In just a few short months COVID-19 has changed the world. As citizens of the world we have learned new definitions for words like pandemic, coronavirus, N95, social distancing and ventilators. We have also witnessed small business closures, food and product shortages, distribution delays, mobile hospitals, tent-based triage stations and around-the-clock efforts to “flatten the curve” and reduce mortality rates. Although the disruption from “shelter in place” has been obvious on air/public transportation, hospitality and traditional retail, every industry has been impacted, causing wild swings in global financial markets. The pandemic has had a worldwide impact, creating a “new normal” unlike anything most of us have experienced in our lifetimes. This new reality presents us with new challenges—and new opportunities.
In the current COVID-19 environment, there are a few bright spots: for example, distribution and delivery services are now necessities and are scaling up. Businesses are fully adopting digital technologies, including video conferencing and electronic collaboration to transact business remotely. And some businesses have adapted with in-store personal shoppers and pick-up services. Governments are providing emergency assistance to its citizens including “wartime defense decrees” to produce the essential medical testing, devices, medicines, medical supplies and protective equipment to address heightened demand.
Defining Essential Business Within a New Normal
From out of this chaos, a new term has emerged to define these kinds of business-related activities: “essential business.” It refers to transactions that involve supplying food, delivery, medicine, healthcare, shelter, information, transportation and insurance. For these types of companies, increasing business efficiency and throughput is not just smart business, it’s a necessity.
In fact, every business should be revising its thinking on what makes its business “essential” to consumers, what operational processes and systems are “essential” to deliver customer value, and what can be done to reestablish a reasonable price point and margin that encourages customers to part with less abundant income to purchase its “essential” goods and services. This mindset should lead C-suite executives to identify and consider options to rapidly divest business units that are no longer essential to the new customer value. At the same time, this approach offers companies opportunities to free capital to quickly acquire and assimilate bargain businesses that expand customer demand and enhance market positioning.
Early-mover, highly adaptive companies will be the big winners in the race to become part of the new generation of essential businesses. And just like the “banking wars” of the 1990s and 2000s, competitive success will demand more than simply picking the right acquisitions. Success will require businesses to rapidly plan and quickly execute to blend their business processes, technologies and cultures together. Speed is key to success, but only if the result is a strategically aligned and collaborative operating model, enabled by highly integrated, streamlined systems and infrastructure.
A Playbook for Rapid Business Transformation
A great track record in running a business is no guarantee of success in adapting or transforming the business. Even before the COVID-19 pandemic, continuously sustaining business relevance and financial viability has been a challenge in a technology-driven, ultra-competitive global marketplace. To make the reward worth the risk in pursuing M&A and divestiture activities, it’s important to ensure the company has effective integration and separation plans that quickly convert strategy into tangible results.
Becoming or remaining an essential business depends on how rapidly fact-based decisions around M&A and divestiture activities can be made and put into action. To be successful and quickly realize the promise of an acquisition requires an “M&A playbook” along with access to specialized resources and tools (such enterprise architectures, technology migration factories and infrastructure harmonization capabilities) – underpinned by strong leadership and sustained commitment.