COVID-19 Update: 8 Actions to Take Now
It’s been 10 days since my last communication regarding the novel coronavirus spreading mainly in China and popping up in other parts of the world. We are beginning to learn more about it as the initial ramp-up phase ends. While there is some good news, we are just now entering the steep part of the exponential growth curve and it will get worse before it gets better. This update summarizes what we are learning about the virus and recommends 8 specific actions you can take based on this new information.
The Good
Cases outside of China are spreading more slowly than I expected and are not as deadly. Despite almost 25,000 confirmed cases, a little over 200 cases are outside of mainland China. And only 2 of the 494 deaths from the virus have occurred in other countries. Johns Hopkins is providing a very good dashboard of what’s going on.
Countries and companies are treating this very seriously and imposing quarantines and travel restrictions. China is the supply chain for the world. That companies are skipping ports, shutting down factories, not allowing travel to the region, and imposing 14-day quarantines on anyone traveling from the region, may help contain the virus in mainland China.
Mortality may be closer to existing flu viruses. As I suggested in my last POV, mortality rate is dropping and may continue to drop. Using confirmed cases the mortality rate is 2%, but that does not take into account all the people turned away from treatment or not seeking treatment due to mild symptoms. My guess is that it is less than 1%, and may be lower outside China. In addition, the large number of deaths are occurring in those over 60 with existing health problems.
The Bad
The spread of the virus inside China is experiencing exponential growth. We need to realize that despite China’s efforts, the virus has broken containment and will move through a large portion of the country’s population. The steep curve of mainland China infections tracked on the Johns Hopkins dashboard is where the main concern lies now. This will make it much harder to contain it within China, and there is a greater chance new centers of exponential growth occur in other parts of the world.
The next phase of the virus is about to start. We are running out of time on initial attempts of containment. People will need to work and eat. Basic goods will need to be made, distributed and sold. The global supply chain will have to start up again. The spread has been contained because of the New Year vacations and work stoppages. The Chinese government has added an extra week of vacation for some regions, but eventually more people will be at work, school, or shopping for staples. In two weeks, I would expect to see over 100,000 cases in China and new centers of growth in other countries.
The hit to the global economy will be more severe. Retail, hospitality, and travel industries were hit first. Now the pain moves to companies that depend on high tech, apparel, and raw materials sourced from China. There are no Apple phones being made right now. Considering 10 iPhones are sold every second, stock-outs and lost sales will happen quickly. A sharp 2 quarter global recession seems unavoidable at this point.
What to do now?
There’s no magic bullet on how to survive and thrive in a potential pandemic. Hopefully your company has a task force and has a plan, as I discussed in my last POV. I’ve added below 8 actions to take now, based on the good news of the limited spread in the US and other countries, and the bad news of a more severe supply chain and economic impact into the summer.
Product rationalization. Right now, it’s time to make the most money from the least amount of stuff. Trim your product line of any dogs or failures. Prioritize on high profit, not high volume, products. Sort your products/services based on profit and inverse to volume and market and sell those things. And work really hard to set up alternative sourcing for those products and services first. De-emphasize in your marketing and operations high volume goods dependent on Chinese raw materials, manufacturing or sub-assemblies.
Invest in innovation. A recession and tight supply will mean your sales will be down and COGS will be up. It would be tempting to slash the discretionary budget and lay off people. But history shows that companies that invest in innovation during downturns end up market leaders once the economy returns to growth. Don’t fire your people, turn them loose with design sprints and lean start-up iterations that will deliver growth once the recession is over. It will also allow you to retain your culture, intellectual capital, and workforce know-how. And it will avoid the cost of retraining workers when you have to ramp up again.
Go virtual and go digital. Turn on any digital product creation capabilities your existing product development process may have. You may be surprised what your current PLM system can do, and if you are using cloud-based product development software you may be able to turn on these capabilities immediately with a phone call. Without an assessment period or data-cleansing/integration front-end it may be ugly, but it might get you through. It’s the future anyway, so get help and get started. This will replace a lot of loops of physical samples and product testing that needs to be done with suppliers in physical locations. It may reduce physical collaboration to a manageable minimum in this time of pandemics and save a lot of money and cycle time when it is over.
Invest in productivity. Beyond digital product creation, most companies are in industries going through profound disruption. Digitalization, automation, and AI are changing how companies compete and create value. When the economy was hot it felt like building a plane while you are flying it. But now you’re grounded. Connect your operations with IOT. Get your data house in order. Get humans in the loop and apply machine learning to your business. Mobilize your workforce to take the time to become a model-based digital company guided by algorithms. Automate where you can and retrain employees for the future requirements of work.
Communicate with your customers. Your customers know what’s going on. Provide realistic delivery windows and be very transparent in communicating with them. Ask your best customers what they need the most and work with them as best you can. Companies who can maintain or grow trust during this phase will win, both now and in the long-term.
Take care of your workforce. I touched on this in my last POV, but it bears repeating. While mortality rates will be lower than expected, you can’t run a business if everyone is sick. Communicate best practices with them, encourage them to work from home, set up space in offices for workers to get supplies and medications, hire a PA to diagnose illness and dispense medications, use your buying power to ensure masks and gloves are available, and get doses of vaccine for your employees when they become available. Make care accessible to everyone you touch, including contractors and gig workers.
Give back to your communities. Work with community leaders and organizations to be a positive force during this crisis. Companies have advantages that governments and individuals do not. Use them in helping in the communities you do business in, and you will gain employee loyalty and trust, the right to operate, and more customers.
Think ahead. While this may sound a bit self-serving, the world will be different. Where will trends create new opportunities? What is the next big threat to your operations? Can you generate new ideas and where should you invest in innovation and growth? How might new players disrupt your market? A facility to recognize and translate change into business actions is your greatest competitive advantage right now. We can help.
Conclusion
My job is to help companies take action in uncertainty. While the future cannot be predicted, forecasting possible events and building a point of view about the future enables companies to place bets. As new information emerges about the future, leaders can recognize the environment has changed and pivot accordingly. My last POV suggested actions to take knowing what we knew at the time and was mostly about setting up planning and capabilities to act. As this virus has evolved, more information about its trajectory and impacts can be derived. This update recommends actions based on new information about the future and is a good example of how a foresight-based approach to innovation and strategy can enable action in uncertainty and turn change into opportunity.