Scaling Up: Why A Few Make It and The Rest Don’t, in Good Times and Bad

The most important thing leaders need in the COVID-19 crisis is the realization that if panic is contagious, so is leadership. Leaders have to lead and lead fast. They need to gather information fast and decide fast.

Entrepreneur and author, Margaret Heffernan has said it is critical to be ambitious right now. This is not a time to hide, and not a time to play to not lose. The ones who are going to survive and thrive are those that are playing to win. The reason that you should get ambitious now is that you can get time with people on the phone right now that you couldn’t get 15 seconds of email time with before this crisis. It is because many people have the time right now that they didn’t have before the pandemic.

This is where the importance of talk time comes in. The key performance indicator, most critical at this time is the amount of talk time. We are capable of using it to get through this crisis, as this is not something we can think our way through.

It is also important who we are engaging with, in our talk time. First, for those in a forum, it is much more important to have shorter and more frequent meetings than it is to have longer and less frequent meetings. So, rather than having a three-hour-meeting once a month, it is better to have 45 minute-meetings once a week. Second, it is important to talk with a friend who you can talk to and laugh with. Third, two or three key advisors should be identified, with whom you can bounce your ideas and share insights. Lastly, leaders should make a list of the key people they need to stay in touch with because when we come out of this crisis, we should not have any regrets regarding relationships that may have been accidentally damaged along the way. However, before that, leaders need to talk with the key customers that they will be able to serve, both within existing markets and potential markets. The other group to have talk time with are three or four people in the industry. They could even be healthy competitors because it is difficult to think our way through this. We need to talk our way through it.

The key performance indicator, most critical at this time is the amount of talk time. We are capable of using it to get through this crisis, as this is not something we can think our way through. 

In this time of crisis, we are all searching for ways to begin rethinking how to start or restart our businesses. SWT (Strengths / Core Competencies, Weaknesses, Trends) is a tool that helps provide two critical things as you begin to rebuild- a brutally honest assessment of your capabilities and the things that you struggle with. Once you get clear about what your capabilities are, the next step is to contrast that with the current trends because a technology or practice can become a trend overnight, as we saw how 3D printing or virtual classes became popular with the onset of the pandemic. With a lot of talk time with your advisors and key executive teams, you can figure out ambitiously what is the opportunity you can jump into.

The following five Cs of leading in a crisis can help at such a time.

  1. Communicate daily: It is critical for leaders to communicate with their teams daily because it helps monitor the employees’ mental and physical health, which is important when they are working remotely. Employees are a lot more afraid than you can imagine, and if you can lead and not panic, they would want to hear from you. This is why leaders need to have phone conversations, and particularly video conversations with them. As we all are physical distancing (more preferable than the term social distancing), we can remain social and remain connected to a lot of people in real-time during this particular crisis, and moving forward. So, it is crucial for leaders to stay connected with the team, whether it is through two minutes of video calls, Whatsapp, or any other mode of communication. Through this internal communication, the team members should get updates every day, and if there is any bad news it should be conveyed upfront as it builds believability and trust.
  • Customer/community support: Now is the time to connect with both the community and the customers. No one can innovate in a vacuum, so connecting with the community and customers is important to know what people need and also how businesses can help the community. 

Ron Lovett, who has a company that provides affordable rental in Halifax, Canada was able to do this during the lockdown. There are 350 units of low-income housing under the company in Halifax, and during the lockdown, Lovett was proactive in his support to the tenants, shared government information that they need about staying safe, ensured that government programmes (if any) aiding tenants, the unemployed, etc. reached his tenants, and he reached out to every one of them to ensure their well-being. He even put out recipes for making hand sanitizers at home. 

Lovett was not just seen as a landlord but probably the most important resource to these 350 units during the pandemic. Innovation comes from lots of input from everywhere, and when he saw people in Italy coming out to their balconies and singing, he was inspired to put together a lip-sync contest. He first did a lip-sync himself, sent it out to all of his tenants, and asked them to participate in a lip-sync contest where anyone who submits a lip-sync video would get a gift certificate, and the winner would get a thousand-dollar prize. This way, he gave back something to his tenants at a time of crisis, and the winning video got national coverage. When the next rent cycle came, he received 25% more punctual rent payments than he did a month ago. There were only nine bounced payments. 

If this is happening at a time when money is tight, it is a result of his support and engagement with his customers and community. This shows it is important to make a list of key people in the community, industry, and the customer base, and reach out to them and give them some support. 

Once you get clear about what your capabilities are, the next step is to contrast that with the current trends because a technology or practice can become a trend overnight.

