While there has been a lot of talk recently about a rapid V-shaped recovery in the economy, it is hard to overestimate the massive effect that COVID-19 is having on businesses.
One of our clients that operates in the utility space has cut its Capex budget for FY21 by 70%! - this in a business that still has strong cashflows and a reasonably captive client base. Companies that are more exposed to discretionary spending have a much more difficult road ahead.
Other forward indicators paint a similarly challenging future - the International Energy Agency, for example, predicts that we will not return to 2019 levels of energy usage until 2023!
In Australia, the financial stimulus provided by the JobKeeper and JobSeeker programs, combined with the added liquidity provided by both the RBA and the "loan repayment holiday" by banks, has provided a temporary reprieve. This has created an artificial world, where everything seems OK, but is underpinned by the unsustainable growth in the public debt of several billion dollars per week.
When these various programs end in late September, many businesses will not be in a position to continue trading, due to a combination of one or more of:
- an inability to continue paying their staff without government support
- an inability to pay monthly rent that has remained at pre-COVID levels
- an inability to service the business' (now larger) debt following the end of the repayment holiday
That's the bad news. The good news is that 30th September is still over three months away. This gives Australian businesses over 100 days to review their business strategy, customer value proposition and operations.
100 days is not a lot of time, but with a shared sense of urgency and the willingness to critically review perceived sacred cows, many businesses are taking the opportunity to restructure now to avoid the possibility of involuntary restructuring at a later date.
Agile and Lean provide a myriad of techniques to help organisations tackle these challenges, including:
- Value Stream Mapping
- Cycle Time Analysis
- The Seven Deadly Wastes
- Time to Value
and above all, a critical assessment of, and commitment to, the value they deliver to their customers.
Using these and other similar techniques, businesses are removing waste from their operations, closing unprofitable lines or offerings, and re-investing these savings in the products and services at which they excel.
Smart businesses are using the window provided by the current business support programs to prepare for the new post-COVID world ahead of us. It is these businesses that will thrive as the economy reopens, albeit it to a world that will be very different from the one we had before.