It is important that we learn from the crisis, and also that we ensure steps taken now enable us to provide continued value to our customers, and employment for our colleagues; while paving the way for sustainable success in the future, says Mark Palmer
Not only is COVID-19 affecting our mental and physical health, it is also drastically impacting our political, social and economic norms, both here in the UK and globally. At a pan-business level, we are witnessing a growing acceptance that we are slowly moving towards a modern cliché; the ‘new normal’.
But what does the new normal really look like? Is this really a destination, or is it just the beginning?
We think perhaps it is actually better to think about this transition as a series of phases, through our ‘crisis curve’ model.
We have outlined each of these phases across the ‘crisis curve’ below:
Rapid crisis response
The first phase we all witnessed immediately after the initial WHO and Government interventions, where business priorities were as simple as keeping employees safe and ‘keeping the lights on’. This response has seen most businesses move to a home working model wherever possible, putting strain on IT, logistics, and operations. In the UK and other European countries, we are out of the shock of this initial phase.
Take back control
This is when lockdown really set in. Here Governments moved to more severe social distancing measures and the initial phases of lockdown. At this point many sectors, such as hospitality and travel, started to be severely impacted. Other sectors, such as grocery and DIY, on the contrary, saw significant growth in sales. Almost all business operations were placed under significant stress as they tried to adapt to employee sickness/self-isolation, ways of remote working, and supply chain disruption. Many businesses also experienced an increase in contact as anxious customers try to ascertain what these changes mean for them.
Business as unusual
This is most probably where we are today. At this stage, there is clarity and recognition that this situation is now only going to be resolved over the medium-to-long-term, with some form of lockdown continuing for several months – with revisions and changes taking place daily. Organisations will need to keep on top of the news agenda and legislation to ensure they understand their place in the changing landscape.
For some business models (particularly those built around costly fixed assets that are lying dormant) this phase could prove catastrophic unless they have an exceptionally strong cash-based balance sheet. Others, however, will have been agile enough to pivot, finding new markets or rapidly developing new products/services that are relevant to society’s evolving needs and challenges. New revenue streams start to become a medium-term reality. This means that the processes, people, technology and supporting functions need some additional thought and design. In short – this is the point at which operating models start to permanently shift.
In the majority of organisations, leadership teams will need to recognise the requirement to optimise the performance of this current phase. This will mean restarting relevant transformation programmes as well as making targeted investments that will be relevant in the medium term.
Transition to new normal
I believe this phase will be challenging to judge and navigate. There will be a balance to strike between being cautious and prudent, whilst also making sure you are in a position to identify and capitalise on opportunities. Over the long term the economic situation will stablise, but I do not believe that necessarily means wholesale change from a societal perspective. In fact, history tells us that these scenarios are not usually as extreme as predicted; for example, following the 2008 Global Financial Crisis, many speculated that levels of consumer credit and borrowing would be much more cautious. That has proved not to be the case in many countries.
However, it is reasonable to assume that the depth and breadth of this pandemic will cause some fundamental shifts in the way we live and work. We have all seen the positive impact on the environment, and some of our clients have reported improved satisfaction and reduced attrition in operational teams, having adopted and optimised a working-from-home model. The key for organisations entering this phase will be to cut through the hype and start to anticipate what these shifts might be and how they may adapt to them – or even influence them. By doing this, leadership teams can understand what the future blend should be between ‘pre-crisis’ ways of operating, and certain key elements of the ‘business-as-unusual’ phase. For instance, a business may ultimately reduce their estate footprint significantly and service more customers using a work-from-home model, but not at the 100% level that we have seen during the crisis. For some businesses this critical restocking phase will be about strict financial management and controls to avoid insolvency. For others, it will be about whether their adjusted or ‘pivoted’ business model could, and should, withstand the transition.
Whether a company’s position is as extreme as the examples above, or more nuanced, all organisations of any scale are going to have to consider whether their current operating model is fit for purpose. Unfortunately, in the majority of cases the answer will be a resounding ‘no’.
We are likely to see another period of significant investment in digital transformation as many businesses reflect that their operational exposure could have been limited if there had been latent capacity in digital channels and AI tools.
The final challenge will be the fact that this transition is likely to be slow and clumsy, so the move to a new operating model needs to be considered carefully.
Frankly, we’re not expecting this phase anytime soon in the UK, but there will come a point where there is a clear exit strategy, and the economy will start to stabilise.
The senses of business leaders around the world are now heightened to the impact that a global crisis might bring. One thing COVID-19 has certainly exposed is the relative fragility of the economic system and the ability for many businesses to effectively respond.
As business models and operating models have evolved during this period, so will the need for revised scenario planning, business continuity plans and an investment in operational resilience. This won’t mean merely preparing for another pandemic (although clearly that will be front of mind). Rather this means considering all threats at both a holistic and a detailed level.
Long term outlook and in conclusion
There is no doubt that this pandemic will be a challenging time for many organisations no matter what sector and what response they adopt.
In many ways, a lot of the changes that we had anticipated such as: the sharing of patient records between hospitals and primary care providers, the change of use of retail property back to residential use and the more widespread adoption of digital will all now happen with greater pace.
It is vitally important that we learn from the crisis, and also that we ensure steps taken now enable us to provide continued value to our customers, and employment for our colleagues; while paving the way for sustainable success in the future.
While the coming months are going to be terribly hard, I truly do believe that longer term we will see a trend towards more resilient, efficient, agile operating models. Those organisations who can make this transition successfully, will be those who achieve sustainable, competitive advantage.
Mark Palmer is CEO of Gobeyond Partners