Only resilient businesses, leaders will survive the COVID-19 crisis – Niyi Yusuf
In this interview, Niyi Yusuf, Managing Partner of Verraki, shares insights with Frank Eleanya on the COVID-19 crisis and its impact on the Nigerian economy, the role of resilient businesses, and how business leaders can improve their resilience.
What exactly do you mean by Business Resilience?
Business resilience is the ability of an organization to quickly adapt to disruptions in a way to minimize losses and to maximize gains while sustaining its operations and safeguarding its people, assets, and overall brand equity. Resilience has four attributes. The first is that the business can withstand and quickly recover from shocks, setbacks, and crisis. The second is that the business can easily adapt to change. As circumstances change, the business itself is not left in a lurch. Thirdly the business can keep going even in the face of crisis, challenges, and adversity. And lastly, the resilient business can seize opportunities that avail themselves during the crisis, as there will be such opportunities even during bad times.
Resilient organizations have a positive mindset that sees opportunities for growth in a crisis. They adapt and evolve easily, and can make lemonade out of lemons, the proverbial squeezing water out of stone. For instance, Ruff n Tumble is a Nigerian apparel retailer that pivoted, ahead of others, from making kiddies clothes to meeting the increased demand for quality facemasks during the lockdown. In a swift move that ensured it would keep up production, keep its employees, and cover fixed costs, the company identified a market that did not exist before the pandemic and seized the opportunity to repurpose existing resources. Rather than being hopeless, admitting defeat, and complaining about the crisis, Ruff n Tumble identified opportunity via a demand for facemasks and quickly pivoted. That is an example of business resilience.
It is those four things – the ability to recover from shocks, from setbacks; ability to adapt to change; ability to keep going even in the face of adversity; and lastly ability to seize the opportunity that the crisis presents – and when you have businesses that can do all four then you say those are resilient businesses.
For an organization or people to be resilient, they need to have 3 characteristics. The first characteristic is that they accept the realities of life. They don’t hope for things to change, they accept the current realities. Our reality today is that there is a pandemic, and we have full to partial lockdown across Nigeria. We don’t know when the virus will be contained or how long the lockdown and movement restrictions will be. Resilient organizations accept the realities of life and define appropriate strategies to cope with the same. The second thing about resilient organizations and people is that they have a deep belief that even within the crisis, there’s an opportunity. The Chinese use two brush strokes to write the word ‘crisis. ‘ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.” So resilient people believe that within a crisis, therein lies an opportunity.
And third, resilient people and resilient organizations have an uncanny ability to turn nothing into something, to squeeze water out of stone, and they can do this because they have positive mindsets, they are pragmatic optimists and are open to opportunities and possibilities. They see every bottle as being half full as opposed to being half-empty. They see through the fog. Resilience is not about dodging a crisis; it is about being involved in the crisis but able to recover quickly from it and making the required changes to be able to keep operating and progressing during the crisis. And lastly, you seize opportunities that come up during that crisis.
How do you think the COVID-19 will negatively impact the Nigerian economy?
The COVID-19 pandemic has highlighted the fragility of many jobs — and markets — across the globe. In a very short time, the context in which we’re operating has changed drastically. The damage to economies in several countries is clear, especially emerging countries such as Nigeria. Businesses are struggling as a result of government lockdowns, supply chain disruptions, and tightening consumer spending. Many businesses that were booming just a few weeks ago now face incredibly challenging times ahead. The impact on jobs, poverty levels, and basic food security will likely be catastrophic — this may be the most important battle we all witness in our lifetime.
Governments around the world are facing the tough option of choosing between saving lives and livelihoods, but the dilemma is even more pronounced in low- and middle-income countries. In Africa, on the one hand, the inability of the continent’s health systems to cope with a full-blown pandemic is a serious cause for concern which has led to the enforcement of lockdowns to delay the spread of the virus and to buy time for the government to provide more health facilities. Yet on the other hand, without relaxing restrictions, the economy is being held hostage. So, many have started relaxing lockdowns to get citizens back to work. The jury is not yet out on whether this has exacerbated the COVID-19 cases. The World Bank forecasts that Africa will experience its first recession in this century. The impact on jobs will be huge — the USA already lost 30 million jobs and I estimate that about half of that number of jobs could be lost in Africa while more than 100 million informal jobs are vulnerable. Globally, around 50 million people could be pushed below the poverty line, with about half of those in Africa.
For Nigeria, it’s a perfect storm in the sense that we had a fragile economy with low capital reserves and then came the crash in the price of crude oil, and now the pandemic and so our challenge is to ensure that the coronavirus health crisis does not become both a social and security crises though it is likely it will become an economic and humanitarian crisis. Let us take measures to make sure it doesn’t become a financial crisis when there are bad debts and banks go under. We also must make sure it doesn’t become a social crisis where people cannot eat or fend for themselves, given the over 76m Nigerians who are daily earners.
