With the enforced closure of pubs and restaurants as a result of COVID-19, orders into online drinks retailers soared. Alcohol sales for home consumption for the 17 weeks to 11 July 2020 were up £1.9bn compared with the previous year, according to US data company Nielsen.

One of the companies well-placed to benefit was FromVineyardsDirect.com, a wine distributor which had found itself in administration just 18 months earlier.

ICAEW members Lee De’ath and Richard Toone of CVR Global – Partner and Managing Partner respectively – oversaw a pre-pack sale of the company in September 2019 after the business had got into financial difficulty.

De’ath explains that the company, which specialises in selling hand-selected wines to the retail and wine merchant markets, had previously seen severely restricted cash flow.

“The company had fluctuating profitability from inception, which impacted working capital, ultimately resulting in the decision to seek the protection of an administration.”

However, by entering a formal administration process, it allowed the business to be sold to a new parent in The Wine Company Limited. The new owners have continued to operate the website and have invested heavily in growing the brand through a marketing programme which has set the business up for the busy period.

Tony Harrison, director of Harrisons, says the key to successfully saving a business through a formal insolvency process is to approach a licensed practitioner at the earliest opportunity, in order to weigh up all the options, including avoiding a formal insolvency.

“Get hold of an insolvency practitioner as soon as you can,” he says. “The reason for that is cash flow. When a business gets into difficulty, it enters a period of stress because the cash flow has gone. If you take advice at an earlier stage, you may be able to avoid a formal insolvency altogether.”

It’s really important to work out if you are legally allowed to continue to trade, says transformation consultant Hannah Keartland, and business owners may need to get third-party advice on this. “When making tough decisions it’s important to be clear on the overarching vision for the organisation — why does it exist, what is its purpose?

“Being really clear on that helps with making difficult judgement calls where there’s no clear answer. It may be that the route to delivering that purpose is not through continuing the activities or operations as before COVID-19 — eg a transformation, takeover, merger or asset sale may be the best route forward.”

Alcohol sales for home consumption were up £1.9bn for the 17 weeks to 11 July 2020 compared with the previous year.

The need for a change in corporate direction doesn’t always come with an immediate deadline. For Ford, one of the world’s largest car makers, it has invoked a transformation programme to strengthen long-term viability in an increasingly competitive market with changing customer priorities.

Unveiled in 2017, the company’s Creating Tomorrow, Together strategy is designed to reinvent the business as a leaner, efficient and futureproof organisation. Specifically, it has committed to scaling up its activities in electric vehicles and self-driving cars and to increase its focus on sustainable transport networks.

“We are moving with a renewed sense of urgency to improve the fitness of the business and improve our launches, while at the same time modernising Ford in a way that plays to our strengths,” CEO Jim Hackett explained in a company statement in April 2020.

The strategy includes a commitment to incorporate the UN’s sustainable development goals into the organisation’s thinking, particularly those on promoting well-being, innovation in industry, taking action on climate change and supporting the transition to sustainable cities and communities. Its commitment to the latter includes plans to help customers work in cities in a sustainable way, through the use of smaller mobility vehicles and measured reporting of its progress.

This focus on sustainability is certainly not unique to Ford. In fact, it has instigated transformations across multiple sectors in recent years as management teams recognise that customers and investors are demanding companies consider how environmental, social and governance issues will affect corporate viability in the long term. 

“There is a growing body of evidence that organisations which have strong purpose, and look at more than just financial outcomes, are more successful in the long run,” says transformation consultant Hannah Keartland.

This trend was justified still further last year when the Harvard Law School Forum on Corporate Governance published a paper that showed that companies that are working to improve their scores on environmental, social and governance metrics outperform companies that are not.

Accountants and chartered practitioners who are keen to improve their skills in sustainable business transformation may want to visit The Finance Innovation Lab, which was originally set up as a joint venture between the World Wildlife Fund and the ICAEW. In 2015, it became fully independent but continues to offer a range of resources for those who are seeking more information about creating sustainable business models.

Ford is currently planning to increase its focus on electric and self-driving cars and sustainable transport networks.

The coronavirus pandemic has been unkind to many businesses with a large high-street presence, and coffee retailers are no different. But despite a significant drop in sales, Starbucks can take some comfort in the fact that its most recent major transformation started during the last global financial crisis, when the previous CEO Howard Shultz closed hundreds of stores, laid off hundreds of middle managers and employees and embarked on a major acquisition trail of smaller drinks businesses.

When Shultz began the 2008 transformation, he started by slashing more than $500m in costs throughout the business. He used some of this money to reinvest into the workforce through training and enhanced employee benefits.

Key to the changes was encouraging a new corporate culture which, he said at the time, would be felt by customers in stores. The company’s leadership was told to focus more on developing its diversity and inclusion programme and encourage transparent engagement, communication and collaboration.

In July 2020, the Thinking Ahead Institute published a study looking at the importance of corporate culture in successful businesses. It concluded that, to be successful, transformational leadership involves “writing wide-scale change and motivating the organisation to do more than happens incrementally”.

Marisa Hall, Co-Head of the Thinking Ahead Institute, distils the best corporate cultures into three categories. According to Hall: “The goals of organisations should focus on sympathetically combining three things: building a diverse array of people that make up the organisation, recognising identity, and treating people with decency.”

In the Thinking Ahead Institute report, it concludes that achieving a change in culture, however, means challenging prior assumptions and beliefs, which requires innovative thinking. So, while the benefits of a strong and collaborative corporate culture are many, achieving a change can be tough for leadership teams to achieve.

“It has to come right from the top,” says transformation consultant Hannah Keartland. “It has to be something they believe deep in their bones. They may have to go through personal change and that’s hard.

“It involves being humble and recognising the leader they were before is not necessarily who they need to be now. It means working differently and it needs to feel like they’re working differently.”

Starbucks is building its corporate culture around transparent engagement, communication and collaboration.

These case studies are accompanied by this feature on successful business transformation and strategy amid COVID-19.