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Data Driven Crisis Management

Data Driven Crisis Management

This is part 1 of a 6 part series on Data Driven Crisis Management.

It is easy to think about business when things are proceeding as expected, since you have the time to think about everything that is happening and why. In a crisis, all of that changes. Things start to happen to you, instead of waiting for you to take action, and they happen faster than you are able to handle them. This quickly overwhelms your standard operating procedure and makes it harder to operate. 

The current global situation caused by Coronavirus is a crisis hitting all businesses, in all countries, in various ways. In a matter of weeks the virus, and the necessary steps to contain it, changed consumer buying, capital investment, and directly constrained entire industries.

In a crisis, you have to start working differently. Unfortunately, the high stress of a crisis makes it hard to think clearly and make rational decisions, which is why many companies start to make mistakes. Using data is essential to staying focused and thinking rationally, but the very nature of a crisis makes data harder to use since everything is changing. All of the historic data about your business might not help at all to predict how the crisis will unfold! Just when you need more data, it gets harder to use. 

Even so, it’s possible to wield data as a mighty weapon to not only survive a crisis but to turn it into an opportunity. We’ll cover various methods and approaches to do just that, which you can use immediately to take back control. 

Specifically:

  1. How to quickly triage what you can trust
  2. Planning in an uncertain market
  3. Identifying Early Indicators of recovery
  4. Finding Green Shoots of new opportunity
  5. Agile Decision Making to ensure you move as fast as the market
“Nobody ever won a chess game by resigning.” 

Data Driven Crisis Management: Who do you trust?

This is part 2 of a 6 part series on Data Driven Crisis Management.

Data is, by definition, a record of the past. When you are in the midst of a crisis, the past may not be a reliable indicator of the present. Take the following example, which is a measure of the revenue volume for a hypothetical company:

As is typical during a crisis, the nature of the metric changes so significantly that there is little resemblance to the earlier data. Not only is the magnitude of the data vastly different, the metric is much more volatile during the crisis. Many (if not all) of your metrics will follow a similar path, meaning that you can no longer trust all of the assumptions you had before the crisis started. The projections, the expectations and the models you might have built before the crisis need to be thrown away since they no longer apply. 

It’s impossible to make decisions without being able to trust anything, so the first thing you need to do is determine what you can trust. 

This is the hardest part of crisis management, as there is no way to know the extent of what is changing, but here are some places to start looking for a foothold:

1. What has NOT changed?

It is likely that some parts of your business have not changed, and if you can identify them they are a great place to start. 

  • Even if you have fewer customers, are some customer segments remaining consistent?
  • Even if you have less traffic, are conversion rates the same? 
  • Even if your partners are struggling, are any of them still contributing?

These things which have not changed are the foundation of your business, and the foundation upon which you can build your recovery. With everything else stripped away, these are the things that are the core engine of future growth. 

2. What is still working? 

Even if part of the business has changed, it still might be working (albeit not as well as before). Identifying these working pieces is important as they can be strong indications about where opportunities might be hiding. For example, if overall transactions are down, identify which customer segments are still buying and which have stopped buying altogether. Drops are rarely the same across the board, so separating what is not working at all from what is still working is an important start.

3. Test, test, test

Since all of the rules have changed, you cannot rely on your old playbook. Before trusting that your annual promotion will be a success amidst a crisis, run a smaller but similar promotion earlier and measure the results. It’s possible that people will react differently, and knowing ahead of time will avoid wasting time and effort on initiatives that were never going to succeed in the first place due to the dynamics of the crisis. The most you test, the more you will know what to trust and the more building blocks you can rely upon.

These footholds are just building blocks, but they are reliable blocks that your recovery strategy can use to get started immediately. You don’t want to wait for everything to be fixed to build a new strategy, and building a strategy on assumptions and guesses is dangerous. These blocks are reliable pieces you can use to start to recover. 

 “One doesn’t have to play well, it’s enough to play better than your opponent.”

Data Driven Crisis Management: One Move Ahead

This is part 3 of a 6 part series on Data Driven Crisis Management.

If you are an experienced leader, you know that planning ahead is the first step in any successful business strategy. However, in a crisis, planning ahead is a liability since everything will be constantly changing. If you were to try and plan ahead, your plans would likely become obsolete as fast as you could produce them, making them a huge waste of time. 

At the same time, you can’t operate without a plan. What is the solution? 

Crisis management requires you to use time dilation in your planning. You want to start planning in very short term increments and expanding that planning timeline as the crisis settles and things become stable enough to plan farther in advance. 

Time dilation in planning might proceed as follows:

When the crisis first hits, you abandon your old plan and focus on trying to get your bearings. What metrics can you trust? What fundamentals still hold true? As you find those foundational elements you begin to plan a month in advance, waiting for more information about how the crisis will play out. At some point the market will stabilize (but not recover) so you can plan for the next quarter. Eventually, the market will begin to recover and you can begin to plan a year in advance again. 

