How to use turnaround tactics to deal with disruption

The COVID-19 crisis, with its myriad economic, political, and social effects, continues to present leaders with a diverse set of challenges. The new year ushered in reinforced lockdowns in many parts of the world and a slower rollout of vaccines than many had hoped. On the bright side, while it may take longer than we all may wish, we know that this immediate crisis will eventually pass.

However, disruption – quickened on many fronts by COVID-19 – is here to stay. New technologies accelerate the pace of change at a rate never before seen in history. New business models and entrants, unburdened by the past, upend the status quo. Empowered consumers, inhabiting their own self-curated digital worlds, demand what they want, when and how they want it. Those very forces that are driving greater disparities between the top and bottom performers in industry are also widening inequalities within society.

Disruption is the new economic driver.

For business, in particular, the risks of complacency or inertia have never been higher. Executives increasingly acknowledge the need to be their own disruptors, but obstacles to successful business transformation remain significant. Necessary investments in digitization and other new technologies can prove daunting, either from a cost or logistical perspective.

Operationally, integrating previously siloed businesses or realigning production models and suppliers – to name just two examples – can be significant hurdles. However, in our experience, cultural and human factors, particularly a lack of focus and urgency, are usually the primary obstacles to overcome in any transformation programme.

For 40 years, we at AlixPartners have been helping our clients manage disruption. Our experience in corporate turnarounds and restructuring shows the absolute necessity of taking required and swift action in this fast and ever-changing landscape. For many distressed companies, the threat is genuinely existential – either a perpetuation of an enterprise or its liquidation.

For otherwise healthy companies, three priorities can be derived from these turnaround situations: 1) prioritize, 2) execute, and 3) communicate.

Prioritize

A fundamental component of leadership is setting priorities with limited resources. When transforming a business, maintaining a focus, measuring progress, and ensuring accountability on these priorities is essential. This means:

In restructuring situations, one of the leading causes of companies entering bankruptcy a second time is that they failed to fix their underlying operational problems the first-time round. Short-term fixes – like a new capital structure – masked these fundamental problems. Focusing on these fundamentals and not compromising on your priorities is essential.

Execute

It’s impossible to overstate the importance of timely execution. All the best-laid plans will come to naught if they’re unimplemented or implemented too slowly. This means:

Disruption across industry after industry is accelerating and relentless. Without an equally relentless focus on speed to execution, you may never be able to build the sustainable future that your business requires.

Communicate

The point of any transformation programme is not the transformation itself, but the path on which it sets your company. A clear and compelling vision of that future is only useful if it is shared and if it inspires others. That means:

Leadership, by definition, requires followership. If you’re not bringing others along on your journey – inspiring and guiding them – then any transformation is doomed to failure.

In the midst of one of the most profound public health and economic crises the world has ever experienced, we saw just how quickly business could transform when necessary. New platforms for remote working and digital commerce, which had been slated to take years, were adopted within weeks.

Supply chains and distribution channels were adjusted to maintain the delivery of critical products and services. And, of course, there are the heroic efforts by pharmaceutical companies to develop, test, manufacture, and distribute vaccines at record pace, which will ensure an eventual end to this crisis.

If businesses can transform quickly and effectively in the face of COVID-19, they can also do so when confronted with the challenges from disruption. In an interconnected world, the success of these efforts reverberates beyond any one business and their stakeholders. It supports societies and communities by building a long-term and sustainable future for many through the virtuous cycle of innovation, job creation, and economic growth.

But the time to define this future is today.