Strategic Planning Through the Pandemic
By: Russell Mcguire
Tags: Strategic Planning, Startup, Strategy Tools, Covid 19 Crisis

Photo by Anastasia Petrova on Unsplash

The past few weeks have been unlike anything our economy has ever experienced. As the world has gone under lockdown, nearly every business has been dramatically impacted. For a few businesses, demand has exploded and they are struggling to keep up with the amount of new business. For others, their businesses have either been completely or virtually shut down as employees can’t report for work and customers can’t visit the business. Many businesses have had to quickly learn how to operate as a distributed organization and serve customers with minimal physical interaction.

This is our reality today, but all organizations need to be planning for a future that won’t look like today and probably won’t look like 2019 either.

In this article we will look at five steps that every organization needs to take in planning for the future, and those steps need to be taken for three planning horizons.

The five planning steps are:

financial modeling,

scenario planning,

situation analysis,

business modeling, and

strategy development.

The three planning horizons are:

“the right now”: how your business can survive the pandemic

“the restart”: how to relaunch after the lockdown, and

“the new reality”: what is our business next year and beyond

This article is structured to look at each planning step, considering how to perform that step for each planning horizon. If you need help with any of this, please let us know.

As Proverbs 16:3 tells us “Commit your work to the Lord, and your plans will be established.”

The Three Planning Horizons

Before we dive in, we need to understand what is true about each of the three planning horizons.

The first timeframe is the “right now” — between today and when lockdowns start to ease and operations can start returning to “normal.” Planning for the “right now” is all about survival and will focus on critical scarcities. Most organizations have limited cash on hand and revenue sources have dried up, so planning will be focused on getting cash to last through the pandemic. For other organizations, demand may be outpacing supply (either raw materials, fixed infrastructure, or people for operations), and for these, planning will be focused on how to maximize output with minimal inputs.

The second timeframe is the “restart” — the transition period that starts when the lockdown ends. Employees and customers can return, but we can’t yet call this period “normal.” People will still be (rightly) wrestling with fears. Every business in the ecosystem will also be in transition. Partners and suppliers will need time to be fully supportive of our businesses. Business customers will take time for their demand to return to “normal.” Many that we do business with will also be in a cash crunch, impacting their needs and expectations, and sadly, some organizations will not have survived this crisis.

The third timeframe is the “new reality” — for planning purposes it probably makes sense to think of this starting at the beginning of 2021. This is “business as usual” but it’s probably not the “normal” we knew in 2019.

As Proverbs 16:9 tells us “The heart of man plans his way, but the Lord establishes his steps.” We are to plan, but only God perfectly knows the future. We can’t accurately predict any of these three planning horizons. There are simply things that, at this point, we can’t know. How long will our markets be in lockdown? When can employees return? When will customers return? Will it make sense for us or our customers to adopt a distributed model more permanently? Have customers’ needs and desires changed through this experience?

Financial Modeling

By now the financial leaders within your organization have undoubtedly developed cash flow projections which your leadership team have used to make hard decisions. So, to some extent, this step is a “given” and my advice to perform financial modeling may seem like it has come a bit late.

However, there is still a lot of planning and strategy development left to do. And all of that planning will need to be done against multiple scenarios. As one recent article described it “every organization is now a startup” and so having the kinds of financial models that startups use may prove very helpful.

Strategic planning for startups is very different from doing the same for existing organizations. Startups have to be focused on very rapidly executing the detailed launch of a new venture while still positioning for a long term successful business. That may not sound different from business leaders who are managing the day-to-day while maintaining a strategic vision, but startups are doing so in the midst of intense uncertainty and change.

Startups don’t take anything for granted, rightly identifying unproven assumptions as the hypotheses they really are, constantly iterating and pivoting until they find the successful path forward, and making sure they have the resources to pull it all off. I dare say that requires different financial tools than the reports even the best corporate financial analyst is excellent at producing.

