How to navigate your startup through the pandemic

Highlights

11 min readAug 12, 2020

Most experienced managers know how to react to a ‘normal’ crisis — but the pandemic is not like any other crisis
The Future is ambiguous and unclear
Agile startups have a big advantage over corporates
The COVID-19 crisis requires a playbook that is different from ‘normal’ crisis measures

COVID-19 has turned the world upside down and we at DiscoEat were not spared from the economic and operational lash out of this fast-spreading disease. As most businesses and especially startups have experienced, revenues have strongly decreased until they ended up at the zero point for almost two months. Luckily, we have rebounded and are fortunately significantly above pre-crisis levels but the last few months have taught us a lesson about how this crisis is different from other crises, how the future will change, and about how companies, especially startups, can and should adapt to survive and strive.

Most experienced managers know how to react to a ‘normal’ crisis — but the pandemic is not like any other crisis

Most managers have experienced a crisis or downturn in one shape or another. The last big downturn was the financial crisis in 2008. Economic crises are usually characterized by business failures and sometimes even bank failures (2008), decreased customer demand, slow or negative growth in production, and increasing unemployment levels. The economic pain caused by recessions, though often temporary, can have major effects that alter an economy. The blueprint response is usually to cut costs deemed unnecessary and to focus on the core business. Credit lines are renegotiated, potential government programs are utilized and most companies go into some kind of hibernation in the hopes that the downturn will not last too long.

A global pandemic shows the same characteristics of a ‘normal’ crisis but at the same time is very different:

Distribution Channels: During a ‘normal’ crisis, traditional distribution channels continue to be functional. In contrast, during the corona crisis, supply and distribution channels have been heavily impacted. As the world of business is so closely interconnected on a global level, supply chains had to be altered, resulting in downstream consequences. Accordingly, some businesses had to close down temporarily, not necessarily because of a lack of demand, but to adjust their distribution channels or wait for supplies.

Interaction of People: While a ‘normal’ crisis does not fundamentally interrupt human interaction, in times of the Corona crisis, people’s human interaction is entirely altered as it becomes difficult to meet friends, family and work colleagues. Everything learned from birth regarding social interactions has been entirely challenged and people have had to learn new rules of social behavior. In recent history, this is the first time that a crisis posed such a strain on people’s personal lives. Even after the reopening of shops and restaurants, people need to remain cautious and live a life that’s different than before. For many, this poses a challenge, and protests due to restrictions have been common in several parts of the world.

The “Human interaction factor” impacts industries very differently: In a ‘normal’ crisis, there are cyclical sectors and less cyclical sectors. But the effect on individual sectors during the Corona crisis differs fundamentally based on how common human face-to-face interactions are. Some industries suffer a dramatic hit — not only because they are affected only by the economic downturn (e.g. luxury goods) but rather because of their ‘high-contact’ nature. Human interaction and contact are at their core and all of a sudden, this is not possible anymore (e.g. some types of travel, events, etc).

“Agility” of Regulations: As most governments have never experienced a crisis of this type, they need to remain agile since they do not have set playbooks to follow. Many governments seem to be overwhelmed. Political leaders, just like citizens learn “on the go”. Regulations are updated according to an ever-evolving situation and advice from community leaders, other countries and health authorities. Consequently, citizens and companies have to cope with changing rules almost on a day to day basis. The changing guidelines around wearing masks are just one example of ever-evolving rules and regulations.

Duration: The duration of the Corona crisis is completely unforeseeable. Especially the possibility of multiple infection waves determines the strength and length of the crisis. The impact is hyper-local and may dramatically differ from region to region. It’s still unclear if antibodies last or whether a second infection is possible. Much will depend on a possible vaccine if there ever will be one that is effective, which is yet to be seen.

The Future is ambiguous and unclear

So this crisis is vastly different from previous crises but what can we expect going forward and how should we react and position ourselves? The future is unknown as this situation is unlike any other, posing major challenges to businesses including altered customer behavior, changing customer needs as well as supply chain dysfunction. The rules of the game for many industries and people are being rewritten as we speak.

