MENA startup countermeasures for COVID-19

The Mindset:

A wise man once said “Out of clutter, find simplicity. from discord, find harmony. In the middle of difficulty, lies opportunity.” – Albert Einstein

While it may feel like the WO/MANKIND is staring into the abyss with the COVID-19 Hysteria…The reality is that the current climate initiated significant and irreversible changes in customer behaviors in ways that will accelerate Tech-adoption at unprecedented levels. This creates a huge opportunity for Tech Startups / emerging technologies to capitalize on including E-commerce, Video Communication, Gaming, EdTech, HealthTech, FinTech to name a few.

This of course isn’t intended to downplay the grand nature of humanitarian tragedy the world is facing right now but rather to highlight the important role technology can play in helping humanity do what it does best – ADAPT!

Having said that, it’s important to note that what will determine whether a startup will survive the current crisis or not; is the Founders’ mindset and their ability to embrace the fact that this is not only about limiting their challenges but more importantly; challenging their limits.

This Is Not A Drill!

Irrespective of when the COVID-19 health threat subsides, the reality is that it triggered an economic downturn reminiscent of the 2001 DOT COM bubble burst and the 2008 Financial crisis, if not worse. This is already manifesting in the Trillions of Dollars lost in global markets, record unemployment rates, all time low Oil prices etc. all of which indicate that the recovery will take time; possibly 18- 24 months which startups need to proactively plan for.

What To Expect?

If all goes well, your business is likely to go through the following 3 phases of the recovery Cycle:

Phase I - SLOWDOWN: 

Impact:

- Operations: direct impact on sales, supply chain, distribution, cashflow etc.

- Continuity Measures: enforcing remote working and limiting interactions

- Rationalization: tough decisions for cost optimization and cash preservation

Focus: securing revenue “Quick Wins”

Phase II – STABILIZE:

Impact:

- New Norm: Business adjusting to new market / customer reality 

- Economic Impact: job cuts, reduced trade, lower income / consumer spend

- Trajectory:  positive changes to business momentum and growth trajectory

Focus: Making “NO REGRETS” cost / operation rationalization 

Phase III – RECOVER:

Impact:

- Stamina: businesses manage for bounce back over extended period

- Stimulus: begin economic recovery due to deployment of Gov. stimulus packages

- Acceleration: proactive measures to expedite recovery and make up for losses

Focus: Strategic “BIG BETS” investment

WHAT TO DO ABOUT IT?

While there is no playbook for such a novel crisis, this is a checklist for entrepreneurs to consider:

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1) Support Your People, Uphold Your Culture
This is the “acid test” moment for Entrepreneurs to demonstrate their true leadership, resilience and adaptability the foundation of which is caring for your people. Here’s how: 

- Overinvest: Implement best practice employee protection measures including office / facility sanization and providing employees with the necessary PPE’s (Personal Protective Equipment).  For more on the topic see CDC guidelines https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

- Over-Communicate: Across the board (groups and individuals where applicable) with full transparency but get your message right! It’s important to build a “Can Do” spirit by explaining the challenge but also the opportunity; reassure employees but don’t overpromise; and push them forward but provide regular feedback. Finally make sure you and your leadership team are accessible 24/7 for both business and personal emergencies.

- Over-Organize: This is an opportunity for your organization to emerge stronger on the other side of this crisis. While agile working may not have been high on your priority list, now is the time to get it right. Review your resources beyond the pyramid hierarchy and imaginary functional barriers and put the right people, with the right skills in the right place where the business needs it most.

 

2Put Your Business Model To The Test

Simulate: stress test your business by modeling macroeconomic scenarios by market and translate to revenue and P&L scenarios as follows:

Yellow – The Dip: 

  • Noticeable changes in customer behavior

  • Flat to mild decline in revenue

  • Manageable disruption in operations and business continuity

Amber – The Downturn: 

  • Dramatic impact to P&L with likelihood of multi-year effect

  • Certain BU’s, geos, channels no longer operating with positive contribution margin

  • Uncontrollable Ops disruption

Red – The Crisis: 

  • Severe drop in revenue and negative cash risking near term liquidity

  • Future viability of parts of business in question

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3) Protect Primary Revenue Streams & Customers

- Insight: understand and adapt to changes in customer behavior 

- Customer Centricity: build trust, loyalty and reassure on business continuity

- Revenue Security: put mitigation actions for core revenue streams

- Quick Wins: focus investments on areas that accelerate revenue recovery
 

4) Streamline & Stabilise Business Operations

- Assessment:  establish a baseline for the new business reality by reviewing operational capabilities, identify vulnerabilities and realign KPI’s 

- Supply Chain: reconfigure your backend (distribution, partner and supplier readiness, sourcing strategy etc.)

- Infrastructure: build a comprehensive contingency plan for front-line operations, physical facilities & IT, liquidity requirements, outsourced staffing etc. This should also include securing the necessary technology tools (communication, project mgt etc.) to enable seamless management of a remote workforce.

 

5) Optimise Costs And Prioritise Investment

1. Minimize Expenses: 

- Freeze non-essential hiring, training, travel, marketing etc.

- Renegotiate payables with suppliers

- Realign investments against quick wins

 

2. Monitor Critical Milestones:

- Follow-up actions in case of prolonged crisis in line with the scenario planning mentioned above.

- Align actions and implications with your teams and investors.

 

3. Right-size Costs / Business: 

- Renegotiate pricing and terms

- More variable / less fixed Costs

- Consider outsourcing functions 

- Calibrate liquidity requirements
 

6) Gloves-Off To Defend & Gain Market Share

It’s critical that entrepreneurs are not simply defensive but also go on the offensive to enable a faster recovery. Things to consider:

1. Outperform: actions to differentiate against and stay ahead of competition including cost advantage, product innovation and customer services

2. Bounce-back: stay ahead of the curve with continued / selective investment in marketing and product development 

3. Leverage: capitalize on changes in customer behavior to secure a future competitive advantage

In Conclusion 

Finally, I leave you with a couple of thoughts:

Don’t get sidetracked trying to manage an uncontrollable situation; Manage Your Business! 

You are more ready than you think to make it through this. This is not optimism but rather based on the fact that startups - unlike larger corporations - are used to bootstrapping and agility both of which are critical traits to survive this crisis. 

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E-commerce deals in MENA-based startups have tripled from 2016 to 2019. Find out more details behind this trend and many more in our 2019 MENA E-commerce Venture Investment Report HERE