I think the hardest decision for senior management and business owners right now is when to change gear: from cost-cutting and downsizing to restoring growth.
The government has already forecast a strong growth recovery starting in 2022 and I think most economists agree that there definitely is headroom for such growth.
The reality is that the COVID-19 virus is becoming ‘endemic’, meaning the virus will continue to circulate among us but will be a manageable seasonal virus similar to the flu. In fact, the Delta variant is less severe, more transmissible and it is increasingly becoming common for vaccinated/unvaccinated people to catch the virus multiple times, (for more information refer to a University of Oxford study of Iran which shows that everyone in the population caught the virus once, with many catching it twice).
This is similar to the flu and means we can as a country go back to normal, and business can focus on the recovery.
Consequently, I believe now is the time for most businesses to change gear and start to focus on top-line growth since the pandemic grip on our economy should start to relax.
Failure to do so will invariably mean that your direct competitors will probably reach 2019 levels before you and ‘steal’ market share. In fact, the rule of thumb is that 85 per cent of market leaders get dislodged during a recession, and the reason is that they tend to be too slow and cautious out of a recession.
Unfortunately, most companies are still in ‘pandemic mode’, meaning earlier this year, they reduced operating expenses, decreased discretionary expenditures, lowered head counts and preserved their cash. They have also most likely postponed any new investments; they are effectively still in survival mode.
I don’t blame them to be perfectly honest, since there are two big unknowns which hang over the economy, and these unknowns create huge business uncertainty and fuel CFOs everywhere to retain a strong grip on belt tightening.
Timing is crucial but, at this stage, I would rather be slightly too early than too late
First, public health officials have not declared the coronavirus as an endemic disease, plus a lot of public health restrictions remain in force and show no sign of being lifted.
Secondly, the prime minister has not declared when the general election will be held. If it is on November 27 or December 4 this year, it is one thing but if it is going to be February/March 2022, this has a big impact on business decisions.
This notwithstanding, and on the balance, I really believe that we will have a strong economic recovery in 2022 and, therefore, companies need to deploy simultaneously both defensive and offensive moves, irrespective of the above-mentioned unknowns.
Furthermore, companies need to be fast, nimble and innovative, especially as the recovery starts to take shape, irrespective of when the election is held and public health restrictions are lifted.
Top-line growth means you need to invest in marketing/branding, employing or retaining the best talent and acquiring new assets, and you need to do so now.
Top-line growth also means scaling up just before the V-shape recovery takes off since if you wait too long, you run the risk of conceding first-mover advantage to your competitors.
For example, if you innovate your business model to include more e-commerce or if you need to recruit talent, there is always a lead time ranging from three to six months.
My point is that if you start when everyone else does, you’ll be struggling to exploit the opportunity which a recovery presents in the crucial early stages. While if you are one of the first to invest, innovate and recruit, you will grow faster and better than your competitors.
Timing is crucial but, at this stage, I would rather be slightly too early than too late. Since if you are late into the recovery due to an overly cautious approach to cost optimisation and/or rationalisation, you will never really catch up fast enough. You will miss the proverbial boat.
Ultimately, great CEOs (great leaders) know when to change gear and bet on the recovery. It is moments like this when you spot the difference between CEOs; those that favour speed, agility and action to those who wait and hesitate.
To my mind, now is the time to focus on top-line growth and the bottom line will take care of itself. Change your priority to sales revenue, market share and investment KPIs, and scale-up in preparation for growth.
At the end of the day, leaders will be judged not just on how they survived the pandemic-induced slowdown (bordering on recession), but also on how they managed the recovery.
Note: This article was written before the Prime Minister announced that the election will be held in 2022.