How CIOS can beat the economic downturn

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Jorge Lopez, distinguished research VP at Gartner writes about the challenges that chief information officers must consider in a world reshaped by Covid-19

Most IT leaders have overcome the immediate technical difficulties the Covid-19 pandemic has brought upon their organisations, however, many are still stuck navigating day-to-day challenges instead of planning for the road to recovery.

Undeniably, Covid-19 is hurting the economy in more ways than we first imagined, and the extent of the damage is unlikely to be local or short-term. As a longer, global recession becomes more likely leaders must plan accordingly.

Executive leaders should manage the crisis not simply with an eye on the immediate slowdown in business but should begin strategising for the economic recovery that will follow, and how to be best prepared for that.

A minority of organisations will emerge from the pandemic unscathed. However, for the majority that will not, we have put together a framework to help leaders focus on the correct actions to take during each phase of this crisis: the triage, doldrums and recovery.

Starting the business triage
Leaders need to revaluate their priorities and direct their time to the most essential activities the organisation needs to stay functional.

Understandably, uncertainty and chaos drive cost cutting — 20% or more are common at this point — and a desire to lower operating costs. As revenue and earnings expectation drop, businesses will adjust to conserve and manage cash flow.

How an organisation handles this will depend on the individual company, but common actions include headcount reductions, asset sales and salary restricting, which all promote lower break-even numbers.

Organisations responsible for loan payments might begin to experience cash shortages, while organisations that have substantial cash will consider this an acquisition opportunity. Other companies, especially those that are highly leveraged, will fail.

What should executives do?

Create contingency plans for extended remote work, including ensuring that cloud vendors and partners can support the increased workload.

Pay attention to supply chain trouble areas and troubleshoot solutions where necessary. Be clear with customers about delays in shipments and look for areas to build loyalty for the recovery phase.

Navigating the doldrums

This phase, which the majority of the world now finds themselves in, is between the beginning of a crisis and the point where things start to recover. It is deceptively quiet but has its own set of requirements. For Covid-19, this will be when the number of cases levels off. Cash flow will improve, but earnings will lag, and no one will be quite certain when the recovery phase will begin.

What should executives do?

It might seem misplaced, but now is the time to look for ways to invest in business growth and explore innovation because delaying investments might put the organisation behind competitors.

Furthermore, the doldrums can be a good phase to take advantage of unique opportunities for transformation. For example, if the entire workforce is already working remotely due to Covid-19, is it possible to keep parts of the business remote during recovery and into the future or to develop creative options for digital delivery of products?

Ramp up business during recovery

The start of recovery is unpredictable, but we can begin to look at Asia for guidance as they are emerging from their pandemic. As consumers come out of lockdown and business picks up, this time is crucial to get right.

Large purchases put off due to the coronavirus will start again, and customer demand will increase. Organisations will see a jump-start in demand and capital and will encourage departments to invest more. But, be wary — it’s likely that new investments will have limited budgets and spending.

What should executives do?

This is the time to rewrap the short-term solutions put in place and reduce nonstrategic plans so that you have more bandwidth to focus on profitable investments of time and resources.

Most organisations were driven to make quick decisions in digital tools, supply chain management and cost optimisations during the pandemic. Perhaps now is the time to revisit those investments and see if they can benefit the organisation in the long term.