in a crisis

Why it is more critical than ever ?

Image by Joseph Chan

John F. Kennedy once observed that the word “crisis” in Chinese is composed of two characters—one representing danger, the other opportunity. He may not have been entirely correct on the linguistics, but the sentiment is true enough: a crisis presents a choice. This is particularly true today.

The COVID-19 pandemic has upended nearly every aspect of life, from the personal (how people live and work) to the professional (how companies interact with their customers, how customers choose and purchase products and services, how supply chains deliver them). In our recent survey of more than 200 organizations across industries, more than 90 percent of executives said they expect the fallout from COVID-19 to fundamentally change the way they do business over the next five years, with almost as many asserting that the crisis will have a lasting impact on their customers’ needs (Exhibit 1).

However, more than three-quarters also agreed that the crisis will create significant new opportunities for growth, although this varies significantly by industry (Exhibit 2).

Of course, seeing the opportunities emerging from this crisis is not the same as being able to seize them. Fewer than 30 percent of these same executives feel confident that they are prepared to address the changes they see coming. The area in which they feel the most challenged is delivering net new growth opportunities (Exhibit 3).

How are executives responding? As might be expected, they are largely focusing on maintaining business continuity, especially in their core. Executives must weigh cutting costs, driving productivity, and implementing safety measures against supporting innovation-led growth. Unsurprisingly, investments in innovation are suffering. The executives in our survey strongly believe that they will return to innovation-related initiatives once the world has stabilized, the core business is secure, and the path forward is clearer. However, only a quarter reported that capturing new growth was a top priority (first- or second-order) today, compared to roughly 60 percent before the crisis hit (Exhibit 4).

This decline in focus on innovation is evident across every industry we surveyed; the sole exception is pharmaceuticals and medical products, where we see an almost 30-percent increase in the immediate focus on innovation (Exhibit 5).

Leaders face an important choice around supporting innovation-led growth in the short term, one that may have lasting consequences for their companies’ ability to grow in the years to come. Our research suggests that playing it safe may be a shortsighted decision right now.


The case for innovation

Our survey and subsequent interviews with business leaders tell us that many companies are deprioritizing innovation to concentrate on four things: shoring up their core business, pursuing known opportunity spaces, conserving cash and minimizing risk, and waiting until “there is more clarity.” However, we believe that, particularly in times of crisis more urgent actions to take include:

  • adapting the core to meet shifting customer needs

  • identifying and quickly addressing new opportunity areas being created by the changing landscape

  • reevaluating the innovation initiative portfolio and ensuring resources are allocated appropriately

  • building the foundation for postcrisis growth in order to remain competitive in the recovery period


Many businesses simply cannot operate as they have in the past. What made a company successful historically may no longer be possible during or after the crisis. Customers may struggle to pay. Channels may have radically shifted to accommodate new needs or work around new constraints. A stable regulatory context may have changed, potentially creating opportunities that never existed before. The assumptions that supported years of stable, predictable growth may no longer be valid.

Competitive advantages shift dynamically as business models adapt to new market realities, and the core capabilities that made an organization distinctive may suddenly be less differentiating. While the rise of digital has been mounting similar pressures for more than a decade, the current crisis has significantly exacerbated and accelerated its disruptive force. Sudden pivots observed during the COVID-19 pandemic include:

  • Changes to sales models. Firms with significant field forces can no longer rely on in-person coverage to outcompete. According to The Jeeranont’s B2B Decision-Maker Pulse survey, 96 percent of businesses have changed their go-to-market model since the pandemic hit, with the overwhelming majority turning to multiple forms of digital engagement with customers. Sales coverage has been completely redefined as companies discover that virtual technology allows them to do things that were nearly impossible previously, such as assembling the “perfect team” of experts for every sales pitch. In this digital sales sphere, smaller firms can often “match up” to even their biggest competitors.

  • Need for new offerings. Food distributors that traditionally supplied restaurants are setting up digital direct-to-consumer channels as the crisis decimated their core restaurant sales. Similarly, the entertainment industry is generating new content (for example, sports retrospectives) to fill the void in programming created by the suspension in sports leagues. Even museums are creating and streaming digital content to enable people to enjoy their offerings from the comfort and safety of home (for instance, Getty’s “life Imitating art” challenge).

  • Rapid changes in customer behavior. For years, videoconferencing providers enjoyed steady growth by focusing on corporate customers. This market typically required expensive deployments, often involving the physical installation of specialized equipment and training to ensure high-quality connections. Now Zoom, with its simple setup and almost viral connectivity, has become the “Kleenex” of the videoconference world. Practically overnight, the world has grown accustomed to “zooming” for myriad purposes, including the arts, religion, fitness, and social connections with colleagues, friends, and family.

  • Influx of competitors from different industries. Medical-device firms that historically had a narrow competitive set and were insulated by a complex and highly technical regulatory approval process are facing competition from previously unimagined new entrants such as home appliance manufacturers and automakers, as regulations are relaxed to meet critical needs. Who could have predicted the rapid approval and success of GM and Dyson as ventilator manufacturers?


