SUSTAINABLE AND PROFITABLE GROWTH IN THE POST-PANDEMIC NEW NORMAL
Written by Dr K Thomas Abraham
The onset of the global Covid-19 pandemic sent shock waves around the globe and the global economy went into a severe recession, which is the worst since the Second World War. This pandemic has been far-reaching and disruptive with about 219 million confirmed cases of Coronavirus infection and about 4.5 million deaths as of 3rd September 2021. Approximately half of the world’s population was placed under some form of lockdown by April 2020. On 24th February 2020, the biggest decline of the stock market since the 2008 Financial Crises took place.
With the Covid-19 pandemic, we have not seen such “turbulence” in recent times, which affected most parts of the world. Although the world is looking forward to the “new normal,” the aftershocks of this pandemic will continue to be felt long after the virus itself has been contained. Notwithstanding, to achieve sustainable and profitable growth, each organization must strengthen its own business fundamentals, and focus on the core business and adjacencies.
In the new normal, people are generally looking forward to the pent-up consumer demand and the rebound effect to help the recovery of the world economy. One of the problems faced in the business world is that while everyone wants their business to bounce back, a high percentage may fail or not hit their growth targets due to over-optimism on the rebound. Establishing a realistic growth target is also difficult and even shareholders and the Board of Directors are likely to push targets higher than what is achievable. However, a target is necessary to galvanise the organisation and create the momentum and stimulus needed for the “new” growth journey.
When the world is recovering from the ravages of the Covid-19 pandemic, growth requires a systematic process together with a business structure designed to help companies sustain long-term growth. When sustained or sustainable growth is mentioned in this article, it can be defined as growth in both revenues and profits over an extended period of time.
Businesses must not lose sight of their core business as they plan for growth. The core business is the set of products, services, capabilities, customers, channels, and geographies that defines the essence of what the company is or aspires to be, to achieve growth and profitability. It is not uncommon for management to undervalue their core business. A strong core is imperative for competitive advantage. Businesses must have a clear “macro” view of their business and business structures before taking a deep dive into the more “micro” fundamentals.
The following are some of the macro strategies that can be applied for profitable growth and sustainability involving the core, adjacencies, and non-core business:
- It is important to place maximum emphasis on the core business or a segment of that business to build market power and influence. Maximise profitable growth from the existing set of products, customers, channels, and geographic markets.
- Reinforcing or expanding adjacencies around the core is another way of strengthening the business base and achieving the goal of growth and profitability. Business adjacencies are growth opportunities to extend the boundaries of the core business. It draws on the established customer relationships, technology or skills, competencies within the core business. This entails utilising existing assets and capabilities to stretch the boundaries of the existing business outwards.
- Sometimes, due to industry turbulence, businesses may have to redefine the core. This is usually done when the core business is in a disadvantaged position due to changes in technology, customer needs, or competitive forces. This is a situation where the business will have to make some strategic decisions about what should comprise the new core.
- Pursuing new business opportunities or markets/market segments that have not been hitherto explored, may be needed for some businesses. This may require investment in new assets and developing new capabilities to create new markets and shift the basis of competition. This may be required usually in highly uncertain or very competitive markets, for new revenue streams for the business.
- In an uncertain market situation, organizations should focus on value-generating businesses. They are key to delivering value to their customer base. They must also be consistent with the long-term strategic goals of the business. All non-performing businesses, if they do not fit the above criteria, especially if they are non-core, can be divested or closed.
Each organisation has its own unique situation, particularly in terms of business performance, competition, and growth phases. There is no silver bullet or one-size-fits-all solution for companies to achieve their targets for sustainable and profitable growth. As businesses pivot to the new normal, business structures should be well-positioned for growth. Then, the next step should be to look at micro strategies to fix other areas (branding, operations, sales and marketing, revenue, and cost, etc)
With a systematic approach and by adopting the appropriate business strategies, companies will have the right strategic posture for sustainable and profitable growth in the post- pandemic period.