The global COVID-19 pandemic is a different experience from other catastrophic events like the September 11, 2001 attacks and the 2007-2008 global financial crisis. It is spawning new thinking in all quarters, especially in boardrooms.
It’s been several weeks since coronavirus disease 2019 (COVID-19) truly captured everyone’s attention across the globe. But with new developments almost hourly, it feels so much longer as the world observes the awful suffering and is inspired by the hundreds of thousands of individuals (including volunteers) in research, healthcare and first-response positions putting everything on the line to bring the suffering to a halt.
Compared to prior catastrophic events, such as the September 11 attacks and the global financial crisis, the COVID-19 pandemic is an abrupt cessation of our way of life for an indeterminable period. As a fight on two fronts — economic and biological — COVID-19 is a game changer in terms of its human and business impact. However, it is also prompting fresh thinking that could very well alter business as we know it and quite possibly drive positive developments for the long term.
As CEOs focus on managing the crisis, directors are having to approach their advisory roles in ways they never have before, both physically and intellectually. Industries with business models dependent on herding and crowd-gathering are focused on their very survival and many may emerge from the pandemic as mere shells of their former selves with a priority to rebuild the business. Industries with a strong digital channel are faring better than those without this capability.
Whatever the circumstances a company may face, paradigms are changing in the now virtual boardroom as fundamental assumptions of directors, CEOs and executive teams about markets, customers, supply chains, the workplace, technology and other factors underpinning the business model are undergoing a sea change.
When advising and supporting the CEO both during the pandemic and in its aftermath, directors should keep in mind five “macro-level trends” that can impact the organization’s culture, go-to-market strategy, business model, cost base and risk perspective.
Workplace design will be reimagined, increasing employee flexibility in many areas through a virtual work experience. Those companies that have been able to transition to a remote work environment have engaged in an exercise of discovery — videoconferencing is not so bad after all, employees are proving to be as or even more productive in this environment, and many employees appreciate its impact on quality of life. Conversely, companies that have been unable to transition to a remote work environment because of the nature of their business or employees, or outsourced providers who have important roles but aren’t remote-capable, are experiencing difficulty. This lack of remote-ready workers is magnified in sectors experiencing a significant spike in business (e.g., financial services, retail, and logistics and distribution).
While not all roles can be performed remotely, the pandemic experience raises several “why not?” questions. For example, why not transition as many activities of the organization as possible to a virtual setting? Why not reduce time-consuming commutes to high-rise offices when the work could be done at home or at a more conveniently located work hub? Why not abandon the “9-5 mentality” entirely and allow people to work where they want and when they want, holding them accountable for results? Why not cut down on nonessential travel?
Because every industry is different and each company is at a different position on the digital maturity continuum, these and other related questions will likely be answered in various ways. But they are very important as the way they are answered has powerful implications for employee flexibility, reduction of pollution levels, use of commercial real estate, the kinds of technology deployed in the business, and talent recruitment methods. The trickle-down effect of these decisions affects virtually every industry, either directly or indirectly.
Business models will need to adjust to post-pandemic customer/consumer behavior. A company’s planning around expected changes in behavior and consumption patterns in the post-pandemic marketplace, the likely effect of those changes on the company’s offerings and the appropriate response to those changes will impact its ability to pivot the business model accordingly. Has the company thought about how the pandemic experience is likely to alter customer/consumer preferences? For example, will customers/consumers be influenced by the time they spent in isolation at home during the crisis in making choices around convenience (e.g., home delivery, curbside pickup, live streaming, home cooking and other home-centric behaviors)? Will they work more from home, as fundamental changes to the workplace drive fundamental changes in consumer behavior? Will they be more conscious of the environment in making purchasing decisions, given the dramatic decline in pollution levels during the pandemic?
While the answers to these and other questions may not presently be entirely clear, management’s assessment of them may lead to opportunities to innovate and enhance the customer experience and to differentiate the company’s offerings. When advising management, it is important that directors inquire whether the company has access to reliable market data and analytics regarding customer and consumer wants as well as their preferences for satisfying those wants. Monitoring buyer behavior is of vital importance, both during and after the crisis.
