“What now?,” asked a recent McKinsey article on the implications of Covid for business. “Over the past six months, they have reorganized supply chains, set up remote operations, and made tough financial decisions. But without a COVID-19 vaccine yet available, not much feels different, and the summer pause hasn’t done much to relieve fatigue.”
“One priority, then, is to reenergize the organization – to act rather than react. Even as the COVID-19 crisis continues to create a world of uncertainty, the goal must be to rebuild for the longer term. Companies that are strong and resilient will be better placed to survive and prosper. Those are qualities that can’t be taken for granted; they need to be cultivated.”
But, how can a company, – regardless of size or industry, – formulate a rebuilding strategy for the longer term in such an uncertain environment? As former president Dwight Eisenhower famously said when he was the overall Commander of Allied Forces in WWII: “In preparing for battle I have always found that plans are useless but planning is indispensable.” In other words, rather than doing so on-the-fly, planning during highly uncertain times requires that companies thoroughly map out their rebuilding strategy, and quickly and flexibly react to the continuing changing circumstances.
“There are many different ways to lead, but regardless of the type of business or geography, we believe that the ten actions detailed here are those from which a path to emerge stronger can be found” said the article:
- Think of the Return as a Muscle. “Handling the crisis is a marathon, so the emphasis should be on reinventing business models for 2021 and beyond, not so much on protecting 2020.”
- The recovery will be digital. Such a digital recovery will include “technology-enabled next-generation operations, analytics-enabled engineering productivity, and automation of service-related processes.”
- Rebuild for speed. “That means speeding up decision making, deploying nimble teams, redeploying talent, and empowering tomorrow’s leaders to take responsibility today.”
- Reimagine the post-pandemic workforce. There will be new ways of working in the post-pandemic era. “Consider changing how work gets done… And continue to invest in learning.”
- Make bold portfolio moves. Programmatic M&A requires a solid game plan. “To get positioned for strong growth in 2021, shed business units that aren’t part of the future growth equation and move quickly to fund new, transformational growth areas.”
- Reset technology plans. Companies have entered a new wave of automation and digitization. “Take a hard look at technology investments and reset them for value and speed. Aim to raise the technology quotient of all employees.”
- Rethink the global footprint. “Given the vulnerability of just-in-time supply chains that the COVID-19 crisis revealed,… companies need to take a hard look at how and where they operate.”
- Take the lead on climate and sustainability. Integrate climate risk into longer term strategies. “The changing climate is poised to create a wide array of economic, business, and social risks over the next three decades.”
- Think about the role of regulation and government. Work with government on top priorities. “As governments continue to act as payers, lenders, and insurers of last resort, their reach has extended into all aspects of business.”
- Make purpose part of everything. Companies should focus on more than the bottom line. “Having a strong sense of purpose helps companies navigate uncertainty – and people stay engaged and productive.” Now more than ever, companies must match their actions to their words.
Let me briefly comment on three of these actions.
The recovery will be digital
Digital infrastructures and applications have kept firms and economies operating during the pandemic. A 2019 study found that the average digitization level across all industry sectors was only around 25% of their ultimate potential. The pandemic has now made the case for accelerating the digital transformations they were forced to make to help them cope with the crisis.
For years, companies and industries found all kinds of reasons not to embrace telemedicine, online learning, work from home, virtual meetings and other online applications. But, necessity is the mother of invention. We’ve been finding that not only do these digital applications work remarkably well, but they offer a number of important benefits, like not waiting for a doctor’s appointment in a room full of sick people, or not having to travel to participate in a 45 minute meeting.
Physical products and services have evolved and been perfected over many, many years. A straightforward digital recreation of a physical offering will generally result in a much inferior user experience. Instead, the offering must be reinvented for the digital world. In the coming years, we can expect superior user experiences and other innovations across many online applications.
Reimagine the post-pandemic workforce
The Covid crisis has forced white-collar America to reconsider nearly every aspect of office life. Before the pandemic, around 10 – 15% of workers were already working from home on any given day, but once the pandemic took off earlier this year, companies had to close their offices and ask nearly all their employees to work from home. Generally, companies have been quite pleased with how well remote working has gone, given that the change had to happen on short notice and with little preparation.
Working from home may well have succeeded during the pandemic because it was viewed as temporary rather than permanent. It worked particularly well for groups that had already built up a reservoir of social capital through countless hours of meetings, informal conversations and other social interactions. But, corporate cultures could erode over time with mostly remote interactions. Newer employees, in particular, may feel isolated rather than part of a kind of workplace extended family.
It’s difficult to judge whether the surge in remote work will last, but it’s likely that office work will never be the same. Companies should redefine what the workplace now means and how to best organize a more distributed, remote workforce. They should carefully examine what has worked well and what has not. Some previous practices now seem to have been wastes of time, but others seem to be particularly important and impossible to replicate online. Many miss the good-old pre-pandemic days when you could bump into colleagues over lunch or coffee.
Properly organized, remote work could contribute to building a more diverse, more capable, and happier workforce, helping companies draw on a much wider talent pool, making work more accessible for people with disabilities, and offering much needed flexibility to parents and caregivers. And, beyond increasing the productivity and job satisfaction of their employees, another attraction for employers is shrinking real estate costs.
Make purpose part of everything
In September of 1997, the Business Roundtable (BRT), – an association of CEOs of major US companies, – issued a Statement on Corporate Governance which argued that “the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.”
But things started to change after the 2008 financial crisis. In August of 2019, the BRT released an updated statement on the Purpose of a Corporation, which overturned it’s 22-year old commitment to shareholder primacy to now emphasize a “Commitment to All Stakeholders” and to “An Economy that Serves All Americans.” This new statement, originally signed by almost 200 CEOs, now places shareholder interests on the same level as the interests of all its other stakeholders, including customers, employees, suppliers, and communities.
Corporations clearly have fundamental responsibilities to make money and reward their investors. But, successful companies serve more than just the bottom line. As McKinsey points out, “The pandemic has brought this issue to the fore in powerful ways, prompting many CEOs to gut check what they really believe and take action accordingly… Repeatedly during COVID-19, CEOs have found themselves consulting and coordinating with governments, suppliers, partners, employees. They have been experiencing multistakeholder capitalism in a more visceral way than ever before.”