An open letter for entrepreneurs, business owners, CEOs, Presidents, and Key Executives.
Thank you for all who commented, provided improvement suggestions, and encouraged me to continue this UpLIFT Series. In this second installment, I have added several content and structural improvements to this letter. First, I have added a brief economic snapshot and economic outlook; Second, each issue will feature a leadership imperative, and this issue’s imperative is leadership agility, creativity, and courage. The Covid19 economy demand destruction has produced strong economic headwinds, and some equally strong tailwinds. I explore how companies are repositioning their business strategies to identify product and service strategy pivots and innovation opportunities to sustain and create new revenue. Next, I’ve added a section titled, “intentional steps” suggesting some deliberate actions and resilience steps companies should be taking right now in this crisis. I follow-up with a “leadership quote” to anchor this issues topic theme. Finally, I close the letter with a new section: “Laughter as Medicine” as Reader’s Digest already owns “Laughter is the best medicine.’ Laughter allows human stress to release like earthquakes allow the earth’s crust to shift and release pressure. So let’s get started.
The big news this morning (4/23/20) was this: US Unemployment claims jumped today 4.427 million[i] bringing the total to 26.45 million (or 20% of all US workers)[ii] unemployed in the past five weeks; for perspective, the number of job losses reported in the past 5 weeks is 3x the number of jobs lost in the entirety of the Great Recession (8.7 million), and already exceeds the number of jobs gained during the entirety of recovery from the last recession. Further, this is the worst jobless claims numbers reported since the 1930s; and if you listen to the US Fed Reserve St Louis, the situation could get much worse with jobless claims reaching 34.1% in a worst case scenario. Interestingly, while the numbers are bad, for whatever reason the market seems insulated or has not accepted this news today. The Stock market was up, and this tells us to beware that the economy is not the stock market, it’s something much broader.
Figure 1 - Unemployment benefit claims past 5 weeks. Source: US Bureau of Labor Statistics
When April 2020’s month-end statistics are posted they will show that business production, new orders, and employment contracted sharply and abruptly[iii]; hardest hit because of social distancing and mandated closures are leisure, hospitality, and retail sales, excepting essential goods. Some businesses are thriving, however most are negatively impacted, and some are severely impacted. Food and medical producers show strong demand amidst supply chain disruptions. Auto manufacturing is largely shut down. Supplier sourcing and deliveries are slowing, supply distribution is inconsistent, and noticeably Amazon home deliveries have slowed; Industrial contract backlog is contracting; raw materials inventory stockpiles are contracting; Business customers’ inventories are low, and consumer staples hoarding appears to be abating. Prices are decreasing; exports and imports are contracting. Excepting periodic seller price gouging for essential products and services, most products and services are seeing low inflation, and some products and services experiencing price decreases driven by and consumer, client, and vendor contract renegotiation of all types. Businesses with asset-light pre-paid and sticky subscription based business revenue models faring better than most, excepting the essential businesses with needed products that are thriving in this environment.[iv]
Deserving its own paragraph, the energy sector is in chaos and is highly volatile as oil is in free fall, impacted adversely from worldwide stay-at-home demand decay, absent oil regime leadership, an overabundance of physical oil reserves and little remaining room to store more commodity in the short-term; the result is that prices have plummeted sharply. For investors, oil futures today are the falsest of economies being influenced by OPEC, government leaders, hegemon corporations, exogenous shocks, and even mid-cycle redefinitions of Oil ETF holdings; in this environment anything could happen; buyer beware.
Meanwhile, in an alternate universe, the US Stock market is somehow ignoring the tidal wave of bad economic as the market was up this morning on the news of the increased jobless claims. How could this be? Hopes that Covid19 might be abate this summer, research that Covid19 may not be as lethal as first reported in some studies, and publicly held believe that the governments will do almost anything to save the market including massive US Treasury CARES Act bailouts and industry supports along with Federal Reserve Bank actions that are providing some social insurance of a softer landing for the next few months. More on this in the next section.
