, millions of rattled employees will return to work and begin adapting to the new realities of temperature checks, plexiglass shields, disposable desk pads, staggered shifts and devices that buzz when people get too close.
Some will thrive. Others will grow demoralized.
Comrade Xiaoping who died in 1997 never bothered to write a memoir, but if he were alive, he might advise leaders in this moment to think boldly but be patient.
On a recent podcast, IBM’s former CEO Ginni Rometty said the pandemic has reinforced “the value of adaptability.” In the future, she added, the most important quality any worker can possess may be “the propensity to learn.”
I’d argue that this also applies to leaders, especially now.
Mr. Walker, a former reporter and editor at The Wall Street Journal, is the author of “The Captain Class: A New Theory of Leadership” (Random House).