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Beyond the storm Critical questions for leaders of businesses aiming to thrive and grow out of the coronavirus crisis
Innergise Pty Ltd, Melbourne, Australia. ABN 14 605 954 818 www.innergise.com.au Copyright © Innergise Pty Ltd, 2020. The objective of publishing this paper is to foster new insight and encourage constructive debate and action on matters of organisational, societal and national interest. This paper should be read in full and no excerpts taken as representative of the whole. Persons who rely on the material published do so at their own risk. Imagery sourced with permission from shutterstock.com Citation: Nicholas S. Fleming (2020) Beyond the storm – Critical questions for business leaders aiming to thrive and grow out of the coronavirus crisis, Innergise Pty Ltd, Melbourne. Published on 4 May 2020, revised 27 July 2020. This and other papers and articles are available for download from www.innergise.com.au Enquiries about how Innergise can assist you can be emailed to enquiry@innergise.com.au Page 2 Beyond the storm | INNERGISE
Beyond the storm
Critical questions for leaders of businesses aiming to
thrive and grow out of the coronavirus crisis
The challenge The solution The benefits
The world is in the midst of a Every organisation will respond to In a crisis, an executive team must
pandemic which, while not the crisis in their own unique way. be supported by the board to
unexpected, has hit with a speed But all organisations can take respond swiftly and effectively to
and scale of impact that is similar steps to discern what their immediate challenges to business
unparalleled. Governments have best response would be. The continuity. While the board “gets
created economic crises by board of directors has an out of the way” of management, it
shutting down society to control important role alongside the can be building its “strategic
the health crises. As Australia and executive team to set up the muscle” for the challenges ahead.
other nations around the world organisation to survive and thrive While the situation can feel
ease restrictions on movement in the medium term. Undoubtedly confusing and overwhelming, a
and business, the recognition is there will be growth opportunities. carefully structured suite of
growing that the world won’t Whether these opportunities are questions can allow the board to
“return to normal”. Business is identified and grasped will engage in crucial conversations
central to the economic recovery depend on the attitude and that bring clarity and coherence to
and leaders are asking “What do approach adopted now. the organisation’s strategy and
we need to do now to thrive in Identifying and exploring some practices beyond the crisis.
the months ahead?” critical questions can clarify and
shape the way ahead.
INNERGISE | Beyond the storm Page 3
“Only a crisis – actual or perceived –
produces real change. When that crisis occurs,
the actions that are taken depend on the ideas
that are lying around.”
Milton Friedman
Page 4 Beyond the storm | INNERGISE
Beyond the storm
As Australia works toward relaxing social isolation rules and prepares to reboot the economy,
business leaders are questioning what the new normal will look like. How will business
conditions continue to evolve and what needs to be done now to thrive in the months ahead?
This paper provides some insights and critical questions for company directors and executives
to address in preparing for a new world.
economy should strengthen from Citizens (and politicians) have
A little history here, but for now directors aren’t been reminded of the importance
One year ago in April 2019, buying it. Rather, they see the risk of a trustworthy government and
Treasurer Josh Frydenberg rocked of further deterioration ahead.”2 the power of people unifying
to the beat of Back in Black. It was At the time, most of eastern against a common foe.
the theme of his first budget as Australia was in drought and
Australia’s treasurer, signalling bushfires had been burning since Emerging from the storm
that in 2020 the Australian June.
government would be back in Today, Australia is moving slowly
surplus. It would be the first time By mid-January 2020, the Prime but surely toward easing the
in more than a decade. Minister was being pilloried for requirement for social isolation, to
his poor leadership of the open up schools and businesses.
It was a pre-election budget “unprecedent bushfire crisis” and Clearly, this does not mean the
founded on some bold his government’s dismissive crisis has passed. Maintaining
assumptions. It promised tax cuts, attitude to the climate public health and rebuilding the
congestion-busting infrastructure emergency3. Ironically, at the economy remains a critical
and more doctors and mental same moment, the World communal problem.
health services for the bush. These Economic Forum4 identified
benefits wouldn’t arrive straight climate action failure as the top Indeed, as we emerge from the
away, of course, but in the next global risk. unifying clarity of virus-induced
four years (or the four years after isolation into the uncertainty and
complexity of the world beyond, it
that). At the time, journalist Navigating into the storm seems that the challenges might
Annabel Crabb1, commented “In
this environment of global On 25 January, the first case of only escalate. Business leaders are
unpredictability we now inhabit, coronavirus was confirmed in genuinely questioning “What is on
the very idea of forecasting four Australia when a man returned the other side of the storm?” and
years into the future feels from Wuhan, China5. “What do we need to do now to
bizarre.” thrive in the months ahead?”
