vuca is the new normal. three lessons in dealing with corona.
What we heard from top managers, founders and investors on xdeck’s first virtual conference on April 22, 2020 about dealing with the Corona crisis
The Corona pandemic continues to create major challenges for businesses across the corporate and startup world. On 22 April 2020, xdeck hence hosted its first large-scale virtual conference with more than 120 registered participants to discuss “vuca is the new normal. how to deal with corona”. We welcomed a distinguished line-up of speakers and panelists from across startups, corporates and investors. Here is what we learnt in three lessons.
Liquidity is king. Businesses across the board are strictly managing cost and cash to withstand Corona-driven revenue losses. And we are to accept that this new normal will remain with us in some form for the remainder of 2020 and very possibly for 2021. Restrictions on social interactions and travel will continue to be in place.
Businesses can thus not wait for Corona to be over. We need to move beyond mere survival and seek timely success, despite all odds. Rapid pivots of the business model to tap into new revenue pools are required besides rigid cost management. Dr. Nael Ahmad, Managing Director Dubai of Rocket Internet, a German digital company builder, told us how they turned Rocket startup Jeeny from ride hailing to delivery of all sorts of goods within a matter of days upon recognizing 80% revenue drops in rides.
Yet, throughout all changes, businesses need to protect their core assets. Nael: “We did not touch our tech team and internal call center. They are key to our customers and drivers alike.” Core assets are those critical to a business’s value proposition and operating model and not easily replicable. It is a fine line to walk between cost cutting for liquidity optimization, business model pivots for new revenues activation, and protection of core assets through all changes.
Crises change demand patterns. Simply put by Jörg Binnenbrücker, Founding Partner of Capnamic Ventures which currently invests from its 115 million Euro tech fund: “Currently, no one buys denim jeans. Sweatpants? Maybe.” Nice-to-have products are being punished by customers. We need to radically challenge our value proposition and focus on selling solutions that customers need to have. If we are not honest to ourselves, someone else will be. We have to leave the (home) office and be with our customers now more than ever, even if it is virtually.
Corona specifically accelerates the unfolding of the digital mega trend. We are witnessing a faster disruption of old-economy business models than anticipated. At DuMont media group, a Mittelstand heavyweight of 400 years of age and 600+ million Euro in revenues, for instance, the past years’ investments into digital business models across business information and marketing technology are paying off, especially in the crisis. At the same time, there are no easy answers, but difficult truths, as CEO Dr. Christoph Bauer argued. In the media industry, revenue streams often come at much lower strength in formerly-analogue, now-digital businesses — just see the drastically decreasing cost-per-thousand prices in advertising.
In the crisis, businesses may further acquire new capabilities that seem trivial at first sight but will prove powerful in the long run. A prime example from Dr. Alex von Frankenberg, Founding Managing Director of High-Tech Gründerfonds, Europe’s most active early-stage venture capital fund, was this: “If you now manage to sell successfully via Zoom or Teams instead of in lengthy face-to-face meetings, you are tapping into huge opportunities for the future. Going forward, you save so much travel time. You can scale up your sales engine through mere technology adaptation.”
Boom follows downturn. Alex vividly highlighted the end of the tunnel: “The crisis will eventually end — and then comes the boom!”
Mindset is key. From the perspective of both Alex and Jörg, the best founders adapt quickly and decisively while simultaneously preparing for the uplift. Jörg: “Great founders do not panic. They get big eyes and see the opportunity. Top companies are created now, today, tomorrow and the day after tomorrow.”
On xdeck, all founders are working hard towards preparing for scale and upswing. First, sustainable food-packaging startup vytal has launched mersineins.de, a non-profit order and take-away platform for local restaurants. The primary objective is to support the local gastro community, Sven Witthöft, co-founder of vytal, told us at the conference. However, the learnings will also help improve its core offering. Second, xdeck startup SWARM Protein uses the current situation to radically shift resources to direct-to-consumer online channels rather than relying on supermarkets and other offline outlets, as co-founder Dr. Christopher Zeppenfeld pointed out. Post Corona, this will accelerate growing SWARM’s business. Third, Roamlike, strongly affected by the downturn in the travel industry, is systematically looking to pivot its business model. Co-founder Hendrik Schubert outlined how they leverage a structured process grounded in customer discovery. The founders are not panicking but actively reconnect with existing or potential clients to discuss how to evolve from the crisis. Fourth and last, fashion transparency startup retraced adapts to deferred customer projects and revenues along three horizons, co-founder Lukas Puender presented to the audience: initially, the team assured liquidity through selective cost-cutting and selling external IT projects; currently, they are switching their sales efforts towards online brands that are less affected by Corona; with a view to the future, retraced remains certain that the fashion industry will continue to become increasingly digital and transparent — and that they will play a role in this.
Corona is only one manifestation of the VUCA world we live in today. A world characterized by volatility, uncertainty, complexity, and ambiguity. This world will remain volatile. New crises will occur. What this means for startups and corporates alike: Staying defensive to survive is not enough. To thrive in current and future crises, businesses must play offense and constantly drive their value proposition to staying relevant also in tumultuous times, offering need-to-have products and services for their customers. Effectively dealing with Corona shall help us practice this mindset.