Springtime has a way of rejuvenating spirits, and this time is no different. Propping up spirits this spring is the massive CARES bailout and support; trillions of dollars legislated so far reflecting over 10% of annual GDP, and nearly the entirety of the annual revenues of the US government in 2019; a staggering amount. Further, while Covid19 cases are climbing the mortality rates in the US are lower than most models indicated, taking advantage of an anchoring bias of a high death rate expectations so that the public now feels somewhat better when the actual death count is lower. Further, individuals and families have been cooped up for over a month in some locations and there is some mental health value in stepping outdoors. And with President Trump and several state governors pressing for early re-entry back to work, and other states preparing to re-open their economy, optimism runs high.
So who is right? Are we returning quickly with a V-curve to normalcy as the stock-market indicates? Or are we facing a 100-year economic storm the likes of the Great Depression? Can both scenarios be right? Yesterday when the Stock Market (S&P500 climbed back to 2,799.31) it recovered nearly half of its losses since the peak in February; today we are only 13% down from the market high? There is some evidence to suggest that the stock market typically improves four months before the actual recovery from a recession. Recently JPMorgan Chase came out with a note that said that the market has priced in too much of a worst-case scenario: coordinated policy action from the Federal Reserve and U.S. government should help markets recover from the recent sell-offs and “ultimately outlast the outbreak,” the firm’s chief U.S. equity strategist, Dubravko Lakos Bujas.[v]
Contrast the comments above with the old sage Charlie Munger from Berkshire Hathaway who takes a darker line on history and the future. Say’s Munger, “We’re like the captain of a ship when the worst typhoon that’s ever happened comes,” “We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity.”[vi] So who should you believe? There is little evidence of the market recovering soon, and some talk about a potential double-challenge in the fall with traditional Flu season and re-emergence of Covid19. Consequently, I would have you hope for the positive outcome and plan for the pessimistic outcome, keeping your dry powder (cash) to make sure you can out-last, and out-play this pandemic, and here’s why.
Figure 2 - S&P 500 performance from peak to trough of economic events with greater than -20% downturn in the market. Source: BNY Mellon.
BNY Mellon’s research shows the past deep S&P 500 Retractions of greater than -20%. What you notice from the chart is that most recessions have “fooler” or false rallies, only to settle to lower lows many days further out into the future. We are only weeks into this downturn and it’s too early for the recovery given the significant damage to the economy, demand destruction, and historically high unemployment. If you look at the Nasdaq crash of 3/24/00 to 10/09/02, notice how many false rallies occurred before the market finally hit bottom. The same was true for the Great Recession (10/09/07 through 3/09/09). Since February 2020, the market fell 37% and has risen back up to only 16% dip; that’s not usual, nor a correction, and it has done so today in the face of 26 million newly employed workers.
Importantly, while I researched the Great Depression economic crash and recovery for my book “Economic Misery and Crime Waves” (2009), I observed that in 1930s those investors who reentered the market too quickly to scoop up asset deals for a bargain (eg. residential estate), were often found to lose these same investments months later with new lower lows and forced liquidations; indeed, during the Great Depression, the average home was sold and liquidated 4 times before the final owner held the property and the economy pulled out of the economic trough. Consequently, I side with Charlie Munger of Berkshire Hathaway; we have only entered the storm… and we have not exited it yet.
Nonetheless, despite the negative market news above, I remain highly optimistic in the human spirit and ingenuity and hold hope that we as the world as a human race will muster through this Covid19 pandemic and that one or more of the 179+ research teams working on a Covid19 vaccine will be successful. I am also mindful that any vaccine will take many months to roll out so it is likely to be fall 2021 or 2022 at the earliest. Consequently, I think it wise for business leaders to be prepared for a longer and more prolonged economic downturn as it will take many months to restore business and consumer confidence lost in the past 5 weeks, in addition to the business and consumer credit-worthiness. Further, I encourage individuals and business leaders to look for, develop, and source alternative demand and revenue to sustain you. That is the focus of this UpLIFT letter no: 2: being agile, creative, and courageous… in this crisis.
Feature Topic: Agility, Creativity, and Courage
What business leaders and individuals need today is more focus on what we can do: i.e., being creative, disruptive, entrepreneurial, and mustering courage to take action to invent the future we want. Let’s face it, business disruptions and crises happen all the time. And when these crises happen, Darwin would say, “it's neither the most intellectual of the species that survives; nor the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”
We must be agile, adaptable, and creative! Indeed, it’s how we prepare for and handle these crises that often makes the difference for our own lives, families, and businesses. Whether we speak of the current Covid19 crisis (2020), the Great Recession (2007-2009), the Dot.com bust (1999-2000), the Great Depression (1929-1933), or any other wartime or significant business disruption, businesses have toiled through these times and emerged the other end sometimes better, and sometimes worse. It’s truly your own strategic thinking and actions during these times that determines your future.
