- COVID-19 means leaders need to find a path from a shuttered economy towards growth and prosperity.
- Organizations will need to be reconceived to combine human ingenuity with machine learning.
- Stakeholder capitalism is more urgent than ever.
- How companies behave now will be remembered for many years to come.
A year before the COVID-19 outbreak, we co-authored an article, Winning the ’20s, in which we argued that the basis of competitive advantage was shifting. The combination of technology-fuelled change, the rise of new learning technologies, and declining long-term growth rates, which require accelerated innovation, called for companies to compete on their rate of learning.
Have you read?
This imperative has only been reinforced by the pandemic. COVID-19 has made organizations aware of the limits of their ability to learn quickly in an extremely fast-moving environment, in which 10 days of hesitation can lead to the quadrupling of infections, and to an escalation of business and societal disruption.
The pandemic has also layered on an enormous transitional challenge: the need to move from a shuttered economy, to a path towards growth and prosperity. This journey involves three phases – flatten, fight, and future. Companies in many sectors will have to survive a brutal short term in order to access long-term options. But while survival may be top of mind today, thriving in the future is the long game. And this requires leaders to respond to a new environment, a new customer, and heightened societal expectations.
Five imperatives for leading in the new reality
To address these enormous short and medium-term priorities, we see five leadership imperatives.
1. Sustainably flatten the curve
The only tools we can use to slow the epidemic are quarantine and aggressive social distancing, measures that are tantamount to freezing the real economy and for which there are few historical precedents. There is no acceptable trade-off between deaths and dollars, so we must seek to break the compromise by not only flattening the curve but by doing so sustainably for both lives and livelihoods, until we have medicines to effectively treat the disease and/or a vaccine to prevent it.
In the interim, we need new approaches: large-scale testing, both for infection and immunity; new models for risk stratification; new practices for rapid tracing, tracking, and enforcement; and new guidelines for when, where, and how to open communities and the economy – and for when and how to react if infections recur.
2. Win (back) the new customer
As the disease is brought under control, businesses will need to start the journey to win the new customer in the post-crisis world. The trickiest aspect of this will be distinguishing between crisis-induced short-term changes and more permanent shifts, with companies pivoting from a crisis management mindset to a more creative and imaginative one.
Against this backdrop, two trends are already clear. The first is a massive acceleration of the shift towards digital platforms and channels. Traditional enterprises will need to make sure that they fully participate in this shift rather than risk accelerated disruption from digital incumbents.
The second is the enormous challenge for many parts of the economy to restore consumer trust. We need to build “control towers” – capabilities that allow us to monitor and rapidly adapt to the constantly shifting landscape and adjust offerings and restructure businesses to reflect new conditions around the world.
3. Accelerate digital transformation
Well before the crisis, many businesses were pursuing digital transformation programmes. But what was a discretionary, self-paced transformation has become an urgent priority. Businesses and consumers have essentially been given an opportunity to try out and get accustomed to digital shopping, working, and collaboration all at once. This and the generally superior economics of digital channels will accelerate the penetration of digital business models.
These digital transformations need to be holistic, focussed on value creation, and not predominantly technology driven or constrained by existing processes and offerings. Above all, to compete dynamically on the rate of learning, organizations will need to be reconceived to combine human ingenuity with machine learning. Companies must focus on the human side of digital transformation at least as much as the technological side, including by incorporating new ways of working.
4. Create advantage through resilience
Companies have spent decades building efficient, extended global supply chains that located production activities in low-cost locations and connected them with digitally enabled logistics. Their effectiveness has been measured in terms of speed, cost efficiency, and profitability. But COVID-19 has shown that systems built mainly to maximize efficiency tend to be brittle under stress, and many companies are already planning to rebuild their supply chains in a more decentralized and resilient manner.
In addition to supply chain resilience, balance sheet resilience is of heightened importance. In the short term, this requires cost reduction, a focus on cash, and in some cases government support. Longer term, it could reduce the power of activists to push boards, and of asset managers to pursue greater leverage and large share buybacks.
5. Mobilize purpose in the common interest. Before the crisis, many CEOs were engaging deeply in corporate purpose, multi-stakeholder capitalism, and sustainability in response to global warming and other collective concerns. This agenda will certainly become more urgent and specific as a result of COVID-19.
As citizens and small businesses endure enormous hardship while governments support major enterprises with unprecedented support packages, we should expect intense scrutiny of the social relevance and contributions of corporations. How individual companies act and communicate in this extraordinary period will likely be remembered for many years to come.
What is the World Economic Forum doing about the coronavirus outbreak?
Responding to the COVID-19 pandemic requires global cooperation among governments, international organizations and the business community, which is at the centre of the World Economic Forum’s mission as the International Organization for Public-Private Cooperation.
Since its launch on 11 March, the Forum’s COVID Action Platform has brought together 1,667 stakeholders from 1,106 businesses and organizations to mitigate the risk and impact of the unprecedented global health emergency that is COVID-19.
The platform is created with the support of the World Health Organization and is open to all businesses and industry groups, as well as other stakeholders, aiming to integrate and inform joint action.
As an organization, the Forum has a track record of supporting efforts to contain epidemics. In 2017, at our Annual Meeting, the Coalition for Epidemic Preparedness Innovations (CEPI) was launched – bringing together experts from government, business, health, academia and civil society to accelerate the development of vaccines. CEPI is currently supporting the race to develop a vaccine against this strand of the coronavirus.
All of these ideas are potentialities, which will be realized only through our individual and collective actions. Never has the premium on leadership been higher. Business leaders need to create a collective narrative of hope and catalyze bold collective action if we are to look back at COVID-19 as an inflection point for collective progress, rather than as a squandered opportunity.
For more on this topic, please read “Leading Out of Adversity.”