Apr 19, 2021
McKinsey: Speed and resilience key to revival
Speed and resilience are key for organisations, according to McKinsey, when it comes to emerging strongest from the COVID-19 pandemic
McKinsey has outlined five priorities for the next five months based on speed and resilience as businesses reimagine themselves for the next normal.
Speed has been a characteristic of the COVID-19 pandemic – from the spread of the virus to reaction of businesses with reorganisation of supply chains and adoption of work from home. Vaccines were also created with unprecedented speed and organisations that acted quickly to deal with disruption fared better than those that did not.
McKinsey says speed is also likely to be a central feature of what happens next, and that speed will need to arrive by design rather than necessity.
To build long-term resilience, businesses need to make sure that the speed unlocked by the pandemic is sustainable.
Here are the five questions McKinsey says business leaders need to address:
1. What kind of demand shift should we expect, and how do we get ready for it?
Both business-to-consumer (B2C) and business-to-business (B2B) companies expect shifts in future demand that will affect their commercial model.
During the COVID-19 pandemic, many households prioritised buying goods (especially basic products such as food) over services (such as restaurants and hair salons, many of which were closed anyway). As a result, pent-up demand could lead to a spike in spending on services. What is still unclear is which services will return and in what form.
2. How do we incorporate new ways of working to enhance productivity and health?
Organisations have worked hard to ensure safe working environments. However, some companies have found that workers are partaking in high-risk activities as a direct result of living through the pandemic. This will need careful handling and messaging.
Data from a wide range of organisations says productivity is higher than before the pandemic, but not uniformly so. According to a McKinsey survey, productivity is up for about half of all workers, with the other half reporting no change or lower productivity. The same survey suggested that, while the inability to disconnect is a real concern, increased productivity is linked to a willingness to change how people work – companies that managed to build inclusiveness into the remote-work arrangements were significantly more likely to see increased productivity.
In some cases, companies are strengthening their speed muscles, while also building personal connections and reducing fatigue. Work can and should look different to create competitive advantage in performance and health.
3. How do we get the most value out of office real estate?
When the COVID-19 pandemic hit, many workers abruptly began to work from home. At first, the thinking was that productivity and job satisfaction would plummet. In fact, while some people struggled with the transition, new flexibility was embraced by others.
McKinsey believes the future working arrangement for knowledge-based companies will be a hybrid solution, with companies deciding when to expect a physical presence, and how often.
Leaders will need to make decisions about office real estate, namely: What kind of office footprint will the organisation have (how much space is needed) and what will the working experience be like inside and outside? For instance, if the vast majority of a company’s interactions are in smaller groups or teams, it can consider shifting offices to a greater number of small locations, rather than having a few large hubs.
4. How can we reimagine capital allocation to promote resilience?
Capital allocation used to be about making large bets early, based on knowledge of trends that could take years to play out. During 2020, it became clear that this view needs to sit alongside a new way of thinking. Companies need to develop a capital-allocation process that allows them to create value by navigating fast-moving disruptions that can manifest themselves over days or weeks rather than years.
Navigating business disruption is easier said than done. One critical capability is “trigger-based capital allocation.” This involves defining a set of big moves, such as M&A, portfolio reallocation, or divestitures, that could significantly alter the shape of the business. Then, the company defines specific conditions, or triggers, under which it would take the proposed action. Finally, the company needs to have a clear mechanism for identifying whether these conditions have occurred, and it has to be able to move quickly when they do.
5. What broader role should organisations play in their communities?
COVID-19 has made many companies take stock and consider their social responsibilities. In the United States, for example, COVID-19 has disproportionately affected women, minorities, people of colour, lower-income workers and small businesses.
Businesses have a role to play in rebuilding robust economies and in improving their communities. As a part of their corporate social-responsibility efforts, companies should consider which areas to prioritise, based on the strengths of their organisation and on what their people value most.
Back in June 2020, McKinsey said “an organisation designed for speed will see powerful outcomes, including greater customer responsiveness, enhanced capabilities, and better performance in terms of cost efficiency, revenues, and return on capital. The speedy company might also find it has a higher sense of purpose and improved organisational health. These outcomes are possible, but not inevitable.”
Today, McKinsey stands by that statement. Speed matters, but not at the cost of making mistakes or burning out. By asking the right questions, business leaders can improve the odds of negotiating the next normal successfully, and in so doing, help themselves, their employees, and their communities.