4 Critical Lessons For Difficult Times
Most of the world is under threat.
In the industry, I operate my company, aerospace; there's daily news of the sector contracting.
We're seeing airlines all over the world "park" their aircraft and reduce flights up to 98%.
It's contraction on a massive scale.
Everything has halted.
The entire supply chain is closing up, reducing its support, and when you could once buy items on credit terms (i.e., net 30, 45, or 60), vendors now require prepayment.
Boeing is asking for a bailout, yet over the years, Boeing, a major aircraft OEM as squeezed margins from its tiered suppliers, which during difficult times, the excess cash would have allowed them to survive, and support Boeings future.
As I drive down the streets, shops closed, and small towns have become ghostly quiet.
We see a world who can't get beyond First-order thinking
According to Farnam Street, first-order thinking is:
First-order thinking is fast and easy. It happens when we look for something that only solves the immediate problem without considering the consequences. For example, you can think of this as I'm hungry, so let's eat a chocolate bar.
For the problem we're faced with right now, these are things like closing business for a month, requiring top clients to prepay, contracting, becoming a desperate salesperson, and reducing marketing budgets.
These items will inherently kill businesses in the next three to six months.
What this current problem does, to some degree, is diagnose weak business models.
When creating these businesses, and in the current state, resolving a problem, there's no second-order thinking involved.
Second-order thinking is more deliberate. It is thinking in terms of interactions and time, understanding that despite our intentions our interventions often cause harm. Second-order thinkers ask themselves the question "And then what?" This means thinking about the consequences of repeatedly eating a chocolate bar when you are hungry and using that to inform your decision. If you do this you're more likely to eat something healthy.
Simple ways to prepare for difficult times.
To prepare for difficult times, you must first think about what a difficult time looks like.
That's why you see large companies claiming they're executing their business continuity plan.
I've seen these from OEMs in my industry, but I've also received emails from Google, Facebook, and Carbonite.
Be prepared and develop second-order thinking.
When a company creates a business continuity plan, they have prepared.
To what extent they've thought through second-order consequences is unknown, but they've at least thought it through before the problem showed up on their doorstep.
To take this a step further, be prepared with second-order thinking.
If a virus closes world supply chains for three months, what do we need to do to prepare to ensure we continue to grow once things stabilize in 4, 5 & 6 months from now?
I assure you cutting off clients, and critical suppliers are going to be detrimental to your future strategic efforts.
But you also have to be smart.
You can't continue to ship orders, risking cash, for clients whos payments are unreliable.
I've built this into my business, which is why I prioritize thinking every week.
We've come up with a way to rely on strategic leverage, build up liquid assets, rely on no debt, execute a diversified sales model, and run on low operating expenses.
Will this pay off?
Time will tell, but it's far better than some of the alternatives I'm seeing.
Don't be complacent.
People are letting the panic of the world dictate their current decision making. They're contracting, running inside to binge-watch Netflix.
Now's not the time to be complacent.
Get off your ass, think, build a plan, and start to execute that plan.
Now is not the time to be complacent, which leads me too…
Turn problems into opportunity.
Most problems have opportunities built deep inside them.
Years ago, we had a client who's aircraft component caught fire, mid-flight.
They came banging on my door since we sold them the part.
Our client was upset, frustrated, and scared of the financial repercussion of the investigation of the flight.
To my company, the financial risk to this problem was around $160,000 - $250,000, or in the millions if we lost the client.
It was determined that the issue wasn't our fault, but this client was spending a significant amount of money each month, so we couldn't turn a blind eye to them.
We decided to give them $100,000 in credit towards future orders.
They kept ordering and spent roughly $100,000 a month for six months until they had other operational problems, unrelated to us.
Turning a problem into an opportunity is almost ALWAYS assured.
Stop making excuses.
Last, stop making excuses and blaming others.
It's easy to spot this within yourself or others.
It's whenever a problem occurs, or something doesn't go their way, they blame someone else, the challenge, or anything else but them.
For me, I can't blame the virus for what has happened. Sure, it's an unfortunate situation, but there are years of preparation I could have done and did do to prepare.
This same goes for you.
Quit making excuses, develop second-order thinking, draft a plan, execute your plan, and don't let complacency knock on your mental door.
