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7 Critical Lessons CEOs Are Learning In The Crisis

The COVID-19 pandemic, though devastating, is a surprisingly useful lever for improving a company’s resilience in the face not only of infectious disease, but also of other more common shocks, including cyberattacks, floods, fires, hurricanes, earthquakes, economic downturns and climate change.

For CEOs, the deadly coronavirus has instilled valuable lessons in risk management and continuity planning. Let me share seven that I’ve learned:

1. Focus on supply chains. As we’re witnessing, unexpected events can knock out operations in large geographical swaths, dealing tremendous blows to companies that lack a plan B, whether it’s having backup facilities, alternative suppliers or big inventories. Where you’re doing business matters: Although a pandemic knows no geographic boundaries, certain countries have more resilient business environments than others, foretelling which regions may be best positioned for rebounding faster as the pandemic wanes. FM Global ranks nearly 130 countries by the resilience of their business environments, overall and separately, according to 12 resilience measures like inherent cyber risk, natural hazard risk, economic productivity, supply chain visibility and control of corruption. Consider geographical resilience as a factor in your pandemic recovery strategy as you decide where to site facilities, build supply chain redundancy and cultivate markets.

2. Quantify risk. Business risk assessment is a science and it involves looking at your entire operation, determining which functions and facilities contribute most to profit, analyzing the threats to each, and shoring up the most glaring vulnerabilities first. Much has been written on institutional denial and the deceptive gut-level calculation that a catastrophe “probably won’t happen during my tenure as CEO.” Another misconception is that loss in a catastrophe is more or less inevitable. In fact, the majority of loss is preventable. The bottom line is it’s far better for your company to prevent a loss than to experience one. Suffering an avoidable loss can have permanent impact on your profit, market share, growth, investor confidence and overall value. Invest in prevention when and where you can.

3. Plan for shutdowns. Takeoffs and landings are the riskiest parts of aviation, and so it can be for business shutdowns and restarts. Although you as a chief executive won’t get mired in the details of shutdown planning, understand that one of the biggest and potentially costliest hazards is waiting too long in the throes of a catastrophe to cease operation. This institutional reluctance to halt production (and revenue flow) even as, say, rising floodwaters are buffeting the walls of the building is another form of denial. Many millions have been lost by waiting to abandon production until it’s too late. Make sure you have a decision tree for shutdowns and a loss-prevention culture.

4. Keep watch on vacant or idled properties. When everyone’s working from home, make sure your operations team has essential personnel in all your geographies doing daily rounds for criminal activity, signs of smoke or new property damage. Ensure they keep fire protection equipment activated. It’s also a great time to commission overdue maintenance.

5. Prepare carefully for restarts. There are several big business continuity risks around resuming normal operations. Many a restart has triggered a disruption leading immediately to another shutdown. The classic case is maintenance equipment left in pipes, vessels and machines or improper reassembly after inspection. Be especially careful if your facilities have switched over to pandemic-related production (e.g., distilleries making hand sanitizer). The coronavirus is also throwing the business world a curveball on staffing: Rare is the company restarting with the same personnel levels in the same configuration. Social distancing will likely require significant modifications. Other planning considerations: Do you have sufficient inventory to restart? Will your suppliers be ready when you are?

6. Formalize and execute. All of these considerations should inform a carefully crafted business continuity plan that will spell out ahead of time procedures for emergency response, evacuation, business recovery, IT recovery, crisis communications and supply chain continuity. Ensure the plan covers the entire company and all its operations; too often, companies plan in silos and aren’t ready to coordinate during a crisis. Also plan for worst-case scenarios: It’s common to plan for 30- to 60-day disruptions, but the worst case—say, a building that burns to the ground—can disrupt an organization for a much longer period. Make sure your enterprise risk team has done all it can to ensure the resilience and readiness of key suppliers.

7. Appoint a business continuity team. Ensure that members of the team embrace the continuity plan and train on a variety of scenarios – including cyber attack, fire, natural disaster and infectious disease. When operations are back to normal, have them perform that testing on the tabletop and in the occasional drill. Refine the plan as test outcomes indicate. And don’t forget to study your role in the plan.

While the current pandemic has delivered an exogenous shock to many businesses, it is teaching valuable lessons to help you prepare your organization for the next disruption. And that’s worth considering given that a hurricane season predicted to bring above-normal activity is in the offing and other natural hazards are ever present. One thing is for certain: Your company’s stakeholders will be watching. Observe the lessons, learn from them and be the most resilient business you can be.

