By Tom De Waele, Managing Partner of Bain & Company Middle East and Hernan Saenz, Partner at Bain & Company Dallas
For a moment in history, every company shared the same simple mission statement: Protect our people, our customers, and our business. The lessons companies learned in the months after the outbreak were profound. Virtual, digital and automation initiatives, for both customer interactions and internal operations, accelerated at an astonishing speed. As leadership teams dig into the complex process of recovery, one truth is abundantly clear: We cannot afford to go back to the old way of doing things.
This recovery will not be a straight path. Employees will head back to work and operations will restart on different timetables, following different curves across different countries, regions, industries and sectors. In addition, the pandemic will continue to test all of us, striking at the heart of communities and demanding that we be prepared for subsequent rounds of reinfection and containment. Companies will advance where they can, retreat when they must, often simultaneously, then adapt and start again.
Industry leaders in the next wave will use each advance to move toward a new future, not back to an old and outdated idea of “normal.” The lessons of the past few months are as valuable as they were painful. Now is the time to turn them into the business and operating models of the future.
A virtual, digital, automated world
Digital technologies and automation played a critical role in many companies’ initial response to the crisis. But it was not video conferencing technology nor collaboration software nor bandwidth to homes that was new. What was new was the sudden willingness of every function in the company—IT, to be sure, but also legal, finance, compliance, sales and other departments—to cut through any hurdle necessary.
As the recovery proceeds, companies need to quickly lock in and extend the success of their tactical, crisis-response experiments by grounding them in a broader vision of what the post-Covid-19 future looks like and how they must transform to succeed. Long-term success will depend not on automating a list of tasks, but on redesigning the work and processes with an eye toward automation and digitalization where they will provide the greatest value.
Resilience for a turbulent world
Although efficiency across functions and business models has been prized for decades, Covid-19 exposed the reality that it often came at the cost of resilience—the ability of companies to quickly recover from shocks. Over the years, increasing market pressures on cost competitiveness have translated into continuous pressure on supply chains. Before this pandemic, supply chain leaders were beginning to see the limitations of these cost-efficient but brittle supply chains in the face of increasingly frequent disruptions. One of the clear lessons from the shocks associated with Covid-19 is that today’s supply chains are too complex and too inflexible, and that the future will demand both more visibility and traceability. Companies are now taking steps to construct flexible networks of suppliers and manufacturing partners.
Resilience also requires piercing the opaque veil that shrouded yesterday’s supply chains. Companies are using cloud-based supply chain applications and other tools that can share information with their networks of suppliers and partners. During the Covid-19 crisis, many manufacturers demanded greater visibility into their supplier’s own supply chains—a practice worth continuing. Likewise, “control tower” solutions that integrate data across the entire supply chain offer leadership teams real-time visibility and allow them to calibrate supply and demand during normal times, as well as react to supply and demand shocks.
The need for simplicity
The Covid-19 crisis and the need for greater resilience also confirmed another lesson many executives already suspected: The supply chains of the future should not support yesterday’s complex product portfolios. The allure of increased customization and product complexity has long been hard for large organizations to resist, even as the cost and complexity to support it grow.
But faced with Covid-19, companies did whatever they had to do to keep up with spiking demand or the challenges of running plants and warehouses with fewer employees and fewer inputs. They focused on their hero SKUs—the profitable products customers needed most—and cut the rest. Many companies report surprising increases in productivity as a result.
Now is the time for companies to look at the products that they do not need and discard them. And, when tempting new product opportunities arise, as they will, companies need to balance the obvious revenue opportunity against the hidden cost of complexity. Without intentional intervention to maintain simplicity in the future, business and product complexity—along with all the processes, initiatives, meetings and reports that prop them up—will come creeping back in and proliferate.
Agility that lasts
Simplicity was not the only unexpected effect of the pandemic. In two short months, Covid-19 rammed through behavioral changes many executives had tried to coax from their companies for years. Small teams on the front lines, each experiencing different phases or different effects of the pandemic in their markets, typically led the way. Quick, stand-up meetings focused on the demands of the day and the immediate goals of the week.
However, a spasmodic approach will burn out the very heroes who pulled it off in the first place. Executives need to systematically support and bolster innovation by creating more agile teams and spreading the principles of agility throughout the organization. With customers’ needs shifting rapidly and employees in heightened learning mode, executives should move quickly to install closed feedback loops with both customers and employees, then use them to test, learn and adapt. Covid-19 broke plans and budgets. Executives can use that to their advantage as well. Instead of trying to right and refloat the annual and three-year plans that foundered, replace them with quarterly sprints.
Every company must figure out how to restart operations. But the long path to recovery is beginning to separate companies into two distinct groups:
The first group wants to go back to normal, following the path of least resistance, restarting in predictable ways and settling back into yesterday’s organizational charts. Understandable and reassuring but destined to result in mediocre performance—even failure—in the new world.
The second group is committing to a harder path. These companies recognize there is no normal to go back to. Instead, they advance into the new future, resisting the gravitational pull to their former state and capitalizing on the gains from testing and learning through the crisis. They view their strategy, their customers, their operations and their cost structure through this new lens.
To conclude, the terrible human toll of coronavirus and the mounting economic damage brought a singular clarity and urgency of purpose, forcing thousands of companies to experiment in new ways of working and operating. The companies that most aggressively adapt and extend new ways of operating will turn this crisis to their advantage. These companies are not simply navigating the restart but positioning their companies for a world of continued turbulence and regular shocks to the system, where adaptation and resilience will create the most value.