Based on Yann Martel’s Booker Prize winning book, movie Life of Pie is a captivating story of a young boy Pi’s magical journey on a lifeboat with Richard Parker, a Royal Bengal Tiger for company, and in the process discovering himself, faith, and God. Pi's 227 days of ordeal in a small boat caught in the middle of an ocean, and the way he deals with umpteen challenges is filled with great lessons in life and business.
The challenge and complexity of surviving seven months on a lifeboat in close proximity of a ferocious tiger is no different than what we as entrepreneurs & business leaders are faced with in these COVID times. Lessons derived from this movie (or the book) hold immense weight in the crisis times that we currently are in. Richard Parker for us has a new name – COVID-19!
Let’s look at 10 salient business lessons!
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Based on Yann Martel’s Booker Prize winning book, movie Life of Pie is a captivating story of a young boy Pi’s magical journey on a lifeboat with Richard Parker, a Royal Bengal Tiger for company, and in the process discovering himself, faith, and God. Pi's 227 days of ordeal in a small boat caught in the middle of an ocean, and the way he deals with umpteen challenges is filled with great lessons in life and business.
The challenge and complexity of surviving seven months on a lifeboat in close proximity of a ferocious tiger is no different than what we as entrepreneurs & business leaders are faced with in these COVID times. Lessons derived from this movie (or the book) hold immense weight in the crisis times that we currently are in. Richard Parker for us has a new name – COVID-19!
Let’s look at 10 salient business lessons!
1) Accept the ‘new normal’
When Pi was catapulted out of the sinking ship into the wild ocean, he cried like there was no tomorrow. However, he quickly recovered and did not allow his grief to overcome him. He was able to understand the context of the problem and planned the next steps that kept him alive.
Entrepreneurs too need to overcome their feelings about their ‘glorious past’ and how & how much they have drifted away from it. There is no use delving into the past and into the loss that the pandemic has caused. The quicker one accepts the change, the better he would one be in a position to cope up and take the new challenge head-on.
The macro situation is constantly evolving. Adaptability of all plans is the key. It is imperative to prepare for the worst, and be thankful if it doesn’t happen. Prepare for the worst, and then readjust if the situation improves faster.
By this time and with advent of new waves and new mutants, it is clear that the recovery will not be a quick bounce-back; plan for multiple quarters of lower revenue.
They say, "Whatever doesn’t kill you, will make you stronger." So right now, it’s important to survive and sustain! For most industries, 2020 & 2021 (& possibly 2022 too!) are years of survival and not for making profits.
2) Exercise Productive Paranoia
Every new day meant new challenges for Pi. The movie shows Pi being paranoid all the time about the changing weather conditions, storms, lurking dangers in the sea and so on. Sleeping with a tiger also meant sleeping with your eyes wide open.
These COVID times are so fluid & dynamic that you cannot predict as to what will happen the next day, and what impact it will bring to your business. ‘Status Quo’ is a thing of past. It’s extremely vital that entrepreneurs exercise what Jim Collins refers to as ‘Productive Paranoia’.
In his masterpiece on management, Great by Choice, author Jim Collins Productive Paranoia as follows,
Being hyper-sensitive to changing conditions
Continuously asking ‘what-if’ by preparing ahead of time
Building reserves
Building irrationally large margins of safety
Since these are unprecedented times, what we are facing today is something we have never ever dealt with. Taking anything for granted or running your business by ‘looking into the rearview mirror’ are recipes for disaster.
Stay in close touch with macroeconomic conditions, trends in your industry, and what's going on with your competitors, customers & suppliers. This will help us to be proactive than reactive.
3) Conserve Resources and Be Frugal
Pi had some stock of food containers & drinking water to start with. Pi realizes the importance of this stock given that he has to feed himself and a large tiger for an indeterminate period. We entrepreneurs are faced with a similar challenge since Mar 2020, and the challenge seems to be getting graver than lighter. With new ‘waves’ coming in, we do not know how long will the ordeal last.
In Great by Choice, Jim Collins says, “If you stay in the game long enough, good luck tends to return, but if you get knocked out, you will never have the chance to be lucky enough.”
We all have limited resources at our command. Additionally, in a state of dwindling and uncertain revenue, we need to make sure that resources (especially money) last as long as possible. Frugality is the key to stay in the game long enough so that our businesses are ‘lucky enough’ to witness the post-COVID era.
Estimate the runway available based on your cash balance today. With little clarity around demand & supply recovery, the need of the hour is to ensure that your company maximizes cash runway. One of the steps for that is cost management. Calculate your ‘net burn rate’ and ‘business runway’. The goal should be to have at least 4- 6 months of runway given the current macro environment.
Cash & Cost Management Tips
· Start with ‘type 1’ actions (those that can be easily reversed) first and then progressively consider more serious actions. An example of a type 1 decision is cutting digital marketing.