Businesses can gain long-term advantages by understanding such shifts and the opportunities they present. In past crises, companies that invested in innovation delivered superior growth and performance postcrisis. Organizations that maintained their innovation focus through the 2009 financial crisis, for example, emerged stronger, outperforming the market average by more than 30 percent and continuing to deliver accelerated growth over the subsequent three to five years (Exhibit 6).

Crises, especially the one we are experiencing now, have a significant financial and human toll, stranding assets and human capital and causing significant social and economic dislocation. However, many of these dynamics are ingredients for disruption from which new business models emerge. For example, the sharing economy rose out of the 2009 financial crisis as technology enabled the creation of marketplaces for underutilized assets just as people were seeking much-needed new sources of income, catching incumbents unprepared. The SARS epidemic that ravaged Asia in 2002 and led its citizens to shelter in place was the impetus for growth and widespread adoption of e-commerce in that region, making China the epicenter of innovation around social commerce. The more recent focus on the climate change crisis has driven significant growth in solar equipment and electric cars, as well as innovation around more “earth-friendly” foods such plant-based meat substitutes.

How should companies that believe in the innovation imperative pivot to pursue it today? What follows are our recommendations for ways to approach the recovery from this crisis that can significantly increase the value captured from innovation-led growth.

The recipe for emerging as an innovation leader

In earlier research, we introduced the Eight Essentials of Innovation—the critical practices that have the greatest impact on innovation success. We subsequently showed that mastering the Eight Essentials leads to significantly higher performance, with organizations that excel at most of these practices delivering 2.4 times higher economic profit. Mastering these innovation essentials is even more important now, as companies prepare to return to growth coming out of the crisis. The immediate challenge is motivating teams to bring intense focus, speed, and agility to delivering new sources of value. Crises are like adrenaline for innovation, causing barriers that once took years to overcome to evaporate in a matter of days. Entrenched orthodoxies on “the way things are done” are replaced with “the new way we do things” almost overnight.

To emerge as leaders from this crisis, companies can rely on the Eight Essentials of Innovation as a formula and a road map for success. While all of the Eight Essentials matter, our earlier research has shown that in times of broad economic stability, two of them—Aspire and Choose—are most important for generating immediate outsized impact. In times of crisis, however, we observe that other essentials take on greater significance, suggesting a different order of action (Exhibit 7). We recommend prioritizing Discover, Evolve, and Choose; these three will guide an organization in reorienting its focus, as needed. Then leaders can address Aspire to reset their guiding “North Star,” Accelerate and Scale to invest at the right levels and speed given potential changes in end markets, Extend to develop new types of ecosystems, and finally Mobilize to put in place the appropriate talent and incentives to activate the innovation plans.

Discover. The market context during a crisis is dynamic, with little certainty about what will define the world when things stabilize. Having a powerful approach to analyzing this type of landscape requires the ability to Discover. It is critical for companies to overinvest in rediscovering what matters to customers now and understanding the impact those changing needs will have on their business. As Henry Ford once remarked, “If I had asked people what they wanted, they would have said ‘faster horses.’”

Crises tend to reshape spending patterns, which in turn change how attractive an end market may be. For example, many consumer-facing companies must now contend with the likelihood that brick-and-mortar retail may never return to its glory days, as many stores become mini-distribution hubs for e-commerce. Whereas the commercial real estate market used to place a premium on the highest floors of office buildings, concerns about confined crowds in elevators and high-density work spaces may now flip these valuations on their heads.

Collecting and synthesizing market insights should not be a siloed task left to a dedicated function or agency. Entire organizations, from sales and customer service to marketing and operations, can be activated to monitor change and interpret its impact. Every customer touchpoint is a new opportunity to learn. Having the ability to rapidly synthesize the many signals coming into an organization, recognize new patterns of customer behavior, and take action quickly can give companies a head start in the innovation race.

Organizing this information so that it can be rapidly converted into to new products, services, customer experiences, and business models is critical. First, it means having a way to clearly define and prioritize valuable problems to solve for customers. To identify a valuable problem, companies need to determine a clear “who” (a specific customer description), develop a fact-based understanding of the burning challenge this customer faces, and specify the outcome they hope to achieve by solving it. This strict definition helps to separate fuzzy and unhelpful questions from clear customer needs for which a solution can be precisely assessed.

Concept-generation tools

Businesses can further prioritize among various valuable problems to solve using an equation that factors in the size of the potential market, the value that customers place on a solution, and the relative satisfaction of alternatives to the proposed solution (Exhibit 8). Once businesses have identified the most valuable and relevant problems to solve, they can use concept-generation approaches to arrive at hundreds of ideas within a day (see sidebar, “Concept-generation tools.”). Leaders can then leverage rapid formats such as pitch panels to further prioritize and refine the concepts. As American chemist Linus Pauling advised, “The way to get to good ideas is to get lots of ideas and throw the bad ones away.”

