The “Snap Of The Tail”​ of Disruption = Next Normal, New Rules

by David Giersdorf

Disruption is not just how it starts, how long it lasts, or how bad it is; it’s how it ends. Watch for the “snap of the tail”, when the stored energy of the disruption event makes its final concentrated burst.

I recently discussed this topic in depth with Bertrand Petyt, Managing Partner of Vitruvius Partners Group in his popular cruise industry-related podcast series. One of the significant carry-over effects of the COVID-19 disruption for the cruise and travel industry will be the return to net positive cash flow. This is an issue that will separate those companies that are able to embrace and act upon new opportunities emerging in the next normal, and those that continue to struggle, looking for ways to regain momentum. And, don’t forget, there are more forms of capital to leverage during a recovery than only cash. These include what I call “Relationship Capital”, “Talent Capital” and the “Power of Purpose”.

Here is the relevant portion of the podcast interview –

Bertrand Petyt:

Tell us a little bit, inside of this, understanding that we will go through this. We’ve gone through 30 different events in the past 30 years or 40 years, so we will go through it, but if you had CEOs, if you were talking to all the CEOs of cruise industries in the seminar, what would be the one advice, the most important advice you would give them in a speech today?

David Giersdorf:

Yes, that’s a great question. I would say, as excited as we are that the reemergence post-COVID pause is occurring, that we must be cautious. We must watch for what I call the “snap of the tail” of disruption. Disruption is an event, and it has a beginning, it has a middle, and it has an end. And there can be a lot of stored energy in that end, a final conclusion where the new rules, the new normal become clear.

I call it the snap of the tail because that’s the point at which perhaps those who have managed somehow to hang through the disruption, but not to use that time to reposition, retool, strengthen their situation, they may be finally thrown off of the disruption to where their position is irrecoverable. I say watch for the snap of the tail, and we’re seeing that. I mean, we have another variant of COVID disrupting markets that were thought to be secure.

But I think there’s an even bigger one and what I would share with the CEOs. I think the snap of the tail, and the whole industry’s issue, is going to be net positive cash for the next two to three years, together with zero disruption to the startup and the reramp to full operations. And the reason I say this is because, while a tremendous amount of cash has been raised to survive the pause, an equally large amount of cash will be necessary to restart and rebuild operations, supply chains, crewing, vessel reintroductions, and taking delivery of so many new ships that are in the pipeline. Tremendous amounts of cash requirement together with the interest expenses and debt payments on the many billions borrowed to get through this time.

I think that cash is going to be an issue. And a key element of that is the industry has published cruises further into the future, which is a good thing to give people something to dream for and to reach beyond the disruption, and to generate cash in the form of deposits and payments now. That means that in the future, that cash won’t be there to cover operating costs, so continued growth, continued eye on liquidity is going to be required because I think it’s going to be two or three years to get through rebalancing the cash to a net positive cash position for the industry.

Listen to the full podcast below, or click here.

To further explore proven strategies for #NavigatingDisruption, and ways in which I can help, I invite you to do one or more of the following:

• Read My Book: Hard Ships – Navigating Your Company, Career and Life Through the Fog of Disruption. Available on Amazon gethardships.com

• Follow Me: https://www.linkedin.com/in/davidgiersdorf/ where I regularly share thoughts and perspective on current developments

• Contact Me: Advisory services for your C-Suite or Board. Benefit from the value of perspective and deep expertise when navigating the challenges and opportunities of change and disruption. david@globalvoyagesgroup.com