Note that it’s not clear how long it takes to transition from one mode of planning to another, that will depend on your business and the nature of the crisis. Some crises last days, while the Coronavirus crisis promises to last many quarters. In the early days of the crisis, the crisis management plans you have will not be reliable as it can be hard to plan even just a month in advance. The best sign that you are ready to transition from one mode to another is that your plans are becoming more and more reliable, as that means the market is stabilizing in ways you can plan around. 

Because long term planning is so fundamental to companies, it can be tempting to try and revert back into long term planning mode too quickly. It feels more natural to follow old habits, so it’s natural to try and push things back to the way they were. This is dangerous since it means you aren’t following the data, and in doing so likely risking more mistakes and more time wasted.

Planning is more of an art than a science, so you will need to trust your experience and the early indicators you identify in your data to know when to make the right planning transitions. 

“Tactics is knowing what to do when there is something to do; strategy is knowing what to do when there is nothing to do.”

Data Driven Crisis Management: Early Indicators

This is part 4 of a 6 part series on Data Driven Crisis Management.

No crisis lasts forever, and the companies that identify signs of recovery first are the best positioned to take advantage of the market growth that results. The earlier you invest capital and prepare, the more likely you surf the recovery wave to a leadership position in your industry. 

However, the cost of prematurely investing in a recovery is high since a crisis puts strong pressure on your financials across the board. If you invest too early you might run out of capital before the recovery materializes. If the recovery takes longer than you expect, you might run out of capital before being able to take advantage of your early action. 

How, then, do you identify when a recovery might be starting? 

The most important thing is to identify the earlier indicators. There are a number of types of early indicators and places to look for them, here are some examples:

  • Customer Behavior Indicators. Customers lead any market, so watching for signs that customer behavior is changing is the strongest early indicator of a market shifting. The very last part of the customer buying journey is a purchase, so don’t rely on purchases as they will be a trailing indicator of these changes. Shifts in advertising conversions, increases in activity and jumps in customer support requests can all indicate that customer behavior is beginning to shift. If possible, watch all possible customer segments since you never know which ones will give you the early indications you need. 
  • Market Indicators. While individual customer segments and product purchases might be too noisy to discern indications from, the overall market performance can blend these smaller signals into a larger signal. The problem is that small changes need to add up to large changes to move the market metrics, which means that by the time the market metrics change the indications might be lagging behind. Even so, looking for even small shifts in overall market performance can be an important hint to look deeper for other indicators that are hiding below the surface. 
  • Competitive Indicators. Watching your competitors can be one of the most important early indicators of change. For example, if your competitors are having massive layoffs it’s possible that they are struggling and their customers are vulnerable for you to pursue. Even more likely, if you see your competitors pursuing specific segments of customers with specific promotions it’s likely they have found green shoots of opportunity that you can capitalize on as well. There is no penalty from learning what others have found, and if you see a number of competitors pursuing the same strategy that can be a strong indication. However, beware following the crowd as they might be running into a wall as a group so make sure you are convinced that there are reasons behind their actions. 

Even the best early indicators can mislead you, and it’s easy to mistake the signals for a recovery with normal fluctuations in the midst of a crisis. To avoid letting your desire for a recovery bias your decisions, it’s important to set out a criteria before looking at the data. What will your early indicators have to show you for you to be confident a recovery is underway? What kind of thresholds or trends do you need to see? Make sure to write down those criteria and always refer back to them, as it will provide important objectivity even if emotions run high.

If you are diligent and data driven, you can turn the crisis into a competitive advantage by riding the recovery earlier and more effectively than any other companies. 

“Life is like a game of Chess, changing with each move.” 

Data Driven Crisis Management: Green Shoots

This is part 5 of a 6 part series on Data Driven Crisis Management.

Forest fires are enormously destructive forces, but even the worst forest fire is quickly followed by new plant growth in the form of green shoots. These new growths are the promise of future forests, and rebuilding from the disaster of the fire.

The same is true of business, every disaster brings with it new opportunities for growth in the future. In the CoronaVirus crisis, one of the hardest hit industries has been Cruise Lines, struck by travel restrictions and the fear of on-board infections. However, even in the midst of such an acute crisis there are green shoots for the Cruise industry. Celebrity Cruises is one of the largest cruise companies in the world, and in the early days of the crisis they identified that there were some customer segments who were still buying and, in fact, buying more cruise tickets based on promotions they were running. An example is below:

Reading How Outlier Helps Cruise Line Weather Once In A Lifetime Waves

Since the market changes dramatically during a crisis, these green shoots can appear in unexpected places. It is almost impossible to know where they might pop up, so the most important thing you can do is be prepared to look for them and find them quickly so you can help them grow into major business drivers. 

