COVID-19 has, in just a few months, shaken and radically disrupted governments, economies and societies alike (even the publication of our GRAPH Papers was disrupted – but we are glad to be back at it).

Whilst the barrage of daily reading on the growing death toll and economic turmoil is sobering, there are a number of uplifting and inspiring cases of business innovation and success from companies that, in a spirit of resourcefulness and agility, have rapidly transformed business models, products, and pricing strategies. Here in the UK and in the U.S., the last few months have shown an immediate and impressive response from consumer businesses. Not only have leading online grocers (e.g. AmazonFresh, FreshDirect, Ocado) increased capacity, but scaling smaller grocery and recipe-box businesses (e.g. Blue Apron, HelloFresh, Farmdrop, Planet Organic) have upgraded their website UX practically overnight and in rapid iterative fashion. Gyms and other wellness clubs (e.g. Equinox’s Equinox+, Barry’s Bootcamp, PureGym, Barrecore) are leading sessions over IGTV, Zoom and new purpose-made platforms. Pop-up delis have spread, as restaurant chains repurpose space and stock to sell ingredients direct to consumers, or work with partners to create pop-up e-shops. Restaurant wholesalers with stock to shift (e.g. Natoora, Harvey & Brockless), have quickly repurposed their B2B apps/websites to be consumer-friendly. Packaging companies (e.g. Saxco International, Albéa) have quickly shifted their portfolio positioning from products such as food service containers to take-out/delivery packaging, medical products (e.g. PPE, test kit packaging, pumps/tubes for hand sanitizers) and e-commerce packaging (boxes, film).

Impressive as these early ‘crisis management’ examples are, the next few weeks may mark a turning point as PE investors move out of pure portfolio triage/cash-flow management and start to think about “what’s next?” What should an investor retain of their original value gen plan for a company? Which short-term adaptations should be integrated into the medium-to-long term? What does the value gen plan for the ‘new normal’ need to look like?

Beyond sheer inspiration, the above stories provide a few key pointers for PE portfolio companies to help B2(B2)C businesses to enable them to survive (and, given greater objectives, thrive) through the era of COVID-19 and, most importantly, beyond:

1. Take stock of your core assets…. Figure out what needs repurposing/redirecting … and if anything is missing. If the latter is the case, is a bolt-on acquisition a better play given that speed is more important (and perhaps viable) than ever, allowing the company to cater to emerging or enhanced needs?

• Does an interim agreement for a JV with a Target allow for even greater speed than the M&A process can allow? Think about the prospect of how a fast but thoughtful JV could foster a successful 100-day plan....

2. Consider your channel strategies…. In the short-term, use and/or create digital channels to sell new, digital products/services (or physical products). Find the right platforms to ‘go live’ quickly and efficiently, which suit the customer demographic. In the medium-to-long term, consider which of these digital ‘replacements’ are likely to stick and become the norm, noting how the crisis has changed consumer habits ….
3. ...Adjusting to customer needs, and re-segmenting customers…. In some cases (e.g. air travel, pub chains) this requires a dramatic overhaul. However, many businesses can benefit from changing their use-case marketing, in such a way that previously non-essential products could be sold as essential. Former ‘nice-to-haves’ may now be solving important problems (to certain groups of customers) such as: “How do I … keep my kids busy? … avoid cabin fever? … stay fit at home? … do DIY? … cook?” Though a lot of the essential may now be discretionary, some of the formerly discretionary could now be solving essential pain points. If this is not the case, consider offering ‘lite’ or ‘mini’ versions of product/service (e.g. half-hour classes for what was previously an hour-long classroom experience), and changing the price accordingly…
4. …which brings us to pricing…. Perhaps the business needs this higher volume/lower value approach (fitness offerings such as Barrecore Online or Barry’s Bootcamp’s Barry’s At-Home classes come to mind). However, in cases where products/solutions can be offered just as well using new channels, major discounting is not necessary. One should not assume that no one wants to buy anything at the moment: businesses should just ensure messaging is targeted accordingly. In this lack-of-discounting case, package discounts and changing payment structures (e.g. offering longer term payment plans leveraging e.g. PayPal credit, Klarna, Clearpay, Afterpay) is advisable…
5. …and all part of eliminating friction. In times of heightened stress, it should be easy as possible for customers to adopt and use your products/services: use best-in-class solutions (e.g. for payments Apple Pay, one-click checkout, autofill forms…) and constantly check for technical glitches. This is especially relevant for newly digital businesses, whose entire competitive landscape may have changed as a result of their crisis-driven repositioning efforts, pitting them up against some far more tech-driven players.

Rather than a return to how things were just a few months ago, we seem certain to be entering a materially revised definition of a ‘new normal’ - with higher expectations for businesses to be digitally savvy, have better supply chains, and more agility. Most excitingly, businesses can use this period as an opportunity to reinvent themselves, by filling new gaps as competitors close, catering to new needs, expanding the customer base (with the ‘democratizing’ effect of online sometimes unlocking previously unattainable customer demographics), re-envisioning products, and adding to/reshuffling teams accordingly to get this done.

If consumer businesses large and small prepare for a long road ahead with resilience, agility, and creativity, reacting to the present but keeping the long-term in mind by avoiding an over investment in things that won’t pay off, they should be in a good place to win in the ‘new normal.’

Copyright © GRAPH Strategy LLC