Has the COVID-19 pandemic been a boon for your business or did it set back the plans you had in place at the beginning of 2020?
Some plastics processors pivoted their businesses to take advantage of new opportunities to produce personal protective equipment (PPE). Time will tell if this will provide long-term sales benefits. My suspicion is that at some point, much of our PPE will again be produced in countries where the cost of manufacturing is low.
In a fascinating new book, business school professor and serial entrepreneur Scott Galloway examines how the pandemic will reshape the business environment. If you are responsible for thinking about and crafting the long-term success of your company, this is a worthwhile discussion.
Galloway’s book is titled Post Corona: From Crisis to Opportunity. He is a professor of marketing at NYU’s Stern School of Business and has founded nine companies, including Prophet, Red Envelope and L2. His other best-selling books are The Four and The Algebra of Happiness.
He starts Post Corona with two theses: First, that the pandemic will accelerate some of the trends already in motion in our society; second, that in any crisis there is opportunity and the greater and more disruptive the crisis, the greater the opportunities.
E-commerce was around but was not having much of an impact in 2000. Its share of U.S. retail sales went from about 1 percent that year to about 16 percent at the beginning of 2020, but eight weeks after the pandemic hit, the share jumped to 27 percent, according to Galloway.
Galloway believes e-commerce’s meteoric growth puts current consumer behavior and markets at levels they would not have been expected to reach until 2030.
Companies that have a weak balance sheet are now untenable. Investors are calibrating the value of firms based not on the next few weeks or years, but on assumptions of what their positions will be a decade from now.
Companies that are perceived as innovators are currently being valued based on their estimated cash flow in 2030. That’s how Tesla’s value now exceeds all other car manufacturers and even Facebook’s value.
Stock markets are thriving because of gains by major players while mid-caps and small-caps are down. Galloway says the long list of well-known brands declaring bankruptcy indicates that a culling of the herd is underway, and big companies with plenty of cash and debt collateral will thrive post-COVID because they can acquire the assets of distressed competitors and consolidate their markets.
Having plenty of cash on hand insulates companies against many pandemic problems. In a May 2020 earnings call, Amazon founder, CEO and President Jeff Bezos told shareholders he was investing the $4 billion in profits they were expecting to receive in COVID-19 expenses.
Plastics processors should consider Galloway’s warning that companies must understand and reassess their markets. Processors doing a larger share of business in struggling sectors such as restaurants, hospitality and travel need to decide if that business has a future.
For companies in weak positions, Galloway says surviving will depend on radical cost cutting and then figuring out how to do more with the assets they have.
“For every business, this is a good time to forget what you’ve learned and make the hard changes necessary to position yourself for a post-corona world,” Galloway writes. “Start with a clean sheet of paper.
“Freed from legacy decisions, how would you change?” he asks. “Figure out the right size and composition of your labor force and decide on your ideal compensation strategies. You get cloud cover to make big decisions, big investments, and bold bets in a global pandemic — no playbook and a lot fewer guardrails.”
Look for opportunities in areas where the pandemic is accelerating change, Galloway writes.
Packaging manufacturers are seeing this firsthand. Pre-pandemic, most shoppers preferred to pick out their own food, particularly produce. But from March to mid-April, online grocery sales increased approximately 90 percent and food delivery sales increased 50 percent, according to Galloway. The infrastructure for our food system has changed and new opportunities have appeared.
This is not a review of Galloway’s entire book, but it does offer food for thought for business owners and managers. He writes extensively about how companies like Apple, Amazon, Microsoft, Facebook and Google became huge and what they are doing right to maintain their positions. There is very little about manufacturing businesses.
Stories about such big companies may seem far removed from a processor with $10 million in annual sales, but reassessing your business in light of today’s fast-paced changes in the business environment is critical for all businesses. You don’t have to be a futurist or science-fiction writer to figure out the best path forward.
Ron Shinn, editor