The global management consulting company McKinsey has outlined some steps companies can follow to stay ahead of the COVID-19 crisis.
As part of McKinsey’s series of advice to help companies manage current crisis, the April report, entitled “Getting ahead of the next stage of the coronavirus crisis”, said most companies will be very vulnerable to the economic fallout of extended public- and workplace-isolation measures.
The COVID-19 pandemic is spreading at an extraordinary speed and businesses put crisis teams in place to keep their employees safe and deal with the uncertainty amid constantly changing conditions. However, this isn’t likely to be good enough.
McKinsey believes companies should help themselves by developing a clear baseline of their last-known position on the market. Think of it as doing a “system restore” back to January.
Companies do not have time for a clean-sheet exercise, but the companies’ existing strategy can be an anchor to use in systematically assessing what has changed.
Companies’ plan-ahead team should take stock in three main areas: financial assumptions, ongoing initiatives, and big strategic choices.
Referring to a three-year plan, and cataloguing the planning assumptions made in that document, will help determine what drives the company’s financial performance forward.
Those factors should be sorted into three buckets: those that still seem about right, those that are wrong, and those about which you remainunsure. If possible, do a quick sensitivity analysis to assess which assumptions matter most.
The next task is to list the big ongoing initiatives, starting with major projects on the capital-expenditure list. These should also be organisedinto the same three bucket categories.
The final step is to list the big strategic choices that underpin your company’s business model. For example, this could be sustaininga price premium, maintaininginvestmentsin a physical network, and investingfaster than the competition. Sort those into the three buckets too. You have now clarified the starting picture and brought the critical issues to the foreground.
Close on the heels of the coronavirus outbreak, the next wave of disruption which is the biggest economic shock since World War II, is headed businesses’ way, the report mentioned, adding that it isn’t just an economic shock: it is a shock to customer behaviors and business models too.
The challenges associated with it will be orders of magnitude bigger than what businesses are used to dealing with which makes the companies need to adopt an operating model that accommodates the extreme level of uncertainty facing the businesses.