The COVID-19 test: is your company perfect for its business ecosystem?
Isaac Getz & Laurent Marbacher
When on March 3, 2020, we asked how he was dealing with the COVID-19 crisis the manufacturing director of a large multinational recounted to us that he gathered his suppliers and told them: “We’ll face this together. We share everything!” In fact, this executive could have put the whole burden of the sudden 15 percent drop in his company’s sales on the shoulders of his suppliers. Half of his ingredients being produced externally and the other half internally, he could have easily lowered his orders to suppliers by 30 percent and maintained the full capacity in his own plants. But he preferred to share the burden of the crisis equally by lowering his external orders and his own production by the same percentage.
Take another COVID-19 example: on March 24, 2020, Laurent Cavard, the CEO of Altho, a leading potato chips maker, sent a letter to its carriers. It announced a 9 percent increase in Altho’s payments to them. Yes, this company – strained by the coronavirus crisis like the whole economy – decided not to underpay its suppliers, but to reward them for their extraordinary efforts in keeping the logistics running, despite the lockdown-provoked drop in two-way hauling. In addition, Altho applied the raise retrospectively and also pledged to pay the invoices on reception.
The suppliers of both of these companies – a key to their business ecosystem – will not forget it. In Altho’s case, the CEO of its key carrier texted this message to Cavard: “In the storm, there are different types of beings: tall, average, and very small. You are in the category of tall. Bravo and thank you.”
It might be that these two examples do not apply directly to you. But how did you act with your own suppliers? Did you gather them to explain that you will not be respecting your purchasing contracts and that they just need to get over it? Or did you show them – as these two companies did – that instead of considering them as a mere variable in your business, you treat them as real partners whom you will not be giving up on when times get hard? As Toyota executive Didier Leroy says, “The supplier’s problem is not his problem: it’s ours.” In fact, it might happen that your suppliers who – thanks to your unconditional past actions – have already become your genuine partners help you solve your crisis-related problems unconditionally, without asking for something in return, just as you did for them. The last big crisis provides an example. In 2009, it strongly hit hotels and cruise ships, key clients of Finnish company SOL, number two in the country for cleaning services. From the very first signs of economic slowdown, SOL offered to lower its prices by 10 percent to these clients – even though these prices were fixed by contract. It allowed them breathing space in the context of rapidly diminishing cash reserves.
It might be that your main concern is not your suppliers but your clients – another key element of your business ecosystem. They might be leaving in spades and cannot help you in any way. But maybe you could do something for them? EnergyVision is a Belgian SME providing energy transition solutions. On March 24, 2020, its CEO Maarten Michielssens wrote to all its clients telling them that it would not charge them for the energy they get from EnergyVision installations for the following two months, roughly the lockdown period in many countries. Already, before the crisis, the company was not charging its clients either for the initial study of their energy infrastructure, needs, and expenses, or for the costs of transforming their infrastructure into a more efficient and greener solution. EnergyVision just charged the client for energy consumption of its transitioned infrastructure and at a price much lower than the one they paid before. Now, this price became zero for two months – a helping hand that their clients are not going to forget.
And could a company act for society as a whole, for the common good? As we write in the midst of the COVID-19 pandemic, many countries are experiencing a dramatic shortage of protective masks. As a result, many healthcare professionals, retail employees and others are falling ill. To help solve this problem, one French SME specializing in high-end apparel textiles, Les Tissages de Charlieu (LTC), decided to act. At the first signs of the pandemic, it developed in 24 hours a professional reusable mask in washable fabric and put the offer on its website. The next day it received close to one million visits and thousands of calls begging to buy the mask.
LTC took the decision to pivot. The company contacted all its current clients, asking them to postpone their planned orders for several weeks: though some were not pleased, all agreed. In the next 48 hours, LTC transformed all its manufacturing and supply chain and launched the non-stop 24x7 production of 150,000 masks per day, delivered to hospitals and other organizations. The company also decided to charge a price just covering the costs of supplies and production. Finally, LTC shared all the information on its mask model publicly so that other manufacturers, including competitors, could produce it themselves. Several quickly did. LTC’s ecosystem legacy clients, the new protective mask clients, and even the company’s competitors, will remember the company’s actions for the common good.
LTC’s contribution to the common good was significant, but your company could face an even bigger case: an entire country’s population lacking an essential service. This is what happened in 2009 in Sweden – and everywhere else – with the financial crisis. Banks turned off the tap for their small business and private customers who found themselves short of cash to meet their financial obligations. All, except one: Handelsbanken, which did the contrary. Rather than restricting its loans to businesses and families when they needed it most, this bank increased them.
