“The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic,” wrote Peter Drucker, revered as the father of modern management.
Using logic based on the new economic realities, I would like to review the changes we’ve seen in the economy recently and propose three actions that you, as a business owner, should take to prepare for success in a post-pandemic economy.
What the economy will look like post-pandemic
To begin, let’s review two premises about the economy.
There will be an Economic Reordering
The current economic crisis will give way to a period of adjustment and recovery. In this period, which I term the “Economic Reordering,” the U.S. and foreign economies will change dramatically.
The rosy-fingered dawn of the emerging business landscape will possess both the familiar and unfamiliar. Globalization, for example, will not end but it will be modified, with huge implications for trade and supply chains.Free guide to help lead your company through challenging times.
Get the Guide
There will also be a new bias for domestic production. Countries will recover from the crisis at different times and in varying degrees of economic strength. Consumer buying patterns will not simply revert to what they were before the pandemic; they will develop in new ways and be affected by new demands and offerings. Many undercapitalized businesses will be swept away by stronger competitors. And there will be dynamic changes in taxation and regulatory frameworks.
The Economic Reordering provides new opportunities for entrepreneurs (and we all must be entrepreneurs now)
The complex interlocking market system will be fundamentally reorganized in the Economic Reordering. There is, and will be, disorder and dislocation. The alert and capable leaders will create order out of chaos by discerning and responding to market shifts.
My premise is based on the renowned economist Professor Israel M. Kirzner’s insight that, contrary to the popular image of the entrepreneur merely as a disruptive force, the entrepreneur’s true role is discovery and correction of market misalignments. I suggest the current economic turmoil will inevitably create and magnify these misalignments. Consequently, I believe, there will be both significant hazards and huge opportunities for entrepreneurs.
How to take advantage of the post-pandemic economy
Leaders should respond to the market disorder by being alert to, and seizing, the opportunities that will inevitably be created. To do this, you must do three things: Assess economic changes, examine yourself and reimagine your business.
1. Assess economic changes
As noted in the premises above, business in the Economic Reordering will be influenced by structural economic changes and timing differentials. In considering your positioning, you should assess at least the following:
- Extent and length of the economic disruption
- Nature of the recovery (u-shaped or v-shaped)
- Rate of recovery in your sector
- Permanent changes in your sector (for example, to buying patterns and supply chains)
- Availability of cash, lending and investment in your sector
- Workforce availability and suitability
- Effect of geography
- Effect of size of companies in your sector (for example, larger companies may receive more government assistance or have more access to lending and investment)
Above all, consider your customer composition and assess how their behaviors will change. Certain businesses, for example, will experience results according to the age groups they serve (a gym with an older clientele may suffer more than one with younger customers), while others will see uniform growth as age group behaviors converge in adapting to the new environment (e-commerce will benefit from older people becoming accustomed to buying online).
Never forget that the consumer is sovereign — ultimately, the consumer drives the economy.
2. Examine yourself
In the Economic Reordering, America will see itself anew. In turn, ask yourself these questions:
- What are your goals?
- Are you prepared to rebuild your business? Do you have the passion and drive to recreate your business model?
- Do you have the family support and stability for the arduous work?
- Can you access the necessary resources (talent, money, etc.)?
In essence, you must decide whether your goals, talents and resources make you more or less likely to succeed in the Economic Reordering. If you do not want to restart your business, consider alternatives to sell in whole or in part. Don’t try to muddle along. Commit or get out!
3. Reimagine your business
If you decide to rebuild, do not merely tinker with your business model. Do not try to fit your business into the future predicted by forecasters. Do not focus on just bringing back employees and restarting prior operations. Instead, be alert to fresh opportunities that others have not yet seized.
Be the entrepreneur you were when you began your business. Reimagine your business!
Once you have done this, realign the business to your new vision:
- Focus on new markets and strategic alliances
- Retain and recruit employees who will advance the new business model
- Reevaluate customer and supplier relationships
- Optimize your debt and equity structure to accord with the new strategies
- Evaluate new technologies
- Shed assets that are no longer mission appropriate
- Direct spending and investment to the reimagined core operations
- Identify and mitigate/seize upon new vulnerabilities from supply chains, regulation and customer mobility
- Communicate the new vision to all constituencies (employees, customers, suppliers, lenders, investors)
Remember, the essential laws of business do not change. Basic human needs and nature are immutable. Ludwig von Mises, the economist who changed our understanding of entrepreneurship, wrote that core economic principles must be obeyed as laws of nature. I suggest that the genius of the entrepreneur lies in coupling these immutable economic principles with an innovative and robust spirit.
You succeeded as a business owner prior to the current economic crisis. You can thrive in the Economic Reordering by entrepreneurial decision-making and action. Assess the economic changes and decide whether you want to rebuild your business for the new era of change and challenge. If you do not want to restart your business, consider alternatives to sell (in whole or in part) or merge. If you want to rebuild, be alert to the opportunities that will inevitably arise and reimagine your business in order to take advantage of them.
Above all, avoid the trap of “yesterday’s logic.” It’s a new world.