For most organisations, the answer is ‘yes’. So, if the COVID-19 impact on your business strategy hasn’t made you reevaluate it, the urgent question you must ask is why not?
In mid-March 2020, the COVID-19 novel coronavirus pandemic is developing rapidly across the world. The response from national governments is fragmented, with some countries doing better than others at containing the spread and the impact. The speed and scale of the impact on individuals, organisations and society has been surprising and, in our lifetimes at least, unprecedented. The political and economic shocks have been unexpected and severe.
PESTEL (which has a number of variants) is a popular strategy analysis framework, guiding the external analysis to the global issues affecting every country, industry and organisation. COVID-19 has affected at least three of the areas:
There may also be impacts related to Technology, the Environment and Legal matters (many countries are passing emergency legislation for example). If we just think about the first three though, it highlights an important point. These aren’t three separate categories. They are perspectives – ways to approach issues to understand them better. Those who are new to PESTEL tend to categorise things as they find them, so the result is a set of lists: political issues, economic ones and so on. This can be misleading though. For example, is unemployment or under-employment a political issue, an economic one, or a societal one? It has all three dimensions, so it is related to each of them. We find it better to categorise the issues as Local, National or Global. So, using the same issue, some countries will rate unemployment as their biggest national issue where others would rate it lower. We have already claimed that COVID-19 has impacts across politics, economics and society, but we would categorise it as global. However, there will be related and resulting issues, some of which may be national or local. Given the illness it causes, it also, sadly, has impacts at a personal level too.
However, there is another aspect of PESTEL that is even more important than the categorisation and isn’t always understood. That issue is complexity.
Complexity arises from the connections between many elements in a situation. When one element changes it can affect any of the others that are connected to it, either directly or indirectly. The effect may not be immediate, so the connection may not be apparent. Complexity explains the law of unintended consequences when a deliberate, careful and often small change later results in something else, often unexpected and not always positive.
How is this relevant to COVID-19 and strategy?
The first point is that the spread and effects of COVID-19 are not an isolated event. This is not only a health issue. We have already discussed the social, economic and political impacts. The link between this new coronavirus strain and an organisation’s corporate and business strategies is complex. It is complex because you can’t just think about the narrow impact of the pandemic, severe and unprecedented as it is. You have, to use a strategy cliche, stand back and try to see the bigger picture.
The challenge is illustrated well by the World Economic Forum (WEF) who produce a Global Risks Report each year. The latest one was published in January 2020. They take information from professional risk managers and academics, among others to assess the global political, economic, societal, technological and environmental risks to quantify their likelihood and impact. They also assess their interactions, which they model and illustrate using an interactive chart. It is a well researched and beatifully produced resource.
The WEF analysis shows that the risk of a pandemic such as COVID-19 is also linked with other global risks, including:
- Water crises
- Involuntary migration
- Social instability
- State collapse
- Global governance failure
All of these are risks that organisations need to consider and factor into contingency planning. They won’t affect every organisation, and the impact will vary by location, industry and other factors. However, the immediate economic impact on airlines, hotels, restaurant and so many other organisations is already evident.
The speed of the impact and the daily developments require organisations to evaluate these external risks and keep the organisation’s strategy under constant review, updating and communicating the changes as effectively as possible even when many of the people might be working remotely and feel increasingly disconnected from the organisation.
For example, the impact on our consultancy and training services has been swift and significant. We are reconfiguring these services to enable consultancy and training that has traditionally been delivered in person to be able to be delivered remotely. We have a wide range of e-learning modules that can be used as short standalone training solutions or combined with on-line facilitation to provide remote blended learning and development services.
If you are unsure how to respond to the current crisis, please contact us and we will offer practical advice. The world has changed dramatically and quickly, if your organisation is not changing at a similar speed and to a similar degree, you might want to pause and check if you should be.