Regulatory guidelines are being adapted.

Just like companies, governments and health authorities have never encountered a comparable crisis. Officials learn from recent developments and constantly adjust rules and regulations in the process. Therefore, even from a legal perspective, everything remains uncertain and ambiguous. Companies have to accept that regulations will continue to change. Depending on your industry, this may have more or less of an impact on your business. Especially “high-contact industries” like events and restaurants are highly dependent on changing government regulations.

Consumer (B2C) behavior is changing.

Many people drastically changed their spending patterns. There has been a strong shift to e-commerce. According to a McKinsey & Co. study, e-commerce penetration in the US surged during the pandemic from 15% at the start of 2020 to nearly 35% at the end of Q1. That’s 10 years of growth in only three months. Microsoft CEO Satya Nadella remarked on a recent earnings call that they “’have seen two years of digital transformation in two months”. The big winner here is Amazon and the big loser is stationary retail. Even with shops and restaurants reopening, customers are still cautious and may not go to the shops or dine out as often as compared to pre-crisis levels. Customer’s are avoiding crowded places which hurts offline stores. Making customers feel safe and to build trust is vital. While it is likely that such behavior prevails post-crisis, future customer behavior remains hard to predict.

Business partners’ needs (B2B) are uncertain.

The same holds true for many B2B businesses who slashed their budgets and are rethinking how they do business and what is really relevant to them. Partnerships, often crucial to startups’ business models, are impacted by the crisis as well. Many projects are stopped or postponed as partners often reevaluate priorities. The needs of your partners are uncertain and they might not even know what is best for them at the moment. In this situation, it becomes even more important to collaborate and to communicate to survive the crisis together.

Agile startups have a big advantage over corporations

The pandemic has taught us one very crucial lesson: trial and error is the key to success. Staying agile and trying out new things has never been more important than in this dramatically fast-changing situation that requires immediate adaptions and does not allow for elaborate “waterfall type” planning. Startups have a few characteristics that differentiate them from corporates that become essential for survival and recovery:

Speed & agility: It's in the nature of startups to “move fast and break things”. The “Lean Startup Methodology” by Eric Ries, a book read by many startup founders, explains the importance of speed & agility as an approach to problem-solving really well. Staying fully operational by switching to home office was just one example where startups did well as many were used to some form of remote work setups from before the crisis and could easily switch to entire remote work during the lockdown or partial remote work to keep up with social distancing regulations. While it often takes corporates time to change from a bureaucratic, office-based setup to a flexible one, startups are much faster in reacting to such changes in the work environment and business operations. But home office is just one example. Rethinking and adjusting the overall business model is where startups really have an advantage over corporates. Overall, startups are more flexible and agile and can, therefore, react more quickly to newly emerging situations.

Open-minded employees: Startup employees often have an open, agile problem-solving mindset that goes far beyond typical response strategies which enables out-of-the-box approaches and tackling unexpected circumstances and situations. Additionally, employees at startups tend to be highly engaged with the product or service and have a stronger feeling of belonging to the team and alignment with the company’s goals which is beneficial in this crisis to keep morale high, stay motivated and collaborate for the greater survival of the startup.

Open-minded customers: Customers of startups are generally more open for innovative new solutions and are more likely to adapt to new features and ways of operation due to the crisis. They are also often more forgiving if they do not receive a “perfect product”. Customers may be more unforgiving for quick and dirty solutions provided by big corporates.

The pandemic requires a playbook that is different from ‘normal’ crisis measures

Since the Corona crisis differs from a ‘normal’ crisis, a new playbook is required to address upcoming challenges and help businesses to survive. Six crucial steps help to bring businesses back on track:

1. Idea Generation

At first, ideas have to be collected about how to adjust your business model, operations, communication flows, product features, and/ or pricing with the goal of increasing the chances of survival and success. Ideas can be generated by consulting with your team, customers, or looking at solutions in other markets. With regards to changing customer needs and depending on the startup and the existing business model, new features can and potentially must be developed, the existing business model changed or new verticals added. The situation forces companies to take a step back and reconsider the business model to find out what else can be done. The great thing about the pandemic is that you get ideas that you would not have gotten otherwise— it literally expands your “thinking horizon”.