· Burn FAT not MUSCLE
Instead of losing any of your critical resources to cost optimization, it may be prudent to stop all discretionary expense (e.g. marketing expense) till business comes back to 'close-to-normal'. When things start picking up, increase these discretionary spends slowly. Ramp it up as things become more stable.
· Most in-efficiencies creep into general & administrative expenses during the growth phase. Relook at these and cut them.
From my personal experience, I was amazed at how much ‘Fat’ (and not ‘muscle’) reduction was possible in The Senate. It’s unfortunate that it needed a pandemic for us to attempt this.
· Consider stopping all new CAPEX and focus on the current business. Even if there is capital work-in-progress, pause the work and pick it up again when demand recovers.
Working Capital Management Tips
· Look at fundamental reduction in cash outflows.
· Match outflows to inflow cycle as much as possible.
· Avoid deferred payment structures that hit as a bullet payment and take the business down eventually.
4) Be Innovative
Pi invented novel ways to take care of himself and his mighty companion. After his supplies ran dry, he invented (or rather had to) ways to feed both of them without becoming dinner himself. He created a mini raft to keep a safe distance from Mr. Parker in the main boat, and innovative ways to fish for them both. He also created a mini rainwater harvesting system to collect drinking water.
In usual times, we are completely focused and occupied with keeping our organizations moving. There are many growth opportunities – new offerings, new markets, better ways of doing things etc – which we are oblivious to. Such crisis time is the best opportunity to turn to these opportunities. Get creative and proactive, and figure out these innovative growth opportunities.
One of my fellow Maven runs a 50 year old well known courier & logistics company. He was quick to sense the change and the opportunity that this change brought, and started a ‘food delivery’ offering. All he had to do was tie-up with restaurants and use the same team & set-up for delivering food parcels instead of courier packets.
Business guru Ram Charan, in his book 'Every Business is a Growth Business', calls this as 'Broadening the pond' and 'Moving into adjacent segments'. This adjacent pond was always available to my friend. However he turned to it and fast enough too, only in a crisis. While his conventional business went down substantially during the last year, his new offering came to his rescue!
5) Demonstrate Reciprocity
Pi eventually became ‘friends’ with Richard Parker in a somewhat uneasy relationship. From the initial period when the tiger helped to dispatch the ravenous hyena to the latter moments when Pi fed him with fish, one could see that a certain bond was being formed.
The principle of reciprocity is an oft-preached one, but its application is often missed out on. A win-win association is established only when you work out ways to benefit the other party while not belittling yourself.
When we help our stakeholders understand the upcoming change and honor everyone's best interest, we get rewarded by their support. In every transaction with the stakeholders, we should always consider how the change could mutually benefit, or at least the damage/loss gets fairly shared.
One of the primary responsibilities on employers is to take the employees along. I have seen several employers (SMEs as well as larger ones) around me who were highly unfair to their employees during these times. Some of them reduced their employee’s salaries to 10-30% for an extended period under the garb of reduced revenue, while the employees were working full-time from their homes (and in some cases even from their offices). I suggested them that a better approach is to downsize your team (at least the laid off employee will find other pastures after bit of a struggle) but to pay them well (full salary if possible).
The following served as my guiding principles.
· Be pragmatic but humane. However, “Don’t try to be a hero”! There is no room for ‘bravado’.
· It’s important to be in alignment with the full team on what you are trying to solve across different macro scenarios. Truthfully share the financial situation of your business & the challenges with your team.
· Be conservative around new hiring
· Currently, it is hard to find new work, so be thoughtful about reducing your workforce. Explore other options instead of layoffs. Can the pain be shared across all employees? Consider options like salary reduction, shifting to variable pay, salary deferral or furloughs (though for a smaller period only).
6) Plan Scenarios and Manage risks
When Pi found Richard Parker on the life boat, he got scared and threw all the supplies in the lifeboat to a makeshift raft and tied it to the life boat and decided to shift to the raft. At that moment, it looked like the wise thing to do, without taking into consideration greater dangers, still unknown to him. When the breaching whale appeared at night and upturned Pi’s raft throwing all his supplies into the ocean, Pi realized, living with Mr. Parker on the boat may be a better option.
It is important to build scenarios and make Plan A, B, and C. Identify all the potential risks and devise your risk management plans.
It is vital not to put all your eggs in one basket. I realized this last April. I had planned my funds well. To my shock and disbelief, Franklin Templeton wound up six of their schemes including the one in which I had put all my short term funds. I suddenly realized that I was left with no funds to take care of staff salaries, EMIs and all other mandatory outflows.
Evaluate your risks of Customer Concentration. If your business relies on a single (or a few major one’s) customer, you could be one decision away from disaster!
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