For some companies, COVID-19 means a sudden ramp up in demand and scale of operations. We have been working with several companies recently who have had to respond rapidly due to increased demand, driven by the pandemic. For example, The Cambridge Mask Company (www.cambridgemask.com), a popular face mask brand, have had to increase the size of their business 10x, in just 3 months. Think about that for a minute. For every operating process in the business, where previously the unit of volume was 1, there are now 10. This type of high-speed growth presents very particular challenges, and demands changes in mindset, in order to achieve. Here, we have summarised learnings and best practises for companies dealing with a sharp increase in demand, specifically due to COVID-19.
Most entrepreneurs are used to peacetime, and there are established best practises of how to run a company in normal times. To successfully capitalise on this rapid demand spike, however, requires a change in mindset, in 4 key ways:
When facing a rapidly expanding market, it’s important to move quickly, in order to scale. The key mindset we have had to apply is to be constantly identifying and eliminating constraints. This is called the ‘Theory of Constraints’ (TOC), and much of the best practise regarding TOC coming from Eli Goldratt, and his books such as ‘The Goal’. The core insight being that you are only as fast as the slowest link in the chain:
The principal is that in order to move quickly, we have to be constantly identifying where the current (and next) constraint is, and taking proactive steps to eliminate them. TOC comprises a large body of knowledge, a few key points of which are summarised here:
TOC is typically used in a manufacturing / production environment, but in a business scenario like COVID-19, it applies across the entire business, including:
It’s worth emphasising that, even though you would think that in a situation of high demand bottlenecks would mostly appear in Operations, we have in fact had to work with constraints at all these points listed above, including situations where market demand was soaring but customers awareness was too low (constraints in Marketing), or where the website was getting overloaded with orders (Sales), as well as all the problems you would expect in on the factory floor, such as recruiting and training enough labour, bringing in components & raw materials, and freeing up space and capacity (Operations).
So, the question every day is: ‘Where are we now, and will be over the next period, currently maximally constrained?’. This has become a new mantra for these teams. Finding and resolving the answers to this question has required putting in place a few best practises:
There is one final insight from TOC, which is that the ultimate constraint in any system is inertia within leadership, as illustrated here:
In the COVID-19 situation, the key reason for inertia is, of course, not indolence. What actually catches leaders of such organisation out is the sudden change in mindset required. Normally, entrepreneurs are used to having to operate on a shoestring. They are cautious and conservative about costs and investment, having had to work hard for every penny they have.
However, for companies fortunate enough to benefit from recent sudden shifts, this mindset has to rapidly change. Money has to be thrown at problems, which can be an acutely uncomfortable shift for entrepreneurs. It becomes necessary to pay over the odds for things, because of the premium on time. For example, Chris, the CEO at Cambridge Masks, early on in the crisis had to make the decision to hire expensive project managers, not something he would normally consider. It becomes necessary, however, because the trade-off has changed, and there is now a premium on speed.
The first law of entrepreneurial gravity is that growth sucks cash, so having a close handle on cash is critical when entering such a high-growth phase. The companies we have worked in are all in situations of providing goods and services that are now in tight supply, so have moved quickly to re-negotiate of client payment terms. It’s important to explain to customers why they have to pay up front, which is to be able to ensure sufficient supply for them. Credit terms and discounts all cancelled.
The finance team need to provide regular (minimum weekly) cashflow forecasts, based on order forecasts from the sales & marketing teams, and to include inputs on labour and production material requirements from the production & delivery teams. This is crucial in order to ensure that we can plan cashflow and be certain we have enough cash to prevent bottlenecks in labour, production, and the supply chain.
We are also finding that Governments are a ready source of cash in the current environment, that it is easy to negotiate and secure interest-free loans at this time (certainly in the UK), however we still prefer to let our customers negotiate this, and to fund our growth from payments from them.
To move fast, how the team is run day to day has to be optimised, otherwise the business simply cannot keep up. Here are some of the key changes we have helped companies in this situation to implement:
We start by assembling a core Task Team who are the nerve centre of our response to the situation. The Task Team must include leaders who represent all the core functions of the business, and it’s important to first clarify who is accountable for what part of the business (we recommend Scaling Up’s FACe tool for this: https://scalingup.com/growth-tools/). This clarification has been particularly important because Task Teams often expand rapidly, so require multiple rounds of clarification on who’s accountable for which part of the business.
For example, one team we are working with in this situation is KwickScreen (www.kwickscreen.com), a manufacturer of privacy and infection control screens for hospitals. The sudden change in situation caused their leadership team to re-allocate roles, so that their CEO could focus on external communications in the healthcare sector, and these changes needed to be clearly communicated to the team.
In all situations, the teams we have worked with have required bringing in considerable external temporary talent, such as project managers, consultants, and agencies. These specialists covered areas such as marketing, production, supply chain, and recruitment & training, which has proven to be key to responding fast. There is a lot of talent looking for work at the moment, so support from those teams has been very strong.
We kick-off the process each time with a 2-hour workshop, the agenda of which covers the points described in this article, in order to put in place the best practises to move quickly.
Communication Rhythms & Accountability
Once the team is assembled, in order to establish a quick pace of work it’s critical to get a regular rhythm of communication going, including:
Each team in the business needs to huddle every day, and preferably before the Task Team Huddle, so that information flows up to the Task Team every day.
a. KPI review. Looking at the key metrics, such as Cashflow, Sales forecast, and Production metrics.
b. Review Risk Register. Explained in more detail below.
c. Key discussion item. Discussion to solve key items where we are stuck, or a decision is required. Items that are too lengthy get moved to separate, dedicated meetings.
d. Who What When. Ensure all action items agreed are recorded in the software.
We have found it incredibly beneficial to use dedicated task management software, to manage the outputs of these Huddles, especially as teams are having to work remotely, so this is one of the first things to get in place. Having the team collaborate using shared task sheets on task management software significantly accelerates execution.
Here is an example (anonymised) of using Monday.com to run the Task List from a Weekly Huddle. This is where the team captures ‘Who What When’ i.e. who needs to get what task done by what deadline. It sounds like so basic, but the discipline of being crystal clear about tasks and outcomes from meetings is so important when moving fast and nothing can be left to chance:
The old adage of ‘what can go wrong will go wrong’ is acutely true at such a time of change, in such a dynamic, unpredictable environment. We have had to be very disciplined about maintaining and regularly discussing (at least at Weekly Huddle) a Risk Register. This is a list of all the risks we can foresee, and a discussion on actions to take, across each area of the business, to mitigate them.
Here are examples of a few of the risks we have had to work on, and their solutions, which may be of interest to any of you in similar situations. They key has been to share around the whole team to brainstorm both the potential risks, and some smart solutions. Also, external networks with other business owners have been key in alleviating risks.
Staff illness. Team members coming down with COVID-19.
City lock-down / quarantine.
Staff self-isolating because of living with elderly parents.
Split shifts, recruitment for redundancy, clear self-isolation policies.
Ensure included on the city’s ‘key workers’ list
Convert empty local hotel into temporary dormitory for staff.
Negotiate extra suppliers, increase stock levels.
For some businesses, maybe yours, COVID-19 is a defining moment. An invention that finally has its day, or a service suddenly in demand. It can be an opportunity not just to grow the size of the business, but also the internal skills and capabilities of it. I hope this article is helpful in showing you how you can grow and improve at the same time.