The Corona crisis has hit many businesses and organisations like a wave. Leaders are now in full crisis mode: Plans can to be thrown out and need to be rewritten, cash is king, work goes mainly remote or stops altogether.
It is important not to fall into common crisis leadership problems like “Running around like a headless chicken”, “Action theater” or “Over-thinking”. We all need to take a (short) step back and reflect on our thinking and mental models about the future. I see the same forecasters who did predictions 3 months ago (now of course completely obsolete) use the same approaches to create predictions. Don’t fall into this trap.
In this time of high stress it is vital to check that one has the right set of mental models on how to approach the crisis. What are mental models? They are thinking tools to help analyze a situation. They are (simple) guidelines that help make decisions, bring clarity into a mess, make sense of the world.
The key mental models needed right now are the ones that help bring clarity, guide action shape a vision for the future. And this is what business leaders have to do now, to save businesses and organizations AND get prepared for the future at the same time.
Here are nine mental models for crisis leaders, to be used individually or together.
Important: I focus this article here on business leaders, not on the health care professionals and political leaders who of course face other tremendous challenges at the moment.
#1 The Dual Strategy
As one senior leader I spoke to recently mentioned: “We have to be careful that with all of our actions to save the present we don’t loose the future.” A dual strategy is a term or mental model that says that you build a strategy not based on one outcome but you take the future directly into account. For instance, you don’t only focus on the short term (setting up a remote workforce) but immediately start to build up also to work on the long term. An allocation of resources can for instance look like the below.
#2 Short/Medium/Long Term
Building on the above, it is important not to get lost in an “action theater”. One easy mental model to have in mind when putting the dual strategy in place is the´Short/Medium/Long term mental model. For instance, make a list of all the assumptions, actions, and forecast you see for this at the moment for 1) the next weeks; 2) the next 4-6 months; 3) the next year. List them down, and constantly update and adjust. With this you don’t loose sight of the different time frames.
#3 The Window of Opportunity
Once you have applied steps #1 and #2 you will see that there is a “window of opportunity” or “window of action”. It is vital that one acts when there is still a window of opportunity, and not when panic occurs. Examples for this is invoice management (send them now!), but it can also be order management, cyber security, making backups, and so forth. In a crisis, windows of opportunity close fast.
For the time horizons that you have defined above, think about: What are some windows of opportunity that are still open? Do we have plenty of open invoices? Can we still act something now? Make a list and act.
#4 Scenario Thinking
People often want to have simple answers, and want to know the ONE right view of the future. Don’t fall into that trap, the future is impossible to foresee, and nobody has the perfect answers. With scenario thinking, you accept that there are outcomes possible, and I always recommend to look at least at 3+ scenarios. Then assess for each scenario, what can we do now, what does that mean for us? For instance, if people will permanently change the way they travel, what does that say about my business?
#5 The 2×2 Matrix, for instance the Depth & Breadth Matrix
2×2 matrices are a in my view a great way to structure reality, and a good way to pt scenario thinking into practice. One of the most powerful areas in where to map your thinking regarding the business impact of the current situation is to think about the “Depth” and “Breadth” of the current crisis: Depth is the potential impact, in this case on the economy. Breadth is referring to the potential length in terms of time. Here is an overview of potential scenarios, described in forms of some letters in reference to the impact to the economy and Sales & Profit/Loss charts. One can get quite creative with the letters, as you can see below.
There is a multitude of scenarios and you will find many of the ones back that are being discussed in the media and boardrooms right now. For instance the “Nothing is going be the same” scenarios vs. the “this will pass quickly”, as German entrepreneur Erich Sixt has recently stated. You can think of additional letters as well (The “W”, a fall back; The “I”, i.e. an endless drop; The “Y”, the “K”…).
Which scenario is true, which will become reality? I don’t know, and nobody knows at this point. But the much more important thing than finding the right letter is to reflect: “What will we do in each scenario?” And get prepared in these areas.
#6 The Circle of Influence
Everybody wants to help and jump in everywhere, save the world, but we have to see where we can truly focus on now. As a leader, as a team, try to define with everybody where that circle of influence and opportunity is and then act accordingly.
#7 Key Lesson from the Pool Table
The previous thoughts all focussed on thinking ahead. However, with all long-term thinking, all strategists and leaders have to remember the essential lesson from pool billiard. In pool billiard, you try to put a ball into a hole. An advanced technique is to try to put the white ball already in a great position so that you can directly do the next shot, and so on. However, sometimes people over-optimise and try only to focus on where the white ball might land after the next shot, and they end up not putting the ball into the hole. Then, the entire plan falls down. In a crisis, and life in general, we should remember this lesson and need to ensure that every shot drops the ball.
#8 Second Order Effects
Second order effects are effects and outcomes that are based on first order decisions and actions that one takes. They are often extremely difficult or even impossible to forecast, depending on the situation. One example: Due to the current crisis, tourists are not any more popular tourist areas. Due to that, for instance in Thailand monkeys don’t get fed by tourists any more. And due to that, monkey start to roam the streets, form gangs and fight for food, as you can see in this video here.
In the longer term, I highly recommend to dive into to the thinking and works of Nassim Taleb. One of his landmark books is called “Anti-Fragility”. He suggests there are three distinctions when describing systems, organizations and so forth: Fragile, Robust and Anti-Fragile. Fragile systems and organizations are vulnerable to all kinds of unforeseen events or pushes, like the situation we are seeing now. Robust ones can withstand them. Anti-fragile ones even benefit from potentially unforeseen events. The key is build your system, organization or company as much as possible in a robust or even anti-fragile way. Once this crisis has passed we should look on how we can make our organizations as robust as possible, in the fields of supply chains, financing, cash positions and so forth.
Small side note: Nassim Taleb also wrote a book called “The Black Swan” back in 2007. Sometimes one can hear people say currently that the current COVID-19 crisis was an unforeseen event, an example for a “Black Swan”. Taleb disagrees. He calls the Corona situation actually a White Swan, a perfectly foreseeable event, and has written and warned about it extensively. One of the people who can truly say “I told you so.”
Conclusion: Stay proactive, think ahead and use simple and effective thinking tools
You will have noticed that these mental models don’t give you exact guidance what to do. Some even might contradict each other. This is ok in my view, as the future in a crisis is also highly volatile.
The key to have in a crisis situation is to have an approach on how to analyse and view the future. We have to stay mentally flexible and look at the situations from all kinds of different angles and time horizons. As crisis leaders we have to act, and act fast and keep calm. Simple mental models can help you to stay sharp in the current moment but also focussed on the future at the same time.
Lars Sudmann is a board advisor and strategy consultant. He was the CFO Belgium of P&G during 2008-2010 and has lived through the financial crisis first-handedly. He is a Council Director for Strategy & Transformation at the global think tank The Conference Board and his latest book is called “Innovation that Sticks” and deals with how to innovate and navigate in uncertain environments.
This post is part of a series on resources for COVID-19 crisis leadership.