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After the crisis: finding economic clarity and opportunity

If the first half of 2020 has taught us anything, it’s that a crisis can be very clarifying. The extended hiatus in economic activity has understandably sent companies and organisations in every sector back to their spreadsheets, to recalibrate and calculate, to reassess future demand, revenue and profitability.  

As 2019 ended the world still needed to speed up climate change mitigation and shift to a ‘net zero’ economy. We knew we were overusing resources and should adopt circular economy principles. We knew many businesses were lagging behind in their digital transformation We knew that bricks and mortar retail was falling in value, but hadn’t yet decided what to do about it. And we knew that supply chains weren’t ethical enough or adaptive to sudden changes. 

None of these trends have gone away. Successful organisations in both the public and private sectors will be those that take the crisis as a chance to make big moves on changes we can all now see coming. At base, that means responding in ways that make us more successful yet also more resilient to shocks and stresses in the highly interconnected world that the virus has laid bare. 

A manifesto for change

It is impossible to know for certain how the world will emerge from the current pandemic crisis, but our recent report on business recovery after COVID-19 considered different future scenarios.  

Scenario planning helps businesses to identify the fundamentals of the sector in which they operate. Success means working out how to stay effective and profitable in a wider range of market conditions, staying ahead of regulation in their sector, and then investing with greater confidence in their chosen path.  

In the event of a true economic depression, organisations’ response might best be muted or focus on building skills and capability and protecting core operations. If we see a more robust recovery then it may be smarter to focus on repurposing parts of your business and expanding capacity. At its heart, business resilience is built around understanding how assets and expertise will respond and behave under different scenarios and adapt to change.  

Returning to our list of existing trends, we can identify four key priorities: 

Renewable energy Renewable energy

Get your business ready for net-zero operations

Get your business ready for net-zero operations

We can already see the energy sector accelerating its own switch to renewables. For business who depend on that energy, transforming their operations to net zero emissions will require the combination of investments in new technology like energy storage or electric vehicles. It might include taking advantage of likely government stimulus funding for new energy sources like hydrogen or tidal energy. Repurposing existing assets for net zero means pushing energy efficiency, focusing on behavioural changes that will help them meet the target.

Covid-19 also provides a host of opportunities to rethink how carbon intensive sectors such as transport are operated. As the world returns to work, there could be a growing risk of congestion exceeding pre- crisis levels, with more people driving in cars to avoid crowded public transport. This will need to be addressed by enabling a shift towards more active forms of travel such as walking and cycling, where social distancing can be ensured – with all implications for the re-designing of cities and urban spaces.

Be digital first

In almost every part of our response to the pandemic, from collaboration to communication to sales and fulfilment, digital has been central, finding new ways to connect people and generate value.

Organisations need to be digital-first from this point on, enabling long-term home working, developing a more flexible supply chain, automating tasks, or bringing management of assets under digital control. The benefits of investment in digital infrastructure, hardware, platforms and skills should go hand-in-hand. Digital innovation pays a return on investment when it is a systemic and planned implementation. For example, to be able to operate a utility (power, gas or water) network remotely with a smaller workforce and to respond to crisis faster, utilities will need to develop digital twins to truly understand and test contingency plans.

Review your supply chains and your business environment

We already knew that a flexible supply chain adds resilience to a business, managing risks and costs more effectively. But after the pandemic, every business will need to re-assess its business model and its chain of relationships for the new economic environment. Under scenarios where the virus may re-emerge regularly, for example a new model focused on remote, digital, and contactless solutions and working with reduced business travel will develop.

Even with a vaccine, a local-plus-regional hubs model may be preferable as international travel costs increase and restrictions remain. Re-shoring and nearshoring will be major post pandemic trends and organisations will need clear strategy for making local and regional supply chains more resilient and adaptive to future demand shifts and surges (for example by ramping up local production capacity in a fast and agile way).

Get ahead of the governance and regulatory agenda

In this crisis, government decisions have reshaped entire economies. They are now setting the rules for how to restart economic activity. There are opportunities in this encounter between private business and public governance. Administrations will need businesses to work with them to realise the benefits of economic stimulus packages. In the second phase they will need private sector capital from businesses to support the recovery.

If the next 3-5 years of recovery will be shaped by government actions, successful businesses will need to think beyond ‘how do I re-open?’ and find ways to become influential. Once more, scenario planning can help guide the conversation, identifying what the no-regret options are and thus set a common discourse with policymakers. You can’t shape the future, without first defining your vision for it.

The opportunity ahead

The globalised economy has been bent out of shape by the virus, but for businesses and organisations with the ability to pivot, the post-Coronavirus period offers real opportunities to move quickly in useful directions. Not necessarily spending money on completely new initiatives, but adjusting operations and repurposing existing plans, projects, facilities and assets to produce more value in this new environment. The first step is to explore the changed landscape your organisation works within and redefine the future success you want to achieve.