At Chief Outsiders, we use the phrase “Building sustainable engines for growth” as our goal is to build an asset that can drive revenue today and be monetized by investors tomorrow. Unfortunately, many companies’ engines have been shut down because of the global pandemic as customers have stopped buying due to choice, circumstances, or government decree. Restarting those engines is not as simple as just turning a switch back to “ON” – at least it shouldn’t be.
Some 3-4 weeks into lockdown, most private equity investors have triaged their portfolios and built survival plans focused on cutting expenses, delaying payments, securing new capital, reducing workforces, and accessing government programs where possible. Those lucky enough to have portcos with products/services that have seen a surge of demand during the current crisis, have ramped up near-term production to take advantage of the surge. Smart investors have started to turn to what it will take to restart commercial engines once the economy is able to reopen. I fear that too many Private Equity investors and the CEOs who run their companies will remain solely focused on the financial and operational aspects of their commercial engine restarts, while missing the go-to-market implications.
A recent piece in The Harvard Business Review provides a good overview of some of the things company CEOs should be thinking about as they restart their commercial engines. Titled, “Preparing Your Business for a Post-Pandemic World”, authors Carsten Lund Pedersen and Thomas Ritter present some “steps that organizations should do to lay the groundwork for their recoveries now.” They present several questions as a guide. Number 1 on their list is “What position can you attain during and after the pandemic?”
I love this question as it gets to the heart of the thinking required to be successful in a post-pandemic world. I’ve put together my own set of questions Private Equity investors should be pressing their CEOs to ask and answer when preparing to restart their commercial engines. Unfortunately, I’m not seeing this happening enough – at least not at this point. In my opinion, that's not only a missed opportunity to get off to a fast restart, it also represents tremendous risk to future investment outcomes for investors.
At a minimum, Private Equity investors should be pushing their companies to address these two critical areas to protect the health of their investments:
These are a baseline of the questions CEOs and their teams need to ask instead of falling back into the old ways of doing business. It’s up to boards and investors to help their companies see the new world and what’s required to win in it. I fear that too many will be disappointed in the results if they don’t.