By James Mworia as featured in the Business Daily on 20th July 2020. James is the Group CEO, Centum Investment Company Plc Group.
The Covid-19 pandemic has suspended ways of life, decimated businesses and put governments on their knees. But even in the midst of this disruption, we must continue to plan and dream of a better future as individuals, corporate entities and governments.
As chief executive of a listed company that directly and indirectly supports tens of thousands of jobs and livelihoods, my primary concern is to figure out how to survive the pandemic, ride it out and thrive in the years ahead.
There are multiple factors that will come into play to determine how successful businesses will look like post Covid-19. The first, and most critical, is that businesses must emerge with their key talent intact.
Companies must make a deliberate effort to protect their employees by observing all scientific and government guidelines that have been issued to stem the spread of the deadly virus. That means, for example, allowing as many staff as possible to work from home, to forestall an office-wide contagion.
As companies keep track of employees’ productivity during this time of disruption and working from home, they must take measures to safeguard their safety and wellbeing since it is the staff who drive sales and keep businesses afloat.
The second most critical point is for businesses to put in place measures that assure customers of their safety. The more customers feel safe, the more they will be willing to engage and transact with you.
That could mean, for example, innovating alternative delivery channels that minimise the need for physical contact and hence the chances of contracting the virus.
Most important though, businesses must devise a way to remain profitable, preserve their core competencies, retain and even win new customers.
Covid-19 has significantly reduced demand for goods and services across a wide range of industries, applying pressure on revenues and profit margins. The slump in demand can be attributed to restrictions on movement, a dent on consumer confidence and disruption of traditional delivery channels.
Businesses must therefore find ways of addressing this slump in customer demand, to remain in business. The collapse in demand, at least in Kenya and most of Africa, was most notable in April and May after most countries on the continent reported their first cases of Covid-19 in March.
The situation has subsequently improved, confirming the fact that life has to go on, even in the midst of the pandemic. What this means, however, is that businesses must now pursue their customers to their new, preferred service points.
Enterprises that spent decades perfecting their traditional routes to market must now wake up and smell the coffee. Customers who bought goods at the local supermarket or kiosk may now prefer to order for the same products online, out of fear that physical contact could expose them to the deadly virus.
A business that will not have a digital delivery channel is therefore not likely to thrive in the Covid-19 environment. The customer is always the king in any business entity, and businesses must perfect ways of pursuing them and meeting their expectations in the new normal.
Businesses must use innovative methods to preserve their profit margins and secure working capital. Preserving healthy relationships with suppliers and financiers will help in ensuring continuity of the supply chain. This, in some cases, could even mean backward financial intervention to ensure key suppliers remain operational and avoid market absence due to production chain disruptions.
Businesses must meet their customers at their affordable price points in the new normal, even if that means changing the packaging size or delivery channel. An apt example here, for one of Centum’s investee companies, is Longhorn which has rolled out digital learning channels to meet its customers’ needs as the requirement for physical distancing has made it difficult to re-open schools.
Companies must cut waste, as profligacy adds to the final retail price of products. As always, price is critical in a perfectly competitive field. This is the opportune time to examine cost structures, and weigh the equity-debt ratios on our balance sheets.
A heavily leveraged business incurs punitive financing costs and has little room to maneuver, as opposed to one with a perfectly poised balance sheet that is able to meet both the customers and the shareholders’ expectations.
This may be the time for businesses to consider evaluating their capital structure and if necessary bring in new equity capital.
But even in the reality of profound uncertainties and a dip in the demand curve, businesses must retain the mindset that there is a market for their goods and services.
REVENUE GENERATION
Those that adopt the mentality that there is no market are unlikely to adopt new ways to meet customer expectations, and will find it very hard to fend-off competition from their more established rivals after the pandemic.
It is important to pay attention to emerging national and local government licensing regulations. A hospitality facility that, for example, flouts the Ministry of Health operating guidelines could have its operating licence revoked and pay dearly for its negligence.
Eventually, businesses need to retain competent managers to see them through this pandemic.
There is need to act with speed, to keep pace with the rapidly evolving environment. All focus must remain on generation of revenue and sustenance of market presence, which are the lifeblood of business.
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