I’m not saying that your existing financial management and reporting tools aren’t important, because they will continue to be critically important. I’m just saying that they may not help you much through the planning you’re going to be doing over the next several months. What you need is a very flexible “back of the envelope” financial model — one that is built bottom’s up with assumptions that can easily be changed in one place and all the impacted calculations are immediately updated. This series of articles does a great job of describing what I’m talking about and how to build it. Those articles recommend using Excel, but in today’s distributed working world, I would instead recommend using an online shared spreadsheet platform like Google Sheets.

Once you have a bottoms-up, assumption driven model in place, you are ready to start dealing with the uncertainty we currently are having to work with. You will build into your model multiple scenarios and create views that make sense for the different planning horizons. For “the right now” you probably want to look at cash flow for every week. For “the restart” you probably continue to look at cash flow, but probably at a monthly level. When looking beyond this year at “the new reality” you are probably looking at quarterly projections for cash flow, profitability, and growth.

Scenario Planning

Scenario planning provides a way to simplify the uncertainties we are dealing with to get to a few manageable and representative future scenarios around which you can plan. Traditionally scenario planning involves choosing the two most impactful uncertainties (e.g. “When can employees return?” and “When will customers return?”). While those uncertainties may have an infinite number of possible realities, for planning purposes, choose two — perhaps an optimistic and a pessimistic value (e.g. “May 1” and “November 1”) for each uncertainty.

Those two values for each of two uncertainties creates four possible scenarios you can then plan around. It helps to assign likelihoods of each scenario, as well as writing a narrative to describe each scenario. It’s also very helpful to assign a name to each scenario to simplify planning and communicating plans to all stakeholders.

The remaining planning steps will be performed for each of the four scenarios. I know that sounds like a lot of work when you’re already overwhelmed — developing 12 different sets of plans — but there’s likely lots of overlap in plans across scenarios and deeply understanding the differences will be critical to being prepared in this time of very high uncertainty.

Situation Analysis

In Luke 14 Jesus warns us to understand our situation before charging forward, saying “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?… Or what king, going out to encounter another king in war, will not sit down first and deliberate whether he is able with ten thousand to meet him who comes against him with twenty thousand?” Situation Analysis is the planning step that helps us know what we’re getting ourselves into.

In business, Situation Analysis is traditionally captured as a SWOT — strengths, weaknesses, opportunities, and threats. I’ve found it helpful to start with the external environment — opportunities and threats. Two frameworks that can help think through these external factors are six segment analysis (demographic, sociocultural, political/legal, economic, technological, and global) and Porter’s five forces (buyers, suppliers, substitute products, new entrants, and competitors). For each of these you will document the current situation, known trends, and uncertainties and then evaluate how those realities, trends, and uncertainties all translate into opportunities and threats for your business.

The internal environment (strengths and weaknesses) is evaluated within the context of the external environment and relative to current and future competitors. A tool I like to use in developing the internal environment is the Blue Ocean Strategy Canvas.

In their book Blue Ocean Strategy W. Chan Kim and Renée Mauborgne introduced the Strategy Canvas which plots performance of different competitors against key factors upon which the industry currently does or could compete. Creating a Strategy Canvas for your industry will make clear where your organization underperforms or outperforms competitors. Focus on those areas that matter the most to customers and where there’s a significant difference in performance.

The resulting Situation Analysis provides a critical perspective for continuing your planning. As I’ve said before, it’s important to do this 12 times — once for each of the four scenarios in each of the three planning periods.

Business Modeling

The Business Model Canvas was developed by Alex Osterwalder starting in 2005. It effectively summarizes an entire business into nine elements. The Business Model Canvas has become an essential element for entrepreneurs following the Lean Startup methodology.

When you look at the canvas, there’s an obvious break between the top section (business decisions) and the bottom section (the financial impact). Less obviously, the canvas can be broken in half left and right. At the center is the “Value Proposition” and this truly is the core of the business model. We like to call the right half, the “Front End” of the business model, and it represents the decisions made in order to bring that value proposition to market. The left half, or the “Back End” of the business model, represents all the decisions that enable the business to successfully deliver that value proposition to the target customers. Successful execution of the Front End results in the Revenue Streams. Successful execution of the Back End requires investment represented here by the Cost Structure.

