When the macroenvironment (and the coronavirus pandemic is a macroenvironmental factor, if ever there was one) causes a disruption, it’s a good time for a startup to step back and review its overall strategy, business model and tactics. Let’s start with a big picture strategy issue, then cover a couple of tactical issues to help your startup continue to thrive.
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What’s the likely growth trajectory for your industry and company?
Every disruption results in “winning” and “losing” industries. In the coronavirus pandemic, the winning industries are the “essential” businesses: grocery stores and food production, pharmacies, health care, utilities, shipping, banking, other governmental services, law enforcement and emergency personnel.
All other industries are then non-essential. This means that essential businesses will be overrun with demand, while non-essential ones will see severe slowdowns.
Your first strategic question should be, “What can my startup do to support these essential businesses?”
How can you change your offering, sales process or delivery mechanism to get them what they need? But, be patient because they may have their hands full and have a hard time hearing you at the start. Breaking through the noise is challenging, so you need a clear signal why you are essential to them.
For non-essential businesses, the key strategic decision is how to stay afloat until a new normal is established. This means scenario planning as the first task. What are your costs and revenue if the disruption lasts one month, two months, three months, six months and one year? What cuts do you have to make? How can you use government dollars to subsidize vulnerable employees? Get help to avoid doing all of the supporting yourself. What can you afford to continue doing? What metrics will help you sort out which trajectory is most likely? What metrics will tell you when to make cuts?
A related strategic issue is to start to sort out what the new normal will look like. Some industries will cross the chasm from nominal to rapid growth.
With the coronavirus, we expect telemedicine, e-learning, video conferencing, e-sports, home grocery delivery, and other industries will cross the chasm in this disruption. Other industries might experience a hype curve instead – they will experience high growth for a short period of time, then growth will dramatically decline and stabilize at a lower level but above where it had started. And, some industries will slowly recover from the falloff to their previous state.
Figuring out which growth curve you are on is important for planning the rest of the year. No one has a crystal ball. You have to look at your revenue generation patterns, consider what behavior is changing, and figure out how those changes will affect your business.
How can you pivot to meet market demand?
This pivot has two options. As we suggested above, what does it take to pivot and serve an essential business?
If you’ve decided that it’s a strategically good idea to serve essential businesses, lay out the steps to meeting their needs. It might mean new software, a new sales approach and maybe even a new delivery approach.
Don’t just make assumptions, though. Try to reach out to these new customers and find out what they need. Use that information to reconfigure your offering. For example, a coffee shop we know could no longer have its customers come inside and work/drink. But, they were right next to a hospital. They put in place a text-to-order system and started making deliveries.
Another option is to pivot to meeting consumers’ needs to stay in their homes. Say your target customer has traditionally been restaurants, but they are no longer buying. Is there a way you can skip over them and go directly to consumers?
Produce wholesalers have taken their trucks into neighborhoods for direct purchases. When that became too unsafe, they opened up a will-call operation where consumers call in, place an order, and then do curbside pickup. While it will take more total orders to get to the same volume these wholesalers are used to, it’s better than no volume.
Likewise, some fitness equipment makers have pivoted to focusing on direct-to-consumer sales. That may mean new ordering and delivery systems, as well as possibly offering financing and guaranteed returns. But the tradeoff is that sales continue.
Several restaurants have pivoted to family meals, in which customers can order online from a limited menu for a complete meal package. In this case, they are bringing products to consumers instead of waiting for consumers to find them.
Many companies, especially small and new ones, have only one way for customers to buy, whether that’s e-commerce or brick-and-mortar. Multi-modal buying, however, is likely to be the new normal. Make it as easy as possible for customers to work with you.
What part of the sales process can be self-serve? Where does your current sales process slow down or fall apart? You have to take out any bumpy parts of your sales process. Do your customers want to shop and order online? Do they want to call and talk to someone? Do they want to shop online but pick up in the store? Give them multiple ways to do business with you.
Going multi-modal might mean adopting new technology into your processes. Now is the time to revise and improve your sales process. It is also a good time to organize your existing customer database and find insights into past behaviors, needs and segments.
The same goes for onboarding new customers. Instead of being forced into one way of getting a program started, allow customers to pick how they want to get started. Maybe it’s by talking directly to your employees, or perhaps there are online resources they can use instead. Even better, design your product for intuitive setup. There will be a delicate balance between letting people take care of themselves and helping them. Again, work with your customers to find out what they really need, what they want, and what they can do without.
When is your grand re-opening?
You have to assume this disruption will end and it will be time to start ramping up the new normal. Start planning now for what that will look like. It will not be an on/off switch, but a bumpy and uneven restart.
Is there an inner circle of VIP customers that you are going to reach out to first? How would they like to celebrate with you?
One of our local retailers announced their virtual re-opening with online ordering and curbside pickup via email. They offered free shipping for those who don’t want to pick up and announced a bunch of new merchandise.
Will yours be a virtual only event, announced through email and social media? Should it be a live event? What offers will you use to create excitement in the re-opening (i.e. discounts, contests)?
This is an opportunity to use your revamped customer database. How will you generate awareness of the event? Is it newsworthy? One of our local restaurants announced their takeout re-opening by having the chef dress up as the Tiger King. It was picked up by all of the local TV stations.
There’s no doubt that this kind of disruption can have a devastating impact on businesses of all sizes. But, smart startups must take the opportunity to get creative, experiment and plan for a path forward. Don’t let the challenge beat you. This is a time to avoid making decisions that can limit your company’s success, or even sink it. We call these decisions “hidden debts” in our book, “The Titanic Effect.”
Find a way not just to survive, but also to thrive through this stress. Your startup will be stronger on the other side.