How to successfully pivot, adjust and innovate in times of adversity

How to successfully pivot, adjust and innovate in times of adversity

[ 11 min read ]

Mark Sanders is the Executive Chairman of Scale Space, here he offers his view on how scaling businesses can successfully navigate the current landscape.

Mark has been involved in what he calls ‘innovational’ growth his whole career. Over the past 20 years, Mark has been involved with several start-up and scale up businesses, giving him extensive knowledge of the scaling industry and a rich, personal insight into the challenges of growth and what he believes are the key ingredients to successful scaling.

What should businesses be doing now to face the challenge posed by COVID-19?

I think it is really critical to approach this in a balanced way – that means thinking about at least three critical constituents.  Your people, your customers and your business.

Firstly, companies have got to look out for the safety and wellbeing of their employees. Leaders should make sure that their teams are not taking unnecessary risks or being put outside of what they feel comfortable doing.

More than that, it is a tremendously unusual work experience at the moment. We are largely working from home where you don’t get to see the people you’d usually see during the day. Working is not just about the 9-to-5, it is also about talking to colleagues and some individuals will be missing out on the social interaction. Leaders of companies should be making sure that they are considering their employees’ welfare above all else and I’d tend to “over-communicate” in times like this.

Secondly, staying close to your customers is key – they have their own problems to solve, so understanding them and their challenges allows you to show empathy and support, as well as identifying opportunities to help them.

Thirdly, you need to be sure you can survive. Understanding your cash flow is key. In periods of great uncertainty, companies need to be very nimble, and all areas of the business should do their bit to embrace that. All businesses will have some sort of budgeting and forecasting mechanism. Right now, companies need to be budgeting rapidly whilst still retaining accuracy. We’ve asked our finance team to adopt an 80:20 methodology; reforecasts need to be delivered faster to keep it relevant, so achieving 80% accuracy in 20% of the time might be acceptable as long as the output is caveated accordingly. It is absolutely essential, in a rapidly evolving situation, to have up-to-date forecasts to validate your decisions.

 

What are the opportunities for businesses to innovate during this time?

Companies need to be “future ready”. We expect the global economy is going to take time to recover and companies need to make sure they give themselves the best opportunity to survive. Staying close to your customers and suppliers is key, not just to understand their financial position and stability, but to help inform opportunities.

For example, restaurants becoming delivery services to meet the needs of customers staying at home is a great example of an enterprising fruit and vegetable wholesaler who started offering home deliveries when he could see his restaurant and hotel customers reducing orders.  Looking back to my experience in the credit crunch, we saw many of our banking clients needing more capacity to deal with customer contact, so we focused the business on growing services revenue, rather than our previous consulting or brokerage income.  We helped support our customers and pivoted the business and in the long run, built long term contracted recurring revenues – which ultimately made the business more robust and more valuable.

 

Is there any particular advice for scaling businesses at this time?

Scaling businesses have a particular challenge since they will often be loss-making because they are expanding and growing revenues. It is very likely they will have committed to additional spend because they are scaling – they may have committed to a 12-month contract they now don’t need, advertising spend or a planned overseas expansion which cannot be pursued with travel restrictions.

Therefore, for a scaling business, the threat is going to be more significant than to an established business. These companies need to be ahead of the curve on their planning and exploration of options because it will impact them more in the absence of having cash reserves that a mature established market participant may have.

There are many articles wisely advising companies to cut hard, cut quickly and cut deep, to preserve cash and to manage reserves ready for when things improve.  I can’t disagree, but it is also critical to explore all the support that is available and to talk to your suppliers and your customers and try to keep things in balance.  For instance, whilst this may seem unlikely, in the last recession we had experience of some of our customers being willing to prepay for services in return for a discount – this gave us secured workflows for a period and helped with our cashflow, whilst helping our customers to reduce their expenses.

On the flipside however, a scaling company will also be entrepreneurial in nature so they’ll have people in the business who can pivot and switch. They have a growth mindset and are willing to do things differently and are able to make changes in the company quickly because that’s what they are used to.

It’s going be rough for the next weeks or months, but out of this, great opportunities will come. There will be whole new markets that didn’t exist before and a number of companies will come out of it stronger and with greater market share.

 

What is your view on the measures that have been announced by the Government?

I think the Government have acted quickly and significantly to try to help businesses, but inevitably their schemes won’t be able to help everyone.

The chancellor has made a number of announcements showing an intent to alleviate the financial impact of COVID-19. Businesses should absolutely ensure they’re maximising the government support available if they need assistance.

The Coronavirus Job Retention Scheme is an unprecedented piece of legislation. At such a difficult time, companies would be struggling with the need to balance costs and also support their employees and not leave them without an income. The government support enables companies to temporarily reduce staff costs, thus keeping great staff ready to return once circumstances allow, whilst ensuring individuals retain vitally important incomes.  During the last recession one of my greatest regrets was having to make good people redundant – the same people you need when you start to see growth.  In this crisis, we have needed to furlough a number of our staff – but I think that by communicating with the team regularly and honestly, they have understood that this is crucial for the company’s survival and have been supportive of the moves.

