Covid19 has laid bare the risks that companies have hitherto not prepared for. As a once-in-a-generation occurrence, this crisis is likely to bring about seismic change – in societies, in business landscape and in consumption patterns. These massive changes will require businesses to seriously introspect and develop new competencies to succeed in the altered environment. While these corrections will be required both in strategic as well as operational matters, here we delve into the key strategic elements that will require meaningful overhaul.
Firstly, companies will have to clearly define, and live by, their role in society. Until now the predominant approach of focusing on shareholders, customers and employees will need to be robustly supplemented by engagement with suppliers and with society in general. Businesses will need to consider not only the market & economic dimension, but more openly any negative externalities that their products and services cause.
Industries like aviation, travel, shipping, liquor, animal produce, leather etc. will need to take a hard look at their negative externalities and redefine their future direction. Some of the companies at the forefront have started to look at the UN’s Sustainable Development Goals (SDGs) and evaluating which of these goals should they be working towards. This will need to be adopted by every business in the future. Companies who are leaders in this space will find significant resonance with Millennials – a demographic, whose concerns go beyond the price value equation and have already become a significant part of today’s workforce.
Secondly, companies will need to re-evaluate the extreme focus on efficiency in all aspects of business, but more critically in supply chain, distribution and revenue generation. The impact on supply chain and physical distribution has been clearly felt during this disruption and companies are working on addressing these through ‘near sourcing’ – both regionally as well as nationally.
Of special importance will be the flexibility of supply chains, despite higher cost, as it would provide for resilience in case of disruption in certain geographies. Similarly, while scale creates efficiency gains, it brings heightened risk in case of supply disruption. Regionalizing and a broader base of supply chain would help trade off efficiency against resilience, while providing greater opportunity of engaging local community.
Besides supply chain, many traditional companies will need to study their revenue generation models. Businesses that depend on unit sales, without ongoing engagement with consumers through the life cycle of product usage will find it increasingly difficult to remain sustainable. Hence, companies will need to incorporate the new consumption paradigm, especially as it relates to distribution and retail. The extended lockdown has rapidly educated the masses to online transactions and fulfilment solutions. Companies’ longer-term customer experience models, with value creation over the life of product usage will rapidly gain preference.
As an example, instead of selling appliances, a company could explore appliance-as-a-service, or even kitchen-as-a-service. Moving from a once-purchase model to an annuity business model will allow multiple benefits to both the company and consumer. Designing and offering these new services and solutions will require a different set of capabilities and processes within the company, which will need to be thoughtfully driven by the CEOs and Boards.
Thirdly, businesses will have to learn to implement their strategies under an extended uncertain environment. It is impossible to forecast how the “post-pandemic normal” will pan out. Consumer behavior, working environment, regulatory shifts, capital allocation methodologies – all remain volatile. If anything, the previous VUCA world will seem like good old days! In this fluid environment, the ability to learn fast and deploy agile solutions will become critical tools in the arsenal of companies. Zero based budgeting, with shorter horizons could enable companies to sequence their initiatives to minimize risky bets, while feeding ventures that show higher probabilities of success.
Finally, these elements point towards a massive digital transformation across the entire value chain. Besides the obvious issue of technology platforms, it will bring to forefront the way companies define core-competence, and therefore, internal skillsets versus outsourcing of capabilities. We have often seen that even within the same large corporation, different units are run differently. And in our experience, it is because of the skill level of individuals. In one unit, if there is a high performer in a role, then that position remains internal, whereas it might be exact opposite in another unit.
Companies will have to redefine their sources of core competence in the future and correspondingly, redesign the organizational structure. They will need to ensure that only the most relevant and required skills are kept internal, while leveraging the gig-economy for realizing other roles through external contracts. Comfort with remote working, and through a broader contract network will also provide cost efficiencies through reduced need for physical office space. One key capability, every company will have to learn will be that of rapidly recognizing and adapting to market and consumer trends and using agile models for developing and launching new solutions and services. The Darwinian principle of the future belonging to the most adaptable will rule the roost even more strongly in the business environment.
The negative impact of COVID19 – on individuals, societies, businesses and countries – can hardly be overstated. Such massive upheaval presents companies the opportunity of using this crisis to deeply introspect its purpose and business model and deploy a path that makes it a successful, sustainable and supportive member of the global community.
Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.