Andy Grove, the talented and legendary Intel leader, defined the term, “Strategic Inflection Points.” All leaders must embrace his recommendation to pay keen attention to such times in a company’s life. React too late, and your business will not catch up.
In his words, strategic inflection points capture “what happens to a business when a significant change takes place in its competitive environment. A major change due to introduction of new technologies. A major change due to the introduction of a different regulatory environment. The major change can be simply a change in the customers’ values, a change in what customers prefer. Almost always, it hits the corporation in such a way that those of us in senior management are among the last ones to notice. What is common to all of them and what is key is that they require a fundamental change in business strategy.”
The COVID-19 crisis is and will continue to create strategic inflection points in many industries and companies. Some examples:
Office furniture, commercial real estate and interior design firms should anticipate a huge drop in demand as more employees work from home. How should these companies pivot? Shifting from the office market to the warehouse market would make sense as companies move part of their supply chains home.
Apple, Google, and Amazon have been investing in digital health, with an eye on the consumer. Perhaps the providers and insurers are now the groups that will catalyze change. How should their business models evolve?
Athletics – from college to professionals – has been hit by the pandemic. Sporting events will be the last events allowed to re-open according to public health officials, but no one foresees them ceasing forever. There will come a time when stadiums and arenas are packed again with fans (hopefully for me before the next March Madness). An advantage may rest, nevertheless, with the organizations that can act now to bring audiences into the games using virtual-reality technologies and other digital innovations. There are new sources of revenue available – how can colleges, the NFL, NBA, and others tap into them?
Distributors and manufacturers who could rapidly expand their capacity are at an advantage during the pandemic. 3M is one model of preparation – their leadership prepared for surge capacity before the pandemic hit. Their ability to quickly increase the number of personal protective masks is mind-boggling. How can more manufacturers secure that kind of advantage? How can management consultants help them create this change without carrying higher fixed costs?
National retailers – already in trouble – may go out of business. Sears, JCPenny, Neiman Marcus, and J. Crew are at the top of the list. And consumers, facing economic peril and depleted savings, have cut back on non-essential purchases. More work-from-home activity will also reduce demand for clothing (at least bottoms – Walmart reports that shirts of all kinds are hot sellers but not slacks). What can retailers do to entice consumers back into stores and purchasing?
Healthcare will never be the same. No workers are losing their health insurance in Europe. Millions are in the US. Employers in the post-pandemic world might welcome being finally free of healthcare benefits administration and its costs. Will the move of drug stores to local clinics end as more clinicians adopt telemedicine?
One challenge of the current Strategic Inflection Point is that it is a new phenomenon and there isn’t anything comparable in most industry or company historical data. As we pass through the COVID-19 crisis, be wary of leaders who say, “Well, that’s finally over. Back to business as normal.” They will have the past data to support them.
The pandemic is a first-of-its-kind in our generation, and the past is no predictor of our future. True, the funeral industry will no longer have to keep bodies in refrigerated trucks, as is happening in NYC. But the emergence of “virtual” funerals during the pandemic may create a different solution to bringing people together to celebrate a loved one’s life. Cremation may pass a cultural pivot point for Catholics.
As we pass through the worst of the economic shut down caused by the COVID-19 pandemic, watch your customers and markets like surfers study the waves. Aim to identify change as it emerges. Andy Grove says when your most worrisome competition shifts, you know you are in a strategic inflection point. Restaurants, for example, now have stiffer competition from grocery stores. The pandemic broke our habit of eating out so much and led families to discover the cost savings and healthier diets that at-home cooking affords. How should restaurants respond?
To better anticipate change, conduct scenario-based planning to anticipate different ways your customers, competitors, potential customers, and suppliers may be reacting to the post-pandemic world. Healthcare providers may decide to create a competency in telehealth. New versions of adult living communities may emerge that do not place so many at-risk people in close living proximity. Auto insurers who are reimbursing customers for low mileage during the pandemic might decide on pay-as-you-drive policy offerings.
“Sometimes change is so vast and dislocating that it is hard to tell disaster from opportunity,” states The Economist. This time, it is both.