Dr. Nada Sanders recently joined FS Insider after predicting a global recession on the show in February due to the disruptive impacts of the coronavirus on the global supply chain. This time, she told listeners what businesses need to be doing to stay afloat during a period of economic uncertainty that she doesn’t see ending any time soon. Read below for excerpts from her fascinating interview on FS Insider. If you’re not already a subscriber, click here.
For audio, see I'm Forecasting a Deep Global Recession, Says Dr. Nada Sanders.
Clearly, the virus isn’t a temporary phenomenon, and you’ve said you’re expecting more a of an L-shaped recovery?
I am. I think it's going to be protracted and I think that it is extraordinarily important for businesses and business leaders to curtail all unnecessary spending— close all the valves if you will, because you have to prepare for this long period, and companies need to stay afloat. That is the first thing. I also think they have to look very carefully at their portfolio of products, their customers, suppliers and look at criticality of the margins of each.
Everybody knows all products and all customers are not created equal. And doing a very thorough matrix analysis of identifying the most critical customers, the most critical products and what those supply chains look like in order to be able to satisfy those customers, I think is extremely important.
Companies that are going back to business even 25%, let's say in retail or restaurants, or even those states that are opening up in those areas. For most of those companies that is not enough to break even. Then you get to an issue of how do you achieve the financial goal, in this case staying afloat, and you have to really focus on the margins and look at where those are. Couple that with the strategic direction, meaning that you have to stay true to your brand and what those key and critical customers are. It's kind of like treading water.
Businesses are going to have to rethink how they do business and they're going to have to be willing to shift gears.
I think for companies that had been focused on growth, it is important to recognize we're not in that period now. But you want to tread water, you want to get through this period, and you want to be super creative. And this is what I had mentioned in terms of pivoting and rebranding. Some of our greatest brands came out of the Spanish flu of 1918 and it was really just great marketing.
Lysol for example, all your listeners know Lysol, an amazing product, which we’re going to continue to see shortage of through the summer. Lysol actually was developed in the late 1800s, but they didn't have a lot of uses for it. And it was only in 1918 with the Spanish flu, that the company ended up with something like five or six different targeted marketing campaigns in terms of how to use Lysol to protect against the pandemic, and it was incredibly creative and launched this brand.
Even if we looked at something as benign as the toilet paper situation, and I think benign because it pales in comparison to the things that we have talked about like food and medication uncertainty. But with toilet paper, you basically have two supply chains. As citizens, we go to a grocery store and we get toilet paper and then you have commercial supply chain that is used in the in businesses. And the pulp is different, the softness is different, the size is different. Since most people are working from home, they are not using the toilet paper in their places of work, they're using it at home.
Stay ahead of the news! Subscribe to our premium weekday podcast
What's interesting is the supply chain that is more industrial that’s intended to provide toilet paper for businesses has had a very difficult time switching over to this other supply chain for consumers, even though we have an unfulfilled demand. So, something even as simple as that, you see these supply chains that are sort of locked into the idea of ‘well, this is how we do it. And it would be expensive to switch our supply chains.’
But I would argue, and I've talked to a fair amount of companies, we have to think about creative ways that are cost effective, that are financially viable, that also meet the challenge. Some of it is just thinking differently. It’s thinking in a different way of how to achieve the objective that we're going after.
In the toilet paper example, again, you've got the two supply chains and the supply chain intended more for industrial use might be thinking, ‘well, we look like this and the other supply chain looks the way they do so how do we become them?’ I’d say, maybe you don't need to become them. But maybe there's a hybrid way of getting there in order to fulfill the demand that is out there while you're sitting on excess supply.
This is what I think businesses need to be doing in order to get through this period and I think they really need to seriously be doing it. I think a lot of companies still believe this will pass. And like all of your listeners, I want this to pass just as much as anybody. I am tired of using Zoom at home, I want to see people, I want to see my retirement account go back up and all that.
But what the numbers and what the virologists are telling me is that it will take a while and we're not there yet. And so, I'm saying that for the business leaders that are listening—they need to understand that because this is not just hang on for another month or two. So it will mean ideating and coming up with different ways to pivot products to look at critical customers, and also a redesign of the work environment to be able to come back and doing so in a profitable way.
Click here to listen to our full-length interview with Dr. Nada Sanders and to hear more on her book, The Humachine: Humankind, Machines, and the Future of Enterprise. If you're not already a subscriber to our FS Insider podcast where we interview book authors, strategists and industry experts from across the globe on all things economics, finance and markets...