What must business leaders do during the crisis?
As business leaders, we need to demonstrate empathy and courage, and to take deliberate, proactive steps. The main priority is the safety of all your workforce. The safety and well-being of the workforce is critical. Next is to identify who your best talents are and find ways to connect with them even during this difficult period to motivate them and give them a sense of belonging, and a sense of job security such that they have no doubts about their sustenance and thence can focus on contributing to the business.
The second priority is financial planning. Know your cash position. How much money do you have in the bank? And I’m talking cash that you have. Not the money you expect from a client because customers may decide not to pay or not pay on time. This is the time for scenario planning. What happens if you don’t have any new business, you don’t sign any new contract for the next 3 months? Don’t stick your head in the sand and hope it will pass; you can’t believe that. You just don’t know what may or may not happen. So have three scenarios from bad to worse to worst (no good scenario in this context). And in those scenarios, how would your business survive given the cash that you have at hand today. It’s what you have at hand or in the bank that you can plan on. Don’t plan on your receivables because your customer may decide to conserve cash and not pay on time.
Then the third priority is to look for ways to conserve your capital and you conserve capital by slashing expenses, avoiding unnecessary expenses. This is not the time for paid training. This is not the time for trips unless they are mission-critical, business-relevant, important travel. So travels, training, non-core marketing, and advertisements; those are expenses to reduce now. And then, any opportunity you see for accretive income to grow your business, take it. Even if it’s small, even if it’s lower margin, take it. Because whatever money you have in the bank is good for you. You will use it to pay salaries and keep the lights on. Now is the time to aggressively chase all your receivables from debtor clients.
How can you build resilient businesses?
To build a resilient business, you must understand that while your prior experience may be useful it might not be relevant in a world that is full of volatility, uncertainty, ambiguity, and complexity. You need to have new perspectives. We all need to have the yield management discipline and mindset of airlines. If you’re the owner of an airline, every plane that is flying will have the full complement of pilots, cabin crew, fuel, food, and entertainment for the entire flight, you’ll also pay levies, charges, and taxes to government authorities for the entire trip. Whether you fly with 10% of passengers or you carry 100% of your passengers, those costs are fixed. What airlines do is ensure that they have a full fight reason why even the economy class has multiple types of tickets. They use technology to optimize the price for each ticket including selling some seats for cheap. And that’s what we all need to do currently. Knowing that you have incurred fixed costs, you have staff – fixed costs. You’ve paid rent – fixed cost. You have a bus – a fixed cost. You’re running a generator – fixed cost. And so it is beneficial that you optimize the revenue that you can derive from these fixed costs as much as possible. You need to assess different opportunities. Begin by performing triage on your products or services. Which have poor survival prospects and may not survive? Which has declining sales but can be stabilized? Which are likely to flourish during the recession and afterward?
Where the business opportunities are uncertain or declining, it may be time to part with those products that were ailing before the recession and are on life support now. For those that remain, companies should concentrate their resources on maintaining relevance to core customers to sustain themselves through the recession and into recovery.
What assets do you have that you can lease out? Resilient companies look at opportunities to reduce their asset intensity and be asset-light because each asset is a fixed investment that makes it difficult to be agile. Do you still need those staff buses, pool vehicles, and drivers if your business will implement more remote working in the nearest future? Do you need those warehouses or big office complexes? Uberize those assets to reduce your overhead. Lease/rent out existing assets to optimize your income.
Second, build your reserves. Resilient businesses do scenario planning and try to extend their cash runway, should clients not pay. Some businesses will open new lines of credit with their bankers, to make funds available. Others renegotiate existing loans to protect the business. Resilient businesses ensure redundancy by building financial reserves, as no business can survive for long on zero revenue.
This is the time to look for ways to structurally design your organization, reimagine and design your operations to suit the new normal, the new ways of doing things like working from home, Bring Your Own Device, extended work hours. Retrofit your organization to match your reduced revenue profile, as customers with low income or no jobs would reduce their consumption.
Thirdly, resilient businesses also explore diversity via multiple supply options, diverse teams, and a wide range of stakeholders. What has become obvious to many manufacturers is the risk of concentrating operations or suppliers in one location. Apple Inc. missed its second-quarter revenue projections due to a delay in reopening its production facilities in Zhengzhou, China over continued coronavirus fears and low consumer demand. Diversity could also be encouraged via managing clients that cut across multiple sectors, multiple locations, different company sizes, maturity, and earnings. For instance, companies that catered exclusively to oil and gas companies are now heavily exposed due to the plunging prices of oil. You want to have diversity from a supplier’s point of view. You cannot have just one supplier and your suppliers cannot come from the same location. Imagine if you’re on the Lagos Island and all your suppliers are coming from the Lagos Mainland and there’s a blockage on third mainland bridge, you’ll have an issue that day. So, suppliers must have multi-locations.