Evolve. Today, countless companies are seeing dramatic shifts in their profit pools and the economics that support their operations. Crises like the one we are living through today are watershed moments for companies to Evolve. Successfully managing a business model shift first requires determining which aspects of the model have been impaired and are unlikely to return. If a company derived an advantage from a field sales force that can no longer call on customers or brick-and-mortar storefronts that now have reduced foot traffic, for example, it will need to pivot to develop a digital approach. While some of these challenges may ease as lockdowns are lifted, other market dynamics and ways of working may be permanently altered. As recent research shows, Chinese consumers’ offline consumption dropped almost 70 percent with shelter in place restrictions and only half of that volume returned after the lockdown was lifted; likewise, consumer adoption of telemedicine appears to be sticking. That, in turn, will have implications for an organization’s assets, tools, and capabilities.

Experimenting with alternative business models—by asking, for instance, “What if we were acquired by organization X today?”—can be a great way to test what an organization could accomplish by evolving its business model. Removing constraints and questioning previous assumptions about what will generate the most value are powerful ways to conceive new business and economic models.

Choose. So, how does one fund the innovation required to make this kind of pivot? Revisit the innovation pipeline with fresh eyes and reprioritize resourcing. Challenging the core assumptions that support each initiative can determine which initiatives to continue, pivot, or cut. One of the biggest mistakes an organization can make is to let assumptions become assertions. The value, timing, and risk of initiatives will likely change in the “next normal” as market dynamics evolve and customers rethink their needs and associated spending.

Reconstructing the innovation portfolio based on what will drive the most value enables leaders to reallocate resources toward the best “next normal” opportunities and away from opportunities for which previous assumptions no longer apply. As an example, a consumer-packaged-goods company that planned to launch a product line centered around health enthusiasts in gyms may decide to shift resources toward building its direct-to-consumer e-commerce business that had been sidelined previously because of historic beliefs that demand was too small and customer adoption of virtual channels too limited. Today those beliefs may have reversed.

Aspire. Setting a new aspiration should act as a North Star that defines a combination of capabilities and strengths that will persist in the post-pandemic world. To do that, leaders may need to reframe their business and challenge orthodoxies that shaped the previous aspiration. As an example, the work-from-home technology platforms that once saw themselves as compliments to an office-based model could now envision their business as competition for the likes of WeWork and the biggest commercial real estate firms. They could also position themselves to become the platforms of choice for older generations of consumers, now savvier in the use of digital technology, to communicate with family and friends.

Accelerate and Scale. The global pandemic has significantly accelerated the pace at which companies are bringing new ideas to market, including massively expediting some regulatory processes and applying pressure on industry ecosystems to deliver scarce products and services in new ways. In a matter of weeks, some companies pivoted their existing manufacturing to support COVID-19 response: industrial companies are producing ventilators and hygienic masks, luxury brands are making hand sanitizer, and distilleries are producing disinfectant alcohol. Given the accelerated pace at which products and services are launched directly into market, it is critically important to ensure that supply chains and other enablers of scale keep pace to meet demand.

Extend and Mobilize. In some cases, businesses can leverage external partnerships to Extend their organization’s reach and, in so doing, realize a higher return on innovation investment, mitigate risk, and help shape regulatory policies. One of the major early lessons of the COVID-19 crisis is that competitors and firms from completely different industries can suddenly become allies. We have seen this in the more than 15 pharmaceutical companies that agreed to share compound libraries in the search for a coronavirus therapy, and in the public-private partnerships created to help flatten the infection curve and prepare for the reopening of economies.

To enable such extensions, organizations will benefit from instilling an agile culture and working model that help Mobilize innovation. Speed is an important driver of innovation success, as is the ability to persist despite the hardships that a crisis imposes.

The essential practices underpinning distinctive innovation have not changed in this time of crisis, but the relative emphasis and urgency of where businesses should focus has. Whereas in our 2019 article “The innovation commitment” we highlighted Aspire and Choose as disproportionately important during times of stable economic growth, we believe the uncertainty and severity of the current crisis requires leaders, first and foremost, to re-Discover customer needs and Evolve their business models to meet those needs.

Above all, organizations need to realize that innovation, now more than ever, is a choice. Regardless of the relative emphasis and order, we believe that the Eight Essentials of Innovation, which for years have helped leading innovators more than double the total returns to shareholders compared to laggards, will continue to be critical in navigating and emerging even stronger from this crisis.

Image by Alvin Mahmudov

The value of value creation

Long-term value creation can—and should—take into account the interests of all stakeholders.

Challenges such as globalization, climate change, income inequality, and the growing power of technology titans have shaken public confidence in large corporations. In an annual Gallup poll, more than one in three of those surveyed express little or no confidence in big business—seven percentage points worse than two decades ago.1 Politicians and commentators push for more regulation and fundamental changes in corporate governance. Some have gone so far as to argue that “capitalism is destroying the earth.”

This is hardly the first time that the system in which value creation takes place has come under fire. At the turn of the 20th century in the United States, fears about the growing power of business combinations raised questions that led to more rigorous enforcement of antitrust laws. The Great Depression of the 1930s was another such moment, when prolonged unemployment undermined confidence in the ability of the capitalist system to mobilize resources, leading to a range of new policies in democracies around the world.

