Seven topics for strategising a (post)COVID-19 world

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Seven critical topics for a (post)COVID-19 strategy  

Beyond the crisis, part 3: A tale of two worlds

The first COVID-19 wave seems to be under control in many countries, it might appear as if we are slowly returning to business as usual. But in Deloitte’s view, this is a tale of two worlds, divided by the summer of 2021. We expect a ‘disruption interval world’ for the next year, dominated by multiple COVID-19 outbreaks and corresponding government interventions. Beginning in summer 2021, when a vaccine might be available for the most vulnerable groups, we expect a ‘post-COVID world’, featuring only some of the changes we are experiencing today.

Laurens Petten | John Luijs | Nicole Lentink

For business leaders, summer 2020 provides a short and crucial window to plan for both worlds. Many of the assumptions our businesses were built on have been broken; it’s time to write a new chapter. Companies that excel in navigating the uncertainty and embracing long-term opportunities can recover, thrive and come out stronger. This article provides practical guidance to thrive in a world distinguished by COVID-19, including seven ‘critical topics’ being considered by business leaders who are already planning for the future.

This article is part of the series 'Beyond the crisis: how to thrive in a (post)COVID-19 world' . Click here to read the other articles in this series.

Better bracing for coming shocks

Any coming outbreaks are likely to be confined to smaller areas and, depending on government response, will be individually less disruptive than the recent one. Most governments will have learned to better contain them, and will try to better balance the effectiveness of health-focused interventions with the economic and societal costs. Finding such a balance leads to a logical and predictable escalation path, as seen in how governments are unwinding current interventions step by step.

Government interventions tend to affect businesses in a single sector largely the same, so for business leaders, outperforming peers matters most: better absorbing and reacting to new shocks, especially if government support wanes. An important first step is understanding the shock exposure of your industry and corporate ecosystem. Given the experiences brought by the first shock, and the relative predictability of renewed government interventions, leaders can quite accurately assess how a coming shock will impact their sector, and prepare. If your ability to anticipate the shocks is stronger than your competitors’, and you can respond faster, what advantage will that create?

Scrutinising the changes

To shape the post-COVID-19 world to their advantage, business leaders should identify changes that have created opportunity, and determine how permanent they are. This kind of understanding will allow leaders to place better bets on the future than their peers, and make smarter investments.

Many changes will be temporary, because they are not driven by customer preference or needs but by government interventions.

Often the changes have involved substantial shifts in demand or usage. Take, for example, the accelerated adoption of technology, such as videoconferencing, and the shift from offline to online channels, such as with online grocery shopping. Although following nearly identical adoption curves to shopping for other products, groceries was a product category still lagging behind many others (e.g., electronics). Lockdowns forced people to adopt online grocery shopping overnight, thereby fast-forwarding several years through the adoption curve.

There have also been sharp drops in demand, leaving businesses with no certainty as to when, or to what extent, demand will return. Air travel is the most obvious example, but many larger expenditures are being postponed as a result of economic and personal income uncertainty.

The truly post-COVID-19 world of summer 2021 will not be a return to the economic reality of 2019 – it may still reflect reduced purchasing power or ‘stickiness’ of new behaviours and preferences – but will be shaped by how people want to behave and spend, not how they are forced to.

What changes will last?

So which changes will stick? A simple question can help answer this:

“Is the new situation a superior user experience?”

No → The change will likely not hold.
Yes → The change will likely persist, or at least remain significantly more prevalent than pre-crisis.

For example: Will working from home (including videoconferencing) remain popular, as a superior user experience? It saves commuting, travel and real-estate costs, and might even be more efficient, but takes away a lot of valuable social and creative interaction. Likely, the new optimum will be more acceptance of working from home but not to the current extent.

There are some obvious inferior user experiences – wearing a mask, not eating out or going to the theatre, not travelling for a vacation, social distancing – but these are temporary. Experiences tied to business will be more specific or subtle, but many are temporary as well. Company leaders should not bet too heavily on current changes or the 1.5-metre economy. Recognise what is temporary versus permanent, understand why, and plan investments accordingly.

Fuelled by media attention, we observe that markets and business leaders may overestimate the stickiness of changes in a post-COVID-19 world, or, in contrast, believe we will go back to normal very soon. Such assumptions create large imbalances in how assets or opportunities are valued. For instance, would you buy office space now, or invest in remote working, online learning, hospitality or retail?

Analysing the assumptions and strategies of others in your sector, who may see the world differently, might reveal interesting opportunities to invest smartly in products, services, customers or channels, or engage in mergers and acquisitions. A more balanced perspective could allow wiser investments and the purchase of undervalued assets, meaning a stronger emergence from the crisis.

 

Seven critical topics for strategising

Business leaders should factor all these considerations into a plan they finalise over the coming months, which sets out how to recover and thrive during and after the crisis. Deloitte’s many recent discussions with executives revealed seven critical topics (and related questions) that should inform the plan. Strategising now will offer the best chance of surviving the disruption interval world, and thriving in the next one.

  1. Robustness and adaptability
    • How much more robust is our financial position, infrastructure, culture, leadership, customer loyalty and supply chain than our competitors’?
    • Can we transition seamlessly in between shocks, such as from physical to digital, and adapt our business model if necessary, faster than competition?
  2. Shifting consumer behaviour 
    • How much are the changes in behaviour driven by better user experiences, and how much by temporary government interventions, or fear?
    • How would being ‘more right’ about structural changes position our company better versus competitors? 
    • How can we benefit from assets that have been over/undervalued because peers have over/underestimated the situation?
  3. People’s well-being and the future of work 
    • How do we ensure the well-being of employees through sickness and stress, (job) insecurity, suboptimal working conditions, etc?
    • How will we work after the pandemic: in terms of structure, offices and flexibility of staff? Which employees want to be more flexible, and in what way?
  4. Financial management and restructuring
    • How can we increase our buffers and improve the strength of our balance sheet?
    • How can we make our cost structure more flexible and reduce costs without hurting critical capabilities and our ability to grow again?
    • How can we free up investment capacity to place strategic bets on undervalued opportunities and changes in customer behaviour?
  5. Adoption of technology and data
    • How can we further embrace and capitalise on the accelerated adoption of technology to build new business or empower our workforce?
    • Can we gain robustness or adaptivity by better embracing technology to run our company?
    • How do we deal with concerns about data, security and privacy?
  6. Innovation and recalibration of ecosystems
    • How can we innovate our business model, products or services to better manage the challenges arising from new shocks and to capture new opportunities?
    • Can we revisit relationships with customers or suppliers and become less transactional? Can the strongest players in the value chain support the weakest, to protect the business as a whole? How?
    • How can we use the crisis momentum to break through longstanding roadblocks or discussion points, internally and/or with some of our partners?
  7. Being purpose led and sustainable 
    • How do we use the crisis to maintain a common sense of purpose among employees for the long term?
    • Which good (purposeful) initiatives have come out of the crisis?
    • How do we better align our company’s purpose with its financial objectives?
    • How can this crisis be an accelerator for sustainability within our company and ecosystem?

In conclusion, we have been transported to the future overnight. Many of the assumptions our businesses are built on have been broken. The decisions leaders make in the coming months will shape their new normal and determine how they can thrive in a post-COVID-19 world.

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