As we enter the second week of March 2020, it’s safe to assume that nothing is safe anymore. The global COVID-19 epidemic has crossed borders & is spreading at an alarming pace resulting in regional quarantines, mass factory shutdowns, axed travel plans, and broken supply chains.
The OECD has forecast a negative 1.5% impact on 2020 GDP, a number range foreboding recession. It highlighted manufacturing as a significant concern as the industry had bottomed out at the end of 2019 & was hoping for revival before the Coronavirus contagion broke out. The fact that the Federal Reserve survey mentioned Coronavirus 48 times in its ‘Beige Book’ highlights the gravity of the situation.
I have been talking to your peers for the last couple of weeks, several of whom are our customers, trying to understand how they are coping. I’ve also had the opportunity to work alongside them in creating a recession-proof strategy as their topline shrinks rapidly.
Industrial OEMs are expecting the epidemic to play out across 3 major tracks lasting anywhere up to a year. The first track will be marked by a rapid reduction in demand on the customer side while the second would be a sharp price increase on the supplier side due to increased commodity prices. The third track would be a long period of uncertainty, eventually leading to the stabilization of the situation.
Here are a few things that I’d like to share with you that the industry is implementing at the highest priority to safeguard business interests.
So what should you be doing?
- Your team & employee health comes first – Let me get the most fundamental step out of the way – Your team’s safety comes first. Avoid travel to places that have been suspected or have reported Coronavirus infections. The vast majority of our customers have canceled their international visits & they intend to freeze their travel plans for the next couple of months. Remote Conferencing companies are offering long term free trials, some running up to 6 months that your teams can avail to connect across the globe.
- Use this time to stress test your risk models – Risk models can make us risk-prone, often creating an “illusion of control” before things fall apart. This happens because we tend to believe we’ve covered the worst-case scenario. But when the rubber meets the road, the best laid plans can fall short. Stress testing is both a science and an art that can only be truly tested on the day those models are stretched to the limit. This is one of those scenarios where your risk models are going to be tested every single day. Take this opportunity to evaluate your risk models & guide your team to gather around the common cause – let them know there’s no playbook for this & you all are building one.
- New customer acquisition will be tough – Across the board, new customer acquisition will be a challenge as customer Capex is bound to go on hold. It’s time to look at your existing footprint & understand additional revenue opportunities in your installed base where the sales cycles are shorter, given the established relationships. As a first step, take inventory of what is installed where & create target segments so you can deploy your sales force constructively. Your sales team is tough, but everyone needs a win in bad times – your installed base is the most accessible place to start.
- Think beyond equipment sale – Aftermarket sales is a trillion-dollar industry that is looked over in good times because everyone is focused on large equipment sales. With a looming possibility of a recession, your customers are going to likely hold onto their equipment longer. It also means that the same equipment will have more wear & require services often. Herein lies the opportunity to sell parts, service, warranties, amongst other things which can offset your lower equipment sales. However, this also implies that you have reliable installed base data that you can quickly deploy to create sales strategies or to power support & services.
As the situation evolves over the next couple of weeks & months, I will make it a point to write to you sharing what I learn from the industry. I am in it so we can ride out this wave together. Entytle provides the fastest way to access clean, reliable installed base data from your existing tools & systems. I hope you find this post useful & in case you would like to discuss this further, please feel free to Contact Us here.
It’s time to act, and it’s time to recession-proof your business.