It will pay off.

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You Can’t Manage Your Way Out Of A Crisis—You Have To Lead

The worldwide containment effort to halt the spread of COVID-19 has had far-reaching impacts on both the world economy and local communities.

Our lives have been significantly altered and the economy has been severely impacted, as reflected in the Dow Jones Industrial Average, which was down nearly 30 percent before partially recovering recently. In addition to our 401ks quickly shrinking, job losses have accelerated over the last two months with real unemployment now over 20%, levels not seen since the Great Depression.

There is no doubt that the coronavirus pandemic qualifies as a crisis, and that it has and will cause many hardships for people. But a crisis also creates opportunities for leaders. President John F. Kennedy said in a speech in 1959, “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger—but recognize the opportunity.” While Chinese language scholars have since explained that this interpretation might not be completely accurate, his point has never been more relevant: a crisis is an opportunity to lead.

Leaders vs. managers

Functionally, managers and leaders apply different approaches in pursuit of different outcomes. Managers get people to follow rules and procedures in an effort to reduce risk and deliver predictable outcomes. Managers view variability as a threat to be reduced as much as possible. A crisis creates change that often overwhelms most management systems.

Leaders, on the other hand, rouse others to take risks and challenge the status quo in an effort to achieve something new and better. Leaders view variability as an opportunity to achieve results that others think are impossible. A crisis is an incredible leadership opportunity.

Companies are filled with managers who have good intentions but are often unable to convince themselves to take a risk. They’re part of a culture that rewards hitting your goal, not taking on challenges that might be hard to solve. They accept boundary conditions for what they are—limits on what’s possible. While this structure works well when the objective is to maintain some semblance of the status quo, it often fails in times of crisis. Since crises don’t resolve themselves, somebody has to step up and find a solution to the new set of circumstances.

During times of uncertainty, a simple truth reveals itself: You can’t manage your way out of a crisis; you have to lead.

Crisis creates leaders

In the early 2000s, William Clay Ford Jr. was the CEO of Ford Motor Company and great-grandson of company founder Henry Ford. During his tenure as CEO, he tried to focus the company on making great cars instead of remaining mired in internal politics and infighting, but without much success. Then the Great Recession hit in 2007. Ford had to convince his family members, who controlled almost 40 percent of the company voting shares, to allow him to pledge the trademarked blue Ford oval as collateral for a financing package to help the company survive the downturn.

Saving the family legacy became more important than the internal politicking that had plagued the company in the past. This gambit created a renewed sense of focus and willingness to take risks that allowed the company to break through the decades-old management barriers and enabled the incoming CEO Alan Mullaly to make real changes.

Ford is an excellent example of how a crisis creates incredible opportunities for business leaders. It creates an environment that, under normal circumstances, is nearly impossible to replicate. A crisis shifts the organizational mindset in three important ways.

1. An increased appetite for risk. During normal times, business decisions are based on some type of risk/reward analysis. Is the potential gain enough to outweigh the risk of failure? In practice, the fear of failure almost always overrules the argument for change. As a result, most organizations are inherently risk averse.

But in a crisis, the dynamic shifts dramatically. When everything stops working as expected, risk becomes less risky. Change becomes not something to be feared, but rather a strategy to possibly make things better. These new ideas may not work, but they become much better options when the status quo is failing. When an organization realizes that there’s almost no downside to taking a chance, then everything starts to become possible and the real risk becomes doing nothing.

A crisis creates an opportunity for leaders to convince others that it’s in their best interest to embrace change and take risk.

2. A renewed focus on what really matters. Most organizations evolve over time to become good at managing competing, and sometimes conflicting, priorities. For a variety of reasons, once something makes the list as important to do, it becomes almost impossible to stop doing it. As a result, organizations allocate resources across a range of priorities, even though some are clearly far more important than others. By default, this reduces the focus on the best ideas.

However, a crisis fundamentally shifts this balance. When your back is up against the wall, the only priority becomes survival. You have no choice but to direct all of your attention to the problem that really matters. This focus is an extremely powerful tool that can give ordinary people the ability to do the extraordinary — especially when people’s jobs are at stake.

A crisis enables leaders to focus everyone on what really matters and to eliminate distractions that might otherwise get in the way of the goal.