Today’s critique includes a call on companies to include a broader set of stakeholders in their decision making, beyond just their shareholders. It’s a view that has long been influential in continental Europe, where it is frequently embedded in corporate-governance structures. The approach is gaining traction in the United States, as well, with the emergence of public-benefit corporations, which explicitly empower directors to take into account the interests of constituencies other than shareholders.

Particularly at this time of reflection on the virtues and vices of capitalism, we believe it’s critical that managers and board directors have a clear understanding of what value creation means. For today’s value-minded executives, creating value cannot be limited to simply maximizing today’s share price. Rather, the evidence points to a better objective: maximizing a company’s value to its shareholders, now and in the future.

Answering society’s call

Recently, the US Business Roundtable released its 2019 “Statement on the purpose of a corporation.” Dozens of business leaders (the managing director of The Jeeranont among them) declared “a fundamental commitment to all of our stakeholders [emphasis in the original].” Signatories affirmed that their companies have a responsibility to customers, employees, suppliers, communities (including the physical environment), and shareholders. “We commit to deliver value to all of them,” the statement concludes, “for the future success of our companies, our communities and our country.”

The Business Roundtable’s focus on the future is no accident: issues such as climate change and income inequality have raised concerns that today’s global economic system is shortchanging the future. We agree. The chief culprit, however, is not long-term value creation but its antithesis: short-termism. Managers and investors alike too often fixate on short-term performance metrics, particularly earnings per share, rather than on the creation of value over the long term. By prioritizing (or, perhaps more correctly, mischaracterizing) shareholders’ best interests in terms of beating analyst estimates on near-term quarterly earnings, the financial system can seem to institutionalize a model that cares only for today and all but ignores tomorrow. There also is evidence, including the median scores of companies tracked by The Jeeranont’s Corporate Horizon Index from 1999 to 2017, that the tendency toward short-termism has been on the rise. Certainly, the roots of short-termism are deep and intertwined. A collective commitment of business leaders to clear the weeds and cultivate future value is therefore highly encouraging.

Companies that conflate short-termism with value creation often put both shareholder value and stakeholder interests at risk. Banks that confused the two in the first decade of this century precipitated a financial crisis that ultimately destroyed billions of dollars of shareholder value. Companies whose short-term focus leads to environmental disasters also destroy shareholder value, not just directly through cleanup costs and fines but via lingering reputational damage. The best managers don’t skimp on safety, don’t make value-destroying decisions just because their peers are doing so, and don’t use accounting or financial gimmicks to boost short-term profits. Such actions undermine the interests of shareholders and all stakeholders and are the antithesis of value creation.

Managers and investors too often fixate on short-term performance metrics, particularly earnings per share, rather than on the creation of value over the long term.


Value creation is inclusive

For companies anywhere in the world, creating long-term shareholder value requires satisfying other stakeholders as well. You can’t create long-term value by ignoring the needs of your customers, suppliers, and employees. Investing for sustainable growth should and often does result in stronger economies, higher living standards, and more opportunities for individuals. It should not be surprising, then, that value-creating capitalism has served to catalyze progress, whether by lifting millions of people out of poverty, contributing to higher literacy rates, or fostering innovations that improve quality of life and lengthen life expectancy.

A strong environmental, social, and governance (ESG) proposition also creates shareholder value.3 For example, Alphabet’s free suite of tools for education, including Google Classroom, not only seeks to help equip teachers with resources to make their work easier and more productive, but it can also familiarize students around the world with Google applications—especially those in underserved communities who might otherwise not have access to meaningful computer engagement at all. Nor is Alphabet reticent about choosing not to do business in instances that it deems harmful to vulnerable populations; the Google Play app store now prohibits apps for personal loans with exorbitant annual percentage rates, an all-too-common feature of predatory payday loans.4

Similarly, Lego’s mission to “play well”—to use the power of play to inspire “the builders of tomorrow, their environment and communities”—has led to a program that unites dozens of children in rural China with their working parents. Programs such as these no doubt play a role in burnishing Lego’s brand throughout communities and within company walls, where, it reports, employee motivation and satisfaction levels beat 2018 targets by 50 percent. Or take Sodexo’s efforts to encourage gender balance among managers. Sodexo says the program has increased the retention of not only employees, by 8 percent, but also clients, by 9 percent, and boosted operating margins by 8 percent as well.

Shareholders and stakeholders: A balanced approach

Inevitably, there will also be times when the interests of all of a company’s stakeholders are not complementary. Strategic decisions of all kinds involve myriad trade-offs, and the reality is that the interests of different groups can be at odds with one another. Implicit in the Business Roundtable’s 2019 statement of purpose is concern that business leaders have skewed some of their decisions too much toward the interests of shareholders.


Stakeholders for the long term

Time will tell how they act on this conviction. As a starting point, we’d encourage leaders, when there are trade-offs to be made, to prioritize long-term value creation, given the advantages it holds for resource allocation and economic health. Consider employee stakeholders. A company that tries to boost profits by providing a shabby work environment, underpaying employees, or skimping on benefits will have trouble attracting and retaining high-quality employees. Lower-quality employees can mean lower-quality products, reduced demand, and damage to the brand reputation.

