The ‘Triple As’ of strategic agility — avoid, absorb and accelerate — are distinct ways that successful companies navigated the COVID-19 pandemic, according to a recent blog from Harvard Business Review.
Companies such as Airbnb that not just survived by thrived amid disruption did so by being nimble enough to avoid the worst impacts. When they were hit, they were robust enough to absorb a lot of the damage, and then were resilient enough to accelerate forward faster and more effectively than their peers, the authors wrote in 6 Principles to Build Your Company’s Strategic Agility, published Thursday.
In early 2020, Airbnb was headed for a banner year — bookings were up, expansion plans were in place and an initial public offering (IPO) was set for the spring. Then COVID hit, more than $1 billion of bookings disappeared, expansion plans were postponed, and one-quarter of the workforce was cut. But by the end of the year, revenues had recovered, and the company completed one of the most successful tech IPOs in history, the blog said.
The blog was written by Michael Wade, Amit Joshi and Elizabeth A. Teracino. Wade is a professor of innovation and strategy at IMD Business School, Joshi is a professor of artificial intelligence, analytics and marketing strategy at IMD, and Teracino is a research fellow at IMD’s Global Center for Digital Business Transformation. IMD has locations in Switzerland and Singapore.
How did Airbnb manage to thrive while others floundered?
“Ultimately, Airbnb and other companies that successfully navigated the crisis identified were able to deviate from their strategic plan and adapt to the changing environment,” the blog said.
As soon as it became clear that COVID-19 travel restrictions would be inevitable, Airbnb took steps to avoid impact to its business: it implemented strict disinfectant protocols for its properties and added a mandatory free night between stays to allow additional time for cleaning. It also relaxed guest cancellation policies and put measures in place to compensate hosts for lost revenue.
Of course, the company couldn’t entirely avoid the effects of the pandemic, so it raised capital to bolster its ability to absorb the impact of reduced bookings and cancellations. Even before the business was stabilized, the company began to accelerate into areas that were less affected, such as in-country travel and stays at rural locations. It also started to promote longer “quarantine” stays and added details such as internet speed to its listings.
By contrast, another company, California Pizza Kitchen, was unable to shift its core dine-in business to delivery fast enough after stay-at-home orders were issue, thus was unable to avoid a direct revenue hit. The company already had a high debt load and by June 2020 had entered into bankruptcy protection. After a few months of restructuring, it emerged in November 2020 owned mostly by its debt holders, who had swapped their loans for equity. The company is now trying to make up for lost time by focusing on certain menu items, expanding its global franchise footprint, and investing in marketing and digital channels.
There are a number of principles behind a ‘Triple A’ rating, the blog authors said. Among them are the following:
Prioritize speed over perfection
During the multi-day celebration of Chinese New Year, movie theatres are typically full of families. But in January 2020, due to the spread of COVID-19, most theaters were empty and many had closed their doors.
While most peers decided to postpone their move releases, the Huanxi Media Group approached Bytedance, the Chinese company behind TikTok. In just two days, a Huanxi New Year-themed movie racked up 600 million views on Bytedance platforms.
“Not only did the movie gain a huge following, it also led to a flood of goodwill from Chinese citizens who were frustrated about not being able to leave their homes during the outbreak,” the blog said. “By waiting, other studios missed out on a major opportunity to build market share and capitalize on a limited-term opportunity.”
Prioritize flexibility over planning
In a crisis, a strategic plan can easily become an anchor that locks an organization onto a path that is no longer relevant.
Faced with a massive drop in revenue during the pandemic, Australian airline Qantas abandoned its five-year strategic plan and dusted off an old idea from the 1980s to offer “flights to nowhere.” These excursions included fly-bys of some of Australia’s main tourist destinations. The entire stock of seats sold out in 10 minutes. Qantas then built upon its initial success, next offering viewing flights to Antarctica.
Prioritize diversification and “efficient slack” over optimization
Pain in one area can be compensated by gain elsewhere. During the pandemic, when sales in P&G’s personal care brands dropped, the company was able to make up the difference in increased revenue of its cleaning and disinfectant brands.
By contrast, other companies suffered from a lack of diversification and ultimately went bankrupt.
“While we will eventually see the end of the COVID crisis, there is no doubt that organizations will continue to face other challenging situations in the future,” the authors wrote in the blog. “Under these circumstances, incorporating avoidance, absorption and acceleration can be the difference between survival and collapse.”