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Leverage May be the Key Strategic Play Now

Leverage May be the Key Strategic Play Now

No Generalisation Zone

This whole pandemic situation has highlighted to me that there is no typical company and no typical owner. Across the range of companies and sectors that my clients span is a range of pandemic impacts and implications, short and long term, good and bad. 

When you factor in the owners and directors’ unique perspectives and reactions, it boils down to what Jordan Peterson refers to as ‘fractionating to the individual’.

It turns out business owners are a bunch of snowflakes, each one utterly unique.

So, are there any common areas of focus and attention? From an economics perspective, there are four focus points in my model: acquisition, execution, customer value and leverage. 

I know several of my clients (and larger companies too) are planning on changing their team shapes and numbers as we ease out of this lockdown and head into what is being glibly referred to as ‘new normal’. Do you make your next Leverage play?

Leverage, the strategy play that keeps on giving. 

One of the things driving this newfound thirst for leverage is the continued uncertainty about how markets will recover and whether there will be additional pandemic waves. No one wants to be carrying a heavy overhead through periods of uncertain demand. 

Lockdown has also had the accidental benefit of putting who is on/off the bus into sharper focus. As we move into the re-opening phase, there is no space for procrastination and avoidance of ‘difficult’ tasks and no place for a ‘do the minimum’ attitude. It’s going to be a land grab in many markets. 

But there is something bigger afoot too. The ongoing march of technology is bearing down upon us, and I sense that this will make the Covid disruption look like a minor hold up on the motorway of commerce.    

Of course, there is never a wrong time to focus on structure leverage. But, coming from the corporate world, I’m still surprised how little focus small companies put on their overheads and the Gross Profit: Operating Cost ratio (my favoured measure of execution and leverage). Maybe it’s the uncomfortable nature of the decisions and actions that follow on from a look under the bonnet. 

In my last corporate years, I was immersed in outsourcing and offshoring strategy. No doubt automation, through robotics and AI, is on the table now. 

Leverage is not necessarily cost-cutting.

But before you make sweeping changes to the company, it’s worth checking in on how you will adapt the company to run lighter. One thing is for sure, even the least productive person in your company is doing something in the time they are there. 

Arbitrary cost-cutting without well thought out leveraged solutions has the potential to do a 360 and kick you in the butt with unforeseen impacts on customer experience and the economics of the business. 

So, you need to think before you act. How will you pick up any slack (or are you confident demand will remain suppressed at levels that will make some people surplus to the company need)?

There are only four ways that you can remove people without some level of operational consequence. 

Productivity uplift – The people remaining have the capacity and (just as important) the attitude to absorb additional activity into their daily lives without putting them under excessive pressure.

Systemisation – Replacing work with improved systems, processes and data that can replace human activity, oversight, and manual checks

Automation – Working with some tech companies in this space, I’ve been surprised at the level of progress made, particularly in robotics and vision systems. Return on Investment is advancing rapidly in favour of SME’s here. 

Perhaps the positive to come from this pandemic will be closing the productivity gap for UK PLC and, at a company level, a chance to redefine what your company is about and how it does what it does. 

All of this requires clean thinking, an open mind, a full Audit, and a willingness to challenge the old mythologies and stories that contain your ambition and advancement. That’s where I come in. 


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