October 13, 2020 Deshpande Suraj 0Comment

The coronavirus pandemic is a crisis that tragically affects people’s lives. It cannot be denied that it also serves as a catalyst for change – economic, social, personal, and corporate – on a scale not seen since the war. The number of changes and the speed with which they occur demonstrates the fact that companies are faced with changes that occur once in a generation. And despite all the uncertainty of the situation, it is already clear that the digital future awaits us.

The challenging economic outlook and continuing uncertainty require CEOs to make tough decisions. Some are downsizing and focusing on weathering the storm. Others are taking decisive action to make their companies even stronger when the crisis is over than they are today.

A new study by consultancy McKinsey says the COVID-19 crisis could dramatically accelerate the digital transformation and significantly reshape the business landscape. Even before the worldwide pandemic, 92% of companies believed their business model needed to be changed through digitalization. And the crisis has only accelerated these transformations. Digital transformation means, first of all, the transition from experimentation to active scaling up. These steps should take place in two directions: within the company and through the development of new business areas. Successful digital companies take this approach.

McKinsey experts have identified the TOP 5 questions that will help executives prepare their businesses for recovery from the coronavirus crisis.

Do you have a clear idea of ​​the consequences and a plan for overcoming the crisis?

Despite some success in adapting to new living conditions, many business leaders were frustrated at how slowly their operating model has changed, from serving customers who are migrating to digital channels to scaling internal operations. One of the main reasons for the difficulty is that while companies have implemented many digital initiatives, they have not created a coherent and integrated digital vehicle to drive their businesses.

Accelerating digital transformation requires leaders to take a step back and analyze possible action plans, cost and feasibility assumptions. These assumptions should be based on new behavior of customers, suppliers and changes in regulation.

For example, completely new consumer groups are now emerging who are trying digital products and services for the first time. In the United States, about 35% of Gen Z members used video chat for the first time during quarantine (6% of the Baby Boomers). And 54% of families with incomes over $ 100,000 tried online streaming for the first time (compared to 35% of families with incomes under $ 50,000).

In the B2B segment, digital interactions with B2B customers are now twice as important as traditional channels, with a jump of about 30% since the onset of the coronavirus crisis. In telemedicine, regulation, licensing, all issues that previously impeded the digital development of these industries were dropped.

One of the most important tasks in the implementation of the roadmap (action plan) is to coordinate all the steps between management and team leaders, as well as provide the resources necessary to complete the tasks. However, coordination during quarantine and remote work is a little more complicated – during a video conference or a phone call, the CEO must be frank about the plan of action, assign responsibilities and discuss the availability of resources.

How can business development facilitate faster entry into new markets and access to new customers?

Many companies can only keep up with the pace of the crisis and changing customer behavior by creating something outside of the main company. However, the problem is that less than 10% of business projects are successful. When businesses take a more structured approach – including a clear strategy, entrepreneurial talent, and the right balance between corporate support and operational freedom – the success rate rises to 67%. Corporate support is especially important now.

A recent study of B2B segment shows that large companies remain more stable, with approximately 50% planning to increase or maintain their expenses in the short and long term.

Experts say there are many opportunities to build a post-crisis business. And CEOs will play a key role in expanding and driving the business.

How can you focus on a more flexible operating model to accelerate change in your business?

Once the Agile approach was an exclusive area of ​​information technology, and now it has penetrated almost all areas of business. Companies are being forced to move and act at unprecedented speed – all remotely. For example, one large bank faced a 20-fold increase in lending under its small business lending program. He employed a multi-functional team to tackle this challenge – from customer communication to underwriting, product development, and employee training. And all this is completely remote. The bank succeeded in doing this using an Agile approach.

The nature of the crisis has forced teams to act quickly in the face of uncertainty, make decisions with limited control and respond to rapidly changing situations. Typically 50 people make 80% decisions.

Some new ways of working are more of a response to the current situation. But it’s important for CEOs to protect what works well. Centralization can be useful for crisis management, but should not be confused with a growth model. It’s about leveraging the vitality and effectiveness of extended agile teams working on goals, not just tasks.

Video conferencing can be an effective method of verifying the fulfillment of the assigned tasks. But face-to-face meetings will also be necessary – previous research has shown that productivity declines as the number of locations employees work from decreases. Most likely, some hybrid models will be used, taking advantage of distance and personal communication. Quarantine experience has shown that the ideal effective team size is from 5 to 9 people. A Zoom meeting involving 20 people but only nine of them visible on screen is often a disappointment. Leaders need to be able to see how many people on a team are the backbone of the team and how much they can do if given the right tools and support.

The need to solve problems instantly identified some more important abilities: learning and adapting.

How should the strategy towards employees change?

As the crisis affects the economy, the need to cut spending will increase. Leaders will face difficult staffing decisions. However, the importance of talent must be considered in the recovery and growth of a company after the crisis. It is also imperative to develop the skills of people who already work for the company.

Leaders must build this strategy based on the type of business of the company. For example, in technology, you need to focus on building your base of top engineers who are ten times more productive than less experienced developers.

It is worth paying attention to employee training. Before the world faced COVID-19, most companies tried to train employees online. Now people are used to tools for remote work. This enables teams to quickly acquire new knowledge needed in times of crisis.

What investments are needed to create a technological environment that will allow the company to grow?

The supplies due to the coronavirus have highlighted the critical role of technology – from supporting telecommuting to scaling digital channels, improving supply chain with the implementation of new ways of sourcing (like using such platform for industrial components sourcing) for growing customers. During this period, many failures revealed systemic deficiencies. This shouldn’t come as a big surprise, as 79% of the organizations that have done digitization are still in the early stages of their technological transformation. More importantly, they brought to the fore a point that can no longer be ignored: technology is a key-value factor, not just a support function. This understanding is important because all too often cost is the main factor when it comes to technology. Nowadays, flexibility, cybersecurity, and resilience also need to be considered.

To achieve this goal, CEOs will need to work directly with their Chief Information Officers (CIOs) or Technical Executives (CTOs) to invest in technology, legacy system upgrades, and microservice architectures. Direct involvement of CIOs in shaping the business strategy drives faster progress towards the company’s digital goals.

It is also worth focusing on data analysis and advanced analytics. The need for accurate and timely data has never been greater. The South Korean government has proven this when it worked with companies to launch the COVID-19 data platform. The latter reduced contact tracing time from 24 hours in early February to less than 10 minutes on March 26. To this end, a digital surveillance system was developed that brings together information from 27 public and private organizations.

Additional initiatives could include modernizing data architecture or moving to the cloud. To get the full meaning of the data in the future, it will be important to update the algorithms based on new realities. At the same time, company directors will need to work with their risk experts to ensure that data is used in accordance with strict privacy and cybersecurity rules.

The rise in digitalization has also highlighted the growing importance of ecosystems. For example, in response to customer needs during the crisis, some banks have integrated health consultation, prescription, and automotive services for their customers. As protocols and standards increasingly normalize this integration, the CEO must determine which ecosystems can deliver the most business value.