So, think through the potential scenarios and invest the resources required to reserve your right to play and get out of the starting blocks early once you know which scenario is coming true.
Those successfully shaping a market get to make the market’s rules, limiting others’ degrees of freedom. Witness Apple, effectively creating the smart phone market and reaping unfair returns for literally decades.
Those choosing a fast-follow or adapting strategic posture choose to let others innovate and then leverage their own strengths to build their business once they know which way the wind is blowing. Coca-Cola, for example, has been a fast-follower in new beverages. They let others pave the way and then either buy them or run a similar beverage through their superior manufacturing and distribution system as soon as those new beverages are ready to scale.
These approaches work when customers, collaborators, capabilities, competitors and conditions are behaving normally so people can make rational predictions of what’s going to happen.
That is most definitely not the case now. The only thing you can even come close to controlling is your own capabilities. Fauci expects vaccines to be widely available by April. But that’s just his current best estimate. The virus is controlling conditions. No one really knows how it will mutate and play out. And no one knows how your customers, collaborators and competitors are going to adapt to those changing conditions.
Of course, you want to do scenario planning. But all these unknowns will make the scenario planning coming out of the pandemic materially different than what you did going in.
Going into the pandemic, well-run organizations laid out what they thought were the most likely, best, and worst-case scenarios. They then quickly cut and reallocated resources to enable them to survive the worst-case scenario, building back as they could.
If you do the same coming out of the pandemic, you run the risk of getting caught in the middle.
- Those that bet right and re-build the right capabilities in the right place at the right time will shape the market and reap out-sized rewards.
- Those that bet wrong and re-build too many capabilities in the wrong places will suffer material financial losses.
- Those that choose not to ramp up resources until they have more certainty will neither reap “bet right” rewards nor suffer with those that bet wrong. But they won’t be able to meet increasing demand and will lose market share – over time.
Keeping your options open
Options have a price. The thesis is that, in this case, you’re better off having a call option on resources than you are either ramping them up ahead of time or waiting.
If you are a design/innovation-focused organization, secure your options by keeping your 1st level designers engaged and having those skilled at commercializing those ideas on call. This may involve putting outside developers on low-level retainers so they’ll be available when you need them.
If you are production-focused, you need to keep supply-chain, production, and distribution options open. You may literally want to purchase commodity options so you ensure your supply, knowing you can walk away from those options as required. You may want to have a skeleton crew keeping your plants running or have contract manufacturers on retainer.
If you are distribution-focused, you’ve likely built a web of alliances already. You do need to make sure enough of your allies survive the pandemic for your entire eco-system to continue to function. If you’re not sure they are going to survive, you may want to bring in some other redundant allies just-in-case.
If you are service-focused, you can preserve options by ensuring you’ve got people indoctrinated in your culture and trained on your delivery before they are needed. In this case, you’re buying an option by investing in onboarding, socialization and training ahead of the concrete need.