We must remember that for every crisis head-wind, there is a strong tail-wind. Some businesses face great challenges with lost demand in legacy markets, and others see surge demand that threatens to break their company apart from the inside as they burst from the seams. Whether your challenge is market bleak-house and full-house, the challenge is to be agile, creative, and courageous. That's what this presentation is all about: making the most of the challenge or opportunity in front of you. For business owners and leaders, remaining flat-footed (frozen) and standing still during crisis times, thinking that somehow this will blow over soon without injury may actually result in worse outcomes. Fear itself can be paralyzing.
This is why in this challenging environment, I have taken on the special mission to lift, teach, and help business owners, entrepreneurs, CEOs, Presidents, and Key Executives how to pivot, re-invent, be creative, out-last, and out-plat the competition. The pivots are out there for you to tap into like a spigot that can bring life blood and new revenue to your company.
Figure 3 - Misadventure & Co., a sustainable vodka distillery in Southern California, has switched all production to make hand sanitizer.
Consider for example the many micro-brewery restaurants that are now closed do to state and local stay-at-home orders, who have pivoted with their liquor licenses to making and sell alcohol-based hand sanitizers by the truckloads.[vii],[viii],[ix]
Or the automobile assembly line quality control company that has repurposed their thermal imaging cameras from detecting auto parts defects and redeployed them to their new purpose of rapid non-evasive detection of the employee tear ducts at Amazon and other distribution centers.[x],[xi]
Or consider Dyson the innovative vacuum cleaner manufacturer who with the lightning speed of 10-days completely reinvented an elegant MVP “CoVent” Ventilator with stated capacity of 15,000 units in weeks.[xii] None of these business strategy pivots were in place 60 days ago, and they were only inspired by the necessity of pivoting for revenue sake and the need to solving a need or hard problem.
All three of the situations mentioned above created new life and revenue for their businesses. Now, what about your business? How are you pivoting?
Plato was the first to say, “The true creator is necessity, who is the mother of our invention." Since that time in crisis others have coined inspiring variations on this theme that inform our ideas on innovation today. For example, Horace observed that “Adversity has the effect of eliciting talents which, in prosperous circumstances, would have lain dormant.” This is certainly true of companies that I have built where we would stay on a certain glide path not veering from side to side while all was well. However when we hit a significant road bump (loss of a key customer, market crash, or other significant event), it had the effect to have us refocus our efforts to find a new way to go around, over, under, side to side, or through the challenge to restore profitability to our firm through a pivotal new service or product. This time is no different.
Emerson remarked, “When a man is pushed, tormented, defeated, he has a chance to learn something." What are you learning from this crisis? How are you pivoting? Necessity does everything well. What are you observing around you that has needs, and how could you pivot to service those needs? You must be have more curiosity about the events, needs, and demands around you. Einstein knew that curiosity was the singularly most important element to discovery when he remarked, “I am neither clever nor especially gifted. I am only very, very curious.” Clearly this is a self-deprecating remark on Einstein’s part as he was genius yet he told the key for us to consider… be curious. And a close cousin of curiosity is self-directed lifetime learning. So what are you learning from this crisis? And how are you turning this crisis into your next best version of you?
As you think of candidates for ideas and pivots for your company, I would encourage you to be mindful of the work from MIT and other business schools that find that innovation is most successful when you improve your core business, and next successful for close adjacencies from your business.
In the three examples I provided above about the Automotive Thermal Imaging company, or the microbrewery, or Dyson vacuum cleaner…. All of them pivoted by repurposing something core from their business to a new purpose. This was one of the secrets to their their early pivot success. So also was speed.
Lewis Carroll’s Queen of Hearts…said it best, “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.” To be late to the re-invention game is to be sidelined with inventory that will not sell, or whose time has past. We must be nimble, agile, and creative to excel in these times.
So some early goals for business leaders to consider:
- Ask yourself, what are your most likely business strategy pivots?
