While we are in lockdown, the media around the world are full of speculation about what the short, medium and long term hold for the economy and industrial sectors. People such as CEOs, who have to make far-reaching decisions in this environment, are desperate to understand what is going on, what comes next and what the world will look like “when this is all over”.
Those who have to make such decisions in the glare of the public eye, like the US Federal Reserve or IMF, will unavoidably make those decisions based on certain assumptions. Even such institutions, with their vast research capabilities, are having to admit humbly that they have no idea what is really going on, or how this crisis will play out. It seems there are two types of economic analysts and commentators: those who pretend to know what is going on and how it is likely to play out, and those who admit they have no clue.
Economic models and algorithms, whether developed by humans or through artificial intelligence, all work on the assumption that a certain basic logic applies in some way. It is this that would enable us to predict the future. But because the long-held assumptions and taken-for-granted cause and effect relations of yesterday no longer apply in the current circumstances, all of these sophisticated predictive models have become dangerously irrelevant and misleading.
Even scenario planning, a way of strategic thinking that has helped us navigate the uncertainties of the SA political and economic landscape through our turbulent history of the past few decades, is of limited help because it also requires certain assumptions and predictability, in an environment where such factors have become unstable.
How then should we make plans and strategise in a situation like this? Such strategising can have little to do with what is happening in the broader environment. It must focus on the inherent purpose of the organisation. It digs deep into the question: what are we actually here for? What contribution are we committed to make and what value we are here to add?
Our situation puts those glossy values statements written in the past to the test. Are they still relevant when the hope to produce significant returns for shareholders is no longer more than a distant thought? With its dramatic disruption of the status quo, the current crisis has the potential to lead to a fairer and more equitable and sustainable world. Already it has given us a new appreciation for people who provide basic services such as food, health and transportation.
Strategic thinking in times of such profound uncertainty must focus on creating a compact with employees and stakeholders that can survive even the most testing of times. Such a compact is in each case built on trust, but also on a clear idea of what value and contribution employees and stakeholders can count on receiving and providing under all circumstances, and as long as the organisation exists.
Importantly, the contributions and commitments people will now require and expect from companies are likely to have been changed by the current crisis in rather fundamental ways. Constant dialogue with them and flexibility will be crucial.
The world has never before witnessed an economic calamity quite like the fallout from the Covid-19 pandemic. The closest event to compare our present situation to is the Great Depression of the early 1930s, but even this event is in many ways fails as a direct comparison when the economic data of both events is juxtaposed. The Great Depression led to, among other things, Roosevelt’s New Deal, the World War 2 and a world order that brought prosperity to billions for 70 years, though not without its faults. Yet this world order had already started to come apart before the pandemic, with income and wealth inequality rising over time to obscene levels and the natural environment collapsing.
If the past is still anything to go by, times of deep crisis tend to punish those who merely try to hold on to old customs, wealth and privilege, and provide opportunities for those who are flexible, make genuine contributions, get innovative in providing what is needed and wanted, and whose integrity we can trust regardless of circumstances. The work of those of goodwill and genuine contribution has just begun. Heil is a visiting senior lecturer at Wits Business School, a programme director at Cranfield School of Management and a partner at Hewers Communications.
First appeared in Business Day, 21 April 2020.