While your business model has likely already been well established, it is important to understand how it might change, or where there may be stresses on the business model during each of the three planning horizons under different scenarios.

The most important elements to deeply understand first in building out a business model are the Value Propositions and the Customer Segments. Osterwalder and team have developed an additional tool for understanding these elements, which they call the Value Proposition Canvas.

On the right side of the Value Proposition Canvas is the Customer Profile which provides a structured approach to understanding the targeted customer segment and their thought process in purchasing a certain type of product or service. This profile is developed entirely from the customer’s perspective using their language and based on their values and perspectives. The Customer Profile begins with the Customer Jobs section which describes what customers are trying to get done in their work and/or non-work lives. The Gains section describes the specific benefits they hope to receive and the outcomes they hope to achieve through those Jobs. The Pains section captures the risks, obstacles, and bad outcomes that make it hard to achieve the Gains when doing the Jobs.

The left side (the Value Map) corresponds to the Customer Profile, but starts with the list of Products and Services being offered to help customers do their Jobs. The Pain Relievers section describes how the Products and Services (and how they are delivered) specifically work to reduce the Pains, and the Gain Creators section similarly describes how they specifically work to deliver the hoped for Gains for the customer.

For many businesses, customers’ Jobs, hoped for Gains, and anticipated Pains will vary significantly across the scenarios and different planning horizons. Similarly, what you and your partners can do and how best to reach and serve customers are likely to change over the coming months and under different scenarios. Therefore, it’s important that you create versions of your business plan for each of the twelve combinations of scenarios and planning periods. You need to understand what changes between scenarios so that you can be ready for whatever happens. It’s also important to think through what will change when you move from the “right now” to the “restart” and finally to the “new reality”.

Proverbs 19:2 warns us “Desire without knowledge is not good, and whoever makes haste with his feet misses his way.” Take time to understand your customers and your own operations through these transitions. Your employees and customers depend on it.

Strategy Development

Undoubtedly you’ve been asked “what’s your strategy” for getting through this crisis. You’ve probably had an answer, but maybe one that you weren’t even sure of yourself. Hopefully this article has provided a stronger foundation for answer that question with confidence. But to answer that question, we first need to identify what a strategy even looks like. My definition is a bit unorthodox, but I like to think of a strategy as a framework that makes hard decisions easier.

Over the years, I’ve adapted some existing tools into what I call the Purpose Pyramid:

The Situation Assessment that we talked about above provides the Panorama within which we develop our strategy. That strategy starts with our Purpose — what we are trying to accomplish. Below the Purpose are three Pillars — what are the three things that absolutely need to be true for us to accomplish our Purpose. Under each Pillar are three Proofs — the three most important things we need to do for that Pillar to become true.

Normally I think of a strategy as a long term framework, but these aren’t normal times. Many organizations will experience more change between February and December of 2020 than they’ve experienced over the past five years. This is also a period of unprecedented uncertainty, so it is completely appropriate and worthwhile to develop a strategic framework for each of the four scenarios in each of the three planning periods.

For example, your Purpose for the “right now” may be “Survive this crisis, retaining the ability to serve our customers and love our employees.” The Pillars under that Purpose may be “Cut Operational Costs”, “Launch New Delivery Models”, and “Retain Key Employees”. The specific Proof actions taken under each Pillar may differ significantly under the different scenarios for the “right now.”

The Purpose Pyramid for the “new reality” would look more like a traditional long-term strategy. For example, for our business, the Purpose might be “Honor God by helping businesses achieve long term success.” My three Pillars might be “Deliver Customized Advisory Services”, “Develop Tools To Accelerate Strategic Decision Making”, and “Share Tools and Tales To Help Others Build Sound Strategies”. The specific Proof points will likely differ significantly under different scenarios.

Proverbs 24:3–4 tell us that “By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches.”

Of course, the fear of the Lord is the beginning of true wisdom, but I hope that I’ve been able to provide a framework and some tools to help you as you seek the Lord’s guidance in building a business that will withstand this current storm and those storms that will undoubtedly come in the future. Let me know if there’s anything I can do to help you through this process.