Facing Covid-19: Net practical insights and learnings from select SaaS B2B ceos and executives

Adapt fast, find hidden opportunities and show crisis leadership

Corona virus, or Covid 19, can now almost undeniably be classified as a ‘black swan’. Many supply chains have paused production, stock markets have been crashing, and many companies find or will find themselves in delicate situations.

Nowhere is this situation felt more acutely than in small businesses and in the startup world. Organizations that had based their business plans on the back of an +10-year bull run have seen their outlooks imperiled as their customers lack near-term visibility, and even viability.

The SAP.iO Fund has the privilege of working with leading B2B SaaS startups and a few select leaders, ceos and executives of these organizations were recently asked about how they are coping with the current environment and planning for the future. Here is a net net summary of their insightful recommendations, summarized in five key categories: Sales and customers, Value proposition and business model, Product and processes, People and Finances.

Overall, their recommendations were to:

• Adapt fast and fix the organizations to align to new market dynamics.
• Find hidden opportunities in the new market environment.
• Show crisis leadership at a time of destructive creation.

Hope this summary helps and feedback welcome as always.

Facing Covid-19: Net practical insights and learnings from select SaaS B2B ceos and executives

1) Adapt fast and fixing the organization to align to new market dynamics

Whether they were small or leading large organizations, whether working in digital or in the physical world, most or all companies mentioned the need to:

• Reassess their organizational fit in this new environment.
• Make scenarios with at least one very dark scenario — to plan for worst and identify which elements can be at present and future risk.
• As a caveat, some indicated that choosing timing wisely is important to make changes. Some businesses are more impacted than others. Hence, while most were swift to take action, some preferred to wait to understand the full impact and then see how to prioritize change. This was however not incompatible with the organizational reassessment highlighted by many. Rather it meant a need for a plan to be ready, and a timing for implementation that could be modified.

a) Sales and Customers

• Prioritizing pipeline and reassessing acquisition channels: most companies ran an exercise to prioritize pipeline. It was important to do so to ensure salespeople do not waste time on accounts that would not be productive. Many companies decided to reduce certain acquisition channels, either inbound or outbound, to reduce burn.
• Prioritizing sales: likewise, most companies ran a hard assessment on existing sales to adjust communication effort, sales strategy, renegotiation of contract terms and anticipate scenarios. In such times, some customers will not upsell, others may cancel contracts, renegotiate or just go bankrupt.
• Communicating with customers: Many executives decided to over communicate, and often in a personalized and one to one basis, with every single customer, to attempt to ensure business continuity.

b) Value Proposition and Business model

• Thinking about the value add: Most businesses reflected hard about their value propositions and how they would phrase it. Sometimes when these value propositions were not essential anymore, the whole positioning and business model was changed.
• Modifying contract setups: Many companies took a hard look at their contracts to see if they could offer payment terms to keep their customers; or if on the contrary their contracts were set up in such a way that they could continue (severance penalties, legal departments, etc.).
• Revising partner policies and commitments: Some organizations took the opportunity to revise their partnership models and the way they would share value-add.

c) Product and Processes

• Digitizing processes and workflows: most companies were swift to enable digital working and workflows among their employees. For instance, where a centralized call center could be outsourced or covered with employees in a central location, they could now operate remotely from their respective locations. Approvals also needed to be streamlined.
• Shifting roadmaps: Companies highlighted that some roadmaps can be shifted in time or scope or area. For instance, connectivity roadmap does not require as many stakeholders and can be continued whereas roadmap require more customer testing may be less relevant now.
• Reducing R&D: Most companies decided to significantly reduce R&D to reduce burn.
• Identifying disruptions in supply chain, stocks and transport: SaaS B2B companies do not usually have high capex costs, but some companies may have partnerships and links with companies that do. Such is the case of marketplaces. Executives there pinpointed the need to revise every component, supplier and partner to identify disruptions, potentially creating buffers, renegotiating contracts and payment terms.
• Monitoring security: with processes and workflows becoming more digital, special attention needed to be given to physical and cyber security, to prevent either disruptions or attacks.

d) People

• Crisis communication and leadership: most companies quickly gathered their employees, reassured them on the company goal and vision and aligned on how to communicate with the various external stakeholders.
• Keeping employee morale up: likewise, many highlighted the need to identify in the workforce select elements that needed specific coaching and to ensure the overall organization’s morale could stay high. Leadership matters so much in these times.
• Keeping the best elements: Many expressed concerns and the need to retain the best elements and ensure they are best positioned to deliver in these new circumstances.
• Revising targets: some companies chose to revise their employee KPIs. Some others did not to touch anything and sometimes let natural selection work among their employees.
• Stopping recruitment: most companies immediately stopped recruitment and existing processes.
• Letting some people go: as sad and painful as it may be, many companies decided to plan for the worst and cut costs with some layoffs. On average 20–25% in small organizations, and 10–15% in larger organizations. Country locations mattered, as some countries are more flexible with regards to layoffs. In many countries, governments have prepared compensating mechanisms for both workers and companies.