Regarding government-backed loans, business leaders need to be reviewing the lending criteria and making sure that they are ready. If your business qualifies, do you have the information you need to supply? Do you have the mechanisms needed to collate and present the data?  The government-backed loans are a step in the right direction, but some of the criteria is troubling for scaling businesses. Demonstrating that a business is viable when it is currently loss-making may be difficult.

Ideally, you’d want to have an existing relationship with a bank that is part of the distribution channel, which certain SMEs might not have. Assistance in navigating the process may be key, and scaling businesses won’t necessarily have access to investment and financing advisors to help them construct their applications.  I hope that the banks will support businesses through the application process, but I fear that may be difficult in the face of large volumes of applications.

There are additional incentives available for companies, for example for companies in certain industries such as the leisure industry rates holidays are available.  We hope the industries qualifying for business rates incentives will be expanded as rates represent a huge economic burden on properties which currently cannot be occupied in most instances.

It’s vital that businesses keep on top of the treasury’s initiatives throughout and ensure your company can access the relevant schemes when it needs them.

 

How should businesses approach cash flow and reducing overheads?

We have seen welcome reliefs on the arrangements for deferring PAYE or VAT which should be factored in cash flow planning.

Companies should try to the extent possible to offer furlough arrangements or arrange reductions in working hours or salaries in preference to redundancies. This could be a beneficial arrangement for both parties. It is very possible that people have different childcare requirements now the schools are closed.  In the last recession and during this crisis, we’ve asked our senior team to accept reductions in pay, which they have all agreed to – it doesn’t need to just be external support that can help.

Secondly, make sure that you contact your suppliers and customers. Keep those conversations up, so you can plan what your cash flow in and out is going to be and build up that trust with people in these extraordinary times.

In terms of other overheads, beyond rates relief there may be items that you’re not using, for example travel insurance, hotel bookings, club memberships etc. Go through your supplier list and add them up, there will be a lot of small savings which together will soon add up. Credit cards bills are a great one to scrutinise, as quite often you’ll find subscriptions on cards of five to twenty pounds that you no longer need.

 

Any tips on maintaining productivity while working remotely?

Make sure that you are taking the time to ask people if they are okay. Typically, we take that for granted, but when you are apart make sure in every conversation that you ask at the beginning, or at the end or both. And not just a throwaway comment of ‘are you okay?’ Create a space where people genuinely feel able to say how they’re feeling.

You have a duty of care but there should also be an element of friendship and camaraderie – it’s not difficult to chat with people each day. Also, make sure that nothing is taking team members a disproportionate amount of time compared to the value of the task.  If you’re sitting near someone you get a sense if something is taking the whole day when it isn’t that important. I’m consciously articulating how much time something should take with my team to avoid misalignment and proactively facilitate prioritisation.

Technology is an amazing help – video conferencing services are real benefit and where possible make it a standard that the camera is on. This helps avoid the temptation to try to do something else while on a call!  And I can personally say that you need to be disciplined about your calendar – it is easy to fill your day with back to back meetings, when you must preserve time to reflect, plan and look after yourself.

 

What advice can you share for how business leaders can keep positive and optimistic?

Speaking personally, it’s about staying connected with your colleagues. One of the things that we’ve done in my team is regular informal catch-ups. A Monday morning coffee, Wednesday is a bit of a show and tell and of course a Friday beer. Hopefully there’s something there for everyone.  At the moment things are dominated by the virus, but we do get together and the interaction is good for everyone. It makes me feel happier being able to speak to those people more than just about business.

As a leader, you must make sure people are focused and aligned – something we’ve introduced with the senior team is a daily call at the end of each day.  It allows us to review any developments and to agree any changes for the next day and to make sure we’re clear on key actions.  It is something I’d like to maintain when we return to a more normal work pattern.  We also use the time to find positives that we can share with the team.

Make sure you’re taking the opportunity to exercise. One simple idea I’ve heard of is a virtual commute; you might be working from home but before you start work walk for 15 minutes as if you’re commuting.

For your business, remember although there are number of challenges and there will be a lot of scrambling to stay afloat, there will also be opportunities – and whoever moves fastest is best placed to survive. My advice to business leaders would be to see the opportunities rather than the threat – because every business is in the same position. Putting to one side the awful human tragedy, we’re facing unprecedented commercial turbulence; however there will be unique opportunities if your business reacts quickly, effectively and intelligently.

Mark Sanders is Executive Chairman of Scale Space, an entirely new concept that brings together Blenheim Chalcot’s venture building expertise together with world-leading universities to create a new community for scaling businesses. The first Scale Space is a joint venture between Blenheim Chalcot and Imperial College London and will launch in 2020 on Imperial’s White City campus.

Prior to the opening of the White City campus in Summer 2020, Scale Space will be launching ‘Scaling from the Edge‘, a programme to support scaling businesses and the innovation community through the pandemic and beyond, from May 2020.

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