Brief
Executive Summary
- Executives are starting to write their companies’ blueprints for recovery by reevaluating how they will create value in a post–Covid-19 world, by redesigning how to execute that new strategy and by realigning their executive teams to lead it.
- Lessons from Italy and other highly affected regions illustrate how companies are beginning to build the engines today that will help them accelerate out of the crisis.
When Roosevelt, Churchill and Stalin met in February 1945 in Yalta to plan for the postwar future, World War II was by no means over. Armistice did not come to the European front until May, and it did not come to the Asian front until September. These leaders knew, however, that the war would end. And while much is made of the Marshall Plan for European recovery enacted three years later, the foundational planning for a very much changed postwar world started much earlier, while the battle still raged.
Today, we are in the midst of another global crisis, Covid-19, the human toll of which is tragic and difficult to bear. Organizations around the world have sprung into action to deal with urgent and acute needs. Millions of people have switched to working virtually from home, seemingly overnight, and millions more are unemployed. There will be many difficult days ahead, with further disruption and more uncertainty.
But just as in early 1945, we need to start planning for the time beyond the crisis. Corporate leaders are scrambling to protect their businesses, working hard to ensure the safety of their people and the continuity of their companies. At the same time, many are beginning to lay the foundation to retool for a different future.
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No one knows exactly how this will all play out, but it is clear that for many industries and companies, there will be no going back to how things were before. A retail bank in the first phase of the crisis may have had to shutter its branches and perform back- and middle-office activities remotely in order to protect employees and customers. Now, it must ask how many branches should reopen when the time comes and what services to provide when they do. In pharmaceuticals, how will sales reps who once visited physicians in person adjust to the fact that many doctors have largely adopted virtual? Will returning to physical sales visits, with all the associated logistical inefficiencies, still make sense?
As they begin to try to answer these long-term questions, leaders are first formulating a hypothesis on how their industry will evolve and then thinking through the implications for their own company. Asking questions such as: In that new world, how do we reestablish customer relevance? Reactivate our supply chains? Mobilize our people?
The pace can be blistering. What once took weeks or months, now seems to be measured in days. One global consumer products organization has reduced its SKUs by more than 50% and ramped up production on its key lines by more than 20%, all within just the past few weeks. Under normal circumstances, transformation of this magnitude would have taken months, if not years.
While challenging, these changes can also help companies accelerate toward a different—and potentially even better—future. To determine what that future looks like and the best way to get there, executive teams are beginning to look at the problem through three lenses: reevaluate, realign and redesign.
Reevaluate what will create value
Imagine what the future will look like and how your company can best participate in it.
As a result of the pandemic, many existing strategic priorities will take on new urgency; others will shift. Nowhere is that clearer than in Italy, hard-hit by the coronavirus and locked down now for more than a month. Even as they grapple with tremendous immediate challenges, leading Italian companies are beginning to plan for the post-pandemic future as well.
For many industries, that future looks quite changed. In Italy, where people have been leaving home only for urgent necessities such as food and medicine, bank customers are using online banking and call centers to do things for which they usually would visit a branch. One major Italian bank would like this digital migration to continue when the crisis abates, and its leadership team is already thinking about how to make these changes permanent—what its new distribution model should be, what tasks should be done in branches (and what can be done more efficiently elsewhere), and how many branches it will need to reopen.
Studying his team’s rapid adaptation to the crisis, the bank’s CEO is gathering clues regarding how to mobilize the organization around remote banking and other urgent priorities once Covid-19 has abated. Today, they are working to keep the business strong by taking steps to reinforce its credit operations, improve its call centers as they handle skyrocketing volume, help those working from home be productive, manage costs and prioritize IT spending. At the same time, the bank is also planning for the post–Covid-19 future. This includes not only supporting customers’ digital migration but also thinking through potential new products and services for evolving customer behavior and economic conditions.
Realign the leadership team
Having worked hard to answer the first wave of urgent Covid-19 operational issues—among them protecting employees and customers to ensure business continuity—now, a new wave of strategic questions are emerging about what to do next. Working on those will put an additional strain on already-stretched leadership teams, increasing the need to forge strong alignment on the appropriate future direction.
Within the leadership team of the Italian bank, for example, each member has his or her key priorities—issues that have dominated their long days for weeks and that still remain urgent. Often, a balance must be struck. The chief commercial officer’s desire to recover revenue must be weighed against the chief lending officer’s task of managing credit risk. While the chief operating officer seeks to improve call center effectiveness and minimize costs, the chief human resources officer is looking to increase work-from-home productivity and sort out the implications of a dramatically shifting business on bank employees. The need for alignment and coordination is immense.
This bank’s leadership is building that alignment by focusing on three things. First, they are articulating their ambition by making a case for change and creating a compelling narrative to illustrate that case to the organization and explain where they want the company to go. Second, they are designing the portfolio of initiatives and investments that will put them in the best position to create value in the world they see coming. And finally, they are creating a roadmap for how to get there, including how they will orchestrate all the steps they will need to take and the sequence in which they will need to take them.
Redesign for the future
Once a vision for the future is in place and the leadership team is on board, the next step forward is to invest in new capabilities that the business will need following the crisis. Recognizing this, one leading European credit and asset manager has already begun to think about what those capabilities will be. It began by asking its leadership team a series of questions meant to establish their new vision for the future and how it differs from what they had previously envisioned: Which existing trends will accelerate? Which ones will become obsolete? Which new ones must be contemplated? What, in short, are the scenarios to prepare for?
From there, the company has begun exploring how these trends could alter the boundaries of its business, profit pools and its industry’s rules of the game. What it concludes will influence how it adapts its customer propositions, corporate capabilities and ways of working.
Alongside the “red team” that the company has handling crisis management, the CEO has launched a separate “green team” to define and prioritize strategic priorities, moving into offense. While certain teams focus on urgent business recovery initiatives, such as cutting costs and stress testing cash and profit-and-loss statements and even work-from-home capacity, others are adopting Agile ways of working to release quickly the next generation of services that their banking and investor clients will need.
During a time when most of its competitors continue to struggle with the shock of the crisis or are focused exclusively on short-term initiatives to recover the business, this company hopes to come out of the Covid-19 crisis with its leadership positions reinforced. By setting that goal, leadership has already boosted executive morale.
As executives consider how to reevaluate, realign and redesign, it is important to adopt a kind of mental ambidexterity—namely, the ability to think and manage simultaneously across multiple time periods. In addition to running the business now, it is time for companies to retool for a recovery that will surely come.
What is the Marshall Plan for your business? It’s time to start planning.
Coronavirus
The global Covid-19 pandemic has extracted a terrible human toll and spurred sweeping changes in the world economy. Across industries, executives have begun reassessing their strategies and repositioning their companies to thrive now and in the world beyond coronavirus.
David Michels leads Bain & Company’s Global Results Delivery® practice, and he is based in the firm’s Zurich office. Luca Penna leads the Transformation practice in Europe, the Middle East and Africa, and he is based in Milan.
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