When planning for the future is impossible, you need to be ready for anything at all times. Here’s how to train for resiliency in the face of uncertainty.
The future has seldom been so uncertain but by establishing a flexible focus on four key business areas, it is possible to be ready for it. Writing for McKinsey & Company, Mihir Mysore, Bob Sternfels and Matt Wilson say preparing to face whatever lies ahead is akin to “developing a new ‘muscle’: an enterprise-wide ability to absorb uncertainty and incorporate lessons into the operating model quickly”.
FOCUS ON THE CHALLENGES
It might not be possible to paint an accurate picture of the future, but there are four areas where uncertain outcomes will have an impact on your business.
1. Demand. COVID-19 has provoked a shift to online consumption. There has been a 20% to 25% average increase in the number of digital consumers, with new digital consumers accounting for 40% of growth. This shift to digital has also seen 15% to 20% of online shoppers in the US switch websites since the start of the pandemic, suggesting brands can’t rely on customer loyalty.
The shift to digital has not impacted all sectors equally. For example, recent surveys by McKinsey show that while 13% of retail customers expect to use mobile banking more, 7% expect to use it less.
There has been an overall fall in demand, due to both economic uncertainty and shifting consumer priorities. China has recovered faster than most other countries, but still consumption is 20% lower than it was pre-pandemic. It is difficult to highlight universal trends, but what is certain is that different sectors will recover at different speeds.
2. Workforce. In April, a study by the McKinsey Global Institute, showed that up to one-third of US jobs could be impacted by furloughs, layoffs and pay cuts, with 80% of the jobs affected held by low-income workers. For business leaders, choosing when to add workers to the payroll will be one of the biggest challenges post-pandemic.
For white-collar workers, remote working has become the norm, but although a positive change for some, not all have welcomed it. Throw in the childcare stresses faced by dual-career couples, and it becomes clear employers will have their work cut out finding a balance that works both for business and their employees.
Employers are also discovering that the impact of the disease on workforces coupled with shortfalls in the specific skills required to tackle the current challenges, eg digital sales skills, means that even as firms are forced to lay off staff, they face a shortage of talent in specific areas.
3. Regulation. In the wake of COVID-19, governments and regulators have put in place measures to safeguard workers. The problem for businesses is that these safeguarding measures are far from universal. For example, in the US, some states have banned all gatherings, some have banned gatherings of more than ten people and some allow gatherings of 20 to 50 people.
“For leaders whose businesses span multiple geographies, ensuring consistency is highly challenging.” Balancing health and safety requirements with the need to achieve a level of productivity that will ensure the company’s survival, is set to remain a priority for businesses.
4. Safety. Responding to COVID-19 has involved a “gargantuan medical and scientific effort”. It is ongoing – the science doesn’t stand still. New information regarding testing and transmission is emerging all the time, and your safety protocols will have to reflect the latest recommendations.
HOW TO MAKE READY
Forget the traditional “war room” focused on tactical planning. You need to build a “nerve centre”, “a flexible structure that… gives leaders the best chance of getting ahead of events rather than reacting to them”. This nerve centre will likely be in place for the next 12 to 18 months.
The role of the nerve centre is to monitor changes in demand, workforce, regulation and safety. For example, identifying skills gaps in your workforce and providing the necessary mentoring and training for your staff.
It should comprise two “core teams”: a “delivery” team and a “plan-ahead” team. The delivery team focuses on achieving a clear objective and learns from the experience. The plan-ahead team learns from the experience of the delivery team, accelerates the pace of change (eg new product launches) and stress-tests key areas of the business (eg supply chain resilience).
Collecting, processing and acting on data from a wide range of sources is vital. Companies need an information platform that captures such data, flags them if certain thresholds are breached and helps generate responses to problems.
“The ability of top leaders to refocus on the task of building sustainable capabilities will define the companies that emerge intact from the pandemic over the next two years.” Do not make the mistake of simply reacting to events, resilience is built by being proactive – it’s a muscle that gets stronger the more you work it.