By mid-March Australia’s borders
were closed and social isolation
The federal government was
was imposed. Now, nearly two
A clear role for government
returned to power in May 2019
thanks to “the quiet Australians”. thirds of businesses are suffering Averting the health crisis has
Prime Minister, Scott Morrison, plummeting demand for their incurred an economic crisis.
reassured voters the economy was products and services6, and Nearly 800,000 Australians have
strong, resilient and under the governments take on debt lost their jobs. Millions more have
Coalition’s plans would “keep exceeding $320 billion (16% of had their work hours reduced or
ticking along”. This was despite GDP) to prop up the economy7. are working differently8.
the country’s economic growth On the upside, supermarkets are Unemployment is predicted to rise
slowing to its weakest point since booming and farming prospects to between 10% and 15%.
the global financial crisis. are up. Oil is being given away.
So, the priority for government is
In October 2019, AICD’s Chief By world standards, Australians clear: to restore economic growth
Economist, Mark Thirlwell, said have navigated the COVID-19 so that people can return to work
“The Reserve Bank says that the crisis remarkably well, thus far. and debt can be repaid.
INNERGISE | Beyond the storm Page 5inequality, will economic inclusion
be on the private sector agenda?
And does the disposition and
capability exist within our
business community to navigate
and thrive in a world of
uncertainty, within a community
that generally views it as
unethical12.
Uncertainty on steroids
Any assumption that coming out
Figure 1. Before the pandemic, Australian businesses were considered competent but of social isolation means “getting
unethical by the general population (Edelman Trust Barometer, 2020) back to normal” is naïve. Many
businesses are already adapting
Remember that our economy was savings may be the priority of their business models (think tele-
faltering before we encountered households for many months. So, health) and social attitudes are
COVID-199. So, it will be essential we should expect a lower than changing. Indeed, there are good
to remove major impediments to ordinary level of consumer reasons to argue against returning
economic growth. Taxes on demand over the medium term. to our prior state of thinking,
income, consumption and land That is, consumer spending operating and governing.
must be reformed along with should not be looked to as the While the social disruption
innovation policy and industrial stimulus for an economic experienced in Australia is less
relations. At the same time, people recovery. than other countries, and
will be seeking government consequently the political impetus
support for education and A critical role for the for change is lower, there will still
retraining as many of the jobs that
business community be a suite of policy reforms by
were lost will not return. federal and state governments.
Consequently, there is a critical
To pay down debt, governments These represent just one aspect of
role for private investment and
will also be looking for cost the uncertainty and complexity
the business community in
savings rather than raising taxes. that businesses must navigate.
Australia’s economic recovery.
Any increase to business and How the community responds to
household costs puts confidence, Like governments, the private
circumstances will have major
spending and thus the economy at sector is seeking the highest
consequences too. Current crises
greater risk. impact, least cost way of
have raised big questions like “Is
rebuilding consumer confidence
the economy serving private
and demand. Business leaders will
Muted consumer spending interests at the expense of public
be keenly focused, endeavouring
While the Australian Government interests?”, “Who are the most
to ensure that every dollar spent
has taken on considerable debt to essential workers?” and “Are we
creates maximum value.
keep people in jobs it has not more entwined and vulnerable to
reached all workers10. Many are But in a society where COVID-19 Nature than we think?” More
now having to draw on limited has increased unemployment and fundamentally, as people move
savings and superannuation to through different environments,
survive. If the need for social
isolation drags on, more
businesses and households will
become bankrupt. “How do we make sense of the situation?
Indeed, Australian households are I’m not sure anyone can.”
already the most indebted in the
world11. Paying for basic John Mullen, Chair of Telstra and Toll Holdings13
necessities, paying down debt and
establishing some precautionary
Page 6 Beyond the storm | INNERGISEFigure 2. Responses to the coronavirus crisis could be many and varied making it
virtually impossible to predict the medium-term future with any confidence.
like public transport or high- Leading your business What then are the practical
density apartments, they will be actions you should take to
response
asking “Do I feel safe?” maximise the odds your business
How we respond to these and and its stakeholders can thrive
Quite simply, many shifts in
other questions as leaders in over the medium term?
