The COVID-19 Crisis has brought most businesses to a moment of reflection – either because demand has dropped significantly and they need to rethink their business model, or because demand has overwhelmed them, and they need to rethink their way of working. Writing from Guatemala, stars alumna Margarita KLOSE, who heads the impact investing team at Grupo IDC – a leading investment and consulting firm in Central America – and her colleague Ben SYWULKA from their innovation team share some insights on how to leverage this crisis to build new growth.
Understanding the bottlenecks to growth
Before jumping into an innovation process, it is important to get a better sense of where your growth bottlenecks are. A successful business generally operates in a “Business Loop”, where it designs a value proposition, takes it to market, gets customers to buy it or to agree to buy it, produces or acquires the products and services that comprise the solution, delivers the solution, then gets paid for it and uses those funds to pay for costs and to make a profit. After this, there is usually some customer feedback, which in turn helps the business design a new or improved value proposition, and the cycle starts over again. Though the order of these elements can vary by industry, most businesses operate with these basic elements.
Innovating for a New Normal
For many businesses, the bottleneck in the short term has accumulated around their cashflow management – an inability to “Get paid and Make Payments.” For some, overwhelming demand has led to a bottleneck around the production or delivery of their value proposition. Entire industries, however – such as tourism, airlines, luxury goods and retail – have fallen into a major bottleneck when trying to “get customers to buy.” Customers are cancelling contracts, reservations, or simply not showing up to buy. These businesses aspire to go back to a pre-crisis “normal” when the markets were not stalled and want the loop to start flowing again.
This is not easy to do, however, because your business is part of a larger “Value Chain Loop” of businesses that are all interconnected. The reason your customers are no longer buying from you is because their own customers have stopped buying from them, and these have stopped buying because their own customers have stopped buying as well. And your company is also a customer to your suppliers, who have stalled production because you stopped buying from them.
Breaking the vicious cycle through innovation
While governments try to implement stimulus packages to help keep the whole system from collapsing, the future of your company will depend more on the strategic decisions you make – how you respond and adapt your business loop to a new normal. Taking into account our innovation work with hundreds of companies over the years, we have developed some tools to help companies not only weather the crisis but to start a new chapter of growth because of it. We would like to share some of our insights with you.