3. A reevaluation of mindset. According to the consulting firm McKinsey, 84 percent of executives agree that innovation is critical for their business, but only 6 percent are satisfied with their performance. It seems that the more people try to implement processes to be more innovative, the less they actually do it. The problem is not the process, but the people following it — and more specifically, their mindset. But someone’s mindset does not easily change on its own.

When an organization faces a crisis, the people inside it are forced to reevaluate how they think about their work. This opens the door to shifting the entire mindset of the organization. Values may change from collegiality to brutal candor, from compliance to rewarding initiative, from valuing learning more than being right. If you’re satisfied with how things are, you will never motivate others to overcome a crisis — because innovation requires a mindset to pursue the impossible, and that mindset starts with the leader.

A crisis forces leaders to reevaluate their mindset and create an environment where success is the only option.

Perspective is a choice

You have a choice in how you view this crisis. In fact, the opportunity actually lies in your perspective. As John Wooden, the legendary UCLA basketball coach who won 10 national championships in a 12-year period once said, “Things turn out best for the people who make the best of the way things turn out.”

A crisis is the perfect time for people to take more risks, focus on what really matters and embrace the opportunity to lead.

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Leaders, Do You Have a Clear Vision for the Post-Crisis Future?

Executive Summary

As the Covid-19 pandemic shakes the global economy and disrupts the way we live, work, and conduct business, leaders are scrambling to manage the immediate fallout. But, as history proves, it’s also necessary to prepare for what’s next.

The authors suggest (1) dedicating about 10 to 20 percent of your time on a weekly basis over the next few months to exploring and envisioning where you want your organization to be when the crisis passes; (2) laying out a path from your long-term aspiration to the mid-term (your post-crisis focal point), and from there to today, while reverse-engineering a series of benchmarks and milestones at regular intervals along the way; (3) pivoting and learning along the way; and (4) rallying your team around your vision.

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As the Covid-19 pandemic shakes the global economy and disrupts the way we live, work, and conduct business, leaders are scrambling to manage the immediate fallout. But, as history proves, it’s also necessary to prepare for what’s next. Visionary leaders like Abraham Lincoln, FDR, Winston Churchill, and Nelson Mandela didn’t simply react to the most imminent threats confronting them; they also looked beyond the dark horizon. They were guided — and guided their people in turn — by their vision for a better future, after those challenges had been overcome.

Vision is especially urgent during a crisis as global and systematic as this one. Inflections that you might have had five years to anticipate in a normal environment might unfold in a matter of weeks or months. Trend lines, such as those towards telecommuting, telemedicine, online shopping, and digital media consumption, are suddenly much steeper. Global supply chains are broken. Healthcare delivery is likely to change in ways that will make the last decade’s adoption of Obamacare look trivial. Many of your B2B customers may be shut down; millions of consumers are out of work. Some of the fundamental assumptions underlying your current business model may have been (or may soon be) upended.

In short, the business environment that you land in when the pandemic comes to an end — which could be one to two years from now — may be very different from what it was before the crisis began.

Further Reading

You need to begin preparing for it now. And to do that right, you need to have a longer-term vision of what you aspire to become in five or even 10 years — a north star that will focus and help shape your thinking about the short and the mid-term. It may be hard to see now, but the seeds of the next great growth industries are taking root now. Think back to Apple 20 years ago, which famously envisioned and started to plan for the iPod and iPhone as its computer business came under enormous strain during the dotcom crash.

Of course, nobody has a crystal ball (even Steve Jobs didn’t); if such a thing existed, we wouldn’t be in this fix. But while you can’t predict what’s coming with perfect certainty, you can develop much more clarity than you might imagine about what you could and should become, create a plan to live into it, and then set it into motion. Here’s our process, as detailed in our new book Lead from the Future, for doing exactly that.

Spend time envisioning your future. Ideally, you should dedicate about 10 to 20 percent of your time on a weekly basis over the next few months to exploring and envisioning where you want your organization to be when the crisis passes. This aspiration, of course, should be consistent with your longer-term vision.

Given the urgent demands of the present, some leaders may be tempted to delegate the responsibility for this kind of thinking to others, but it is critical that the CEO, CFO, CSO, and other key line leaders — the people who sign off on major resource allocation decisions — do this work themselves.

Interrogate what is likely to change about your customers, markets, and operating environment, and what isn’t. Focus on what your customers will require, how you’ll meet their new and evolving demands, the resonance of your products and services, and your overall capabilities.