community expectations, public business, public enterprise and
policy and economic and business GOVERNING WITH PURPOSE
the community will reflect our
activity are possible locally and sense-making capability and Prior to COVID-19, company
abroad (see Figure 2). The values. It will be reflected in the directors, investors, regulators
combinations and permutations
choices we make. Those choices and academics around the world
are vast, making the medium-term could create confusion, fear and were debating and revising the
future impossible to predict.
anger or comfort, hope and role of business in society16. Now
productivity. this question is front and centre …
INNERGISE | Beyond the storm Page 7and the answer has possibly never To be able to lead and govern your BOX 2
mattered more. organisation with clarity,
Scenarios aren’t optional
creativity and conviction, you
While executives are busy dealing should examine the ideology that Scenarios have always been a
with immediate issues of business shapes your organisation. Discuss feature in good strategic analysis
continuity, directors should be these five questions: but now they are essential.
reviewing the expectations,
Your scenarios should be framed
material issues and direction of • How is the role of our business
around business-critical variables
the organisation in the medium in society changing?
that have uncertain outcomes.
term. • What societal outcomes can we
influence effectively, Work across multiple time
constructively and responsibly? horizons, discerning between
• If consumption is the route to short-term changes triggered by
economic recovery, what the shock of COVID-19 and
longer-term shifts arising from
characteristics make goods and
the enduring stress it has created.
services worthy for
consumption? What trends are reliable and
• How is our business purpose which are speculative, and what
more or less relevant? Do we factors while concerning are less
need to pivot? relevant to your industry or
BOX 1
• What are the big assumptions business? Climate change, for
Why are we here? we’re making that might not be example, will be a feature in all
We must learn from this crisis. true? scenarios as it presents a
The tragic and ongoing loss of significant, predictable and
thousands of lives must not be in LEADING STRATEGICALLY enduring condition.
vain. This means facing into the Business leaders have always had Identify options for action,
real root causes of the dual to negotiate uncertainty. Now it’s particularly those that are
health and economic crises, and more vivid and confronting. But sensible under a number of
what’s required of us in building rather than fighting and reacting different scenarios. Remember
more a resilient, prosperous to it, you could be assertive and that it’s not about starting with
society. embrace it. Many business leaders the perfect plan; it’s about being
Leading scientists have will not have experienced a similar on the fastest improvement
demonstrated that rampant opportunity to redirect, declutter trajectory17.
deforestation and exploitation of and energise their business. Four
Beyond the immediate insights
wild species has created the questions to examine are: scenarios provide to build robust
perfect storm for the spill-over of business strategies, they also
• What do we need to do to
diseases. Today, roughly 70% of build a collective awareness how
emerging human diseases
enhance the clarity and power of
circumstances can change. This
originate from contact with wild our strategies?
enables an attentiveness to the
animals14. • What are we collectively
early signals of emerging
inspired to create?
So, while it might be politically important shifts.
• What are the three business-
expedient to relax environmental Indeed, it may be wise to brace
shaping choices that are crucial
standards to prop up industries, it for another crisis. In Australia, we
for us to make?
essentially subsidises the are probably just lucky that we
• What recalibrations should we
emergence of future pandemics. weren’t fighting bushfires at the
make to our risk appetite?
While the cost of environmental same time as the coronavirus
protection and rehabilitation may Make sure the board and outbreak. Could your
be billions of dollars per year, a executive team discuss these organisation survive, say, a water-
pandemic can cost trillions. By things together. You will need to borne virus outbreak at the same
the end of 2020, “rich-world build a collective consciousness time as a cyber-attack or a warm
public debt” could run to $66 and make sense of the uncertainty conflict in south-east Asia?
trillion or over 120% of GPD15. together. Otherwise, different
interpretations of the business
Page 8 Beyond the storm | INNERGISEconditions will hamper effective
decision making, sap confidence
and destroy alignment and “Resilience is no longer a theoretical concern.
productivity. Companies and countries have been made
ENABLING GROWTH painfully aware of the fragility of the critical
In the midst of a recession it systems on which they depend.”
might seem that there are no
growth opportunities. But change Rich Lesser and Martin Reeves18
brings opportunity. To be
successful, you need to adjust your
perspective and expand your
Some questions to help identity • How do we align our financial
economic imagination. Consider:
productivity improvement arrangements and shareholder
• What now are our customers’ opportunities are: expectations?
unmet needs?
• What initiatives should we stop Try to move beyond incremental
• What do customers value more because they add little value? adjustments to budgets to make
now than before?
• How can we achieve greater sure you are resourcing for the
• How can we make customers utilisation of valuable assets? future, not the past.
more “sticky”?
• What service extensions can we
• How can we act more nimbly offer to existing customers?
than our competitors?
