Some reflections on Leadership and strategy in COVID and POST COVID times.

By Mauricio Calero

The COVID-19 pandemic has undoubtedly dealt a severe blow to the world economy, both because of the unforeseen manner in which it arrived, as well as the harmful effects that affected the physical and emotional health of the population worldwide.

In the case of Ecuador in terms of employment, about 270 thousand people lost their jobs as a result of this pandemic between March 16, 2020 and the end of June of the same year. The confinement imposed by our authorities, in order to prevent the spread of the virus, caused that companies in some sectors of the economy could not provide their services or sell their products, suffocating their operations and liquidity. In the study published last year by the Superintendence of Companies and Securities on the effects of COVID-19 confinement, it cited Carrillo-Maldonado, Deza and Camino-Mogro (2020), who argued that 50% companies were operating with a median of 33 days of resistance without liquidity, but also that 25% companies were highly vulnerable to quarantine or suspension of economic activities for more than 16 days. In addition, this study mentioned Bachas, Brockmeyer, Santiago and Semelet (2020) who estimated that only 35% of companies would remain profitable and that almost all companies in the most affected sectors would record losses. 

In this sense, Diario La Hora in its publication of May 30 of this year and based on a study prepared by the Inter-American Development Bank (IDB), highlighted that the Ecuadorian productive sector was the least prepared to face such a shock for two reasons: its cost structure and low liquidity levels. In this same report, Diario la Hora presents the effects of this crisis on the Ecuadorian economy:

• 269 companies closed down in the commercial sector
• 244 companies related to construction and real estate activities closed down
• The decline in revenues amounted to 1TP4Q11.837 billion, along with more than 80,000 formal jobs lost.
• Other hard-hit sectors were professional services with 134 closures and manufacturing with 102. 

Undoubtedly, despite these negative results in Ecuador, there were companies and sectors that achieved very encouraging results, both locally and globally. In a report published by Diario El Universo in June 2020, some winning sectors were mentioned, such as companies related to healthcare, including pharmaceutical and biotechnology companies. Global mask manufacturers such as 3M and technology companies such as Amazon, Netflix, Spotify, Tik Ttok, Zoom made it possible to offer value to all their customers in the midst of the deadliest pandemic of this century. 

On a personal and professional level, this crisis also meant many challenges for me. However, I had the opportunity to remember and apply some principles and lessons from Bill George, author of the book “7 Lessons for leading in Crisis”. The following is a brief summary of these principles that gave me many insights to lead and apply an effective strategy to the company I currently manage. This company, last year opened 5 stores since mid-2020, which meant reaching the same level of sales in 2019 and with very positive results at the end of the fiscal year. Here is a brief summary of the principles outlined by George (2009), which are still more valid today than ever; in my opinion, from COVID19 onwards, a turning point was reached that changed the world in all its facets:

1. Facing reality, starting with oneself

• The first challenge for a strategist is to define reality. As the English philosopher Edmund Burke once said, “Those who do not know history are destined to repeat it. 
• Our role as leaders is to define the problem and develop plans to address these challenges. In this sense, as strategy leaders, we must look deep within ourselves for wisdom and courage to move forward. The worst thing that can happen to a company in times of crisis is to remain inactive. The leader moves forward and thereby pushes the entire organization.

2. Do not assume the full weight of the problems, involve the whole team.

• The question is not whether projects fail during a crisis, but rather how we should respond to these difficulties and challenges.
• Key is to form a solid team to support all change processes and solve the problems encountered.

3. Deepening the causes of crises
   • It is very important to question oneself and ask questions that lead to a correct definition of the problem in order to solve it.
   • Often in this process, it is necessary to seek external support from experts. 

4. Preparing for the future
   • It is so difficult to know exactly when a crisis will arrive, but it is even more difficult to predict when it will end. 
   • In the case of COVID19 this principle applies, and it is very clear to us that when everything returns to normal; at the same time everything will be different.
   • This principle highlights that reinvention is paramount. In and during a crisis, cash is king. This phrase in the Anglo-Saxon language reads: “Cash is the King”.

5. Never waste a good crisis 
   • In crises, strategies and leadership are tested. Those businesses that do not take advantage of this opportunity to make long-term improvements are the ones that waste a crisis. This principle relates to the concept that the Austro-American economist, Joseph Schumpeter, promulgated last century in his theory of “Creative Destruction”.

6. Being true to the vision 
   • The best strategy and mission of a leader in a crisis are: 1) To maintain the reputation of the company and 2) To maintain the integrity of the work teams.

7. Go on the offensive, focus on winning 
   • If we invest in times of crisis, we will be ready when the situation improves. Those who take this aggressive step will be the ones who will make the most of the market and take advantage of their inactive and timid competitors.

Business has changed as a result of COVID19 in Ecuador. In the fast food industry (cafeterias) where the business I lead operates, one of the vital changes is to have a strategy of direct online sales or through delivery platforms. Many cafeterias, fast food and restaurant businesses were able to operate and continue to do so, despite the restrictions with this primary channel. 

Below are four strategies needed in times of COVID & POSTCOVID and my recommendation on the appropriate levels of investment and weight on sales: 

1. Sales strategy through delivery platforms (own or outsourced). Achieving at least 40% of total sales through this channel should be a priority. 
2. Communication Strategy through Social Networks. Invest more than 50% of the Communication Mix budget. 
3. Strategy of seeking alternative revenue channels. Question in what other non-traditional ways the target group can be reached. This channel should contribute at least 30% of sales in year 1. 
4. Customer Loyalty Strategy, generating attractive repurchase programs that generate engagement and positioning of my brand. At least 35% of my marketing budget should be allocated to this type of strategy.

And I conclude with the following popular phrase “Necessity is the mother of virtue”. 

Bibliographic references:

Lessons for leading in Crisis, Bill George (2009) - Jossey-Bass a Wiley Imprint