Ask how resilient your core businesses will be in the light of these changes. Consider both threats and opportunities, and pinpoint elements of your portfolio that may no longer make sense and that will need to be sold off or shut down, as well as opportunities to accelerate new growth offerings.

Develop a strategy to walk back your envisioned future to today. Working backwards, lay out a path from your long-term aspiration to the mid-term (your post-crisis focal point), and from there to today. Reverse-engineer a series of benchmarks and milestones at regular intervals along the way. The reason to start in the future and “walk” backwards is that (1) it allows you to “clean-sheet” what you could become without being overly constrained by the way things are today; (2) it forces you to think concretely and in terms of dollars and cents, which (3) helps you decide which investments should be given priority.

To give you an example of how this works, suppose you are the president of a university. You know that online learning will be a major part of your future and anchored in new models that seamlessly blend online and in-person offerings. That future – already burgeoning before the crisis, and now being rushed into prime time – has accelerated. Step back from the mad dash to move this year’s courses online (an admirable feat, no doubt) and imagine what you’ll roll out at the start of the new academic year in the fall of 2021.

Then ask yourself what would have to be true, and by when, for it to happen in the best possible way. Systems will have to be in place, curriculum locked down, integration with conventional offerings worked out, people trained and hired. Perhaps you can meet all your benchmarks if you create the program internally, or maybe you need to partner with a developer or buy something off the shelf. The fall 2020 semester, starting a few months from now, will be a prime opportunity to pilot key elements of your envisioned program.

Be prepared to learn and pivot. Given the rapidly changing environment that you are working in, make sure to measure, monitor, and formally review your progress. Initially, you will be working off assumptions. As you test them in the real world, you will have more data and experience to prove or disprove them. Based on what you learn, adjust both your vision and your strategy.

As you work toward your mid-term and long-term goals, you must be attentive to both the strong and faint signals you receive. That requires a certain degree of humility, as you will likely have to surrender some of your certainties after they are tested against reality and fail. Speed and agility are key; you must learn quickly, constantly pivoting and adjusting. In doing so, you’ll also revisit your vision and continue to shape it.

Rally your team around your vision. Your people and stakeholders will have to make sacrifices, so you want them to believe in your view of the better future that they can achieve. Ideally, you already have a long-term vision of what you want to be which is inspiring, imbued with purpose, and relatively stable, compared to the roller coaster you are on today. While a business can succeed without having an explicit mission, there is a close association between missions and margins.

In 2019, our firm Innosight identified the 20 global companies that had achieved the highest-impact transformations of the decade. A newly strengthened sense of purpose, we found, was their common denominator. Siemens, for example, had recently embraced an explicit mission to serve society. China’s Tencent had announced a quest to create “tech for social good”; while Denmark’s Ørsted transformed itself from a struggling natural gas business to a cutting-edge wind energy company, increasing its net profits by some $3 billion per year. Ørsted’s long-term vision of itself as a green company not only inspires its people to perform, it helps its leaders keep its strategy on target.

It is impossible to overestimate gravity of the present crisis. Many of you are wrestling with existential challenges; virtually all of you will have to adopt what amounts to a wartime footing. You may feel that you simply can’t afford to carve out the time that it takes to set a vision and build a strategic path to it. But the leaders who manage the day-to-day and lead with vision will emerge from the crisis with companies that are stronger and more resilient than they were before.

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5 Ways You Business Can Adapt to Dynamic Market Shifts

The coronavirus pandemic provides us with a somber reminder that the world is volatile. Our planning for volatility should involve more than panicked midnight runs for hand sanitizer and toilet paper. Those who prepare for the things they can’t control are in a better position to react to the unexpected.

It is becoming clearer which companies need to bake agility into their strategies and operating models. The word agile conjures up a way of doing business where things are a bit chaotic, but it doesn’t have to be that way. Best-in-class organizations have a vision for the future, and the ability to pivot based on changing levels of demand. 

Here are six ways to adapt to dynamic shifts in market conditions:

Conduct a STEEP analysis.

A STEEP analysis is an external environmental scan of social, technological, economic, ecological and political trends that could affect your business. While it would have been hard to predict a pandemic that would bring the global economy to its knees in a matter of weeks, companies can consider market dynamics that could change an industry forever. By reviewing outside forces (social, technological, economic, ecological and political), a company can paint a picture for various external events. 

For example, when Square came to prominence, there were powerful societal influences that shaped the demand curve. Malls started attracting pop-up kiosks, and retailers wanted their salespeople out on the sales floor. Smartphone adoption made more flexible payment options possible, and Square replaced an industry (cash registers) that took 100 years to erect. 