• How should we refocus our
• How is your market access innovation, research and
changing? What partnerships development investments?
can expand our access?
• How can we engage our people
• What market segments could to drive week-on-week
benefit from our capabilities performance improvements?
(e.g. clothing manufacturers
• What parts of the business are
producing protective masks) BOX 3
over-optimised and
• What should we divest and/or consequently fragile? Solve problems better
acquire to facilitate future It is confronting but true that
• What low value, highly
growth? much of the time people are
repetitive work can we
automate? solving the wrong problems. It’s a
It might be that your access to
major impediment to productivity
international markets is impeded
FINANCING GROWTH growth. To overcome it, first
but local demands are growing,
Beyond the short-term issues of encourage people to ask, “Are we
particularly for simpler, lower cost
cash flow and solvency, you need solving the right problem?”.
products that can be trusted.
to set the business up to fund Second, maintain a sharp focus
Customers might particularly
growth over the medium term. on those things that create value
appreciate service options that
This may require you to rework for your customers. Don’t assume
allow them to expand over time
your budgets. a business-as-usual response is
and pay on an instalment basis.
still fit for purpose, nor jump at
• What functions should be
ENHANCING PRODUCTIVITY the first solution idea. Generate a
operating on a survival budget?
Emerging from COVID-19, all range of ways the customer value
• How should we adjust cash and outcome can be delivered.
organisations will need to invest
reserves and access to debt to
carefully. Every dollar spent needs Third, make a range of small bets.
fund future growth?
to create value. So, how do you Reduce your investment and risk
• What provisions do we need to
best allocate resources on a day to by trying solutions as quickly and
make for bad debts and
day basis, particularly when so simply as possible. Embrace and
inflation?
much is uncertain and conditions improve those that work best.
can still change quickly? • What non-core business
Learn fast and compete on the
functions can we outsource to
basis of your rate of learning.
reduce recurrent costs?
INNERGISE | Beyond the storm Page 9• How could we derive value by • What workforce capability to do
exceeding minimum regulatory we need to build (or access) to
standards? enable our future business?
• How can we make regulations • How can we equip our people to
irrelevant? make decisions as if it were their
business?
LOOKING AFTER YOUR PEOPLE • Who should we engage to think
Over the medium term, the work with and coach our executives?
BOX 4 environment has the potential to
be tremendously exciting but also
Remove your own red tape Summary
very stressful. The pace of learning
While systems, procedures and The dual health and economic
and adjustment will likely be high.
rules have their place, they can crises triggered by coronavirus
People will learn lessons that will
also stifle innovation and be a present the greatest challenge to
serve them well throughout their
significant self-imposed ‘red tape’ our communities, governments
careers. But this will also expose
cost. In fact, Deloitte Access
people to mental health risks. and businesses since the Second
Economics found that the cost of
Those that can’t cope with the World War. And as we emerge
complying with self-imposed
pressure will be particularly from the crisis, the challenges will
rules in the private sector is
vulnerable. So, look after your likely exceed those going into it.
double that attributable to
people, from the top floor to the Reforms will be necessary and will
government regulations19.
shop floor. Make their health and not be easy. There will be winners
It can be a better investment to welfare an authentic, overt and losers.
equip people to make good priority.
decisions on the basis of values, For many it is a distressing time
good-business principles and MAKING IT HAPPEN and the future can appear bleak. A
customer interest than to follow The question then becomes “Can desire to “get back to normal” can
ever-expanding rules and you pull this off?” Do you have the be coupled with the hope that the
procedures. leadership skills, culture and economic recovery won’t be too
alignment to succeed? Based on painful and future circumstances
the low levels of productivity and not so different to before. But
REMAINING HYGIENIC
innovation commercialisation hope is not a strategy. Nor is there
While you are making the
occurring prior to our current room for complacency. We will
business fit for the future, you
crisis20, it’s reasonable to assume not “return to normal”.
can’t forget matters of hygiene.
The business must remain viable many organisations will struggle. Responsible business leaders
by complying with regulations and Undoubtedly, it presents a should get on the front foot.
mitigating critical business risks. challenge (and growth Change brings opportunity.
Of course, there are also opportunity) for many business Indeed, our current crisis provides
opportunities here for value leaders21. an unequalled opportunity to
creation. It needn’t just be a drain refocus, declutter and energise
Furthermore, no business leader
on resources. Some questions to businesses. For business leaders
can gather all the data, make
explore are: with ambition and vision, it is an
sense of the complexity or have all
the answers. So, tap into the talent immensely exciting prospect.
