Adapting Your Business To The Post-COVID Environment

While the Covid-19 pandemic may have created new opportunities for growth in some sectors, it has had a devastating impact on most sectors and businesses across the country. The crisis has brought with it significant changes in customer behaviour and supply chain disruptions that necessitate that businesses reimagine their strategy and operating model. Nigerian businesses now operate in an environment of high unemployment, declining consumer buying power, declining profitability, high insecurity, galloping inflation partially driven by the rapidly declining value of the Naira, unstable government policies, soaring government deficits and the continual threat of a third covid outbreak. Experts believe that it may take years to return to the level of economic performance enjoyed pre-pandemic with the crisis estimated to have wiped off over a decade of economic growth in the country.

Business leaders across the country now have an renewed appreciation for the need to rediscover their customers evolving needs, drive efficiency while simultaneously building resilience to secure the survival of their organisations. For most, cost optimisation is back at the top of their corporate agenda after years of growth and investment.

Traditionally, costs remains one of the few controllable levers business leaders can deploy at times of economic uncertainty or decline. The danger is that embarking on an indiscriminate cost cutting drive may result in adverse unintended irrevocable damage to your company’s ability to remain competitive in the long run. A better approach is to take out as much near-term cost as possible to mitigate the decline in revenue and protect business margins, whilst retaining strategic investments required to drive longer-term transformation and innovation.

Fortunately, organisations have a few proven ways to keep their costs under control:

1. Tactical cost reduction: reducing discretionary non essential spending (for example travel and entertainment), outsourcing non key functions, substituting production materials for cheaper alternatives and improving the procurement management system.
2. Reduction of operating footprint: this may be an ideal time for many organisations to consider consolidating their operations and shrinking to grow. This may require that the business exit sub-scale markets or segments, unproductive client relationships and product lines, with a view to removing entire segments of the cost base and freeing up assets to be re-deployed more productively to higher margins or growth sectors.
3. Organisational simplification: combining operational and support teams across functions and customer segments; hubbing teams in fewer and lower cost locations; adopting a hybrid workplace model, outsourcing some processes and creating utilities for common activities (such as client services, logistics and document management)
4. Process streamlining: re-engineering processes to structurally take out cost while simultaneously improving the customer experience. This often relies on cross-functional collaboration and deploying an integrated end-to-end business workflow solution.
5. Leveraging technology: discarding less cost effective legacy systems and deploying new, cloud-based and modular technology platforms to support end-to-end digital journeys, lower operating cost and improve customer experience. Digitisation and automation of processes and operations. While these initiatives may increase capex in the short term it would help the business move to a structurally lower (and variable) cost base for the future.

Effectively managing your costs will generally provide the following benefits:

1. Improved margins
2. Improved liquidity
3. Frees up funds for strategic investments
4. Enables the business compete at a lower price point if required
5. De-risks your business

Over To You:

Considering your organisation’s unique context and experience, which cost optimisation methods have been most effective and if your organisation hasn’t implemented any in the past, which would you consider utilising and which you definitely stay away from?

Do share your experience and opinion in the comment section below.