How do you find green shoots? Here are some ways:

  1. Survey ALL of your data. Since green shoots will appear in unexpected places, you can’t rely on your intuition to know where to look for them. Surveying the entirety of your data is critical, since the larger the net you throw the more likely you will catch them. For example, some of the best green shoots for customer growth might come from customer support requests, since anyone engaging for help with your product is still engaged. That can tell you a lot about what types of new customers you should target. Outlier finds the unexpected in your data automatically and quickly. In this new normal, it is imperative that your resources be focused on the most optimal outcomes for your business. 
  2. Think differently. One of the most important mental shifts you can make during a crisis is to view problems as opportunities. Something that is hurting your business now, might be an opportunity if you start to operate in a different way. For example, if customers aren’t buying your product but existing customers are still upgrading their accounts you might want to start offering a free version of your product and rely on upgrades for new revenue. 
  3. Talk to your customers. Quantitative data is important, but qualitative feedback from customers can reveal things that are not obvious on the surface. For example, if some segments of customers are still buying your product during a crisis it’s possible they are using the product in an entirely new and unexpected way that can be a new market opportunity for you. To get this feedback, you’ll need to do more than offer surveys and gift-cards, you need to build customer discussions into your buying experience. While the friction can reduce sales in some cases, the new information you gather is will pay huge dividends in the future.

The best thing about green shoots is that they are the fuel for future competitive advantages. If you find green shoots before the competition, you can get a head start on a market recovery and build growth engines for the future while they still struggle to make their old approach to business work. While this is generally good advice, during a crisis it becomes a secret weapon. 

“Even a poor plan is better than no plan at all.” 

Data Driven Crisis Management: Agile Decision Making

This is part 6 of a 6 part series on Data Driven Crisis Management.

During a crisis, time is very expensive. While your revenue is likely down significantly, your costs are likely the same as they were before the crisis started which means you are burning more capital every day the crisis persists. Cutting costs quickly can be hard, so it’s critical to make the most of every single hour of every day to get the most from your business until there is a recovery. 

The time that elapses between new information, decision making, and action is important because that determines how quickly you can move. If the time between new information and action is very short, your decision making is agile and you can react quickly to changes and opportunities. If it takes you a long time to take action from new information, you are burning more capital than necessary and likely missing out on opportunities. 

How do you measure your decision making timelines? How do you decide if your decision making is agile? Since this is probably not something you were focused on before the crisis, here is a three-step process to get started:

Start measuring your decision making timelines. Starting with every new piece of information, begin tracking the time it takes to go from information to action. This can be as simple as watching the timestamps on emails (if you are notified by email of new information) or as sophisticated as tracking the progress of tickets in Salesforce, et al. 

  1. Understand how fast you can realistically move. With your data in hand, it’s important to understand what your ideal time to action will be. If you move too quickly you will make too many mistakes, but if you are too slow you will miss opportunities. This ideal timeline may or may not be based on how long it takes you today, as crisis management often requires you to use radically different decision-making frameworks. 
  2. Monitor time to decision. Once you are measuring your time to decision, and have a target speed, you can monitor your performance. While this is different than core business performance metrics (like revenue, new customers, etc), during a crisis the time to decision is often a leading indicator of how quickly the business will recover. As a result, it is often a good idea to add it to your list of Key Performance Indicators, at least until the crisis subsides. 

Remember that time to action is NOT the same as the time to CORRECT action. It is possible that you will make mistakes in your pursuit of faster decision making, and the balance of speed to accuracy is a decision you will need to make for your team. 

One helpful way to visualize decision-making time is a Burndown Chart which tracks how quickly you are resolving tasks over time. An example Burndown Chart is below:

The x-axis is time and the y-axis are tasks. If you define new information as a task, the burndown chart can help you understand how long you are taking to resolve them. You’ll notice there is also an “Ideal” line on the chart, which represents how quickly you’d like to be handling tasks. This works for decisions as well, based on your decision about realistic time to action. This visualization is available in most ticketing systems (like Zendesk, Salesforce, etc) so if you use a platform like that to handle your crisis decision making you can use it easily. 

Whatever you use to measure your time to make a decision, the critical thing is to measure and ensure it’s as fast as you need it to be. If the competition has a shorter time to act, they will have a strong competitive advantage when new information becomes available to everyone in the market. Considering how expensive it is to make mistakes or miss opportunities during a crisis, it’s critical that you don’t give the competition that advantage. 

Conclusion

A crisis is a trying time, and your first instinct might be to abandon data and rely on your intuition for important decisions. However, that strategy is similar to running through a forest in the dark as it’s only a matter of time before you run into something! You need to harness data in your crisis management and decision making, starting with identifying what data you can trust all the way through to finding early indications of recovery. 

Crisis management is not easy, but for every crisis, there is a recovery.  As long as you focus on a logical, data-driven, approach you can not only survive a crisis, you can thrive.

“Even a poor plan is better than no plan at all.” 

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