- Goal must be to rebuild for the longer term, McKinsey experts say.
- McKinsey identifies 10 actions from which a path to emerge stronger can be found.
- Next normal may also mean resetting how companies relate to their governments and how they should address environmental issues.
Dubai: As many business leaders return from a summer break, it is time for organisations to act rather than react.
Even as the Covid-19 crisis continues to create a world of uncertainty, the goal must be to rebuild for the longer term, experts at McKinsey said.
“Companies that are strong and resilient will be better placed to survive and prosper. Those are qualities that can’t be taken for granted; they need to be cultivated,” Kevin Sneader, Global Managing Partner at McKinsey, said.
There are many different ways to lead, but regardless of the type of business or geography, Sneader believes that the ten actions are those from which a path to emerge stronger can be found and they are:
- Think of the return as a muscle. As companies return from the COVID-19 crisis, they need to exercise certain capabilities, including the willingness to change future plans and manage structural shifts. Handling the crisis is a marathon, so the emphasis should be on reinventing business models for 2021 and beyond, not so much on protecting 2020.
- Focus on high-impact actions. Which actions are best for the business? They will differ by the company but may include technology-enabled next-generation operations, analytics-enabled engineering productivity, and automation of service-related processes.
- Rebuild for speed. Getting things done fast—and well—is critical: what used to take a week now must happen in a day. That means speeding up decision making, deploying nimble teams, redeploying talent, and empowering tomorrow’s leaders to take responsibility today. Cut nonpriority initiatives to free up leadership time.
- Reimagine the workforce from the top down. Identify employee segments that may be under new forms of stress (such as parents of small children, isolated single people, and caretakers). Consider changing how work gets done, whether that’s through job sharing, flex teams, or hot-seat changeovers. And continue to invest in learning.
- Make bold portfolio moves. Companies that make smart portfolio moves now will benefit disproportionately after crisis recovery. To get positioned for strong growth in 2021, shed business units that aren’t part of the future growth equation and move quickly to fund new, transformational growth areas.
- Reset technology plans. Take a hard look at technology investments and reset them for value and speed. Aim to raise the technology quotient of all employees. “Cleansheet” the tech budget for 2021 rather than working off the backlog. Ensure that tech capabilities are mapped to sources of customer value.
- Rethink the global footprint. Given the vulnerability of just-in-time supply chains that the Covid-19 crisis revealed and the diminished labour-cost advantage of offshoring, companies need to take a hard look at how and where they operate. That could mean reshoring or multishoring operations and developing regional—rather than global—strategies.
- Take the lead on climate and sustainability. Some pandemic-related economic-stimulus measures (such as the European Green Deal) have been linked to sustainability-related goals. Two ideas for connecting sustainability to business opportunity are to explore industry consortiums for setting new standards and creating large-scale impact and to embed sustainability into business by design rather than as an add-on.
- Think about the role of regulation and government. As governments continue to act as payers, lenders, and insurers of last resort, their reach has extended into all aspects of the business. Work with them on top priorities, such as reskilling and building digital infrastructure. Develop insights on social shifts that could inform legislation and regulation.
- Make the purpose part of everything. Having a strong sense of purpose helps companies navigate uncertainty—and people stay engaged and productive. Now more than ever, companies must match their actions to their words. Embrace stakeholder capitalism—the idea that successful companies serve more than just the bottom line.
“Not only do leaders need to act now, they need to act boldly. Our previous research has found that companies that made substantive changes fared better coming out of downturns than those that didn’t,” Sneader said.
Bob Sternfels, Senior Partner at McKinsey, said that companies have had to make so many changes so quickly—often with startling success—that leaders have every reason to believe that they can do even more.
Of course, not every company needs to take all ten actions; conditions differ, he said, but they cover the range of possible activities that fit with the situations in which today’s leaders find themselves.
“We start with an idea—that returning is a muscle that needs to be exercised, not a plan to be executed once or a date to be achieved.
“We go on to more specific considerations, such as the need to make big moves fast and to be willing to rethink entire portfolios, including where work gets done. People management will be critical both in ensuring that workplace learning gets its due and in taking care of people,” he said.
However, he said that the next normal may also mean resetting how companies relate to their governments and how they should address environmental issues.
“Finally, having a sense of purpose knits everything together. Knowing what your company stands for—and living those values—provides a framework for sound and ethical decision making,” Sternfels said.