- What core service, skill, product, or knowhow might you turn into a new business, product, or service now in this new Covid19 economy?
- How might you serve your customers broader line of needs?
- How might you foster the creation of new ideas for pivots in your company?
- How might your realign your teams to create the supportive environment and incentives for company strategy improvements?
- How might you inspire agency, innovation, and action?
- Lastly, what can you learn from this crisis to make yourself, your company, your opportunities better, so as not to let this crisis go to waste?
If you run out of ideas how to get the business strategy pivot and ideation process started with your team, in my next letter I will share some business ideation strategies, tips, and tools.
If this still doesn’t work for you, then give me a call, and let’s see if we can get the creative process jump started for you over zoom video ideation session.
For interested businesses, entrepreneurs, CEOs, Presidents, Key Executives, I've put together a LIFT series training deck on being agile, creative, and courageous in times of crisis that I would be happy to explore with you if you are interested. In my next issue of UpLIFT No. 3, I will have dozens examples of business strategic pivots and ideation methods that you may use to set your company on the path to a new normalcy, and a brighter economic future.
Remember, “The obstacle is the path.” - Zen Buddhist Saying”
"It still holds true that man is most uniquely human when he turns obstacles into opportunities.” - Eric Hoffer
“Today is only one day in all the days that will ever be. But what will happen in all the other days that ever come can depend on what you do today. It's been that way all this year. It's been that way so many times. All of war is that way.” – Ernest Hemmingway
Laughter as Medicine
From Psychology Today, Hara Mariano writes, “Laughter, it's said, is the best medicine. And there's lots of evidence that laughter does lots of good things for us. It reduces pain and allows us to tolerate discomfort. It reduces blood sugar levels, increasing glucose tolerance in diabetics and non-diabetics alike. It improves your job performance, especially if your work depends on creativity and solving complex problems. Its role in intimate relationships is vastly underestimated and it really is the glue of good marriages. It synchronizes the brains of speaker and listener so that they are emotionally attuned. Laughter establishes -- or restores -- a positive emotional climate and a sense of connection between two people, In fact, some researchers believe that the major function of laughter is to bring people together. And all the health benefits of laughter may simply result from the social support that laughter stimulates.”
Further on this topic, a dear friend of mine, Sally Rhoads, LCSW, encouraged me to add to my UpLIFT letters a laughter section, as one cannot overestimate the medicinal value of a good belly laugh to reduce and relieve stress and uplift the spirits of others. So in honor of Sally and her late husband Bill, I add this new section titled simply ‘laughter as medicine.’
For this first laughter inclusion I have found some comical relief that will surely bring a smile to your face as you watch how humorous, witty, and outright ridiculous the following “Disney Covid19 Theme Song Parodies”[xiii],[xiv] by actor Kurt Tocci. We can all use some good humor right now and this certainly ranks up there with the best ones created just for our time.
Figure 4 - Cooped up too long inside his apartment, actor Kurt Tocci provides comic relief in his “Disney Covid19 Theme Song Parody."
# # #
In closing, may you find the opportunity in front of you, remembering like the proverb, “The obstacle is the path.” Be agile, creative, and courageous in these times of crisis. By doing so, you will reach a little higher to become the leader your company needs at this time. Being good, doing good, and being good for something is the right standard of leadership in these times. Keep your chin up and move forward. And remember, like Oscar Wilde said so wonderfully, “We are all in the gutter, but some of us are looking at the stars.” Make sure to look up and your future might just follow you in the same path.
Until next time… get to mental juices flowing and consider your potential business strategy pivots, be creative, and I’ll have many ideation and pivot tools for you in my next open letter to CEOs.
As always, if I can be of assistance to you in any way please reach out to me.
Severin Sorensen, M.Phil.
President & CEO
PO Box 980068
Park City, UT 84098
[ii] US worker population is estimated to be 130.2 million (2019). Unemployment claims in past five weeks totals 26.5 million, reflecting 20.3% of estimated workers in the US now unemployed.
[iii] March 2020 Manufacturing ISM Report on Business, PMI @ 49.1%; https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?SSO=1
[iv] Federal Reserve Beige Book, 4/15/20, https://www.federalreserve.gov/monetarypolicy/beigebook202004.htm
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