You heard it here first, but, he said it better, “he” being Professor Ravi Bapna of the University of Minnesota’s Carlson School of Management; “it” being a discussion of “Two Things Companies Should Do Now to Set Up for a Post-COVID-19 Future.”
Well, okay, he actually said it first too — beat me by a week.
Professor Bapna’s recommended two things are: (1) upskilling your workforce, because “as organizations shift to an AI-first world, they need a workforce which understands the world of data, analytics, and AI”; and (2) re-thinking operations and strategy toward an “AI-first strategy.”
So let me up the ante with KJR’s Thing One and Thing Two: AI-based business modeling and anticipatory customer re-identification.
AI-based business modeling
While our pre-COVID-19 fascination with Digital transformation frequently led to little more than Digital superficialities, it did lead to one salutary change in executive thinking — recognition that increasing revenue is just as legitimate a strategic outcome as cutting costs. It didn’t, sadly, overcome the metrics obsession that’s the root cause of management’s over-reliance on cost-cutting, but it was a start.
Briefly, the issue is that connecting a cost-cutting effort to an actual cost reduction is, for the most part, pretty simple, while connecting revenue-enhancement efforts to actual increased sales is frustratingly multivariate.
What’s needed to manage effectively isn’t more and better metrics. It’s the ability to model complex cause-and-effect relationships.
Start here: For many companies, strategic change isn’t really strategic in nature. Planning is based on the unstated assumption that the business details might shift from year to year, but the basic shape of the business doesn’t change. The buttons and levers management can push and pull to make profit happen are constant.
To the extent this unstated assumption is true, it should be possible to direct the attention of machine-learning technology to a business’s inputs, outputs, and operating parameters so that, after some time has passed, the AI will be able to determine the optimal mix for achieving profitable revenue growth.
And in case you’re curious … no, I’m not remotely qualified to delve very far into the specifics of how to go about this. That would call for deep expertise, and I’m a broad-and-shallow kind of guy. I do know someone who built this sort of model the hard way, and she verified that yes, it can be done and yes, machine learning would be a promising alternative to doing it the hard way.
Anyway, while I’m a broad-and-shallow kind of guy, I’m not so shallow that I can’t suggest Thing #2, which is:
Anticipatory customer re-identification
Right now, as pointed out here a couple of weeks ago, most businesses are just trying to survive until the future gets here. And please don’t misunderstand. Succeeding at this will, for most businesses, be nothing to sneeze at (insert your own COVID-19 snark here).
But smart business leaders will take their planning to another level, and it has everything to do with their expectations regarding what the economy will be like once the crisis has passed.
My own, everything-I-know-about-economics-I-learned-on-a-street-corner expectation is that as we’re reaching Great Depression levels of unemployment we shouldn’t expect the post-COVID-19 consumer population to look just like it did before we started self-isolating.
As with the Great Depression most working-age adults will be employed, so there will be consumers to sell to. If we use the Great Depression as the benchmark of our worst-case-not-including-total-societal-collapse analysis we’ll figure about 20% unemployment as the basis for customer re-identification — my just-invented term for Figuring Out Who You Want to Sell To.
The KJR point of view: There will still be consumers and they will still be spending. Fewer and less, for sure, but still well above the zero mark. The affluent and wealthy won’t go away either, and it wouldn’t surprise me if many do quite well in the aftermath and decide this is an excellent time to buy stuff.
I’m not going to try to identify specific consumer segments here. That’s for you and your fellow strategic planners in the business to do. What I’m recommending is that business leaders shouldn’t wait to find out who will be spending what, and shouldn’t undertake their survival efforts based on an expected return to status quo ante.
Make your adjustments based on positioning the business for the consumer marketplace to come, and which segments within it you want to cater to.
And yes, that includes those businesses that don’t sell to consumers, because in the end, no matter how long the business-to-business-to-business value chain, it’s always consumer spending that pays for the steps in between.
I’m going to disagree with the not unreasonable idea of IT upgrading its skills in the area of AI. I suspect the way that the pandemic has been handled at the Federal level will have a transformative effect on our culture and our economy, not necessarily to the good.
Like our researchers, I think IT needs to focus on data gathering and support of collaboration within the organization, and, perhaps, without, until we truly see what we have, when the smoke begins to clear, before we can begin to consider what solutions might look like.
Then, beginning to look at strategic analysis might be a good IT focus again.
I’m certainly not going to argue that IT should ignore the importance of its role in encouraging collaboration among employees. Quite the opposite – I think it’s a crucial one that’s often relegated to the back burner.
I guess this means we have a Thing 3. Thanks!
Thanks for sharing the clever quip:
“A lot of people are afraid of heights. Not me. I’m afraid of widths.” — Steven Wright
One of my all-time favorites. Glad you liked it too.
Since we’re adding to your and Professor Bapna’s recommended 1-2 things, how about another one for business leaders to focus on—namely leadership. This pandemic and ensuing economic crisis has highlighted out the incredible value of true leadership.
Let me reference interviews with three amazing leaders who were interviewed on CBS Sunday Morning last week
https://www.cbsnews.com/news/what-kind-of-leadership-does-our-nation-need/
as well as your May 2013 column on the value of organizational leadership in IT organizations
https://issurvivor.com/2013/05/13/three-more-it-critical-success-factors-and-theyre-all-about-leadership/
It might be easier to decide what the main demographic with money will want to buy, rather than try to redefine your particular set of new customers. There’s an article in USA Today where the WalMart CEO talked about what they ran out of in weeks one, two and three. Week four they started selling lots of haircut kits.
The on-line clothing stores are selling a lot more tops than bottoms since that’s all you see on Zoom. And they’re going big into balaclavas and neck gaiters. Traveling and camping might actually pick up since that’s a good way to move around without too much interaction.
And if they cut the number of passengers on cruise ships in half or even a third as some companies are talking about, that means the cabins will be bigger and the pools won’t be as crowded which means more different folks might cruise, but the company won’t have near the profits it used to.