Tag Archive: covid-19

  1. A 2022 Retrospective, and 2023 Predictions

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    Last year, we posed some questions for 2022 (see the original article here), based around a few common sense predictions on what was likely to happen in the year ahead.

    After the positive reaction to that post, we thought it would be fun to review how accurate our thoughts for 2022 were, and to consider what we think will happen in 2023.

    What did we predict in 2022? 

    Based on the experience of our collective team of consultants, our clients across multiple industries, and research into macro-economic trends, we suggested certainty around three key economic factors:

    1. The after-effects on Covid-19 pandemic would continue
    2. There would be supply chain and labor market shortages
    3. There would be high inflation

    Any reasonable assessment of 2022 would conclude that these predictions proved to be accurate.

    However, the subsequent questions that we raised ended up being less reliable predictions of what most businesses did (even though we still believe our recommendations were valid!).

    What actually happened?

    • In terms of our suggestions on Price Increases: many businesses instituted price increases in 2022, but based on anecdotal observation, many of our fears on the effectiveness and medium to long-term effects of poorly implemented price increases seem to have been well founded.

    In fact, many organizations were relatively slow to implement price increases in 2022, often waiting until later in the year, meaning much work may still need to be done in this area in the year ahead.

    • In terms of Data Literacy: we saw plenty of businesses come to the realization in 2022 that, in light of supply chain difficulties and other challenges, their data and reporting tools and capabilities left a lot to be desired.

    But in 2022 very little of this translated into the action (in terms of skill development and technology investment) we were suggesting. Admitting that you have a problem is the first step, but companies seem to be overwhelmed by the perceived challenges and cost of addressing these gaps (more on this later).

    • In terms of Automation: many businesses suffered from the labor market shortages we predicted for 2022. However, most businesses tried to address them by raising pay (on top of inflation driven increases), or tried to mitigate them and “struggle through”, hoping they could maintain output (but likely not growing as much as they could have, or achieving their full revenue and profitability potential).

    With everything that happened in 2022, many businesses focused on “business continuity” versus investment, believing that 2022 was “not the right time” to revisit automation. While we have a lot of empathy with the sheer magnitude of challenges that businesses faced and continue to face, we would contend that now is exactly the right time to consider automation opportunities, as the underlying drivers and business cases have the potential to fundamentally transform business performance.

    • In terms of Cost Structure and Expenses: it wasn’t until the third and fourth quarters of 2022 that we saw signs of significant “belt tightening”, as evidenced by the layoffs in big tech firms and the like, and many companies landing on their individual long-term policies and philosophies to flexible working etc..

    While it is true that labor is often a significant expense for most businesses (and therefore one that is focused on when reviewing cost structures), and that some businesses over-expanded their labor forces during the pandemic, we would argue that few business have yet done the work that we suggested: taking a deep and holistic view into how cost structures and all major business expenses have changed in light of the pandemic.

    As an example: it is only recently, and often driven by additional factors (such as the invasion of Ukraine, the reliance on Taiwan as a source of semi-conductors, and continued geo political concerns related to China), that some firms are taking a look at their supply chains and considering strategies including re-shoring and moving production from China either closer to home (e.g., Mexico, South America) or to other low-cost locations (e.g., India, Vietnam).

    What do we think will happen in 2023?

    If anything, uncertainty and ambiguity is even greater this year than last.

    However, three things we can be relatively certain of in 2023 are:

    1. The economic challenges of 2022 (inflation, dramatic shifts in supply and demand, wild swings in critical markets such as labor, housing, automobiles, and travel) and supersized economic policy responses to them will likely carry over to 2023.
    2. While a recession is not guaranteed, 2023 is likely to feature declining inflation and slower growth as we return to more stable equilibriums/new norms.
    3. Stabilization of supply chains will likely mean that job openings remain abundant (with the same “skill gaps” as 2022), but there will be fewer labor shortages, while declining inflation will likely mean that prices will revert to pre-pandemic trends

    So what questions should you be asking yourself in 2023?

    Last year we mentioned the term VUCA, which is an acronym for volatility, uncertainty, complexity, and ambiguity. Policymakers worldwide have warned of a more unstable period where global conflicts, pandemics and climate change are the norm, and 2023 will be a test of whether the world is truly entering a new period of persistent shocks. That is, ones that creates persistent supply challenges and makes it harder to maintain low and stable inflation.

    Therefore, we think one of our questions for 2022 (Data Literacy) carries through to this year, but in an even more magnified way: if 2023 is going to be even more VUCA than 2022, do you have the right data, at the right time, and the right people to interpret the data and make decisions as things change?

    If you do not, and want to start to understand this better or address the underlying issues, Core Catalysts is here to help you. We have completed multiple engagements in this area, and sourced multiple employees for our clients to manage the improved systems and processes we have put in place. We can show you that the challenges and costs of improving data literacy are not as overwhelming as you think, and the returns on investment are also clear and compelling!