These are the two most important Cs, and the third is Clean up and catch up. This is the time to do spring cleaning and clean up your processes, and make sure that things are easier for your employees. This is the time to sharpen the saw, be prepared, and at least unleash people’s internal innovation around ways to make things easier coming out of this crisis, to do business with this, and so on. Fourth, cash, cash, cash: Like the third C, this is not as important from the perspective of innovation. Lastly, be Calm and considerate. Whatever you do, remain calm and considerate.

It was found in research that companies that make the best decisions have a pattern to them. It can be done in three steps- first, gather as much first-hand intel as you can. There is not enough right data in the world that we are looking around for during this crisis. This is where the importance of communication with key people in the industry and the right customers is underscored. The second step is to simply take a deep breath, and then step three, check in with your gut, the intel that you have gathered before you make the decisions.

Brad Stevens in Conversation with Verne Harnish

Brad Stevens: Amidst the crisis and the difficulty we are facing right now, what are the greatest untapped opportunities that we can leverage or gain from, and also, what mistakes might we make?

Verne Harnish: The biggest mistake is not leading. You cannot wait for consensus, you have got to gather as quick data as you can, you have to then get out to market, and it’s just a lot of tests and trials. The founder of Habitat for Humanity said it very well, “You cannot think your way into new action. You have to act your way into new thinking.” It is that lean start-up or what we call agile scale-up, where you engage in real-time with a group of customers and you iterate very quickly. Hence, you have got to learn fast, act fast, and decide fast.

 As for the biggest regret, the CEO of Honeywell says that the key thing is to look backwards and ask “what am I going to regret that I did?” and that is where you have to be very clear when you triage. There are key members you have to hold on to, then there are the key customers, the key capabilities, and you have to be willing. This is the time for you to shed everything else that hasn’t up to this point proved to be useful. Those are the two key things- prune and focus.

Stevens: A lot of companies have slowed or stopped hiring. Do you think this is a mistake? Also, what are some key tips on strategy when it comes to pruning?

Harnish: You better prune back if you don’t have the cash flow. You have to plan for the worst case. Our plan started with expecting not one traditional dollar of revenue to come in over the next six months and starting with that brutal fact, we then engaged the creativity of our advisors, our team, some fellow folks in the industry, to quickly pivot our business, which we did. 

This is the moment when you make or lose your brand, and that has to do with maintaining your key relationships in the marketplace and your community. Between Marriott and Hilton, I always saw Marriott as the white horse and Hilton as the evil twin when it was led by (Stephen) Bollenbach. That has changed in the last 24 months. Hilton was named the best place to work for the last two years in the United States, ahead of Facebook, Google, and Microsoft. In this crisis, Hilton realised that its 300,000 employees are needed now for delivery, so they worked employee by employee to figure how they could help get them placed in the growth industries, knowing that when this thing settles, they’ll have the brand still with their employees so that they’ll want to come back. 

Leaders should also share their daily updates with furloughed employees as well as laid-off employees. This is the time to over-communicate. 

Stevens: What can an employee do, especially if the CEO is not doing the things that you recommend?

Harnish: It has always been important to lead as if you were a CEO. It’s best if you have got a company of leaders, so just do it in your own sphere of influence. Lead by example, and I think you are going to be able to make a very important decision of where you want to pivot after this crisis is over.

Stevens: Amidst everything else, what key action items would you recommend everybody to take immediately, to survive and thrive?

Harnish: It is to dramatically up your talk time, and very precisely, get together, through your trade association or whatever you relate to, three or four people in your industry, probably not a local competitor but maybe folks in the same industry in other cities that you have met, and brainstorm with them. You need lots of ideas very quickly, that you can then begin to test and work through. 

Stevens: What is the definition of growth during a crisis?

Harnish: The reality is we are all trying to climb Mount Everest, whatever our Everest is, and now the massive storm has come in. We are trapped on that mountain, so that is why the most important thing is not for you to figure out what are you going to do on the weekend. Right now, growth is movement and you have to decide what is the right next step up or what is the right step down the mountain. You have to keep moving because what would kill you right now is for you to freeze. That’s what growth is.

Stevens: Any closing remarks on what to do, actions, and steps to take?

Harnish: There are two important things. First, up your talk time with a friend several times a day, with two or three key advisors that can give you that talk time, with a group of folks in the industry, and with a group of business people in some kind of forum, if you have one. Have shorter but more frequent meetings. Also, make a list of who are the key folks, influencers in your community, customer base, key suppliers, and those relationships that you want to strengthen your brand with, and not hurt your brand with, and then engage them. It is best if it’s through a video call so that you can connect in real-time and have a social connection while staying apart physically. You can then gather all that information quickly, and then test it with the key group with your eye on where the puck is going. It is because if you are not in a business model, you are probably going out of business. Then we have the 5Cs.

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