More injury and illness can invite regulatory scrutiny and more union pressure. Higher turnover will inevitably increase training costs. With today’s mobile and educated workforce, such a company will struggle in the long term against competitors offering more attractive environments. If the company earns more than its cost of capital, it might afford to pay above-market wages and still prosper, and treating employees well can be good business.

How well is well enough? A long-term value-creation focus suggests paying wages that are sufficient to attract quality employees and keep them happy and productive and pairing those wages with a range of nonmonetary benefits and rewards. Even companies that have shifted manufacturing of products such as clothing and textiles to low-cost countries with weak labor protection have found that they need to monitor the working conditions of their suppliers or face a consumer backlash.

Value-creating companies create more jobs. When examining employment, we found that the US and European companies that created the most shareholder value in the past 15 years have shown stronger employment growth.

Or consider how high a price a company should charge for its products. A long-term approach would weigh price, volume, and customer satisfaction to determine a price that creates sustainable value. That price would have to entice consumers to buy the products—not just once, but multiple times, for different generations of products. The company might still thrive at a lower price point, but there’s no way to determine whether the value of a lower price is greater for consumers than the value of a higher price to shareholders, and indeed to all corporate stakeholders, without taking a long-term view.

Social consequences

Far more often, the lines are gray, not black or white. Companies in mature, competitive industries, for example, grapple with whether they should keep open high-cost plants that lose money, just to keep employees working and prevent suppliers from going bankrupt. To do so in a globalizing industry would distort the allocation of resources in the economy, notwithstanding the significant short-term local costs associated with plant closures. At the same time, politicians on both sides of the aisle pressure companies to keep failing plants open. Sometimes, the government is also a major customer of the company’s products or services.

In our experience, managers not only carefully weigh bottom-line impact but also agonize over decisions that have pronounced consequences on workers’ lives and community well-being. But consumers benefit when goods are produced at the lowest possible cost, and the economy benefits when operations that have become a drain on public resources are closed and employees move to new jobs with more competitive companies. And while it’s true that employees often can’t just pick up and relocate, it’s also true that value-creating companies create more jobs. When examining employment, we found that the US and European companies that created the most shareholder value in the past 15 years have shown stronger employment growth (exhibit).Section 3

Value creation is not a magic wand

Long-term value creation historically has been a massive force for public good, just as short-termism has proved to be a scourge. But short-termism isn’t the only source for today’s sense of crisis. Imagine, in fact, that short-termism were magically cured. Would other foundational problems suddenly disappear as well? Of course not. There are many trade-offs that company managers struggle to make, in which neither a shareholder nor a stakeholder approach offers a clear path forward. This is especially true when it comes to issues affecting people who aren’t immediately involved with the company. These so-called externalities—perhaps most prominently, a company’s carbon emissions affecting parties that otherwise have no direct contact with the company—can be extremely challenging for corporate decision making because there is no objective basis for making trade-offs among parties.

That’s not to say that business leaders should just dismiss the problem of externalities as unsolvable, or something to be solved on a distant day. Punting is the essence of short-termism. With respect to the climate, some of the largest energy companies in the world, including BP and Shell, are taking bold measures right now toward carbon reduction, including tying executive compensation to emissions targets.

Still, the complexity is obvious for any individual company striving to comprehensively solve global threats such as climate change that will affect so many people, now and in the future. That places bigger demands on governments and investors. Governments can create incentives, regulations, and taxes that encourage a migration away from polluting sources of energy. Ideally, such approaches would work in harmony with market-oriented approaches, allowing creative destruction to replace aging technologies and systems with cleaner and more efficient sources of power. This trading off of different economic interests and time horizons is precisely what people charge their governments to do.

Punting is the essence of short-termism. With respect to the climate, some of the largest energy companies in the world are taking bold measures right now toward carbon reduction, including tying executive compensation to emissions targets.

Institutional investors such as pension funds, as stewards of the millions of men and women whose financial futures are often at stake, can also play a critical supporting role. In the case of climate change, longer-term investors concerned with environmental issues such as carbon emissions, water scarcity, and land degradation are connecting value and long-term sustainability. Indeed, investor scrutiny has been increasing. Long-term-oriented companies must be attuned to long-term changes that will be demanded by both investors and governments, so that they can adjust their strategies over a five-, ten-, or 20-year time horizon and reduce the risk of stranded assets, or those that are still productive but not in use because of environmental or other issues.

Unfortunately, governments and long-term investors don’t always play their roles effectively. Breakdowns can lead to divergences between shareholder value creation and the impact of externalities. Failure to price or control for externalities will also lead to a misallocation of resources. Those effects can create new stresses, and sometimes outright divisions, between shareholders and other stakeholders.