    Likewise, we think our questions on Price Increases and Automation also still stand and carry over to 2023. Do you need help in analyzing, planning, and implementing price increases? Are you interested in identifying opportunities for automation in your business, and the costs / benefits / business case for doing so? If so, Core Catalysts can help!

    Finally, the other major questions for this year revolve around Expense Structures and Supply Chain.

    Expense Structure

    In terms of the question of expense structure, where we challenged you to challenge costs in light of the impacts of the pandemic on ways of working, we challenge you to do this again. This time, however, keep in mind the impact of inflation on the underlying margins and profitability of your business.

    You may have increased prices last year, but have you maintained your underlying margins, and will you be able to contain input costs and expenses this year so that price increases (if any) can be smaller this year?

    If the answer isn’t a clear yes, Core Catalysts can help you identify cost and expense management opportunities that maximize your efficiency and effectiveness. We can help you craft pricing and price increase strategies that will ensure that margins remain healthy in the short, medium, and long terms.

    Supply Chain

    Equally, last year we flagged the need to improve supply chain management in light of what we thought would be short to medium term shocks, but this year, despite the fact that China has reopened, we believe that continued Covid-19 related supply chain uncertainty there, plus geo-political policies and upheaval elsewhere (e.g., Ukraine, 2022 CHIPS act, etc.) means you should be considering your supply chain more deeply. Ask questions such as, “are my suppliers and manufacturing located in the right place?”, “what are my supply chain vulnerabilities?”, “what should I be doing to improve my supply chain flexibility and resilience?”, and “what changes to my supply chain can I make to minimize risks to revenue and profitability?”.

    Again, these are all things that Core Catalysts has helped multiple clients across multiple industries and situations both assess and address, and we’d be happy to discuss in more detail how we might be able to help you!

    Thank you for reading. We hope you enjoyed this article. As always, comments, questions, and invitations to provide more information are welcomed!

    Mark Jacobs, Client Service & Delivery

  2. Are You Scenario Planning Around the Coronavirus?

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    Without wanting to further add to the concern and hysteria around COVID-19 (aka the Coronavirus), fears that there might be a widespread epidemic here in the US are causing widespread business uncertainty (just look at the swings in the stock market the last few days).

    This raises questions on how well prepared many business are for unexpected or unusual issues in supply and demand.

    Consider the Impact

    As an example, have you considered the impact on your business, and what you would do, if:

    • A sizable percentage of your workers called in sick and were out for a few weeks?
    • Your key vendors experienced a reduction in output due to their workers being ill?
    • A measurable percentage of your customers / consumers become unwell for a short period of time?
    • A measurable percentage of your customers / consumers become unwell for a long period of time?
    • Your inbound and / or outbound logistics takes twice as long as usual?
    • People start stockpiling goods and staying indoors?

    Why Scenario Planning is Useful

    The uncertainty around COVID-19 is a perfect example of why, when faced with uncertainty, scenario planning is useful.

    The process of scenario planning (sometimes also called ‘war-gaming’) involves risk-intelligent companies taking time to proactively address risks and consider a variety of possible scenarios to help them ‘pressure test’ and ‘rehearse’ their ability to handle issues as they arise and to spot sources of risk that may otherwise go undetected.

    Scenario planning also gives a company the opportunity to challenge key assumptions that underpin baseline business performance and to ‘peer-around’ the corner at alternative versions of the future, with consideration to second and third order effects as well as the obvious ones, because, like an iceberg, much of the risk (ice) often cannot be seen (under the water).

    Thinking through various scenarios that are driven either visible trends that are shaping the longer-term future, or by forces and events that cannot be predicted or controlled (such as the Coronavirus) also helps companies prepare for potential situations and build longer-term organizational capability in thinking through other issues in their supply chain (like product recalls) or organization (like a data-breach, a factory fire, or a major vendor going in to bankruptcy) and making the right strategic choices despite the uncertainty.

    Scenario Planning Workshops

    Here at Core Catalysts, we have run multiple scenario planning workshops for our clients across a wide range of issues:

    • One recent example considered the effect on prices, supply, and demand, for Pork products around a variety of scenarios involving Swine Flu.
    • Another revolved around potential competitive reactions to merger and acquisition activity in a rapidly consolidating medical specialty market.

    We prepare and facilitate scenario planning sessions to help our clients think through and develop of usable strategies and risk mitigation tools for both ‘wildcard’ or ‘black-swan’ events (low-probability, high-impact occurrences that could dramatically change the business environment) and more ‘every-day’ activities (such as product launches, price changes, and other externally facing strategies where the responses of customers, competitors, and other parties can affect results), giving management teams the ability to gauge the effectiveness of existing strategies and tools and to feel better prepared and more confident in their decision making if and when a variety of situations arise.

    Do you think you or you team might benefit from a scenario planning workshop? If so, please get in touch to find out more.