Capitalizing on crisis: Strategy in the time of coronavirus

The failure to prevent, contain, and mitigate COVID-19 could wreak more havoc on the global economy than the 2008 financial crisis and so-called Great Recession, Foreign Policy magazine projects. As Rahm Emmanuel, former White House chief of staff under President Barack Obama, famously said,

“You never want a serious crisis to go to waste. And what I mean by that: It’s an opportunity to do things you think you could not do before.”

The United States economy is likely only in the early innings of what promises to be several highly disruptive quarters, but businesses are already using the crisis as an opportunity to make far-reaching strategy changes. You won’t hear executives admit it, but not all business changes being floated are wholly attributable to the spread of coronavirus.

The coronavirus crisis hit the travel industry early and hard, so it’s no surprise we’re seeing many changes in that category. Still, the airline business is difficult under normal circumstances: The Brattle Group finds that “the good times aren’t good enough,” while “the bad times are terrible.” Perhaps this is why Richard Branson, founder of Virgin Atlantic, once said,

“If you want to be a millionaire, start with a billion dollars and launch a new airline.”

It’s no surprise that an industry well acquainted with harsh business cycles is rushing to cut customer creature comforts like food and beverage service. However, industry executives are also considering structural route changes that could leave smaller regional airports with only one carrier—an effective monopoly rarely seen since airline de-regulation created a free-market air transport system some four decades ago.

Some strategic shifts supposedly forced by the pandemic are even more loosely connected to the disease’s spread. TechCrunch reports that loss-making scooter-share services are slashing staff, but observers have long doubted the viability of the business model.

Perhaps most interesting, though, is the announcement that global QSR behemoth McDonald’s will end its high-profile expansion of breakfast to all dayparts. This move is notable because the breakfast all-day campaign appears to have been a popular but costly mistake for McDonalds. The company’s hopes for increased consumer visitation failed to materialize. Instead, the morning day-part became less profitable as breakfast fans no longer had to hurry in to score their favorite fare. And many consumers opted to down-gauge from the lunch menu to less-expensive breakfast options, making all-day breakfast a double-whammy for the company.

The coming months will surely see many more headlines about shifts in corporate strategy ostensibly driven by COVID-19. As you read them, consider whether the companies or industries making these regretful announcements are truly reacting to an unforeseen external impact, or whether they are harnessing the value of a crisis to achieve strategic ends.