This article was first published on The Business Times Online 11 June 2020.
THE Covid-19 pandemic has massively impacted businesses around the world and startups have not been spared. Founders and their teams have had to make tough and swift decisions to keep the lights on.
From observation, the savvier among them have found a sweet modus operandi in going “zag” when most go “zig”. That is, when confronting the effects of Covid-19, these entrepreneurs have, more often than not, opted for more aggressive, high-risk and sometimes combative approaches.
By bucking the trend, these startups have been able to uncover and capitalise on new opportunities, prevailing over the crisis.
One such approach is to boldly redesign operations so as to do more with less. Take PatSnap, a global innovation intelligence startup founded by a National University of Singapore alumnus. As early as February – at the onset of the outbreak – PatSnap made a firm call to reduce costs and bank on cash preservation, having anticipated significant market turbulence over the next few months.
PatSnap’s management team decisively opted to adapt its customer acquisition efforts. Historically, the company has generated sales and sustained revenue by way of calling target customers. Recently, the startup’s leaders instead decided to go with a less costly and more aggressive product-led growth strategy, under which they worked to create awareness and interest around their product by launching new, compelling features, and promoting them through advocacy and referral loops.
This led to two positive outcomes: the generation of a large pipeline of new customer leads at a much lower cost, and the opportunity to observe product usage and validate new functionalities. Beyond the immediate business results, an “operations redesign” approach has the ability to transform employee mindsets into accepting that companies can attain strong growth with little spend, shifting away from the mantra of burning large amounts of cash to grow fast.
When the economy recovers, this new mindset will greatly benefit companies, enabling them to outpace the competition without having to increase expenses.
A second approach that savvy entrepreneurs adopt is to use this period of the Covid-19 pandemic to build new assets and strengthen their product offering. Funding Societies, a South-east Asian lending platform for SMEs, did just that. The startup doubled down on efforts, early during the outbreak, to enhance its proprietary data analytics and digital offerings, leading it to reach out to more SMEs to fulfil their financing needs, with even more compelling products and support.
In another example, Singapore-based ShopBack, an online loyalty platform that boasts several million monthly users across nine countries in Asia, continued to invest in onboarding new brands and retailers even after Covid-19 broke out.
In addition, the startup deployed resources to develop new capabilities to help users compare products, save time and get rewarded for shopping online. These actions helped ShopBack steadily acquire new customers at a time when online shopping has become the standard, as more people lead their lives from home.
This strategy of creating new assets and bolstering the fundamentals of a company’s value proposition during a crisis will allow it to emerge from the crisis a stronger and more value- adding business.
But first, this will require – on the part of founders – foresight on potential new assets, and the agility and the competence in leading the charge on asset building.
A third, atypical approach used by startup founders to tackle the Covid-19 crisis is to restructure the management team to comprise more “founder-like” leaders. This happened to a startup that provides communications services for corporates globally. That Singapore-based company had raised a significant round of Series B funding, and to take the business to the next level, the startup’s founder recruited a dozen of new senior managers – a move which did not pan out.
While these new hires were well-experienced executives coming from larger companies, who worked hard and made good contributions, they lacked the entrepreneurial instinct and the hustler mentality. They did not have the extra-resilience to cope with unusual challenges. This led to the company quickly losing its original “founder-led” dynamics and the business taking a hit. Revenue started to decline and customers started to churn, and cash started to shrink seriously, despite the team working hard, prior to being hit by the crisis.
The founder then decisively made the call to restructure the management team with more “founder-like” managers, who were more “obsessed about the company”, and showed more ownership spirit, hunger and resilience.
As the Covid-19 pandemic started to hit, the company was much better prepared with much stronger revenue trajectory and a bottom line moving, in a short period, from significant loss to almost break even. With stronger “founder-like” DNA, companies are better equipped to handle a crisis, which usually demands decisiveness, speed and resilience not just from the leadership, but from the entire organisation.
“Founder-like” managers are able to inspire the same traits among their employees; they are also happy to take on double roles where required to keep the company afloat and turn it around during challenging times.
“Zig-zagging” is an instinct that is vital to navigating Covid-19 and other strong disruptions. It is a brazen call to redesign operations, build new assets, or reinforce a “founder-like” DNA within the company – all of which warrant courage, foresight and agility. While the above approaches have worked well for some startups, not all founders and business leaders will find them relevant to their fight against the pandemic.
Nonetheless, adopting a “zag” strategy when other companies go “zig” has the potential to bring massive benefits to any business. Not only will it help the company confront the crisis, it reinvents and positions it favourably to seize opportunities before others do.