Where Do We Go From Here? Our Perspective.
The COVID-19 outbreak is having an unprecedented impact across the globe, causing a public health crisis, disrupting everyday life, and driving a steep slowdown in economic activity. As contingency plans continue to be put in place, we encourage business leaders to begin to think through what a post COVID-19 crisis world will look like and the key strategic questions they should consider in order to build a robust go forward plan. When businesses are fully prepared for the recovery, the faster their companies, the economy, and society can get back on the path to growth.
The key strategic questions will differ depending on what this future world will look like. At this point, we see three potential overarching scenarios emerging over the next 12 to 18 months.
The impact on society and the economy is sharp and short. The measures currently taken dramatically reduce the spread of COVID-19 and safeguards are put in place to contain any future outbreaks with high certainty. For the most part society returns to normal. Assuming economic fundamentals were solid going into the crisis and “animal spirits” are high, there is catch-up growth as pent-up consumer and business demand is released. Lessons from the crisis even drive increased investments in certain sectors of the economy (e.g., to balance supply chains and build up resilience in the healthcare sector). In this scenario business leaders should be asking themselves:
- Where will the bounce happen first? Not all regions or areas will experience it at the same time as recovery washes through the global economy.
- Where should investment be focused going forward?
- How should the company’s go-to-market approach be adapted to best serve a surge in demand?
- How must customers and opportunities be prioritized?
New Normal (for Now)
The spread of COVID-19 is contained but measures put in place to do so need to remain for an extended period (i.e., 12 to 18 months). We adapt to a new normal, a society and economy heavily impacted by the need for social distancing and precaution. Certain sectors (e.g., business travel) will remain challenged but others will see significant growth and further investment as demand shifts (e.g., packaging for home delivery), how things are done changes (e.g., telemedicine), and new solutions are developed for challenges that have emerged. Some of these changes will stick around and become the new normal for the long term and not just the short term (e.g., virtual learning). Growth returns, albeit at a slower pace and in fits and starts as society and the economy adjust, before settling back to long term averages. In this scenario business leaders should be answering key strategic questions around:
- What offerings in my portfolio are advantaged or disadvantaged in the new normal?
- What new customer needs have or will emerge?
- Does my value proposition need to change? How?
- What new relationships need to be established? New customer segments? New channels? New partnerships?
Long-Term Economic Contraction
We contain the spread of COVID-19, but the crisis exposes fundamental weaknesses in the global economy and depresses activity over a longer time frame. We are in a Great Recession scenario where economic growth will be negative or muted for a significant period of time. Businesses will need to determine how to best position themselves for lower demand. In this scenario business leaders should prepare by rapidly putting together and executing on a recession playbook, asking key strategic questions such as:
- What is core to the business’s future success? What can be de-emphasized to create greater financial flexibility?
- Are there attractive acquisition opportunities to take advantage of?
- What are the winning customer and channel relationships to focus on?
- What offerings and accompanying pricing strategies should be shifted to match changing customer purchasing behaviors?
As with previous crises we are confident society will prevail. Betting against human drive and ingenuity is a losing bet every time. We will emerge more robust and resilient and businesses will play a key role in how well we emerge.
Our hope is we will see a Bounce Back and at worst a New Normal. Signs of a strong recovery in China are a positive indicator. Although the global economy had been on a record-breaking expansion before the crisis and was potentially due for a correction, economic fundamentals appeared solid going into the COVID-19 crisis.
Regardless of which scenario plays out, businesses should be reevaluating their strategic direction and we stand ready to support our clients to effectively do so. We encourage business leaders to be proactive in defining a go forward plan to ensure their company, the global economy, and society can emerge from this crisis in the best shape possible.