• Who is responsible for keeping There is reason to be confident,
close to regulators and emerging and potential of your people.
Invite your people take ownership and confidence matter
policy shifts? enormously to your investors,
for the business success, because
• How will safety expectations staff and the wider community.
it is their jobs on the line too.
evolve in a post-COVID-19
world? Consider the following: While management teams deal
• How can we benefit from a with the immediate issues, it is up
heightened focus on cyber • Are executives clear about the to directors to start to do the
resilience? risks we want them to take? deeply thoughtful work in
• What adjustments in our • What missions can we use to supporting the executive to
financial and business reporting align everyone’s efforts? reposition businesses for growth
will enhance trust? • Are our decision-making criteria over the medium term. A good
clear and applicable by all staff? place to start is some powerful
questions.
Page 10 Beyond the storm | INNERGISEReferences 12. Edelman Trust Barometer 2020
(Australian edition)
1. Annabel Crabb (2019) Federal
Budget 2019 sees Josh 13. Narelle Hooper and Jane
Frydenberg make a noisy debut Southward (2020) What
— but we've seen this act before, happens next? Company
ABC News (online), 2 April Director, Vol. 36 Issue 4, pp 16-
19
2. Ipsos (2019) Director Sentiment
Index: Research Findings, 14. Eduardo Brondizio et al (2019)
Second Half 2019, Australian Global assessment report on
Institute of Company Directors biodiversity and ecosystem
(AICD), Melbourne services of the
Intergovernmental Science-
3. Laura Tingle (2020) Are the Policy Platform on Biodiversity
bushfires Scott Morrison's and Ecosystem Services,
Hurricane Katrina moment that Intergovernmental Science-
he can't live down? ABC News Policy Platform on Biodiversity
(online), 4 January and Ecosystem Services
4. World Economic Forum, The (IPBES), Bonn.
Global Risks Report 2020, 15. The Economist (2020) The
Geneva. pandemic will leave the rich
5. Department of Health (2020) world deep in debt, and force
First confirmed case of novel some hard choices, 23 April
coronavirus in Australia, 25 16. David Walker (2019) What is the
January, Australian purpose of the corporation?
Government, Canberra Company Director, Vol. 36 Issue
6. Andrew Stevens (2020) 2, December 2019
Repositioning for recovery, 17. Martin Hirt et al (2020) Getting
Company Director, Vol. 36 Issue ahead of the next stage of the
4, pp 48-49 coronavirus crisis, McKinsey &
7. Mark Thirwell (2020) Fighting Company
the fallout, Company Director, 18. Rich Lesser and Martin Reeves
Vol. 36 Issue 4, pp 38-39 (2020) Leading Out of
8. Alex Collie (2020) 90% out of Adversity, 9 April, BCG
work with one week’s notice. Henderson Institute
These 8 charts show the 19. Deloitte Access Economics
unemployment impacts of (2014) Get out of your own
coronavirus in Australia, In: The way: Unleashing productivity,
Conversation, 28 April Building the Lucky Country
9. Stephen Letts and Michael Series #4, Deloitte Touche
Janda (2019) RBA cuts interest Tohmatsu, Sydney
rates to new low of 1pc amid 20. Ian Jacobs (2018) Australia can
slowing economy, prompting big do a better job of
four banks to respond, ABC commercialising research –
News (online), 2 July here’s how, In: The
10. Paul Karp (2020) Jobkeeper Conversation, 3 May
payment: check your eligibility. 21. Peter Gahan et al (2016)
Here's everything you need to Leadership at Work: Do
know to register. The Guardian, Australian leaders have what it
30 April takes? Melbourne: Centre for
11. Chris Pash (2018) Australia's Workplace Leadership,
household debt is now one of the University of Melbourne
highest in the world, Business
Insider Australia, 18 January
INNERGISE | Beyond the storm Page 11Innergise is a firm focused on fuelling progress and prosperity by helping people to
conceive, design and deliver better programs and projects.
We remove the impediments to superior productivity by unleashing and focusing the talents of
your people, achieving your current goals and setting you up for enduring success. Monotony
becomes momentum. Risks become results.
Innergise provides proven skills in strategic thinking, complex problem solving, innovation and
facilitation.
We apply hands-on experience in executive leadership and change management, with insights
drawn from our work across industry sectors and regions of the world, to generate a sharper
focus and more realistic, integrated solutions that stick.
It’s all about better placed effort – not more effort – to deliver immediate and lasting
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