e) Finances

• Reducing the burn rate: most companies decided to decreased their burn by 20–40% — the usual suspects were certain non-essential contracts, R&D, office closures, workforce layoffs, etc.
• Improving working capital and renegotiating terms: Other ways to improve finances may include work on working capital, payables/receivables, sometimes renegotiating terms
• Analyzing fixed, variable costs and contributions: likewise, a hard assessment was often made to understand what was needed and attempt to reduce fixed and variable costs.
• Forecasting best and worst case scenarios: cash flow scenarios are crucial in these times.
• Communicating with investors with scenarios and revised business plans: Most companies found it very useful to get in touch with investors asap, to get their thoughts and exchange on a new business plans and milestones.

2) Finding hidden opportunities in the new market environment

Another series of recommendations then have to do with how to take advantage from the new setup, and find hidden opportunities in the five categories:

a) Sales and Customers

• Reprioritizing industry verticals: Several companies found an opportunity in re-prioritizing their customer industries. Indeed, certain industries are actually seeing a greater volume, such as ecommerce, logistics, healthcare, video collaboration, etc.. It is helpful for certain organizations to reprioritize industries.
• Using creative setups to keep customers: Contracts, or pilots, will invariably be cancelled. Some companies thought hard about techniques to keep contracts, such as discounting to secure commitments, payment deferrals or scope revisions. Such new conditions may create the conditions towards continued market traction.
• Shifting the marketing mix: some channels may now work even better, such as all electronic modes of communications including emarketing and webinars.

b) Value Proposition and Business Model

• Revise ROI approaches: due to the new circumstances, a cost ROI (e.g. creating savings) may now work better than ones that expand customer revenues or productivity. Some companies took this opportunity to change the way they were presenting their ROI.
• Looking out for interesting M&A opportunities: Opportunities will arise in this environment — quality assets at reasonable cost.

c) Product and Processes

• Shifting product areas to match opportunities: Some companies found opportunities in new product areas. Some large companies even shifted the type of products made, such as LVMH which converted itself in a hydro alcoholic gel maker. These are opportunities to consider.
• Shifting geographical focus to match opportunities: Some larger companies with global scope emphasized the need to shift geographical focus to follow business availability, for production, warehouses and stocks and customers.

d) People

• Enabling mobile working: seems to be working and enable greater availability time through voice and chat messages (Slack, Zoom, etc.).
• Manager changing roles: some company managers needed to shift their roles from management to coaching in these remote work setting, with different types of goals.
• Shifting activities between departments: many companies decided to shift activities between departments (business development, sales, marketing, etc.).
• Scouting for good elements outside: some key resources will become free in this environment. This may also be an opportunity.

e) Finances

• Keeping cash reserves for opportunities: Opportunities may exist that may require cash, for instance acquisitions, or the restart of the economy post Covid-19.
• Seeking subsidies: Certain subsidies and reliefs may exist. Whether industry related, or even C02 (C02 not emitted giving way to advantages), there may be unexpected opportunities.
• Securing investor funding asap: In such environments, most mentioned that it was best to secure funding asap — term sheets, credit and loans, etc. The medium term may not work anymore — nobody knows what the environment will look like in a few months’ time.
• Obtaining financing/loans: states announced billions in schemes to help businesses — some lending should be available through applications, in the form of zero-interest loans.

3) Showing crisis leadership at a time of destructive creation

Finally, several executives highlighted that that this may not all be bad. The right combination of innovation, execution and leadership can help some, either new or existing, emerge stronger than before.

Showing crisis leadership

It is in these times that leadership matters, to provide direction, enable careful assessments, communicate transparently and involve employees. However, growth leaders sometimes have different skills than crisis leaders. Some have said that crisis leadership entailed the ability to:

• Have tactical plans but keep an overall vision and big picture.
• Make hard choices to cut losses, and gather energies towards the right direction.
• Align expectations of many different stakeholders and parties.
• Accept all the attention — one has to have the shoulders for this.
• Have empathy towards those that are impacted.
• Stay positive to gather forces, and calm to provide reassurance.

Room for destructive creation

It is in such situations that destructive creations take place, to quote the famous Schumpeter. Thinking with an open mind, analyzing the shifts in the world order may enable some to spot opportunities to pursue and execute on. Some will thrive in these times of change. But it requires an outside-the-box type of thinking.

That’s all folks. Hope this helps. In summary, to cope with Covid-19, select leaders, ceos and executives of SaaS B2B startups recommended to adapt fast and fix the organizations to align to new market dynamics; find hidden opportunities in the new market environment and show crisis leadership at a time of destructive creation. Then of course, the devil is in the details for the right selection of changes, timing and proper execution.

We will get through this, and for some even stronger. Have faith.

Hope it helps, and feedback welcome as always.