Contingency Planning

Contingency Planning

Contingency planning for the next few months.

In my article on contingency plans for the Covid-19 Pandemic, I outlined a threat-based approach to the pandemic impact.  This week, I’d like to extend that thinking into the next few months.  While this may not seem strategic to some people, huge chunks of market share will be up for grabs in the next 12-18 months as the global economy grapples with various approaches to the pandemic and its effects on your industry.

To begin with, we need to lay out a few key items and assumptions. 

My assumption for most businesses is that your revenue has taken a moderate to severe hit from stay-at-home orders, social distancing, and consumer fear.  Of course, these hits have spread through B to C industries and are also affecting B to B companies, whose customers are similarly harmed by the crisis.

We also need to make assumptions about the scenarios likely to play out over the next several months. 

I like to examine best-case, worst-case and most-likely scenarios when the outcome is uncertain and will affect your industry.  The current best-case scenario is that States in the US are about to begin moderate distancing.  They will allow some businesses to open while maintaining some precautions, such as masks and social distancing.  Consumers will begin to flow back into the marketplace, engaging in a somewhat reduced level of purchasing. This mild improvement will start to lift intermediate and basic products and services as well.  This approach will be followed by many countries as the results in larger and harder hit countries begin to materialize.  By Autumn, pent up demand will start to heat up some markets to pre-pandemic levels.  Others though (especially those built around crowded venues and large groups) will languish into the Winter.

The worst-case scenario is that current easing backfires.

This may lead to a resurgence of Covid-19 cases in countries that are starting to loosen up. Many will immediately re-enter strict lockdown, while some that do not experience much higher infection and death rates.  In this scenario, almost all industries will suffer greatly through the Winter, and a huge proportion of smaller businesses will go belly up.  Mild improvement and easing will only come about with the development of a vaccine and deployment of widespread testing and contact tracing, which are unlikely to be practical before early 2021.

The most likely scenario is between these two.

Mild easing will be OK but lead to some spikes in infections in some countries and States.  Companies with good game plans will end up having an unpleasant, but not terrible year, while some industries may be severely affected.  Unemployment will begin to drift slowly downward in August or September, as businesses recall some workers to begin creating the “new normal” that will only end with vaccinations and widespread testing.

Some industries – travel, restaurants, theaters, banking – are already seeing tremendous downturns, and they are likely to improve very slowly in these months in any scenario.  In the worst-case scenario, there will be bankruptcies and consolidation of larger and larger companies, with attendant unemployment and credit shocks.

One problem with our current planning is that we won’t know which scenario will happen for about two months. 

In the meanwhile, we need to plan as if any of these three could happen, and act accordingly.  Here are a few useful ideas that will help in each scenario.

1. Public support will be key for everybody.

Any company seen as profiteering or taking more than their share of support from government sources is likely to be shamed and shunned by customers.

2. Quick adaptation will help.

Effective, productive adaptation for the longer term, however, will be a hallmark of more successful companies. This means not just having Zoom meetings, but embracing alternative approaches to meetings, work and management of your workforce.

3. Your old standby customer base may not be as reliable as a newer base of customers.

In consumer markets, people in some lines of work (grocery, health care and remote office work, for example) are seeing steady and possibly rising income, while people in areas like manufacturing and entertainment will have a pretty bad year regardless of how good the scenario is.

4. Everyone is trying to pivot.  

This means your competitors are trying to change, to find the good customers, and to do the business that can still be done while you are.  You may need to dust off your strategic competency, or re-frame how to use it to create value in the “new normal”.

5. Because so much is changing, there is a lot in play in many markets.

How you re-enter your business could lead to domination or disaster.  If you have breathing space, now would be a good time to check in with your strategic plan, and look at how you can adjust it to be more competitive in rapidly changing markets.

In our experience, companies with well-considered contingency plans end up improving their competitive position when handling industry-wide and economy-wide threats.  This makes contingency plans an important part of your competitive strategy toolbox.  If you’d like to use Simplified Strategic Planning to create a contingency plan as part of your strategic planning, consider attending our next Simplified Strategic Planning seminar. If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process. Then you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings.  Furthermore, they understand how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2020 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

Co-Author Robert Bradford

Author Robert Bradford

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