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|In: Digital|Last Updated:

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.

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|In: Strategy and Tactics|Last Updated:

We must, I’m told, plan for the future, as if some other period of time might seem more worth planning for.

Right now, the future most business managers are planning for is next week, or, for the more visionary, next month. This is as it should be. Many businesses are in the metaphorical emergency room, where stopping the arterial bleeding gets priority over curing a long-term illness like cancer.

And yet …

The decisions executives and managers make today should be informed by their view of what’s in store once the immediate crisis has passed. To that end, and because I really wanted to write science fiction, and because there’s still only one Subject worth writing about, here are some thoughts about the post-crisis future and how it should influence the decisions business leaders are making here in the self-isolated present.

In round numbers, when SARS-CoV-2 eventually recedes from view (in case you haven’t kept track, SARS-CoV-2 is the virus, COVID-19 is the disease it causes, and coronavirus is the family of viruses SARS-CoV-2 belongs to), I see three major competing What Happens Next scenarios. Call them Survivalism, Normalism, and Transformationism.

One at a time:

Survivalists are going to pivot from a dystopian future in which nuclear war has wiped out much of our societal infrastructure and norms to the same dystopian future only with a pandemic as the cause. Self-reliance (including a strong immune system) will matter more, social adroitness will matter less; the adjective of choice will be “grim”; and living off the grid will be less isolating than expected because those choosing the survivalist lifestyle will experience an influx of new, like-minded neighbors.

Business survivalism puts us in Great Depression territory, where dramatically reduced commerce leads to greatly reduced personal income, wealth, and spending, which leads to a vicious cycle of even more dramatically reduced commerce.

Survivalist business leaders expect a slow, protracted recovery. They should reduce their workforce to the numbers needed to supply a much smaller marketplace.

Their strategies will be pseudo-Maslowist, figuring most spending will be for needs, with wants and desires a distant second and third, too miniscule to be worth catering to. Probably they’re already adjusting their products and services catalog to fit.

For Normalists the current pandemic is a temporary disruption. They need strategies to get through the next few months, not to adapt to changes to societal fundamentals.

And while nobody has ever deliberately turned off the economics motor before, normalists are confident we’ll all figure out how to re-start it once we can stop dealing with the threat of contagion.

Business normalists should be thinking about the best ways to ride things out so they can ramp up quickly once the recovery starts. This means furloughing employees rather than laying them off, converting others from full-time to part-time status, renegotiating services contracts and licenses, optimizing raw-materials inventories based on a post-recovery demand forecast, and figuring out how to quiesce production facilities now so they can be re-started with as little delay as possible then.

Normalists should also include a chapter 11 contingency in their plans. (Expectation: massive use of the chapter 11 mechanism will help the economy recover by sharing out pandemic-induced economic damage, not that I have any serious expertise in such matters.)

Transformationists? They figure the pandemic will accelerate trends we were going to have to come to grips with anyway, the most important of which is the decreasing need to employ human beings to do all of the work that has to get done. The second most important is that consumers, and especially younger consumers, want more experiences and less stuff. That’s fine if you’re in the entertainment business or are a tourism destination, although the future of cruise lines is debatable.

But even if you’re Disney you rely on retail revenue along with the theme park entry fee.

Those who figure the past prefigures the future will explain that all previous waves of technology have created more jobs than they destroyed. Although the transitions were painful, the new jobs did appear.

But increasingly capable machine learning and robotics mean fewer and fewer humans will be needed to create the stuff retail outlets will be selling less of.

Transformationist business leaders should be doubling down right now on the investments they’ve already been making in artificial intelligence and robotics. They should also, right now, start to re-conceptualize their businesses in terms of how they fit into a less-stuff/more experiences consumer marketplace.

Meanwhile, transformationist savants will start thinking about how to configure an economy so that people don’t need to work to make their lives work.

And not only an economy, but a society and culture, too.

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