Strategy: learn about the main challenges for companies

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David Kallás, professor at Insper and coordinator of the Center for Business Studies (CENeg), addresses challenges and paths for companies in this period of crisis


4/3/2020

Following the joint efforts of the entire Insper Community to mitigate the impact of COVID-19, we are publishing a series of interviews with professors, managers, deans, and directors to address actions taken by our school, as well as tips and guidelines in the most diverse fields to help overcome the challenges of this period.

In the interview that follows, David Kallás, professor at Insper and coordinator of our Center for Business Studies (CENeg), addresses relevant issues when we think about the challenges companies will face, from a strategy point of view:

1) From the point of view of strategy, what are the main challenges brought to companies by the crisis generated by the new coronavirus?

The main challenge is to plan and execute the strategy in times of uncertainty. We do not yet know what the impact of the pandemic will be, let alone how long it will last. To this end, executives must exercise flexibility and responsiveness at their highest level.

2) Is it possible to develop strategic planning at this time? If so, how?

Here, I think we should separate it into two levels of plans, as follows:

  1. a) short term (until the end of the crisis — today I think that this term should not end before the end of 2020): At this time, all efforts should focus on crisis management. In general, plans should focus on topics such as (1) what to do to take care of human capital, (2) how to manage cash and working capital, (3) how to take care of the brand and reputation and (4 ) how to secure the supply chain during the crisis.
  2. b) medium and long term (after the end of the crisis, with the entire population immunized or vaccinated): Here, it is already possible, for sure, to anticipate what changes will take place in the business context. Which sectors will be deeply impacted? Which behavioral changes will be irreversible? In this time horizon, it is possible for sure to plan likely changes in the organization’s business model (or in part of the model). If your organization is in one of these impacted sectors, a thought on scenarios and possible strategic movements of attack or defense to them is suitable here. I think that sectors like education and health services are two examples where the change will be radical.

3) Regarding the supply chain: Is it possible to anticipate potential impacts?

Definitely, and perhaps there is no more time to “anticipate” impacts, as they must already be occurring. However, it is possible to devise strategies to minimize them. Here, the duration of the pandemic is crucial, as possible shutdowns, in the production by suppliers, in their different tiers (suppliers of the first-, second-, third-order, or more), can generate production losses. On the other hand, the sharp drop in demand in some sectors may offset that loss in supply. In the worst case, the problem will occur only on one side (only on supply, or worse, only on demand), impacting inventory levels. At this point, executives must develop logistics alternatives, such as the development of other modes and suppliers, besides recalculating inventory levels needed to withstand the crisis.

4) Regarding the relationship with employees, what are the best strategies for companies at this time?

The moment is to build strong bonds with employees and bring them security in these times of distress. Health protection comes first. It is recommended to follow safety criteria, guide teams, isolate at-risk groups, and seek alternatives such as working from home for those who can work in this way. Transparent, two-way communication is essential. It is time to bring out the human side and practice empathy, recognizing that it has not been easy for anyone.

5) Can the crisis generated by the coronavirus bring strategic opportunities for companies? If so, which ones?

For some companies, definitely. During the crisis, suppliers of essential supplies and services will have excess demand. Other companies can develop creative solutions to problems that arise from social isolation. Moreover, after the end of the crisis, with possible changes in behaviors and patterns, opportunities for companies that react more quickly will arise, too.

 

David Kallás is a partner at KC&D, UPF, and JBJ Partners, all management and strategy consulting firms. He is a professor at Hospital Israelita Albert Einstein and Insper, where he also coordinates the Center for Business Studies. Prof. Kallás also serves as Vice-President at ANEFAC (the Brazilian Association of Finance, Administration, and Accounting Executives). He holds a Ph.D. in strategy from Fundação Getulio Vargas’ São Paulo School of Business Administration (FGV/EAESP), as well as a master’s degree and a bachelor’s degree in Business Administration from the School of Economics, Business, and Accounting of the University of São Paulo (FEA/USP). He has articles published in several Brazilian and international journals and had authored four books on management and strategy.

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