At DiscoEat, our main business is to bring customers to restaurants at off-peak hours via a reservation app. With restaurants closed, we had no business from one day to the next. We quickly “hacked” the app to be able to book slots for pick-up — completely free for our partners. We also just launched a complete delivery solution in record time — a completely new vertical to our business model that will stay in the future. Another interesting example is the food supply ordering system for restaurants called Choco — in order to increase revenues of suppliers and restaurants, the Berlin-based startup changed their business model to accommodate for restaurants to sell high-quality restaurant ingredients they ordered from the suppliers directly to their customers.

2. Idea Prioritization

Coming up with many ideas is important but not all ideas are great and not all can be executed. Therefore, the collected ideas need to be prioritized according to time, costs, risks and legal requirements. During the pandemic, time to market is the driving force behind the decisions. While speed is of essence, it is important to decide on a mix of fast and immediately impactful ideas (e.g. our “hack” to change the app to restaurant pickup) and some that may take slightly longer (e.g. developing a new vertical, like our full delivery solution). Lastly, there will be fantastic ideas that will have a massive positive impact on your business but take too long to develop now. Those can be put on the backburner for now, but should be tackled in the future — we got a few of those that we’ll develop in Q4.

3. Idea Execution

Once ideas have been decided upon, they need to be executed. In this pandemic “better done than perfect” is often the right approach, This does not mean that you have an excuse for sloppy work. Your solution must be functional, but it does not need to have a full and perfect set of features from the start. Following Ries’ lean startup methodology, understanding the needs of the customers, and developing solutions to address such has priority over extensive planning of the perfect launch of a feature or product. A “waterfall approach” often does not make sense, but this is even more true during the Corona crisis. It remains essential to be agile and to develop fast. Wherever necessary or useful, partnerships can be formed. At DiscoEat, we support our partner restaurants in optimizing their occupancy. Hence, we looked at how we can solve the newly arising challenges of our partners with new pickup and delivery features. Be scrappy!

4. Testing & Feedback

Testing the new features with customers is essential in order to check if operations run well and see how customers react to them. How else would one know if the changes truly work? If you are running a platform like we are, this includes both — partners and customers. Be aware of this complexity and don’t over-prioritize the feedback of one over the other.

5. Assessment

Once tested and feedback is received the features need to be assessed, unemotionally, to make decisions on what to keep and what to drop. Unsuccessful features/ ideas should be dismissed, the medium successful ones further improved and the very successful ones should be doubled down on. This way, you can ensure that the best possible options are taken forward with the highest chance of success. This step sounds simple and straightforward, but often the devil is in the detail and the assessment criteria are different from company to company.

6. Monitoring & Re-evaluation

The rapidly changing situation should be continuously monitored and re-evaluated. The truth of last week may not be the truth of this week. According to new regulations, changing customer behavior and changing partner needs, businesses have to adjust and decisions have to be made continuously. Just like you, your partners are also learning, adding skills, and experimenting with new ways to do business. They are a valuable source of feedback about your solutions which is why constant interaction is vital for your business’ success. As an example, at DiscoEat, we call our restaurant partners once every two weeks to update information on both sides and determine areas of support. We are also in constant exchange with our users. Staying close to your customers is as important as ever.

As long as the Corona crisis prevails with all the attached uncertainties and challenges, survival is the focus of any business. Compared to corporates, startups are better positioned to navigate the ever-changing industry environment to come out stronger than before. We are all surely in for a challenging ride with ups and downs on a bumpy road. Only time will tell how the “new normal” looks like. Until then, we need to be agile!