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Pandemic, a weird opportunity

Pandemic, a weird opportunity

27/08/2020

We recently ran a strategic exercise with one of our customers. They are engaged in the distribution business.

The question under discussion was that the pandemic revealed, suddenly, something that had been happening for quite some time now: they have been running a business under mistaken habits instead of run it based on business sense, information and under a clear business strategy. Some of the symptoms are: tight (maybe very tight) cash flow and expenses despaired to revenues. It is nothing really surprising if we come from mistaken business habits.

The Customer considers the reason behind symptoms is that the business, a good and profitable one back in time, has come into some trouble recently, legal trials with a vendor and a Treasury department review which may result on tax liability to the company; however, these are common business circumstances; not desirable but common. Going deeper in details, in our view there is a lack of policies or routines for the assessment of operative and financial information, nor there is available information for such a review. This resulted to be an interesting (maybe surprising) finding for them.

We called a meeting and worked further on the business operation, the business model, the reason for business (understood this as the value proposition for customers) among other business aspects.

Based on the findings from this meeting, we came out with a working plan focused on:

  • Identifying the value proposition – this resulted to be inventory availability countrywide
  • Developing the business model contributing to deliver the value proposition to customers
  • Developing a commercial plan based on the preceding
  • Developing an operations plan to ensure fulfilling value proposition (mostly focused on logistics) Establishing an administrative process to manage and provide information as well as to execute periodical reviews.
  • Establishing internal controls are part of the administrative process.

Now is the time to execute. The biggest difficulty will be to change business habits and undesirable behaviors into a virtuous cycle arising from routines based on clear tasks and objectives agreed upon among management and employees. This implies an information based decision system guided by a practical policy operational scheme.

The customer should have identified the problems well in advance, they did not as they had acquired the wrong business habits not using information, nor planning and executing but reacting to events as they appeared. This was so until the pandemic appeared brought out to light the trouble. Instead of an operation/administration based on information and review routines, the customer relied on explanations and justifications from employees, not getting the adequate deepness in their analysis nor coming to actual conclusions and action plans.

It now seems that this customer has a fair opportunity to recover a profitable sustainable business. Will they devote to execute management on their day to day activity? Should they modify habits and behaviors?

Our expectation and hope is they will.

Abraham Arcos, Auren Mexico