Since March, businesses have had to focus on survival to maintain sufficient cash flow and keep their heads above water during the lockdown. With thoughts beginning to turn to bounce back scenarios, it’s time to broaden our focus.
Cash is king and credit is crucial before, during and after a pandemic; however, every king needs a retinue. In a business sense, the king’s retinue needs to provide the broad range of other resources and relationships necessary to create and preserve value.
We all rely on a multitude of relationships, human capabilities and collective know-how. For many years, I have extolled the benefits of making business decisions based on a multi-capital approach in which not only financial factors are considered but also the non-financial. Known as integrated thinking, this approach tends to guard against short-termism as it includes a broad range of stakeholders and often leads to resilient and sustainable businesses.
Integrated thinking refers to an inclusive process of decision-making, management and reporting, based on the interdependencies of a range of factors that affect an organization’s ability to create value over time. It will be interesting to learn if organisations that focused more on the long-term, rather than short-term financial considerations, will fare better during this crisis. They would tend to have robust supply chains, a more adaptable, versatile and flexible workforce, good business processes, and technical knowledge to maintain or flex operations during the crisis.
Integrated thinking could not have guaranteed that all businesses would have survived the unprecedented business downturn that COVID-19 inflicted, but this approach would have helped businesses be better prepared to face the unparalleled challenge.
Holistic thinking will help businesses bounce back quicker and with greater resilience.
There will be a need to balance the short-term priority of cash and cost control with the long-term focus of innovation and business resilience. Financial considerations are important in decision-making but it is equally important to answer questions such as these:
- How would this decision affect our ability to adapt to an uncertain business environment?
- Would this decision make our business model more resilient to unforeseen external changes?
- How will our material stakeholders view this decision, not just our shareholders?
Broader, deeper thinking about business strategy is needed as we seek to develop more resilient businesses. There will be challenges as the adoption of a new approach that contain elements of differing or opposing ideas entails integrating intuition, reason and imagination to develop a holistic strategy that follows an iterative process: tactics, action, review and evaluation.
As we continue to adjust daily operations and begin to emerge from lockdowns, it will not be enough to focus on the financial return on capital. The six capitals of integrated thinking and reporting — financial, manufactured, intellectual, human, social and natural — will help companies balance resources and think holistically about their strategies and plans.
More on integrated thinking and how to cultivate robust decision-making: