LEADING OUT OF ADVERSITY
COVID-19 has added an enormous layered transitional challenge—the need to move from a situation where the real economy has been placed in a coma by social distancing measures, to building a path to growth and prosperity. As a result, companies in many sectors will have to survive a brutal short term in order to access long-term options. But while survival may be top of mind today, thriving is the long game. And this requires leaders to respond to a new environment, a new customer, and heightened societal expectations in order to lead the way out of adversity. Trustful, purposeful organizations will lead the way.
In other words, long-term imperatives have been supplemented by the short- and medium-term imperatives of conquering the disease, restarting the economy, and adapting to and shaping the post-COVID world, which will likely be quite different from the pre-crisis reality. There will be no “return to normal.”
FIVE IMPERATIVES FOR LEADING OUT OF ADVERSITY
To address these enormous short- and medium-term priorities, we see five leadership imperatives.
SUSTAINABLY FLATTEN THE CURVE
From quarantine and aggressive social distancing to treatments and vaccines… In the interim, we need new approaches, drawing on learnings from places like South Korea. These will require large-scale testing both for infection and immunity, new models for risk stratification, new practices for rapid tracing, tracking, and enforcement, and new guidelines for when, where, and how to open communities and the economy—and for when and how to react if infections recur.
WIN (BACK) THE NEW CUSTOMER
As the disease is brought under control, businesses will need to start the journey to win the new customer in the post-crisis world. Wars, contagions, and other social crises often shift attitudes, behaviors, and patterns of demand. World War II not only forced the invention or accelerated the commercialization of jet engines, radar, penicillin, helicopters, pressurized aircraft cabins, guided rockets, artificial rubber, and a host of other products, but also ushered in or accelerated commercial aviation, a suburban housing boom, the participation of women in the workforce, and other profound social changes. Companies need to discern, adapt to, and shape the emerging new reality.
The trickiest aspect of this will be distinguishing between crisis-induced short-term changes and more permanent shifts. Companies will need to detect emerging trends using high-frequency data analysis and test their durability by looking at coherence with long-term trends, analyzing consumer frictions, examining signals from maverick players experimenting with new business models, and learning rapidly from countries that are further ahead in the cycle, like China and South Korea. To do so, companies will need to pivot from a crisis management mindset to a more creative and imaginative one.
With imagination, we can do better than merely adapting to a new environment — we can thrive by shaping it. To do this, we need to strategize across multiple timescales, each requiring a different style of thinking. In the current Covid-19 crisis, for example:
- The initial emphasis is on rapid reaction and defense.
- Then the focus shifts to constructing and implementing plans to endure the likely economic recession to follow.
- As the recession abates, the focus shifts to rebound — making adjustments to portfolios and channels as we seek to exploit recovering demand.
- Over time the situation becomes more malleable, and imaginative companies shift their focus to reinventing — seeking opportunity in adversity by applying more creative approaches to strategy.
In other words, renewal and adaptive strategies give way to classical planning-based strategies and then to visionary and shaping strategies, which require imagination.
Against this backdrop, two trends are already clear. The first is a massive acceleration of the shift toward digital platforms and channels. Traditional enterprises will need to make sure that they fully participate in this shift rather than risk accelerated disruption from digital incumbents.
The second is the enormous challenge for many parts of the economy to restore consumers’ trust. Entering a restaurant, going to a store, flying, or watching live entertainment will all entail heightened levels of anxiety, which could inhibit demand well after distancing measures are lifted. Businesses will therefore need to implement confidence-building measures, both individually and collectively, just as a series of new security measures were necessary to restore confidence in air travel after 9/11.
ACCELERATE DIGITAL TRANSFORMATION
As businesses adjust to the post-COVID world, they must therefore accelerate their digital transformation. Well before the crisis, many businesses pursued digital transformation programs to both defend themselves against competitive disruption and leverage the superior functionality of digital business models with respect to agility, evolvability, scalability, productivity, and customization.
CREATE ADVANTAGE THROUGH RESILIENCE
As companies and countries reconsider their operating models, resilience will become a key design criterion. Companies have spent decades building efficient, extended global supply chains that located production activities in low-cost locations and connected them with digitally enabled logistics. Their effectiveness has been measured in terms of speed, cost efficiency, and profitability. COVID-19 has shown that systems built mainly to maximize efficiency tend to be brittle under stress. This applies not just to business systems but to our health care and disaster preparedness systems, too. Our benchmarking indicates that many companies intend to rebuild their supply chains in a more decentralized and resilient manner. And many governments, having discovered their dependence on a handful of distant manufacturers for vaccines, masks, and ventilators, will likely be considering whether shorter supply chains, emergency stocks, and greater self-sufficiency constitute better policies in critical areas.
MOBILIZE PURPOSE IN THE COMMON INTEREST
Companies must engage deeply in corporate purpose, multi-stakeholder capitalism, and sustainability in response to global warming and other collective concerns.
Source: BCG