By Tom De Waele’s, Partner and Managing Director at Bain Middle East
Business leaders are navigating a disrupted world, with lockdowns slowly expanding and taking different forms. Even though we’re still in the tunnel, however, we’re focused on the light at the end. Why? Because we think that light provides the best direction for actions to take now.
If CEOs are lucky, they’re able to take the long view. We polled more than 130 CEOs in India on April 2, and 70% report that they are balancing communications regarding what they are doing to protect the business now with what they are doing to prepare the business for the new world. Global leaders are thinking about urgent actions (how to keep their people and customers safe while ensuring business continuity), recovery (how to restart normal operations when lockdowns are lifted) and retooling (how to adapt to a new reality). We’ve heard the best CEOs share three messages about creating balance and preparing for a post-coronavirus world.
Reintroduce yourself and your people to your customers
During the crisis, most companies will inadvertently let down some of their most important customers. Some will still love your company; others will feel your propositions are tone-deaf to a transformed society.
While personal journeys and relationships with individual companies will differ, the pandemic will result in some changes. In several industries, when consumer behaviors change, there is no going back. The organizations that acknowledge and prepare for these shifts will be in a better position than those that fail to do so.
When this is all over, you and your customers will have some catching up to do. It will take time. You’ll need to throw away old assumptions: The raw customer needs that will define your industry may be dramatically different. You’ll need to avoid any discussions about the “average customer”: Insights will emerge by market, by category and by cohort.
Ask difficult questions about your strategy and organization
The best CEOs see the coronavirus crisis as a dress rehearsal for a new normal—namely, a world of climate change, accelerated digital disruption, radical shifts in national alignments and more. They know they can’t return to the way they were before Covid-19. Instead, businesses must retool to emerge stronger and more resilient than before. To get there, CEOs should address four important strategic questions.
What is our new definition of “risk management”?
A lot went wrong here. But if we break down the problem, we can solve it correctly. Risk management requires three things:
·Prediction: Have we identified the right scenarios and assigned the right probabilities?
·Adaptation: Are there built-in checkpoints so that we can adapt as the scenarios and probabilities change?
·Resilience: Is our decision-making process resilient to unanticipated shocks?
Running future-back scenarios for your company and your industry could change your business forever. But even with the best prediction models, you can’t predict your way to a no-risk world. This means you must become far more adaptable. During this crisis, we’ve seen founder-led organizations retool in a matter of days or weeks, thanks to highly adaptable teams. We’ve also seen large incumbents, with vast prediction capabilities, seemingly paralyzed by the virus as it spreads. These organizations can improve their agility and speed by learning what worked (and didn’t work) over the past few weeks.
Most firms also can become more resilient by reflecting on the Covid-19 outbreak. Organizations that have global supply chains based on low costs and just-in-time production found themselves without supplies. Moving forward, leaders can ask, “Which parts of the value chain do we manage for costs? Which do we manage for redundancy?”
And let’s make sure to get “redundancy” right next time, too. Many companies had outsourced call centers across multiple countries to guarantee redundancy. Yet they found themselves without support when employees didn’t have access to laptops or broadband at home. Multinational redundancy couldn’t survive a single day of multinational lockdown.
Leading companies will also build resilience into the balance sheet. In asking the tough questions now, CEOs can help CFOs create stronger balance sheets and cash flows. They can find a way not only to withstand the next supply and demand shocks but also to help the company recover and retool to become stronger than its competitors.
How will our strategic priorities change?
Industry landscapes will look vastly different than before. Although many trends have been around for a while, the pandemic accelerated outcomes.
Think of retail: Any companies that were slow to move online during the past decade could be gone soon. Sadly, for many, Covid-19 is writing the final chapter of the e-commerce story.
Consolidation will happen across industries. New insurgents will also emerge, born ready for the new world. They could be your best partners or your worst nightmare. To adjust to the new landscape, companies should identify critical capabilities and determine how they will acquire them if opportunities arise.
What does our operating system look like?
We believe that leading companies will rally around a big idea and re-imagine how they work and compete. We think that one aspect of today’s big idea will be a new operating model, with a redefined global center and a more widely dispersed set of local and fast-moving entrepreneurial teams. This could be the perfect time to capitalize on your virtual work experience.
Many new founders have pointed out that your technology backbone will matter more than ever post-coronavirus. But they also believe that it will be as important (if not more important) to have a technology mindset. The best leaders will think about their company as a core operating system with a whole set of plug-and-play applications that supply incredible business-building freedom.
There are a couple of non-negotiables for the center: No one can tinker; no one can deviate. This is your operating system, and you should run it the same everywhere. Once it has been established, companies can then determine where they need fast entrepreneurs. These teams leverage the operating system, but they are otherwise free of bureaucracy. They adapt to win with local customers and channels.
How can you become a winning business of the future?
Companies that hurry back to old ways of working may very well stumble in the decade to come. The pandemic has given you and your team the opportunity to transform your organization for a more turbulent world. You can start by fully reimagining the boundaries of the company. We believe the next generation of leading companies will be defined not by assets but by partnerships. They will shape an ecosystem of winning customers, channels and industry profits.
Winning businesses of the future will also kill the myth that companies can’t be big and fast and stillclosely connected to their customers. They will compete on scale and speed. The best CEOs understand that their speed during the crisis will redefine the cadence of the company. Make good, careful and value-based decisions.
Recognize that every action is a communication
Wise CEOs are already talking about their new customers, strategies and organizations. Very wise CEOs are also aware that every action they take, big or small, during and after the crisis sends a loud message, signaling the leadership team’s values and priorities to every employee and customer.
Of course, every leader will face difficult decisions during this pandemic. They may halt discretionary spending, lay off employees, slow recruiting, cut SKUs and business-building pipelines, or put backlogs on the backburner. But how these decisions are made and communicated will show employees and customers who you are and who you aspire to be. One CEO shared, “My people don’t expect to know every step I take, but they want to believe we are moving with the same compass, in the same direction.”
As you reintroduce yourself to your customers, retool for the new world, and communicate through actions and words, prepare for moments of truth that will define your company.
Of course, you’ll start every conversation by checking on the safety of your people and their families. Everything communicates. And this is your moment.