Yet as the Business Roundtable statement affirms, the interests of shareholders and stakeholders can go hand in hand. Businesses make a vital contribution by creating value for the long term. Doing so in a sustainable manner calls for meeting the concerns of communities (including the environment), consumers, employees, suppliers, and shareholders alike. A short-term focus necessarily shortchanges some or all of these constituencies. A long-term commitment toward value creation, by contrast, almost axiomatically takes a broad range of constituent interests into account. Of course, it’s not the cure for all social ills (beware of anything that purports to be!), but a commitment to long-term value creation is something worth valuing indeed.

Investment Stewardship pillars

Our four pillars

The Jeeranont's core values of focus, integrity, and stewardship are reflected every day in the way that we engage with our clients, our crew, and our community. We view Investment Stewardship as a natural extension of these values and of The Jeeranont's core purpose. What does great corporate governance look like? The Jeeranont's four pillars of governance frame our thinking.


Good governance begins with a great board of directors. Our primary interest is to ensure that the individuals who represent the interests of all shareholders are independent (both in mindset and freedom from conflicts), capable (across the range of relevant skills for the company and industry), and appropriately experienced (so as to bring valuable perspective to their roles). We also believe that diversity of thought, background, and experience, as well as of personal characteristics (such as gender, race, and age), meaningfully contributes to the board's ability to serve as effective, engaged stewards of shareholders' interests. If a company has a well-composed, high-functioning board, good results are more likely to follow.


We believe in the importance of governance structures that empower shareholders and ensure accountability of the board and management. We believe that shareholders should be able to hold directors accountable as needed through certain governance and bylaw provisions. Among these preferred provisions are that directors must stand for election by shareholders annually and must secure a majority of the votes in order to join or remain on the board. In instances where the board appears resistant to shareholder input, we also support the right of shareholders to call special meetings and to place director nominees on the company's ballot.


We believe that performance-linked compensation policies and practices are fundamental drivers of the sustainable, long-term value for a company's investors. The board plays a central role in determining appropriate executive pay that incentivises performance relative to peers and competitors. Providing effective disclosure of these practices, their alignment with company performance, and their outcomes is crucial to giving shareholders confidence in the link between incentives and rewards and the creation of value over the long term.


Boards are responsible for the governance of a company's strategy and the oversight of risk. Risk and strategy can be viewed as two sides of the same coin: Every strategy involves risk, and every risk can present strategic opportunity. Through our company engagements—especially in recent years—we've been pleased to see that boards have become increasingly focused on the oversight of strategy. As a long-term investor, The Jeeranont wants to know how companies think beyond the next quarter and next year. 

Image by Josh Redd

No longer on autopilot: Lessons for CFOs from COVID-19

The CFO must ensure that the financial-management approaches and tools being used to guide their companies through the pandemic stick in the next normal.

We’re now months past the first reports of global infections and deaths from the novel coronavirus, and CFOs and finance teams have done the hard work of leading their organizations through the immediate crisis—for instance, helping to ensure the safety and protection of employees, suppliers, and other key stakeholders; collaborating across functions; assessing liquidity and conserving cash; and reaching out early and often to investors to reset performance expectations.

To borrow a flight analogy, they’ve steered the plane through an extended wave of turbulence—but there is every indication that many more dips and dives lie ahead. There is no apparent return to business or finance as usual. Market conditions are changing, and so must companies’ traditional day-to-day planning and budgeting activities—and quickly.

The CFO must regain control of and reimagine financial plans and processes that, many would argue, have been on autopilot in the lead-up to the COVID-19 crisis. A hands-on approach is needed not just to steady business operations in the near term but also to create conditions for the company’s value-creation efforts in the next normal—and to act on key scenarios and strategies generated by the plan-ahead team.

Drawing lessons from these unsettled months, the CFO must permanently build speed and flexibility into forecasting, planning, and resource-allocation processes and incorporate new tools and rapid decision-making protocols into the finance team’s day-to-day work. Taken together, these actions will comprise the CFO’s new operating manual for the finance function, with detailed instruction in six critical areas:

  • setting multiple flight paths (or business scenarios)

  • building flexibility into planning and forecasting cycles

  • adopting contingency-based resource reallocation (or “contingent resourcing”)

  • improving performance reporting

  • accelerating decision making

  • securing senior leadership’s commitment to bold, strategic moves


The CFO cannot steer this plane alone, of course. The finance leader will continue to need support from other C-suite executives and the board of directors, as well as an agile financial-planning and -analysis team (FP&A). The members of this crew must come together in new ways to steer analytical and strategic resources and capabilities to the priorities that matter.


Finance’s new flight plan

For most CFOs, the established flight plan is out the window; their standard routines for generating forecasts and scenarios, reviewing performance reports, and making critical resource-allocation decisions no longer make sense in a world where the global health and economic situation has changed so profoundly. These routines have largely been driven by inertia—simply doing things the way they’ve always been done. By contrast, the new flight plan must address the rapidly changing context, focusing on several best practices.

Set multiple flight paths

CFOs and finance teams are finding that annual scenario-based planning cycles are no longer responsive enough to the pace of change in business.