Past decisions to build tight coupling and complexities into supply chains will be revisited. The past 30 years of interconnectivity spawned by globalization have led to the increased use of single-source strategic suppliers, just-in-time manufacturing and delivery techniques, and complex logistics. These trends have emphasized trade-offs in which quality, time and cost considerations have tended to override business continuity considerations. The COVID-19 pandemic has made this point crystal clear.
Going forward, companies are likely to pay more attention to such factors as where key suppliers are located; reliability of second-and third-tier suppliers; availability of qualified, alternative supply sources; how long suppliers can operate during a catastrophic event; and how long the companies themselves can operate during a prolonged disruption in the supply chain. The sourcing of materials and components that are a priority from a national security standpoint, particularly related to healthcare and other strategic needs, will garner close attention from both the public and private sectors, as will the concentration of key suppliers in a given country or region.
A corporate culture founded on trust will prove vital to a company’s resiliency and ability to pivot in the face of changing market realities. Trust will be hard to retain and may even have to be regained if huge chunks of the workforce are laid off, and organizations that are agile and able to pivot quickly will outperform those that are not. Companies that experience difficulty will be the ones that cling to the status quo, lack a full grasp of the issues and are being second-guessed in every major decision they make.
The discipline to act decisively to refine strategic, business and product plans in response to changing market realities is the hallmark of a resilient organization. Communications flowing freely up, down and across the company help ensure that decision-makers are in direct contact with the unvarnished truth, so they can build trust, stay in touch with the customer and foster a resilient organization that embraces change. Strong communications coupled with a strong innovation culture position organizations to pivot and find creative solutions more effectively than those with a culture devoid of these attributes.
Organizations that advance their digital maturity and ensure the hygiene of the technologies enabling their work environment will be more successful. The competitive environment has driven many companies to expand their deployment of digital technology to innovate the customer experience, digitize new products and services, automate internal processes, improve information for decision-making, and enhance workplace flexibility. As virtual workplaces and digital channels take root, companies should take the necessary steps to secure the technological platforms that enable them to function and protect sensitive data and information flows. Increased vigilance is required to protect the sanctity of corporate networks, systems and information assets.
Organizations that have not advanced their digital maturity face the specter of customers transitioning to competitors able to satisfy their needs as the market transitions to a new equilibrium, and not returning once the crisis subsides. These companies should resist postponing automation initiatives as part of cost-cutting exercises as these investments can make a difference in terms of their competitiveness during the recovery period. Further, there may be an expedited focus on infrastructure, network expansion and 5G initiatives that could unleash a disruptive force similar to what occurred over 20 years ago when online payments and mobile capabilities and services sparked the exploitation of B2C e-commerce on the web. Will companies be ready? Organizations making cuts in areas in which they should be investing — including the teams that could help them reinvent their business — risk alienating the very people who could drive their future at a time when those people should be valued more than ever.
These five megatrends constitute a powerful paradigm shift for both the C-suite and boardroom. As society transitions from enforced isolation, the environment may be one in which markets must function with the pandemic threat looming large for a period of time. As markets ultimately evolve to a new equilibrium, the companies most likely to thrive in the years to come are those with resilient cultures that can address evolving workplace dynamics and adapt to customer needs, wants and preferences in an intelligent and innovative way.
Note: A more complete discussion of this topic, including examples, is available on the Protiviti website.
How Protiviti Can Help
As the COVID-19 pandemic continues to disrupt business activity across the globe, organizations are reconfiguring the workplace and adopting new business practices to align with social distancing, stay-in-place directives and other public health protocols. As they do so, they are confronting questions related to their resiliency in shifting to a distributed workplace, adopting appropriate security measures around the enabling technologies they choose to deploy, and implementing ongoing changes in business models and processes affecting how they interact with people in the aftermath of the crisis. Protiviti has the experience, know-how and expertise to help companies navigate these challenges. We can provide companies with access to industry, digital and innovation talent who can bring disruptive thinking to the table in helping them rethink their business, not just in the short term, but also in the medium to longer term. Companies can benefit from working with our professionals who share their values, have knowledge and understanding of the technologies they deploy, and are able to draw on a risk perspective. Our people are fully operational as our firm functions remotely during this crisis, so we’re with our clients all the way — now, in the next phase and once the eventual equilibrium is achieved in the market.
(Board Perspectives: Risk Oversight – Issue 127)