Hara-kiri – Cut through the belly or cut the fat but strengthen your muscles.

‘The Internal vs external response during adversities’

Essentially, this is written at a time of a pandemic like no other. But adversities will keep trickling, both big and small. Our way of responding will test our nerves and focus.

Many discussions, webinars and forums on efficiency and productivity norms amidst COVID.  Not so much a means of action perhaps, but more so to develop a feel-good factor.  The human mind mostly, given a chance, races back to the pre-change era; the comfort level. 

The question to ask is, how much are we holding onto old strategies and processes and how much into transformational responses and processes. Agree, transformations are not achieved in a day or two nor is it the best to hear during adversities. Yet, that remains one of the most basic and pertinent questions to ask yourself, through adversity.

Most in today’s context, amidst a pandemic, would agree that we need to transform the way we do businesses; thus, we respond better. The question is how? That answer could mean the difference between being an average or great business.

Respond or React?

They say, never let a crisis go to waste. That’s true if you look at opportunities, which provide space to realign and refocus, not to create Hara-kiri; a Japanese term referring to an honourable form of ritualistic suicide for a Samurai. Committing Hara-kiri (or seppuku the more formal word), is essentially self-driven and stems from within. Have we been reacting or responding to the current pandemic?  A question we should all ask ourselves. Faced with a sudden adversity, none can deny a certain element of reaction to prevail, before we respond. The question is which do we do more? That, in my opinion would determine your transformational mindset.

The words you hear the most!

What have you been hearing the most from boards and/or senior management? Whilst, it is inevitable that both, reacting and responding to some degree are in place, as one alone cannot fulfil a pandemic response; the question is, which of the two plays a more dominant role?

1. Cutting costs to the bone: Reduce manpower – we can do with half, close sections – we don’t make money, divest some areas – we better be on cash, reduce inventory – borrowing costs are higher, stop extending credit or borrowing – it’s dangerous and hits the P&L, don’t invest – just survive, customers need to understand our stance, etc.
2. How do we respond to the emerging new customer needs: Have we looked at how to digitise deliveries better? What is our digital transformation plan? Can we relook at governance and control? Are we drawing policies and procedures for better work arrangements such as working from home? What is our external security status? How is the new normal HR response? etc.

As you could see above, one sounds more of an internal directive while the other sounds more of a question to finding right answers.

We have read several letters from corporates, that spoke of cost cuts which were received with applause from many, but very little on future based action to stay on course. To say the least, the latter perhaps did not receive the same attention.

So what?

Don’t get me wrong. Cash remains the King, and in fact, cash-inflows remain the Emperor. That is perhaps something every business reacts to and focuses on. Quite apart from this notion, the language narrative on the points above, describes two clear response ideologies; Internal or External.

The first set, from costs to cash is essentially internal. When the boards ask to cut costs, seldom do they question as to what happens to the customer. At a point in time in my career, I met with a very senior business personality who termed revenue as vanity (to infer that its worthless or futile) and only profits as sanity. He went on to advocate cost cutting as the means of increasing profits, openly encouraging a lukewarm response towards revenue.  I could not comprehend as to what he would cut down on, without revenues, in the first place.  Yes, you guessed it right, the run had severe limitations and businesses were stagnant. They didn’t make true cash profits; at best some proceeds from asset sales.

Here’s the issue. Cost optimization is a must for every business, and this should be a way of life. However, to cut cost alone as a business strategy amidst a pandemic! Well, I leave it for your imagination. Nevertheless, we can certainly agree that it is an internal ‘reactory-strategy’ (Guess I invented a word; reactory). Internal, not because it is internally orchestrated, but because it fails to understand the externalities and not driven with a customer focus.

The second set looks to be more driven by external factors. Did I say external? Well the right context would be, we respond based on a customer who is external. Your cost and action as a measure of your response to your revenue, which stems from the customer who pays you. You strive not to cut the pipeline that feeds, but optimize cost on delivery, across.

The reality in the second one is, you never lose focus on your customer. Your response to cost or any other stringent measures are based on your customer, of course internal customers too come as a part of it. Besides, your focus and discussions are on responding better and not closing shutters and waiting for the rain to cease.

The reality checks

Panic mode sets the trigger, the trigger to cost cutting, as opposed to optimizing business processes and costs. Panic is the mother of all ills.

• Have you positively enacted policies and action for internal realignment?

Realigned HR – work from home, hot seats etc.  The new normal action to transform processes and business strategy – new products and services, new brands, new channels and new investments.

• Are you actively looking at digitization? It is not about e-commerce though.

Your delivery channel revamping, your logistics and supply chain rearranging for efficiencies, tracking your customer journey and repositioning offers as required.

• Sorting your new response to cash. 

The new age responses that reduces cash deployed but not the output, better arrangements that bring in cash faster but not by alienating customers, plugging in profit or cash leakages, etc.

We can go on, I only jotted a few. The underlying factor is, when you are internally driven with a response, you are looking at short term – very short term, in fact months!

When you are driven by external realities, you are responding by future proofing your business in the medium to long-term. Given, that we might need some short-term action to tide over, but that should essentially not be detrimental to the long-term journey.

Conclusion – The new normal transformation strategies

Why we termed response one, as a reaction, was simply because it only creates short-term benefits at the expense of long-term, unless covered with long-term plans.

Adversities might have some element of reaction, but that perhaps should not be the way for a forward plan. Rather, a more focused response is required based on customers, with a view to realigning the business.

Current adversity has given an opportunity to do things differently and realign. If we are too pre-focused on the internal, we might miss the chance for a planned response.  Whatever we have done well, history will have it on record.

Are we late? Well, perhaps not. The pandemic is still at large and economically the worst is yet to hit. Turnaround strategies by doing things differently to add value to the customer journey, can be still be done, met.

Digitization based transformation, in the current context, might have greater benefit in the medium to long-term for those who have the nerve to move in that direction.  It might be even better for those who would have the courage to invest into the future, today.