Winning in the 20s' would require the basis of competitive advantage to change. Technology fuelled change, new learning technologies, declining long term growth rates require the companies to compete on their rate of learning.
This would require a new hybrid learning organization, combining AI and human ingenuity, an effective approach to change, innovation, and creating a trusted organization. Every organization should become aware of the limits of its ability to learn quickly in a fast-changing environment. Companies will have to survive the brutal short term to access long term options. This requires leaders to respond to the new environment, a new customer, and a heightened social expectation to lead out of adversity.
System resilience can be developed only through cooperation between companies and companies and governments. The long-term imperatives have to be supported by short-term and medium-term measures. To address these, the following five measures must be considered.
Sustainably flatten the epidemic
Currently, the only tools that can control the epidemic are quarantine and social distancing. Both measures impede the flow of goods and people and result in freezing the economy over a long period.
The only alternatives are medicines and vaccines. Medicines are not yet proven and vaccines are at least 18 months away. We need new approaches and learn from countries like South Korea, conducting large scale testing for both infection and immunity, new practices for rapid tracking, tracing and enforcement, and new guidelines for when to open up the economy and what to do if the infection recurs. This will require total collaboration between government, health systems, and businesses as well as policy innovations.
This will truly test the government, society and business. We have little choice but to do all we can do to make it work.
Win back the new customer
Businesses will need to win a new customers in the post-epidemic world. Companies need to discern, adapt to, and shape the emerging new reality. the difficult part would be to distinguish between crisis-induced short-term changes to long-term permanent shifts. Companies will need to detect emerging trends and test their durability by looking at coherence with long-term trends, analyzing customer friction points, and learning rapidly from countries ahead of the cycle. For this to happen companies should pivot from a crisis minded mindset to a more creative and imaginative one.
Two trends are clear. First, is the massive shift towards digital platforms and channels. The second is the enormous challenge for many parts of the economy to restore consumer trust. Going out will entail heightened levels of anxiety, which could inhibit the demand. Businesses will need o build confidence-building measures.
Accelerate digital transformation.
Even before the epidemic, many businesses pursued digital transformation to defend themselves against competition and to leverage business models concerning agility, scalability, productivity, and customization.
Most businesses have a digital strategy that encompasses digital platforms, ecosystems, underpinned by AI, and supported by digital transformation program. What had been discretionary has now become mandatory in the wake of the epidemic. Businesses and consumers have been allowed to try out digital shopping, working, and collaboration.
The first wave of digital transformation has proven as challenging as other large scale programs. They need to be holistic, focused on value creation, not constrained by existing processes. organizations have to combine human ingenuity with machine learning.
Create an advantage through resilience.
Resilience will become a key factor. Companies have built efficient, global-supply chain locating production activities in low-cost locations and connected them with digitally-enabled logistics. This is brittle under stress especially due to the disruption on account of the epidemic. This calls for building a supply chain that is decentralized and resilient.
In addition to supply chain resilience, balance sheet resilience is also important. This requires cost reduction, focus on cash, and in some cases government support. Very few companies design, measure, and manage the critical systems for resilience. The key characteristics are redundancy, diversity, modularity, prudence, and adaptivity. For this, the companies will have to rethink business, with a biological rather than mechanical mindset. Instead of asking how good is my game, ask yourself how robust is my game, can it adapt and how long will it last?
Mobilize purpose in the common interest
As citizens and businesses endure severe hardships while governments support major enterprises with rescue packages, there would be intense scrutiny of social relevance and contributions of corporations.
Companies and governments will have to collectively mobilize and take action. Our biggest problems are all communal problems that cannot be solved by competing harder within the current framework of markets.
Governments are more trusted than corporates but are seen as less competent. To collectively succeed, the government and companies need to be resilient and purpose-driven.
All of these are only potential ideas, which will be realized only through collective action. Business leaders need to create a collective narrative of hope and take bold action rather than squander the opportunity offered by the pandemic in rethinking the organization.
Rich Lesser and Martin Reeves BCG 202004
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