Separate trends from hype.

There are times where it is hard to separate a real trend from propaganda. While it seems like cyber-currencies may be more hype than substance, blockchain looks like a technology with legs. In order to “separate the wheat from the chaff”, assign team members to stay current on emerging technologies to assess their relevance. Identify external indicators that may provide a measurement of demand (such as volume or the stock price of companies in that space). 

Build scenarios into your strategic plan. 

Nowhere is it written that your goals and objectives must be set in stone. In fact, scenario planning provides opportunities to weigh multiple variables and imagine various financial conditions. Companies may have as many as three financial scenarios–the most likely, one optimistic and one pessimistic.

Develop a 6 + 6 budget.

During the course of a year, companies can pressure test their financial plans. By using a 6 + 6 budget, your financial people can blend reality into a forecast. For example, 6 months into the year, use 6 months of actual data and 6 months of budget to create a working forecast (this could be done in any month, as in 3 + 9).

Establish a business continuity plan.

In recent weeks, companies have unearthed their business continuity plans only to find them out of date. Companies should do a deep dive to assess business risks and develop plans to mitigate them. Such a plan can be your lifeline during a cyber-attack, natural disaster, utility failure or market shock. Companies need to be prepared in the event that they do not have access to the internet, power, or their physical workspace. 

It is critical in times of crisis that:

  • You have a way to contact all employees through a mass messaging app such as Simplified Alerts. 
  • You have alternative methods for retrieving documents, information and data. 
  • Your team is equipped to leverage collaboration technologies. 
  • You test your plan through simulations.

Develop contingency plans.

Other market shocks may require specific course corrections. For example, the following would be an example of a contingency plan in the event that you lost a large customer.

Scenario A: Loss of ABC Widget Company, 22 Percent of Revenue
Risk Level: Medium
Annual cost: $2 million

  Role                  Action                                                                                                Timeline

CEO Notify board 1 day
Communicate with team 5 days
Notify lenders 5 days
CFO Restate forecast 5 days
Reforecast scenario cash flow/ratios 5 days
Sales Consolidate account management 5 > 4 5 days
Revise workflows 14 days
RIF 10 FTE 21 days
Ops/HR Close PA call center 21 days
Consolidate into Tucson call center 21 days

Planning can be hard work. It’s often easier to wing it, but it may not be the best approach when your business is on the line. Your future could depend on your ability to adapt to things beyond your control.

Published on: Apr 14, 2020

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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What CEOs Need To Know As U.S. Industry Rallies To Fight COVID-19

The business community has leapt into action to help fight the novel coronavirus pandemic. Automakers like Ford, GM and Tesla are retooling their factories to produce ventilators. 3M and GE Healthcare are working to boost production of masks, face shields and other protective equipment for healthcare workers. Even small-scale “makers” and volunteers armed with nothing more than sewing machines and 3-D printers are pitching in.

While these efforts are heroic, business leaders can’t simply snap their fingers and transform their production lines and supply chains overnight. It could take months, for example, for automakers to fully ramp up production of ventilators—well after the (first) coronavirus peak hits the U.S.

What can business leaders do to respond as rapidly and effectively as possible? This pandemic is a rare event and the response will have to be equally unprecedented, requiring innovative partnerships, buy-in from workers and strong government leadership.

Unorthodox Partnerships Are Essential

Retooling or ramping up production operations takes time, particularly for complex products like ventilators. Unorthodox partnerships, flexible strategies and cross-training of the workforce can speed the process along by combining expertise and capabilities from different industries and parts of the supply chain. For instance, one surprising entrant into the ventilator race is Dyson. They collaborated with TTP, a medical technology company, to leverage their expertise in air flow devices like vacuum cleaners and hair dryers and designed a new type of ventilator, CoVent, in just 10 days.

Such partnerships can help companies from outside healthcare navigate the sector’s highly regulated landscape and meet relevant licensing, testing and quality standards. Automakers are partnering with medical device companies like GE Healthcare, Ventec and Medtronic not only for their technical expertise, but also for their already-approved ventilator designs that won’t require a lengthy approval process. Meanwhile, pharmaceutical giant Pfizer has offered to put the weight of its drug development expertise behind anyone working on promising coronavirus treatments, from small biotech firms to academic researchers and government agencies.

