Victoria’s current Lockdown is set to cost the Victorian economy as much as $2 billion a week, delay business investment and snuff out the recovery in the jobs market.
At the beginning of this second wave of the Coronavirus Lockdown, many businesses had to close their organisation’s doors or contract their activities. This was due to the government lockdown mandates or because customer numbers had diminished significantly. Most sectors of the Australian economy have been adversely affected by the pandemic
In the June quarter, Australian GDP has taken its biggest negative quarterly hit since records began and further adverse impacts to GDP are predicted for subsequent quarters. The OECD’s June 2020 Economic Outlook projected that the COVID-19 pandemic would see Australia’s GDP decline by around a further 5 per cent. However, this impact is not as drastic as comparable nations.
At ground level, all commercial activities and many employees have suffered the challenge of transitioning from wholesale to direct consumer sales. Whether fresh fish, meat, dairy or delicatessen produce, many appear to be making a success of this during lockdown.
A recent client acquisition that specialises in 3D printing has pivoted from print products for the construction industry to PPE face shields. The company realised fast that its true value is its agility and ability to source, ship and deliver product at speed. Strategic decisions depend heavily on context and while these tactical manoeuvres are aimed at keeping the business afloat during the pandemic, they could also be strategic turning points. Some will be winners, some losers.
As CFOs, our natural inclination would be to focus on the business fundamentals such as the liquidity and cash conservation. However in the spirit of Winston Churchill and “never letting a good crisis go to waste”, opportunities abound in all economic environments and throughout the globe there have been many innovative examples of businesses recognising market opportunities and pivoting their business to remain viable.
For example, the restaurant sector supply chains have adapted to preserve value and make their offer relevant. All very legitimate. There is, however, another vital consideration that needs addressing. As businesses start to plan for life after lockdown when trading resumes, the need to have a clear understanding of the business you are really in will be vital. “What business are we in?” can seem an immaterial question and the immediate, natural response might be to focus on the product or service being offered. Regardless of whether the offering is B2C or B2B, the key to unlocking the answer is to view this question from the customer’s perspective. Identifying the important reason for the existence for any business has everything to do with the value perceived by the market it serves and what that market actually sees as important. Those that do this well can flex and adapt both tactically and strategically as they understand the difference between customer orientation and product focus.
There are three points I have found invaluable to help identify a business’s value proposition:
1. Does your offering make me want to buy from you verses from a competitor? You may be selling into a busy, even crowded market so what makes that market lean your way? Convenience, quality, efficiency, customer service…? A great way to find out is to ask your existing customers why they do business with you. Also, take time to observe how customers actually use your goods and services. Finally, ask those that chose not to buy from you, why they didn’t. Do this by conducting customer surveys and if at all possible, have the CEO actively engaged in the process.
2. Are you creating a sense of value that is more than the basic expectation a buyer would normally have? This is all about the user experience and unfortunately too often is noticeable by its absence. There is a lot of research into what constitutes the basic expectations or hygiene factors in terms of service or product delivery, verses what are the motivational elements that make a difference. In a landscape where markets are fluxing and reshaping, how can any business redefine itself and forge a way forward? The question that seldom gets attention but is now critical to urgently ask; “what business are we really in?” Although commercial flights may be a memory for us all right now, I never did get my head around why people applaud a safe landing when that’s a basic expectation, isn’t it? Yet, so many sales pitches are focused on features verses the benefits. But if apart from arriving safely at the destination airport, if my whole journey was a delight, now that is worth celebrating. The motivational factors are all on the margin and address the “how” verses the “what” of every encounter. If your customer says, “My goodness. That was an amazing experience”, you are indeed creating value.
3. Does the proposition itself hold up? Understanding that any proposition worth its salt is all about the customer and their compelling reason to buy, not a business’s compelling reason to sell. This is at the heart of any sustainable offer. It means stepping back and seeing things from the customer/market perspective. “The wood for the trees.” The current “wood” means really getting our heads around how our clients will trade successfully in this new order, this new norm as it has been called. In summary, for any business anywhere it’s not about you or what will compel you to sell to buyers. It is whether the value you are offering is really causing a buyer to take positive action and buy from you. Because, if it isn’t then you’ve got to question your proposition and seek honest answers.
Jeff Bezos recently quoted Dr Seuss, in a letter to Amazon shareholders: “When something bad happens, you have three choices. You can either let it define you, let it destroy you, or you can let it strengthen you.”
Written by Peter O’Sullivan, Regional Director at The CFO Centre – Victoria