Fourth, stop digging. A pithy comment attributed to Warren Buffett is “Be fearful when others are greedy and be greedy only when others are fearful.” Resilient businesses must challenge implicit assumptions that the status quo is the safer default path. It may be necessary to forget what you have learned. Prior experience may be useful but they might not be relevant in a world that is full of volatility and uncertainty.
It may also be important to stop digging and cause more troubles. One of the useful tips given to people when they are learning how to swim, is not to panic if drowning, as they may drown faster. During a crisis, be still. Don’t make any silly mistake that you’ll come to regret later.
Lastly, in terms of your operations, go digital. Technology is what allows you to scale and to grow big. Look at the mobile phone companies. When they started in Nigeria, we were all buying physical recharge cards. Today, most people recharge through virtual top-ups, that’s digital. Imagine what would have happened if, during this crisis, we all needed to be buying paper recharge cards. We would be more exposed to danger and of course, the telcos will not be able to sell as much and earn as much. Another example: because the CBN suspended the cheque clearinghouse during the early days of the lockdown, which means if you present a cheque, the cheque cannot be paid. But some customers had already digitized and had embraced internet banking, online banking, mobile apps, or USSD. So, diversify your products, go digital because digital allows you to run a product at scale at any point in time and from anywhere.
Smart businesses and organizations embrace technology to promote cost-saving, operational efficiency, and increased performance. Technology is what allows businesses to scale and to grow during a crisis. digital allows organizations to leap boundaries of place and time to run fully distributed operations. Offices are leveraging digital to work remotely; educational institutions are providing learning opportunities for students without concerns of physical space or number of students and online portals are creating huge platforms for religious programs, medical, and education-related services. Technology is democratizing access for many and resilient businesses are taking advantage.
Some sectors are more resilient than others. The average person in Nigeria spends about 84% of his income on food, clothing, and shelter, and by the time you add expenses on health, education, and transportation, that’s about 94% of income. And what we have seen in this pandemic, is that we are all spending more on health, on food, on digital, on mobile communication, and mobile entertainment. There is limited spending on transportation, cinemas, restaurant dining, hospitality, tourism, etc. And so different sectors will respond or react to crises differently and you are lucky if you’re in a sector that benefits from the crisis or is not significantly affected by the crisis.
What is the role of a resilient business leader?
Resilient businesses are peopled by resilient individuals and leaders. What can you do as an individual to make yourself resilient so you can make your organization resilient? The first thing as an individual is that you need to be competent in something, have relevant and useful skills.
The second is you need to have a high level of confidence in yourself, in your ability to deliver what you’ve promised. You must also be clear as to what your purpose is, your mission and goals, and your values. What values do you subscribe to? How relevant is your moral compass, especially regarding difficult decisions?
You must also develop an ability or strategy for coping. How do you cope when there’s stress? Some people exercise, others take a walk or swim. It is important to determine your strategy for coping when you are in a crisis or stressful situation. As a leader, you must be in good physical form. You must look after your mental and physical development. Do you sleep and rest well? Do you eat the right nourishing foods? Do you exercise well so you can grow both physically and mentally?
Resilient individuals depend on a supportive network that provides a listening ear and acts as a sounding board. This network can help you get resources when you need but you must first invest in that network. Resilient individuals also have character. Character is about your moral compass, your sense of what is good, what is bad. And character will give you courage so that you can dare to take tough decisions that are required during such challenging times. And because you are confident in your abilities because you know your competence, you have deep-rooted values and you have courage, you also will be flexible and adaptable as situation changes. You must be a committed person. Commitment is about staying true to your purpose, sticking to it until you succeed. And then you must be consistent, exude principles-based leadership.
Resilient individuals understand and play to their strengths. If you look at football, Jay Jay Okocha will never be a defender. He knows he cannot do so and so it will be a waste of his time if you keep teaching him how to be a defender. If coaches play athletes to their strengths, why are you not playing to your strength, and why are you just focusing on your weaknesses? To be a resilient leader, you need to understand and play to your strengths. Play to your strength, focus on your strengths and maximize the opportunities that your strength can provide. For your areas of weakness, be humble and willing to seek help. No one is perfect. We are all bad at something. It is important to focus on the areas of your competence and seek help in those you are not as good at.
Lastly, give hope. Resilient leaders know that nothing lasts forever and that this tide shall soon pass. So, they give hope and confidence to the team, to prepare them to be ready to seize opportunities as good luck is when preparation meets opportunities.