Why having a solid strategy is key to managing times of crisis

Published on June 1, 2020

Andrew Balgarnie has over 30 years experience in Corporate Finance and Strategy and has worked in the UK, USA, Europe, Russia, Kazakhstan and India. He shares his views on formulating strategies during times of crisis.

The commentariat has already said a lot about the COVID-19 crisis, much of which is speculation and changes by the week. There is still so much we do not know. Larry Summers writing in the FT says that we are living through what may be “a hinge in history”, and the coronavirus crisis “will still be considered a seminal event generations from now”, alongside the 1914 assassination of the Archduke, the 1929 stock market crash, and the 1938 Munich Conference.

If Larry Summers is right, there may be more crises to come. For me three areas of concern stand out, all of which predate COVID-19, but may be exacerbated by the virus: the US-China economic conflict; the end-game from quantitative easing and central bank intervention; and climate change. What is the right strategy for dealing with these difficult times?

Business leaders fire-fighting the immediate challenges brought about by the COVID-19 crisis might be forgiven for not spending time or resource on strategy. After all, strategy is too often given insufficient attention and poorly executed even in the best of times. A time of crisis makes strategy more important than ever. It is a great tool to make sense of the uncertainty, and has the potential to add a lot of value. Strategy provides a framework for what to do.

My favourite strategy framework comes from Richard Rumelt’s Good Strategy Bad Strategy. The central thesis is best summed up in this diagram:

Strategy Kernel
“A strategy is a diagnosis of the situation, the creation of a guiding policy for dealing with the critical difficulties, and a set of coherent actions.”

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If you want a topical illustration on how this framework can work, look no further than Bill Gates’s 2015 TED Talk on…. a virus outbreak. He gives a very clear diagnosis of the problem, and sets out a 5-part guiding policy, including a high-level ROI rationale, to prepare for the next outbreak. We all now regret that there was no coherent action (including Gates himself).

Responding to the challenge of COVID-19 is not easy. We like to use the rear-view mirror of experience and stick with long-held beliefs. We can view issues in isolation and miss the bigger picture. It is easier to avoid change and support the status-quo. We can fix one problem only to miss the unintended consequences that create other problems. Status, group-think and corporate politics can get in the way.

Now is the time to rethink your strategy. Invest in a rigorous process to help meet the challenge of the current environment. Your future success, or even survival, may depend on it.