How to adapt quickly in a rapidly changing environment? No business plan survives the first contact with a customer

We are in the 9th week of lockdown. Let’s see how things are going. In the case of COVID-19, we still have more questions than answers; e.g. how quickly does the virus mutate? Is it realistic that we will have a vaccine in a year or two? Will we face the second wave in Autumn? How long does immunity last? The answers determine the economic options – for example, how quickly the economy can be opened up or when the economy will be frozen again, and to what extent, due to the spreading, the disease will be accelerated.

The world will change even further, because in the background we have the growing American-Chinese conflict – which at best, in my opinion, will be the beginning of a multipolar world – which will affect economic relations.

It looks like the restrictions will be loosened soon, which should help businesses do business. Perversely abolishment of measurements doesn’t have to endure uncertainty in business. I assume, that spreading the disease will last, so we can expect imposing and withdrawing restrictions (to control the acceleration of spreading) or we can face the local lockdowns. This scenario is a realistic one – I refer to the example of Wuhan (where, on 28th March, after months of lockdown, residents were told they could leave their homes, only for the decision to be reversed 5 days later) or Shulan (which has been locked down this week). Imagine, it might be possibility in the near future, where Glasgow, Birmingham, York are in lockdown, and if you had a business partner, a client or a supplier in that city you need to deal with the immediate impact on your business.

The world will change even further, because in the background we have the growing American-Chinese conflict – which at best, in my opinion, will be the beginning of a multipolar world – which will affect economic relations.

The coronavirus has changed our world already, and the world will change even further, because in the background we have the growing American-Chinese conflict – which at best, in my opinion, will be the beginning of a multipolar world – which will affect economic relations

 

 

How does the current business situation look in numbers?

 

“Nearly 1 in 5 of all UK SMEs may not get the cash they need to survive in the next month. Between 800,000 and 1 million firms may have to close over the next four weeks. Globally, research by McKinsey suggests that 45% of businesses immediately cut back spending. 39% have cancelled or postponed planned investments – a number which is likely to grow as short-term business liquidity becomes the overriding concern.”[1]

 

Of course, we all trust that the government will be able to mitigate the worst case scenario, by running support programs, but we need to remember this will be at the expense of public debt – which will have to be repaid by us or our children. I stand by my belief that  entrepreneurs are responsible for maintaining the economy, and the sooner we get to use agile approaches, the faster our economy will recover.

 

I network intensively, and I’m talking with people who  have found themselves in very different places:

  • I talk to people who have used this situation to their advantage – their companies are developing very intensively,
  • I talk to people whose businesses have been wiped out, they rely on government support and they are waiting to see what happen next,
  • I talk to people who had really good, developed companies – and now, a month later, they don’t have them – or they don’t know if they still have them. They don’t know if, after removing the lockdown, their customers will go back to previous habits and if there will  still be a demand for their value proposition (for what they offered previously). Some of these companies which I have spoken to, are currently looking for new opportunities – for example they try to adjust an existing business model (e.g. by offering a new value proposition or achieving new customer segments with an existing value proposition).
  • I am talking to people who service the current market, but they recoginsed that they it will be not be as profitable as before, so some of them are aware they need to build a new business model.
  • And, last but not least, there are people who decided to make a pivot in a completely new direction (they decided to build something new).

 

Many of us will reach the point of needing to create and then develop the business idea. And many of us will find out that the business environment has changed – that the things that we know don’t work the same way. Many of us will reach the point, where will need to put together a new business plan.

 

This lengthy introduction leads us to today’s short article on observation: no business plan survives the first contact with a customer.

 

No business plan survives the first contact with a customer

 

Most of the time in business, we spend time focusing on a good execution – once we know what we  do – we try to do it better. When we plan, we plan it to execute more efficiently what we know.

 

There is a saying: No business plan survives the first contact with a customer [2]. My thesis is as follows: Most of the time in business, we spend time focusing on a good execution – once we know what we  do – we try to do it better. When we plan, we plan it to execute more efficiently what we know. And this is OK, as long as we understand what the right things to do are. But what if we try to do something relatively new? Or if the business conditions have rapidly changed (e.g. Customer behavioral changes)? And we need again to recognise what the correct things to do are. Typical marketing research (which should be a part of any proper business planning process) often takes a long time, generating a significant cost and often capturing:

  • data about past successes and past failures (which can be very irrelevant for the current situation) or
  • data from a different context (which might be very irrelevant to the context of our business).

 

“If, when building a new business solution, we focus on planning and implementation, it may very soon turn out, that the foundation of our business plan is purely assumptions.”

If we focus on planning and implementation, it may very soon turn out, that the foundation of our business plan is purely assumptions (we focus on building plans based on our interpretation of a future reality which was not validated in any way). Running a business based on unverified assumptions is a simple recipe for trouble.

 

“No business plan survives the first contact with a customer” – it is an observation – but very often painfully real. The chances of you coming out immediately (at the first attempt) with an idea for a ready-to-build business are very small. That is a reason why we need to use more adaptable approaches when we start to build a strategy.

 

Do you think, you will need to build something new, or adapt your company in some way? Look at how the risk might spread in different situations, where and when you may have to adapt.

  • Low risk – if you have a significant experience in serving to the market which is not changing rapidly, and if you going to deliver a relatively small adjustment. There are still risks, but they can be easily mitigated.
  • Medium (sometimes changing to high risk) – delivering an existing solution to a new customer segment, building a new value proposition for an existing market, building a new value proposition for  a new customer segment.
  • High risk – making a pivot, building an alternative business model where more than two building blocks in business model canvas have changed. Especially if the change is irreversible connected with large investment – if this is true, its often a one-way decision.
  • Extremely high risk – when we work on radical innovation which is going to change the paradigm (how we frame what we do).

Where are you on this scale? Are you going to create a new idea and then plan how to deliver your change? Are you going to focus on executing the plan?

If you would like to read more about approaches which help to adapt quickly in a rapidly changing environment, which will help to mitigate the business risk and test the assumptions early – check out this series of articles.

[1] STATE OF THE NATION, SCDI’s Economic Data Briefing, May 2020
[2] That was said by Steve Blank, when he paraphrased Helmuth Graf von Moltke, who said: “No campaign plan survives first contact with the enemy”

In order to confront the rapidly-evolving world around us, we need to have a system in place to adapt with the changes. This article is the sixth from the series which aims to describe basic approaches, which can help to be more responsive and adaptive. Sign up to the newsletter – so you will never miss an update!