The K-Curve and the Value of Frameworks

For those that know me well, they have learned that I’m a sucker for graphs, curves, Venn diagrams, four-quadrant illustrations and just about any shape imaginable that provides context to understanding business. Perhaps an artifact of my deeply engrained ENTP (Myers Briggs) profile…but true enough I am a framework junkie and my latest find in this regard is timely, while somewhat elusive to find.

The image in this post was a screenshot from an online meeting I had with a client earlier this summer. As you can probably tell, this was posted on Facebook of which I do not frequent very often and even less so expecting relevant business discussions, however this one caught my eye. I’ve since attempted many times to find the source of the graph and is purportedly from a Raymond James post, but that is still to be verified. If anyone happens to know more, please do share!

In the absence of an authored title, I will call it the K-Curve as it illustrates the variant paths and likely outcomes businesses have experienced in the current reality of Covid-19 and describing the shape of the letter “K” based on the different outcomes. As is annotated in the image, the four main outcomes businesses are experiencing are described as follows:

Scenario #1 – Straight up: Some won’t skip a beat (i.e., Medical supplies, streaming, e-commerce)

Scenario #2 – Straight down: Some will have to face the music (i.e., Over-leveraged, cash-flow driven small businesses)

Scenario #3 – Rebound: Some will get their rhythm back – (i.e., Home improvements, surgeries, technology)

Scenario #4 – Delayed agony: Some will get the blues – (i.e., Airlines, entertainment, car sales) 

While there is certainly plenty to debate in the categorization, what is more important is what does this mean to your business? My first cut of how I would begin framing action based on each of the categories is as follows:

Scenario #1 action planning: Supply chain, supply chain, supply chain (and in the case of the virtual products, that can be interpreted as capacity, capacity, capacity, both in pipe or platform logistics as well as technical human capital).

Scenario #2 action planning: By far the grimmest future of the four, it is an honest assessment of whether there is enough of a viable market to warrant the continued risk. You will find out quickly in this scenario whether you have any fire left in the belly for your business as it will be tested. Just ask those in hospitality right now. Interestingly enough, the endowment effect looms large for many in this scenario and will likely cut their losses even if there is a way to gut it out. This inevitably makes room for those (maybe you?) to stay in the fight in spite of the uncertainty.

Scenario #3 action planning: Strategize how you come back not just as you were (pre-Covid) but how you will pivot nimbly and take market share in the rebound while others are still hiding under a rock.

Scenario #4 action planning: While there is still a cash lifeline, assess business pivots in the business model and similar to scenario #2, what you have FITB for. Some of the greatest success stories are those of businesses that found themselves facing down the barrel of obsolescence, only to pivot their way out and finding the outcome more than the former business could have ever produced. One of which is a client and while I can’t share the details of now, in the near future I will have them as a guest on my podcast to hear them tell the story. It is truly inspiring.

Whichever of these describe your situation, the wisdom is in asking the hard question that doesn’t have the easy answer. And which is why I appreciate frameworks and mental business models as this type of analysis, as simplistic as it may be, can be revealing in examining your business. Safe to say I am a big advocate of visualization of data and I repeatedly find value in what an image will communicate about what is happening in business versus just looking at the numbers. And if a second set of eyes would be beneficial as well, happy to oblige.

Update - Fresh off the 1st presidential debate where the K curve came up in discussion, see the following:

One more thing… As an Advisor to owners and operators of small to medium sized businesses, I help solve big problems and assist my clients in achieving their goals. If you are, or know someone who is, a business owner looking for a fresh perspective or needing help in some way, I would welcome the opportunity to learn more. I can be reached here and please know that I treat all inquiries and referrals with the utmost responsiveness and professionalism. Thank you for your consideration! Rick