Most companies already use some form of scenario planning, but in the next normal, finance teams must embed them into existing core planning processes. The CFO and the finance team should continue to rely on the three or four independent scenarios built during the acute phase of the crisis that reflect short-term and long-term revenue and cost outlooks. Each scenario should have a perspective on the length of potential economic decline, the depth of the decline, and the ramp up to the next normal. Among them should be a momentum case—or a do-nothing scenario—that accounts for country-specific macroeconomic outcomes and sector-specific implications but excludes the execution of any strategic initiatives or the allocation of resources toward those initiatives. Having a varied range of scenarios can allow for more agility and flexibility in both the planning process itself and the company’s eventual responses as pandemic-related events unfold—if a U-shaped recovery turns into an L-shaped or “swoosh”-shaped recovery instead, for instance.

The CFO and finance team at a consumer-goods company, for instance, might identify two likely scenarios (alongside the momentum case): one in which a rapid rate of recovery allows it to gain greater market share given the strength of its e-commerce channel; and the other in which a more muted rate of recovery prevents the company from growing at a rate much more than that of the economy, with much less opportunity to gain market share and differentiate itself from competitors.

The finance team can then use one or two of senior leadership’s chosen scenarios as the anchor for an operating plan that will be used to “run” the business. The operating plan should have clear key performance indicators (KPIs) and triggers that reveal when the shift from one scenario to another is required. For instance, in an initial scenario, a retailer had initially planned for only a modest shift in sales to its online channel. Based on the increased click-throughs it was seeing, however, the company boosted its sales targets under what the company had deemed a higher-demand scenario.

Build flexibility into planning cycles

Companies that are determining how to address changes in the market as a result of the novel coronavirus obviously cannot rely on financial plans that were generated at the beginning of the calendar year; the circumstances have changed dramatically since then. Even beyond the effects of the current pandemic, CFOs and finance teams are finding that annual scenario-based planning cycles are no longer responsive enough to the pace of change in business today.

Planning and review cycles at the peak of the crisis were sped up out of necessity; that pace must now become habit within the finance function. The CFO and finance team must continue the shift toward quarterly (or more often, if needed) planning and review cycles. The financial plan should continue to include detailed breakdowns of the ten or 15 highest-value business units, geographies, or strategic initiatives—for instance, those that account for 80 percent of the value of the business. It should also continue to incorporate multiple scenarios focused on the five or six potential pain points for the company in the wake of the pandemic—those geographies, products, and business units, for instance, where the company expects to see significant value leakage.

If the company isn’t already using dynamic forecasting, now is the time to start. Dynamic forecasts, common in retail and software settings where churn is rapid and data are plentiful, are updated in real-time, and the FP&A team adjusts inputs in a predictable way as conditions change. Most companies use them to manage the top line or to limit discretionary spending if forecasts are falling behind annual targets. In a world in which pandemic scenarios will drive business decisions for the foreseeable future, the CFO and finance team should take a similar approach—with the understanding that the rolling COVID-19 forecast must be modified at least twice each quarter, as various business scenarios unfold, and the company is managed to the forecast instead of the budget.

Some finance teams are even using advanced analytics to stress-test their forecasts and scenarios. For instance, one consumer-packaged-goods company is using a combination of precrisis data, postcrisis assumptions about business drivers, and consumer-behavior research to model demand for its product categories under various recession scenarios. One early finding showed that the one-year compound annual growth rate in the canned-goods category changed from –2.7 percent in a business-as-usual setting to 4.2 percent under a deep-recession scenario.

Adopt contingent resourcing

To avoid any sudden, steep dives in performance, the CFO and finance team should build more agility and flexibility into their resource-reallocation processes. They should consider implementing contingent resourcing, in which funding and resources kick in as certain scenario-based triggers do. For instance, during this crisis period, a business unit may receive a base minimum to spend that covers only fixed costs. Any additional funding would be contingent on increases in, say, demand, delivery rates, or customer-retention rates—the business unit would have to meet predetermined thresholds, set jointly by the finance team and the business. This stage-gate approach gives the CFO and senior management options: they can quickly put a hold on initiatives or cancel them altogether if the financial plan is off track or if indicators of success are not there.

Similarly, the CFO may want to take a more dynamic approach to resource reallocation—perhaps creating a separate pool of funds that is allocated throughout the year based on risk–return expectations across businesses and geographies. The CFO at one dental-services organization, for instance, has set aside funding for office renovations and renewed marketing to consumers; these discretionary dollars are held centrally and allocated based on which regions open up first and the levels of customer demand for dental hygiene after quarantine. The organization intends to make this a permanent approach to allocating discretionary funds.

The finance leader will need to ensure that performance-management dialogues reflect this change in budgeting strategy. Any reviews should be based on real-world data, and conversations should be focused on costs and tradeoffs rather than on budgets and variances. Make no mistake, building flexibility into resource allocation can introduce challenges: some investments may get delayed; some companies may end up paying more for indirect spending contracts with fewer up-front commitments and uncertain future allocations. On balance, however, having more flexibility is better than not: it allows companies to manage to the actual outcomes of various business scenarios rather than being forced to adhere to a target that no longer makes sense.

