24 May COVID-19, is there worse to follow?
COVID-19 has clearly already had a significant impact on our lives and businesses. As we gradually get the disease under control how difficult, defining or disastrous will the subsequent economic and business impact be?
Difficult, yes and defining, certainly. Disastrous, in my opinion not necessarily, if as individuals and businesses we make the right choices, acting decisively and acting now.
There is much opinion about the economic impact, and it is widely varying. Ranging from a rapid bounce back to the worst global economic crisis ever. The reality is that nobody knows with any certainty. With so many variables, how could they?
It is already clear that from a business point of view some sectors have been badly hit, sadly leading to many job losses already. Some of this in the UK is clearly in sectors which had underlying structural issues where even pre-COVID we were seeing business closures such as in retail, travel and some restaurant chains where there was clearly over capacity.
Other sectors are the inevitable if highly unfortunate collateral damage of lock-down. Particular examples being the arts and entertainment sector as well as pubs and hospitality. Businesses which were doing well but have had their income stream switched off. As a vital component of many town and city economies action and support will be essential.
As we gradually get the disease under control and prepare to come out of lock-down and given the high level of uncertainty about what happens next, how should businesses be planning to come back strongly? Given the unprecedented nature of these events in modern times there is no playbook.
It is clear that economic, industrial and business strategies will change to adapt to a new world view. This will not happen overnight; it is likely to take years. For example, if, as is likely, governments and businesses rethink their approach to complex global supply chains effecting any meaningful change will not happen quickly. Given this, what is clear is that we are entering an ongoing period of uncertainty and change. This is something for which companies (and us as individuals) need to prepare.
To deal with a climate of ongoing change and to survive and thrive we need to build flexibility and agility into the fabric of our companies. Business must accept change will happen at an increased pace and will at times be unpredictable. They will need to respond and act fast. They will need the right data at their fingertips to make the right decisions. In practice this means becoming increasingly digital in how we build and run our businesses.
The majority of businesses already have a digital transformation agenda. Surveys show >90% of CEOs see this as important. The reality is that for companies which are not digital first (Amazon, Netflix, AirBNB, etc) limited progress has been made. A social media presence and nicer website may well be it for some.
The last few weeks have seen some clear winners and losers as the country shut down and digital channels became the only option to trade, to engage with customers, employees and suppliers. The winners were those who have been investing in digitalisation. Whilst everyone knew they should be looking at their options for becoming more “digital” it is now clear that it is no longer a choice. McKinsey believe that the world has fast forwarded by 5 years. This applies to every business, no sector is immune.
An interesting takeaway in observing how companies have responded to lock-down is how quickly they can move when forced to act and become decisive. The usual corporate barriers to acting at pace have been swept aside and some great outcomes delivered. Equally we have had to rely on individuals at all levels in our organisation to make changes and discovered deep wells of talent – if only we knew and if only we empowered them before now! Acting with this level of decisiveness and pace will not be temporal, it by necessity has already become the new normal. This will force a long overdue review of how we run our companies.
What does “becoming digital” mean in practice? Clearly at the simplest level it means making better use of digital technologies. But, in practice it is much more. It requires a fundamental change in mindset across all dimensions of your business. This is a challenge for which the CEO needs to take accountability.
The first mindset shift is in how companies think about technology or IT. Technology has to move from being a support function to becoming a strategic driver of value and competitiveness. Not simply something that is outsourced to the CIO or CTO but a key competence of everyone in the leadership team.
At the same time every aspect of your business needs to be examined:
Customers – how is being digitally connected transforming behaviour & expectations?
Employees – how will digital improve their experience, environment & opportunities?
Processes – how will your end-to-end processes continuously change, adapt and become more intelligent and efficient?
Property – how will employee and customer shifts impact your bricks & mortar? Partnerships – which partnerships do you need to grow and succeed in new ways?
Governance – if you are to be agile and act at pace; how are decisions made and who has decision rights?
Investors – how will your business thrive in a digital world?
Sounds like this could be hard? I would be being disingenuous if I claimed it will be easy, it won’t be. Irrespective of the size of the challenge, financial or otherwise, the leadership of companies in my view are duty bound to their stakeholders to create a roadmap and put a plan for digitalisation in action. There is no room for hesitation, the first steps need to be taken and they should be taken now. There is no real alternative and it will be difficult, it will be defining but we all need to avoid it becoming disastrous.