April 17, 2020
April 17, 2020
It’s been just a few weeks since the Coronavirus Disease 2019 (COVID-19) outbreak truly captured everyone’s attention across the globe. But with new developments almost hourly, it feels so much longer.
This could be because compared to prior catastrophic events, such as the September 11, 2001 attacks and the 2008 global financial crisis, the COVID-19 pandemic is an abrupt cessation of our way of life for an indeterminable period. As a fight on two fronts—economic and biological—COVID-19 is a game-changer in terms of its human and business impact.
However, it is also prompting fresh thinking that could very well alter business as we know it, even with positive, long-term effects.
As CEOs focus on managing the crisis, directors are having to approach their advisory roles in new ways, both physically and intellectually. Virtual boardrooms are now assumed, and long-standing points of view on markets, customers, supply chains, the workplace, technology, and other factors underpinning the business model are undergoing a sea change.
When advising the CEO, directors should consider five macro-level trends transforming business through—and after—the crisis:
1. Workplace design will be reimagined, increasing employee flexibility in many areas through a virtual work experience. Those companies that have been able to transition to a remote work environment have engaged in an exercise of discovery—videoconferencing can work, employees can be even more productive, and many employees appreciate its impact on quality of life. Companies that have been unable to transition to a remote work environment for various reasons are experiencing difficulty. The lack of remote-ready workers is magnified in sectors experiencing a significant spike in business, such as financial services, retail, and logistics and distribution.
While not all roles can be performed remotely, the pandemic experience raises important “why not” questions. For example, why not transition as many activities as possible to a virtual setting? Why not reduce time-consuming commutes to high-rise offices when the work could be done at home or at a more conveniently located work hub? Why not abandon the “9–5 mentality” entirely and allow people to work where they want and when they want, holding them accountable for results? Why not cut down on nonessential travel?
Because every industry is different and companies have different levels of digital maturity, these and other questions will likely be answered in various ways. But the way they are answered has powerful implications for employee flexibility, reduction of pollution levels, use of commercial real estate, the kinds of technology deployed in the business, and talent recruitment methods. The trickle-down effect of these decisions affects virtually every industry, either directly or indirectly.
2. Business models will need to adjust to post-pandemic customer and consumer behavior. A company’s planning around expected changes in behavior and consumption patterns in the post-pandemic marketplace, the likely effect of those changes on the company’s offerings, and the appropriate response to those changes will impact its ability to pivot the business model accordingly.
Has the company thought about how the pandemic is likely to alter customer and consumer preferences—for example, on home delivery, curbside pickup, live streaming, home cooking, and other home-centric behaviors? Will they work more from home or be more conscious of the environment in making purchasing decisions given the dramatic decline in pollution levels during the pandemic?
Management’s assessment of the answers to these and other questions may lead to opportunities to innovate and enhance the customer experience and to differentiate the company’s offerings. Directors should inquire whether decision-makers have access to reliable market data and analytics regarding customer and consumer wants, as well as their preferences for satisfying those wants. Monitoring buyer behavior is of vital importance both during and after the crisis.
3. Past decisions to build tight coupling and complexities into supply chains will be revisited. The past 30 years of interconnectivity spawned by globalization have led to the increased use of single-source strategic suppliers, just-in-time manufacturing and delivery techniques, and complex logistics. These trends have emphasized trade-offs in which quality, time, and cost considerations have tended to override business continuity considerations. The COVID-19 pandemic has made this point crystal clear.
Going forward, companies are likely to pay more attention to such factors as where key suppliers are located, reliability of second- and third-tier suppliers, availability of qualified alternative supply sources, how long suppliers can operate during a catastrophic event, and how long the companies themselves can operate during a prolonged disruption. The sourcing of materials and components that are a priority from a national security standpoint, particularly related to health care and other strategic needs, will garner close attention from both the public and private sectors, as will the concentration of key suppliers in a given country or region.
4. A corporate culture founded on trust will prove vital to a company’s resiliency and ability to pivot in the face of changing market realities. Trust will be hard to retain, and may even have to be regained, if huge chunks of the workforce are laid off, and organizations that are agile and able to pivot quickly will outperform those that are not. Companies that experience difficulty will be the ones that cling to the status quo, lack a full grasp of the issues, and are being second-guessed as they make major decisions.
The discipline to act decisively to refine strategic, business, and product plans in response to changing market realities is the hallmark of a resilient organization. Communication flowing freely up, down, and across the company helps ensure that decision-makers are in direct contact with the unvarnished truth so they can build trust, stay in touch with the customer, and foster a resilient organization that embraces change. Strong communications, coupled with a strong innovation culture, position organizations to pivot and find creative solutions more effectively than those with a culture absent these attributes.
5. Organizations that advance their digital maturity and ensure the hygiene of the technologies enabling their work environment will be more successful. The competitive environment has driven many companies to expand their deployment of digital technology to innovate the customer experience, digitize new products and services, automate internal processes, improve information for decision-making, and enhance workplace flexibility.
As virtual workplaces and digital channels take root, companies should take the necessary steps to secure the technological platforms that enable them to function and protect the sanctity of corporate networks, systems, and information assets. Organizations that have not advanced their digital maturity face the specter of customers transitioning to competitors able to satisfy their needs and not returning once the crisis subsides.
These companies should resist postponing automation initiatives as part of cost-cutting exercises, as these investments can make a difference in terms of their competitiveness during the recovery period. Further, there may be an expedited focus on infrastructure, network expansion, and 5G initiatives that could unleash a disruptive force similar to what occurred over 20 years ago when online payments and mobile technologies sparked the exploitation of B2C eCommerce on the Web. Will companies be ready? Organizations making cuts in areas in which they should be investing risk alienating the very people who could drive their future.
These five trends constitute a powerful paradigm shift for both the C-suite and boardroom. As society transitions from enforced isolation and as markets ultimately reach a new equilibrium, the companies most likely to thrive in the years to come are those with resilient cultures that can address evolving workplace dynamics and adapt to customer needs, wants, and preferences in an intelligent and innovative way.
A more complete discussion of this topic, including examples, is available here.
NACD’s Summit 2020 is going virtual with complimentary access to select programming included with your membership.
NACD: Tools and resources to help guide you in unpredictable times.