Handelsbanken was able to do this because, for five decades, it has thought that its banking advisers must act like good family doctors or nurses, except that they do not care for the physical health but for the financial health of their clients. Handelsbanken was also the only bank that did not use the bailout money offered by the Swedish government during this crisis. The bank didn’t even ask its shareholders to shore up its capital. Its CEO at the time, Anders Bouvin, explained to us that when “all the banks find themselves in the intensive care unit [in the hands of] shareholders or the government – we want to be a good for society not a burden.”
During the COVID-19 crisis, Handelsbanken advisors proactively contacted their local customers to ask after their situations, and to offer them guidance and financial support. They came up with creative fixes as issues arose and spontaneously covered for each other, working through evenings and weekends if required. The Swedes will not forget what Handelsbanken did for them in 2009 and in 2020.
Last point: the employees. During a crisis, companies might consider them as (human) resources, a variable to be adjusted, or, on the contrary, as human beings to be respected. In 2009, like all manufacturers in the region, Usocome, the French subsidiary of the large German manufacturer SEW, suffered a drastic drop in orders: 10 percent in September 2008, which stabilized to around 30 percent in May 2009. But Usocome was the only manufacturer in its region that did not lay off anybody, nor did it use furloughs. On the contrary, its executives took a certain number of pledges, like using furloughs as the ultimate option that they would resort to only if the drop in orders exceeded 30 percent, and that any reduction in salaries – if such a measure was needed – should start with executives, managers, and salespeople. Large electronic billboards were set up in the workshops that showed the order level compared to the preceding year. The CEO at the time, Michel Munzenhutter, promised that everything would take place in a spirit of solidarity. Hence, he asked for a savings plan of 14 million euros, and that the company should live on essentials. Thanks to many employee initiatives, the goal was met. In July 2009 the company came out of the red and at the end of January 2010 every employee received a bonus, even though orders were still down 28 percent on the year before. The employees never forgot how they were treated at the heart of the crisis; as trusted and responsible adults.
To take another example, once LTC had transformed its plant to manufacture protective masks there was still one unknown – the employees. On March 15, 2020, the French government announced the lockdown, which allowed employees to excuse themselves from coming to work either for health reasons or to care for not-in- school children. If they did, the employer, helped by the government, would still pay them. That’s exactly what LTC’s CEO Eric Boël told employees on March 16: “During this weekend, we took the decision to transform our plant in order to manufacture protective masks beginning Monday. That said, those who believe they need to stay at home should definitely not come. They will be paid.” On Monday, when the CEO started his shop floor tour, he found that 90 percent of employees – all but those with chronic diseases – had shown up. Overwhelmed with emotion he could not finish the tour. Treated as trusted and responsible adults, the employees responded in kind.
All these examples from the COVID-19 and 2009 crises may appear philanthropic, but they are not. These companies are not engaged in charity. They are acting unconditionally for their business ecosystem and employees through their core business processes, which they transformed to serve others rather than themselves. Surprisingly – as a consequence – these companies did better during the crises than their competition. Or rather naturally, since their business ecosystem – clients, suppliers, communities – and their employees responded to their acts and remembered As a consequence too, after the crisis these companies are surrounded by real partners ready to help them, instead of being alone and on their knees. Contrast this with the companies who survive a crisis but are unable to meet demand when it picks up, because many of their suppliers are gone and part or all of the employees have been laid off. After 2009, SOL grew dramatically from €160 million to €285 million in seven years; Usocome recorded six percent annual growth, year after year; and Handelsbanken has been the most admired bank in Sweden for seven years and the country’s most profitable bank for 48 years in a row and counting. And as far as LTC is concerned, at the time of writing, the manufacturer is running at full capacity and without losing money. It also means that in a matter of 48 hours the company will be able to shift a part or all of its production back to its legacy products.
As amazing as these examples may appear, these companies are not the only cases we know. They are what we describe as altruistic corporations. We have studied several dozen of them on three continents, large and small, listed and private, and in diverse industries. At some point, led by their CEOs, they decided to transform their core business activities to serve their business ecosystem – their customers, their suppliers, and the communities they operate in – as well as their employees, unconditionally. As a result – and not as a purpose – all these companies have enjoyed an outstanding economic performance in comparison to their competition.
All crises end – that is what crises do. Facing the storm, will your company be the oak that breaks or the reed that bends but doesn’t break, as in Aesop’s fable? The 17th-century French philosopher Blaise Pascal said human beings are thinking reeds – thinking and remembering. Instead of dodging a crisis, does your company take it as an opportunity to transform its core business processes in order to act unconditionally for your business ecosystem counterparts and your employees? If that’s the case, they will remember it and they will be there for you during every crisis and the day after.
Isaac Getz and Laurent Marbacher are the authors of L’entreprise Altruiste (The Altruistic Corporation). Getz is also the coauthor of Freedom, Inc..
This chapter is partially based on the authors’ article “Creating successful companies that care”, published June 10, 2020 on https://www.strategy-business.com/article/A-lesson-in-creating-successful-companies-that-care.