Many consumer-goods companies and retailers have risen to the challenges presented by the pandemic. Seven core practices can help them keep what has worked and prepare for what lies ahead.
The COVID-19 pandemic is posing staggering health and humanitarian challenges. As the crisis evolves, companies must act on multiple fronts to protect their employees, customers, supply chains, and financial performance. Retail and consumer-goods sectors have been particularly affected, with frontline employees directly at risk and companies struggling with demand that is either rapidly evaporating or surging well past the available supply.
These most trying of circumstances have forced organizations to adapt quickly. In the process, many have achieved what they had aspired but failed to deliver for years. Decisions are made faster. Innovation cycles have dropped from months to days. Working remotely, previously a benefit offered to a portion of workers at some companies, is now an imperative for most employees. Companies are putting a greater emphasis on employees’ physical and mental health than ever before, and they’re celebrating leadership capabilities that weren’t considered critical before the crisis.
These shifts occurred out of necessity—and, without thoughtful action, many of the recent changes are likely to revert over time to more traditional approaches. Leading companies will use this moment as an opportunity to rethink and reset their operating models for the future.
The seven shifts of the next normal
As companies reconsider and reconfigure their operating models, they need to be sure to underpin them with seven core practices that will define the next normal1 (Exhibit 1).
Exhibit 1
New behaviors can evolve into the next normal for organizations.
[What organizations have shown] => [Aspirations for the next normal]
- Rapid prioritization => Reset of operating model and rhythm around fewer (and bigger) priorities
- Management of cost to maintain liquidity => Comprehensive cost reset
- Real-time innovation in digital channels => Significant resource distortion for must-win capabilities
- Experimentation with remote workforce => Acceleration to the flexible workforce of the future
- reengagement with employees => Changed employee value proposition
- Faster decision making => Sustained metabolic rate and speed of decision making
- Resilient leadership during crisis => Heightened focus on leadership development
1. Reset of operating model and rhythm based on fewer (and bigger) priorities
Create a sharper focus on top priorities, while pausing or discontinuing other less critical initiatives altogether. Align with fewer (and bigger) priorities to reset organizational and operating structures.
2. Comprehensive cost reset
Reset cost structures in order to recapture pre-crisis margins.
Physical footprints will change to accommodate people coming back to work. Physical-distancing protocols will likely need to be put in place, at least in the near term, to make sure that employees feel safe. New flexible work options will have immense HR and IT implications. These and other changes will compel companies to adapt their organizational structures and operating models.
Exhibit 2
Cost structures need to be revisited post-crisis.
Profit and loss headwinds
- Top line
- Pricing and promotions
- Shipping and handling
- Labor costs
- Rent/occupancy
Profit and loss tailwinds
- Top line
3. Significant resource distortion to must-win capabilities
Rapidly track the substantial acceleration of key consumer trends (eg, online transactions). Supply chain flexibility, including partner terms and sourcing (particularly nearshoring) are premium needs today.
We have observed other shifts that are much newer but likely to be similarly long lasting. For example, the unprecedented focus on hygiene during the crisis has prompted updated hygiene protocols and a rise in single-use plastics and wipes. These changes are having an impact on sustainability and are forcing companies to innovate eco-friendly alternatives.
Exhibit 3
Executives think important capabilities need greater investments.
Top 3 capabilities considered most important
- E-commerce or omnichannel
- Digital, data, and analytics
- Flexible supply chain
4. Acceleration to the flexible workforce of the future
The COVID-19 crisis has dramatically increased experimentation with flexible workforce models. Use of video-conference applications has risen by a factor of five to seven, and organizations have become more adept at working remotely.
5. Changed employee value proposition
The COVID-19 crisis has changed the employer-employee dynamic. Recent events focused both parties on employee benefits (for example, health insurance and sick leave), protective measures (such as personal protective equipment), and the new norm of remote working.
The acceleration to a more flexible workforce may generate efficiencies that enable this changed dynamic.
6. Sustained metabolic rate of decision making
We have also noted the emergence of expedited and more focused decision making across consumer organizations.
One way to help maintain this practice is by categorizing decisions and speeding up those that need to be made quickly and paying more attention to those that matter most or need careful handling. Some leading companies determine the level of impact (positive or negative) at stake and the frequency each decision is made (and therefore the familiarity of the decision). With this approach, organizations can delegate lower-impact decisions, which often accelerates their execution, and focus leadership time on the big bets, which frequently require time-consuming, cross-functional coordination.
Another approach is to think about how to build a minimal viable product (MVP) for different types of decisions. Many companies have done this throughout the crisis without even realizing that they were doing it. Retailers have focused on MVPs for store reopenings, and consumer-goods companies have replanned and rebudgeted the year (which normally takes weeks or months) in days.
Using both a decision framework and an MVP mindset will help consumer organizations to sustain the metabolic rate and speed of decision making they have had during the crisis.
Exhibit 4
Focus on decisions, not meetings: Major decisions are being made faster during the crisis.
Change in time required to make major decisions: Much faster @ 50% of companies surveyed
Number of meetings required to reach a final decision: 1 to 5 (62% of respondents) vs. 6 or more previously
7. Heightened focus on leadership development
The best leaders can:
- be empathetic—and open to empathy in return
- shift their management style to enable instead of “command and control”
- demonstrate decisiveness amid uncertainty
- be a role model of deliberate calm and bounded optimism
As companies restart and settle in to the next normal, they should aim to create more opportunities for leaders to make rapid, high-stakes, and cross-functional decisions as part of the normal operating model.
Putting it all together
When all of these trends are viewed together, it’s clear that this crisis has required, and will continue to require, companies to make big and bold changes. The recent pace and depth of change have demonstrated what’s possible; companies will need to continue to push beyond the way things have been done in the past, but first they must cement the positive changes they have made since the onset of the pandemic.
By restructuring their organization to focus on the newly created priorities, modernizing their operating models to account for remote working and faster decision making, and shifting routines and rituals to bring value to shareholders, customers, and employees, leading companies will find ways to emerge from the COVID-19 crisis stronger than they were before. Such opportunities do not present themselves often, and organizational leaders need to act now to prepare for the next normal–which, before we know it, we’ll all be living in.