- COVID-19 has accelerated the need for urgent and interdependent responses to a set of challenges facing the world.
- The economic damage wrought by the pandemic has affected government, business and individuals alike.
- A process of repairing, rethinking and reconfiguring will bring about the strategic change needed for future hope.
The COVID-19 pandemic has wrought enormous personal, economic, and social damage. It is primarily a public healthcare problem, but one with immense immediate implications for business, and for economic, fiscal, and monetary policy. This virus is both accelerating powerful existing trends (such as automation and inequality) and slamming the brakes on trends that had, until very recently, possessed tremendous momentum (such as globalisation).
The scope of the challenges, with all their dimensions, is as much philosophical and intellectual as it is physical and practical. Simply put, we are wondering how to go about restarting the economy; repairing what was broken; and preparing ourselves to cope with a host of urgent social, environmental, demographic, and economic troubles.
In 2017, we identified a set of urgent, interdependent, and accelerating challenges confronting the world. We dubbed it the ADAPT framework — describing a world in which asymmetry, disruption, age, polarisation, and trust were fundamentally changing the way millions of people live and work. Accelerated by the pandemic, these changes may actually come about sooner than we thought.
Efforts to address these issues — made even more urgent by the pandemic — face four harsh realities.
First, at both national and corporate levels, balance sheets will require significant shoring up. There will be intense competition for funds as societies focus on the many tasks associated with restarting businesses, creating jobs, and supporting those most harmed by the pandemic and the national response. At the corporate level, limited capital will necessarily be focused on repairing damaged supply chains, restarting the business, rebuilding revenue, and bringing employees back into place.
Second, small businesses will be even more significantly affected by policy decisions than larger ones as most do not have the kinds of cash reserves larger companies do.1 This is a particular problem as small business is generally the most important source of employment and disproportionately the source of growth. But it is also a problem for larger organisations, because small businesses are most often primary customers and a third or fourth tier in their supply chain.
Third, different sectors of the economy — and even individual businesses within the economy — will be quite differently affected by the crisis.2 Platform companies, grocery stores, and pharmacies have, for the most part, done extremely well so far. But many others (e.g., airlines and hotels) were largely shut down. All except the hardest-hit firms are trying to maintain their workforce; the result is that they burn through cash and end up in a much more precarious financial position.
Finally, unemployment has grown in many markets. The International Labour Organization noted in its April 29 monitor of COVID-19 impacts on the world of work that “almost 1.6 billion informal economy workers … have suffered massive damage to their capacity to earn a living.”3 This figure represents both a devastating human cost and an additional burden on countries with already growing fiscal challenges. For businesses, unemployment will affect the ability of the consumer base to buy goods or services, pay rent, and repay debt.
The scale of the problems may seem daunting. But that is no excuse for inaction. For governments, businesses, and institutions, the essential elements of a high-level response are quite similar (see the diagram below). We need to be highly cognisant of the choices we are making today, because they will dramatically affect our ability to accomplish the essential actions that constitute the response.
The overriding short-term imperative is to fix what has been broken. As governments repair the human and economic damage, they are coping with increased national debt, a reduced tax base, and higher short-term spending. They will also have to repair the damage done to the personal balance sheets of citizens, old and young.
Governments will need to manage national costs, shore up revenue, and find ways to accelerate business growth and related new skills development. For their part, businesses will need to address vastly weaker balance sheets, steep revenue declines, and, in many cases, weakened supply chains and stressed or depleted employee bases. Each of these elements will require triage, lest the organisational difficulties persist and erode any real chance of a speedy recovery.
The next step is to quickly begin reimagining and adapting strategy for a post-COVID-19 world. If they weren’t doing so already, companies need to rethink their operating models so that they can be robust enough to handle the disruptions arising from ADAPT. How will supply chains function in a world in which international transport may be shut down? And how to design business models to flex as circumstances change?
Countries and companies will be positioned very differently as a result of this crisis and thus will need competitive and collaborative strategies that are dramatically different from those they might have imagined a few months ago. Both nations and organisations need to rethink what success means. Gross domestic product and earnings per share have been our lodestars for decades. But we clearly need new measures of material, social, and environmental progress that can guide our efforts.
Lastly, how do we create the adaptive capacity essential for addressing the unforeseen issues that are sure to be propelled to the surface by the pressures of the ADAPT forces? Rethinking ensures that organisations are repaired in a way that makes them more resilient and more successful by bringing considerations about the future into the present.
Organisations must make the systemic rethinking concrete by reconfiguring public and business institutions. This represents a much more fundamental redesign of organisations than the repair process entails. The crisis has put into strong relief the uncomfortable truth that a host of institutions around the world are simply not ready for the 21st century.
What does this mean in practical terms? To address the asymmetry inherent in the global economy, governments will have to accelerate the development and scaling of small business on a massive scale. To a degree, reconfiguration also means jumping on the trends that have suddenly gained currency in response to the pandemic, including telemedicine, distance learning, and remote working. But it means approaching issues such as the localisation of supply chains on a systematic basis, rather than an ad hoc one.
Organisations need to rethink technology strategy, geographic footprints, and business models to make them more robust and to recognise the very strong pressures for localisation they are going to experience. They will need to evaluate their portfolios from the standpoint of the products or services needed in a very different economy.
In the midst of the pandemic, there has been a constant search for clarity — on what measures individuals should take, on the availability of testing, on how we construct a path forward. In a period of great uncertainty and invisible threats, people feel comfortable going about their lives only if they are confident in the information they receive. The uncertainty will linger and so investors, regulators, and stakeholders will also be demanding more disclosure and information in real time on everything from cash flow to the health of employees.
A host of organisations will need to restart in a changed world, because they were either shut down owing to government fiat or forced to for financial reasons. This will require the usual steps of any beginning: designing the business plan, finding startup capital, establishing the supply chain, hiring employees, reviewing the customer experience to entice new buyers and bring back old ones, and building brand. But new layers of complexity will be added to the process.
All this must be done with a keen eye toward understanding trade-offs and building the capacity to navigate the disruptions that are bound to arise in the future. The need to restart can happen at any point in the repair–rethink–reconfigure process. As uncertainty grows around the world, this process becomes the new normal: The next crisis will occur, and organisations that have not learned the lessons of this experience are back in repair mode.
a new world
The need for governments and organisations to transition to a new world was apparent well before COVID-19 arrived. The pandemic and the associated economic, organisational, and personal consequences of the decisions made to address it just made the need for those transitions greater. But the monumental changes individuals have had to make to accommodate the crisis have made us better prepared to make necessary changes. It would be unfortunate — and potentially devastating — if we did not take advantage of the opportunity in front of us.
One of the remarkable features of this pandemic is that it has created a shared global experience of an overwhelming event. If this shared experience can engender greater solidarity and a sense of purpose, the prospect of adapting to a new world and thriving in it becomes more promising. Hope is not a strategy. But strategy can provide hope.
For an examination of strategic solutions to the world’s most pressing global crises consider our recently released book, Ten Years to Midnight.
A version of this article originally appeared in strategy+business on May 13, 2020.
Thomas Minet, a director with PwC US and a member of the global strategy and leadership team, also contributed to this article.