Dr. Ram Charan, thought leader and leading CEO advisor, shared his insights during our webinar How Leaders Should Prepare to Weather COVID-19. Charan advised CEO’s around the globe to take strategic steps now, to address unprecedented challenges presented by the COVID-19 pandemic and resulting economic crisis for at least 5 months.
Prepare for a 5-Month Recovery
Charan estimates a 5-month time frame for the US economy to get back on track. His projections are based on China’s response to the pandemic and how long it is taking for their economy to come back online. “They’re getting their factories open by 90%, but they are still slow. They can get demand inside, but there’s a lot of demand that it has taken them almost four months,” said Charan.
Since the US has had a slower response compared to China, Charan estimates it will be August or September before the economy picks up. This period is not short, and it calls for dynamic, urgent change to your business to navigate through. Here’s what you should do, according to Ram Charan:
Focus on Cash Flow
Managing cash flow is the most critical action leaders should be taking now. “Cash is the blood supply of a business,” Charan reminded the audience. He advised leaders to get cash out of receivables and to work closely with customers for payments. It is important to understand their pain points and work together to solve them.
Shorten your cash flow analysis to weekly. “Think in terms of the worst-case scenario, not doomsday,” said Charan, and use at least a 5-month timeline, through August or September, until the economy gets back on track.
“Cash is in short supply throughout the value chain,” Charan observed, advising leaders to get ahead of the curve now. While firms will have to reduce expenses, he advised against increasing credit lines which will create unnecessary long-term debt.
Redesign Your Core Around Customers
Your business can change significantly depending on the current and future needs of your customers. For current customers, leaders must ask two key questions: “What will be their compelling need right away? And how do we adjust ourselves?” Charan said to ensure business is aligned with current customers. For new customers, you’ll need to understand what the new market needs will be. Once you have those questions answered, you’ll have the basis for redesigning your core.
“Some products that you thought will be long term, may be needed now. Some products you thought will only be needed in the future, are needed now.” Charan believes that once you understand current and future customer needs, you should redesign your core by re-prioritizing what you deliver and how you deliver it.
Switch to Digital Tools
Digital tools have transformed how we do business during COVID-19. “It now takes less time to close conversations,” said Charan observing that people can communicate more quickly with others both inside and outside of the firm. Larger firms might cut middle management positions because there are fewer face-to-face meetings.
Technology may replace some of the decisions that employees must now make, so digital tools, and the training that goes along with them, will be necessary.
Charan advised that everyone in the organization should be learning as much as they can in the interim to master a digital skill set to serve future customer needs.
Get Ready for the Recovery
“We must believe that this shall pass,” said Charan, who believes in a future economic upswing. “The most important point of my conversation with you is the resilience, the belief, and the confidence, that we are going to get through this.”
As a result of this crisis, companies will look vastly different as they serve customers in new ways. Therefore, we urge you to actively evaluate your short-term changes, and prepare for your long-term business growth.
To help you with this, we created a free COVID-19 business diagnostic tool based on 4 engines—People, Strategy, Execution, and Cash, by compiling powerful insights from the webinar. Please click here to evaluate your current business standing.
For More Information
Egen Solutions is a Chicago-based digital consulting firm, building cloud-native data platforms that power data and analytics solutions. We are honored to have partnered with Dr. Charan and Christo Popov for their unique insights on this global crisis. For a recording of the webinar, How Leaders Should Prepare to Weather COVID-19, please click here.
Ram Charan is an author and consultant, with intimate relationships with a series of powerful CEOs. He helps leaders face their toughest challenges in the areas of growth, talent development, corporate governance and profitability. Ram has authored over 25 books since 1998 that have sold over 2 million copies in more than a dozen languages. Three of his books were Wall Street Journal bestsellers, including Execution, which he co authored with former Honeywell CEO Larry Bossidy.