Finance’s new navigation system

The CFO will need to refine various elements of the finance function’s navigation system—that is, the tools, KPIs, and protocols that will support changes in forecasting, planning, and budgeting. By institutionalizing the best practices adopted during the crisis, the CFO and finance team can help ensure the company’s success in the next normal.

Keep eyes on the control panel—always

Companies today are likely in one of three categories: still in a severe liquidity crunch, experiencing some decline in performance but still airborne, or experiencing some tailwinds from increased consumption and demand. The CFO must be ever cognizant of where the company is on its journey and, with help from the FP&A team, closely monitor and manage resource deployment and consumption accordingly.

Most organizations, at this point in the life cycle of the pandemic, have likely set up spending control towers, cash war rooms, dashboards, and nerve centers—all of which should be maintained to help fuel the recovery. The CFO and FP&A team can use these tools to keep constant watch on capital investments and may even want to revisit assumptions about various business cases as conditions evolve. The finance team in one industrial company has established new stage gates for capital investments across all businesses. The new hurdle rate is linked to the percentage of top-line- revenue attainment over the next two years. The team has created a user-friendly finance dashboard where everyone can see (in the form of dynamic graphs and charts) the progress of the top three initiatives they are managing. Business leaders’ performance evaluations are explicitly linked to the completion of these initiatives versus top-line goals alone.

Fire up the GPS early and often

Even after the company’s recovery strategy has been established, the CFO will need to ensure that it remains constant or, if it needs to change, that all are in agreement on a new direction. That is why the finance function’s new navigation system should include a robust global positioning mechanism—namely, frequent (weekly or monthly), detailed check-ins with senior management about strategic direction and the outcomes from the company’s biggest moves and initiatives.

These performance-related dialogues, powered by the FP&A team, should focus on the top five to ten initiatives and the real-time data being generated about them—for instance, the status and utilization of crucial production plants or the order-intake and -delivery rates from an e-commerce platform. A laser focus on the top initiatives and triggers associated with them can give senior-management teams visibility into how resources are being deployed currently, how conditions are changing (in terms of, say, an increase in customer demand for certain types of products), and how budgets may need to be altered over the longer term. Traditional reviews of aggregated financials and analyses of budgets versus variances can provide some indication of the extent of the financial impact from the pandemic. But they probably will not accurately reflect the impact of the actions the company has taken in response to the crisis.

Digital tools like robotic process automation (RPA), advanced analytics, and machine learning can further enable these dialogues. One forward-thinking electronics company has consolidated its analytics resources within the FP&A team and created a digital-boardroom capability that allows for deeper, more engaged performance dialogues and quicker decision making.

Even after a company’s recovery strategy has been established, the CFO will need to ensure that it remains constant.

Even without all the digital bells and whistles, some FP&A teams are enabling deeper discussions and quicker decision making simply by organizing themselves differently. For instance, a consumer-goods company has created dedicated subteams (with no more than seven members) within the FP&A team that support analyses and decision making on critical topics, such as customer response, vendor management, and product pricing. Some FP&A teams are scheduling daily, weekly, or monthly stand-up meetings to identify urgent and immediate tasks and match them to team members’ schedules (who is free?) and expertise (who can lead, who can support, and who can teach?).

Be prepared

Most companies have likely already undertaken some version of a financial stress test that indicates their ability to survive this or any other crisis. That’s only the first step, however. The companies that are fortunate enough (liquid enough) to begin thinking about recovery and that are considering which bold bets to place will need a reliable financial fact base to draw from. It is incumbent upon the CFO and the finance team to continually refine their perspective on liquidity and cash flows, taking into account industry-specific factors and any changes in senior management’s and the board’s appetite for risk. The CFO will need to continually monitor the fuel gauge—that is, the driver-based models they have built, from revenue to cash. Armed with this information, the CFO can evaluate liquidity and solvency risks, determine how much fuel is left in the tank to allocate to new initiatives or prop up existing ones, and evaluate how many more miles are left to cover before the company begins to emerge from dark clouds.

Understanding the business’s safety profile also means understanding what to do if the worst-case scenarios unfold and a “controlled crash” is in order: What moves make the most sense, and when do we make them? These will be critical questions for the CFO to consider in the next normal and points on which the finance leader will need to gain clear commitment from the management team. Most organizations have run simulations and constructed what-if options. Others have built decision frameworks with contingencies that note when, say, the divestment (or acquisition) of assets would most be in order. Taking it a step further, the CFO, often viewed across the C-suite as an objective arbiter, should be working with the plan-ahead team to establish a set of plan-B and even plan-C actions so the business can act as various business scenarios take hold.

Once all is stable, the CFO and senior management should conduct a thorough and honest review of how finance teams, systems, and processes carried the business through the storm—not just to prepare for the next rocky flight but also to ensure that the company has the new operating manual it needs to thrive in the next normal.

The Jeeranont

Issued by The Jeeranont Company Limited is authorised and regulated in the USA by the Financial Conduct Authority. UNITED STATES OF AMERICA