Strategic partnerships with suppliers are also critical, as supply chains today often depend on multiple components from across the globe. Coronavirus-related disruptions to production, particularly in China, combined with increased demand, led to intensified competition among manufacturers to acquire necessary parts. When capacity is tight, it’s common for suppliers to give preferential treatment to manufacturers they have ongoing relationships with, which often have to be built over years. Having the right partnerships in place will help ensure companies have access to the parts they need. Those struggling to find components or shave valuable weeks off production times may also have to get creative by simplifying or redesigning products or manufacturing parts in-house.

Workers Are Critical Allies

Pivoting American industry to help fight the coronavirus will only succeed with the buy-in of the dedicated employees who will be on the front lines. Many are eager to help, with some employees at GE going so far as to hold “socially distant” protests demanding their company put them to work producing ventilators. Manufacturers will have to find ways to prepare and protect their workforce as they ramp up production.

Workers will face a steep learning curve as they are called on to manufacture different kinds of products or shift into unfamiliar industries. Some may get sick or burnt out as they strain to meet intense demand. As companies retool production lines, they also need to revise worker safety protections to accommodate necessary social distancing and revisit policies like sick leave and access to health care. They can look at what other businesses, such as grocery stores, are doing to protect their workers. With better data on the spread of the COVID-19 virus, they may be able to allocate production to plants located where infection rates are lower.

Workers are critical allies in this fight. Keeping them safe and engaged is essential to containing the spread of the disease and to ensuring production can flow smoothly. If companies don’t address worker well being, including protective equipment and sick leave, they may face strikes demanding better protections like those recently held against Amazon, Whole Foods, and Instacart.

Government Leadership is Imperative

This unprecedented fight will require a level of government leadership and central planning that will be unfamiliar, and possibly even uncomfortable, for many American businesses. Companies typically manage their supply chains by considering the cost versus risk trade-offs they face, and both costs and risks are highly uncertain right now. No one knows how long the pandemic, and its economic ramifications, will last. Businesses are understandably reluctant to make heavy investments in new (or even existing) production while conditions are so unstable. Some may leap at coronavirus-related opportunities, while others may be hesitant to turn their attention away from normal operations and risk joining a too-crowded field.

In exceptional times like these, government should step in to minimize risk and uncertainty and align supply and demand. The Defense Production Act is one powerful tool for coordinating production, buttressed by central planning from FEMA’s Supply Chain Stabilization Task Force. If used properly, these mechanisms can help provide manufacturers with a clearer sense of what and how much they should be producing, minimize risk by guaranteeing someone will purchase these goods, and maximize effectiveness by distributing supplies to where the need is greatest.

More clarity and guidance from the federal government could further reduce any lingering hesitations about pivoting production. Price guarantees, for example, could provide protection on both sides of the equation — companies know they won’t lose money on new investments, while city and state governments have a safeguard against price gouging. 

Turning the Ship

In our years of studying supply chain management, we have never seen anything simultaneously disrupt so many levels of supply chains across the globe. While large-scale disruptions normally affect the supply side, what is unique in the current situation is that both demand and supply are being impacted.

Now is the time for business leaders to act, but pivoting American industry to fight coronavirus will be a bit like turning a massive battleship. It’s not easy or quick for manufacturers to retool production lines. But even more challenging is the need to transform their thinking – to take more risks, get creative, stay flexible, and be open to unexpected collaborations and solutions.

In our collective race against the coronavirus clock, the business community needs innovative partnerships, worker buy-in, and government leadership. Taking risks right now is scary but could lead to high rewards: ethically, financially, and in the form of consumer loyalty toward manufacturers who step up to help the nation in a time of crisis.

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Coronavirus Pandemic as A Catalyst for Organizational Change

The coronavirus COVID-19 pandemic is bringing most key business activities to a near complete halt. If you work in a product organization, activities that a few weeks ago were routine such as a team meeting for a critical design review or traveling to audit a new supplier are no longer possible.

Seemingly overnight, supply chains are stressed to the limit. Years of aggressive lean single-source supply-chain operations and hyper-speed agile product development methods expose the fragility of many organizations’ supply-chain practices.

This isn’t the first time that overly lean product design and supply-chain operations are being stress-tested. In 2011, a massive earthquake in Japan was followed by a devastating tsunami and temporarily crippled extensive parts of Japan’s auto supply chain.

The Tohoku earthquake of 2011 exposed the vulnerability of the lean and just-in-time manufacturing systems pioneered by Toyota after World War II and has been adopted by practically every automaker and supplier.

