How To Reinvent Your Business To Thrive After The Coronavirus
By Ted Ladd Forbes magazine
Business has changed, perhaps forever, due to the coronavirus. Once we emerge from this crisis, business managers can reinvent their product offerings to survive in the post-
coronavirus economy in four steps: deconstruction, imagination, testing, and prototyping. At the heart of this method is evidence-based decision-making.
To start, let’s admit the obvious disruptions to existing businesses: supply chains are missing a link; company owners have little cash on hand; employees are eager but scared; consumer confidence is low except for staple products and services; and consumer habits haved shifted to online-only channels.
After business managers have made immediate decisions to reduce cash burn, you have a lull during self-isolation to contemplate what the future might hold. Here are the four steps managers should take now to plan for a post-coronavirus economy.
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First, reinvention can be subtle. You could keep most of your core operations to deliver most of your core value to customers, and tweak a few pieces of your business. For example, a company making high-definition computer monitors might still see strong demand for its product, but the customer segment may shift from young tech professionals, who might be running low on cash, to retirees who have discovered the joys of video conferencing with distant friends during the crisis. This latter group does not care about nits, refresh rate, resolution, or next-day delivery. Instead, they seek ease of setup, true color, integrated speakers tuned for delivering crisp voices, and payment via installments. While this represents only a slight shift in the product’s features, it would require that the company entirely alter its marketing message and channel, adjust its prices and supply chain, and establish different reseller partners.
In order to consider these shifts, the first step in reinvention is deconstruction: understanding each of the constituent pieces of your business. The tool that most business schools (including mine) use to help managers deconstruct their businesses is called the Business Model Canvas (see explanatory video and this page for a free chapter from its authors). This Canvas contains the nine elements that are common to traditional businesses: customer segment, value proposition, channel, customer relationship, key activities, key resources, key partners, revenues, and costs. If your business does not make anything itself, but instead acts as a platform to connect buyers and sellers, you should use the Platform Model Canvas (see description, video and website), which focuses on the facilitation of the interaction between buyers and sellers in a marketplace.
The second step is to employ your imagination to create a long list of alternatives for each of these elements. Brainstorm with employees and friends. To return to the example of computer monitors, might there also be a sudden need for toddlers to have a screen for physically distant play dates? If so, the screen must survive lots of fingerprints and paint splatters. Or the company might focus on selling screens in pairs for professionals who have migrated during the crisis to multiple monitors. Or the company could relabel its products by profession: the Accountant’s Screen, the Gamer’s Screen, the Video Conferencing screen, etc.
At this stage, do not filter or criticize these possibilities. Just make lists. This step requires managers to transition from decision-maker to facilitator in order to solicit ideas from employees and business partners. This can be a difficult transition. One of my colleagues, Megan Reitz, has written persuasively about ways for managers to recognize how they might intimidate people around then, undermining the flow of imaginative ideas.
Unfortunately, many managers leap from brainstorm to launch because they are convinced that one of their ideas has the promise to succeed. This kind of reinvention is based on epiphany, and rarely succeeds. Much of my research shows the subtle, pernicious effects of “confirmation bias”, leading managers to make poor decisions. To avoid this trap, the third step in reinventing a product, service, or entire business is to conduct rigorous testing of each one of your ideas independently without spending any money by having conversations directly with customers. This process, you might now realize, parallels the Scientific Method. Testing should occur in three separate phases.
The first phase is an exploration of the problems that the customers anticipate they will face after the virus abates. The company selling computer monitors could ask 100 random people about their computer habits during self-isolation. If these open-ended discussions reveal that customers in a particular demographic segment do not have a problem, then you should not try to solve it, and instead should shift the core value you intend to provide.
From these initial conversations, in the second phase of testing you will narrow your list to a handful of options that seem to address real customer problems and re-state each of these as a testable hypothesis that adds some concrete predictions to your guesses. Here is an example for the computer monitor company: if we ask 100 grandparents in the U.S. if they would consider upgrading to a large monitor that would help them see and hear their grandchildren more clearly over video conference, the company would expect that at least 20% would say ‘probably’ or ‘definitely’. The power of this sentence is that it is now ready for analysis with evidence.
In the third phase of testing, you return to your customers – ideally new contacts – to ask them these simple sentences and track their answers. This will help you collect vital evidence to determine if your assumptions were valid. It generates useful, actionable evidence to improve decisions, and it costs almost no money.
Allow me to give you two notes of caution based on my observation of 2-3 thousand students. First, this advice to seek demand may sound obvious to you. Yet, the majority of entrepreneurs do not heed it. Too many managers would select a single, seemingly attractive options from the brainstorming session and proceed directly to launch without collecting evidence. Second, at least based on my own emotions, your customers are scared right now. They do not know what will happen to the economy, to their business, to their job, to their family, or to their own health if the virus spreads. They are probably not yet accurately predicting their own needs after coronavirus. You might need to delay testing, or focus your conversations on potential customers who seem to be calmly assessing their future based on evidence, perhaps because they have followed this same method.
The final step for reinventing your business is to create simplified versions of your product or service to offer to paying customers. These prototypes might offer your pre-coronavirus product with post-coronavirus marketing and pricing. For example, the company selling computer monitors could advertise a Grandparents version with an installment payment plan to a limit sample of people with targeted ads on Facebook.
This gradual go-to-market strategy continues your collection of customer evidence at low cost. Because you are delivering a solution that helps customers solve a problem that they have already declared they face, you should encounter a higher-than-normal purchase rate with minimal marketing budget. If the “soft launch” of your prototype met the expectations that you defined in your hypotheses, you can be more confident that a “hard launch”, complete with product re-engineering and full marketing support, will be successful.
In this time of crisis and reinvention, my summary is that evidence matters. Perhaps now more than ever. This not should not only motivate the way that you seek to improve your business, but also should filter the advice that you consider. The approach that I’ve outlined above relies on my own research and the rigorous, thoughtful work of others. For further evidence to support an evidence-based approach, I urge you to explore Discovery Driven Planning, pioneered by Rita McGrath; the Lean Startup Method, crisply described by Ash Maurya; and Design Thinking, first articulated by David Kelley.
What all of these approaches share, in addition to an emphasis on evidence, is a well-found faith in the power of business ingenuity, especially during periods of crisis, to not just create resilient ventures but also to address and ameliorate real human need. Be well and reinvent