What role will strategy play through the Covid-19 crisis?
Adam Gates, Head of Odgers Connect, discusses the recovery and reinvention phases businesses will go through looking specifically at the recalibration of strategic plans and the need to resize in order to adapt to the new world
No one has all the answers, for that we can be sure.
This is the resounding sentiment from leaders of organisations we work with. The changes imposed by the virus and subsequent lockdown have impacted our health, our personal and professional lives and has created unprecedented disruption for businesses of all shapes and sizes and in every sector.
As the UK government’s strategic response to the crisis has been consistently inconsistent, many businesses are facing an incredibly opaque future.
However, remaining cognisant of the backdrop of human tragedy, there are positives we can glean out of this crisis and already we are seeing impressive corporate agility and competitive reinvention: businesses pivoting into new channels and providing critical support to key workers, BrewDog probably being the most documented example, which rapidly started making hand sanitiser in their distillery and donating that to the NHS frontline workers and charities.
When the lockdown was initiated, the immediate response was the implementation of business continuity plans. Safeguarding employees and ensuring continued customer care was prioritised and in the main, was handled well. Arguably led by HR and Technology leaders, such was the acute people and IT dynamic, response was quick and decisive, enabling remote working and addressing immediate customer and capital issues.
As we enter the summer months, recovery plans are now underway. As the government starts to tentatively ease the restrictions, businesses must now plan for a return to some semblance of normality and within boardroom discussions and strategic planning sessions, several critical questions are being asked – how will we return to work, and what does our future business and market look like? The operational task of preparing for the return of the workforce is difficult, although not insurmountable. Operational leaders will take the lead here, ensuring facilities are fit for purpose.
Strategy will play a paramount role in what will be the reinvention that many businesses will undergo. It is safe to say most strategic plans and business models will need to be holistically recalibrated given the monumental changes in our economy and way of life. Business leaders will need to determine what the mid to long-term implications of the crisis are and how they should respond strategically. Will the recovery look like a V, U or W curve for instance and what scenario plans are in place to manage each eventuality? This is the heartland for the strategists: scenario planning, sizing markets, analysing reams of market and customer data, reviewing efficiencies and monitoring cash flows.
Done well, strategic planning can allow businesses to benefit from the rebound, but this will take corporate agility, innovation and decisive leadership.
Of course, every industry will be impacted in different and unique ways:
- Life sciences organisations have pivoted effectively to accelerate and prioritise the search for effective diagnostics and treatments and by supporting patients, the NHS and Government across the UK – however this is in parallel with R&D and clinical development being disrupted as colleagues adjust to remote environments, lab capacity is limited and supply chains slowed;
- Insurance has reputational, capital and solvency challenges with significant business disruption claims and the remote working dynamic has exposed the technology debt and digital immaturity across the sector as some firms have struggled to establish virtual contact centres quickly enough to deal with customer demands;
- Retail has already seen major casualties as Covid-19 accelerates the demise of bricks and mortar retail, and online powerhouses like Amazon taking centre stage – retailers will need wartime leadership and robust strategic support to adapt to reduced footfall, store reconfigurations, household income reductions, warehouse challenges and reduced delivery models – the previous strategic question for retail on where the sector was headed, is now being forced upon it;
- Telecoms businesses have seen surges in demand for B2C services, but reduced B2B, and stressed infrastructures and maintenance challenges whilst content providers are seeing increased revenues favouring the tri- and quad- players;
- Utilities have experienced operational challenges: reductions in workforce capacity as premises close or operate safe working protocols has impacted installations, meter reads and maintenance activity as well as in the back office. Spikes in demand and unusual patterns of network usage, caused by the shift from commercial to domestic use;
- Oil & gas (upstream and downstream) has seen well documented negative impact globally due to reduced demand and record low oil prices. E&P projects have ceased given the expenditure, operational disruptions due to skeletal workforces and oversupply has caused storage issues;
- Private equity typically more pragmatic and robust will still have operational and capital challenges as value creation plans will need to be recalibrated to adjust to a soft market and smaller returns on existing investments.
Several key strategic priorities should therefore be tabled as Covid-19 has expedited the urgency of these imperatives:
- Monitoring capital – realign cost structures, improve productivity inefficiencies, review and optimise operating models and scenario plan;
- Accelerate digital transformation – the crisis has put a huge spotlight on digital and in many cases the gaps in digital footprints – businesses must devise and implement an enterprise wide and agile digital roadmap. Simplifying customer experiences, connecting all parts of the business to ensure a future way of working is sustainable, not just retrofit in the short term;
- New revenue streams, new channels, new markets – market resizing and reshaping which will continually change which means businesses in certain markets will look to make up for loss of revenue in core business, by pivoting into new markets. Whilst early days, businesses with strong balance sheets and capital positions may explore M&A opportunities in order to identify accretive revenue streams or supply chains;
- Prepare the workforce – the new normal way of working will need to be defined and organisational structures adapted. In many cases this may mean a leaner workforce and an organisational redesign, including reviews of office space and facilities.
Recovering and reinventing might take a long time and significant effort once economies in lockdown restart, however with strong strategic support, this can be achieved.
And so, to the solution, how will this strategic rethink be achieved? Many organisations will of course have strategic leaders and internal strategy functions who can undertake much of this, however bandwidth and subject matter expertise is a limiting factor. There are also management consultancies, which can mitigate risk, albeit at a high cost. An alternative is the use of highly skilled, high impact independent consultants: alumni from the likes of McKinsey, BCG, Bain and the Big 4, now operating as objective independents offering rapid responses to these strategic and transformational questions.
For more information on how independent consultants can help solve these strategic issues, please contact Adam Gates.