Ironically, Toyota is one of the many companies caught unprepared for the shock caused by the coronavirus outbreak that requires employees to work from home. At a recent news conference, Toyota Motor Corp. President Akio Toyoda acknowledged the company was caught by surprise: “We were not ready for telework. Work-style reform has been the buzzword. And now, we can afford no further delay in implementing it.”

Once again, manufacturers around the world are suffering the devastating effects of a natural disaster. But will they remember the lessons of the COVID-19 crisis once it is over, or is it going to be too easy to go back to the old habits of unproductive meetings and unnecessary travel? Will supply-chain planners be willing to consider killing a few sacred supply-chain cows?

Will the COVID-19 pandemic be a catalyst for a change?

Studies show that people forget about natural disasters rather quickly and how surprisingly small effect such events have on human behavior.

Using the coronavirus crisis as a catalyst to revisit corporate strategies will be challenging for some corporate leadership. Studies of organizational learning demonstrate how corporate leaders often blame their failures on luck and events outside of their control, and, at the same time, the same executives are quick to ascribe their successes to brilliance, skill and hard work rather than luck.

The coronavirus pandemic has shown the critical interconnectedness of global businesses. But the proper response is not to undo globalization and go back vertical integration and push for in-country-only manufacturing.

Organizations should become more resilient not only in the literal sense but more so in their ability to transform and innovate in response to external events. They must become more predictive and anticipatory.

Post COVID-19 pandemic, organizations will identify metrics that define success or failure and use analytics and simulation to reach a balance between highly optimized processes and a sober ability to deal with the severity of shortage, misallocations and instability of local manufacturing.

The operational goals for the post-crisis era should be to establish a thoughtful data-driven approach to balance globalism with regionalism. Organizations should pursue two long term adjustments: developing a productive globally distributed workforce and updating their supply chain assumption, models and practices. Successful organizations will establish loosely coupled self-organizing systems that urge and propel collaboration, co-innovation and supply chain resiliency.

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Preparing Your Business for a Post-Pandemic World

Executive Summary

Coronavirus has impacted the world at an unprecedented level — and unfortunately, the worst has yet to come. Companies need to act today in order to bounce back successfully in a post-corona marketplace. The authors suggest executives ask themselves the following five strategic questions: 1. Which position can you achieve during and after the coronavirus pandemic? 2. What is your action plan to bounce back? 3. How will your culture and organizational identity be changed by the crisis? 4. Which new projects do you need to launch, run, and coordinate? 5. How well prepared are you to carry out your plans and projects?

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Along with the severe health and humanitarian crisis caused by the coronavirus pandemic, executives around the world face enormous business challenges: the collapse of customer demand, significant regulatory modifications, supply chain interruptions, unemployment, economic recession, and increased uncertainty. And like the health and humanitarian sides of the crisis, the business side needs ways to recover. Ad hoc responses won’t work; organizations must lay the groundwork for their recoveries now.

The management theorist Henry Mintzberg famously defined strategy as 5 Ps: plan, ploy, pattern, position, and perspective. We have adapted his framework to propose our own 5 Ps: position, plan, perspective, projects, and preparedness. The following questions can guide you as you work to bounce back from the crisis.

1. What position can you attain during and after the pandemic?

To make smart strategic decisions, you must understand your organization’s position in your environment. Who are you in your market, what role do you play in your ecosystem, and who are your main competitors? You must also understand where you are headed. Can you shut down your operations and reopen unchanged after the pandemic? Can you regain lost ground? Will you be bankrupt, or can you emerge as a market leader fueled by developments during the lockdown?

Further Reading

We hear of many firms that are questioning their viability post-pandemic, including those in the travel, hospitality, and events industries. We also hear of firms accelerating their growth because their value propositions are in high demand; think of home office equipment, internet-enabled communication and collaboration tools, and home delivery services. Because of such factors, firms will differ in their resilience. You should take steps now to map your probable position when the pandemic eases.

2. What is your plan for bouncing back?

A plan is a course of action pointing the way to the position you hope to attain. It should explicate what you need to do today to achieve your objectives tomorrow. In the current context, the question is what you must do to get through the crisis and go back to business when it ends.

The lack of a plan only exacerbates disorientation in an already confusing situation. When drawing up the steps you intend to take, think broadly and deeply, and take a long view.

3. How will your culture and identity change?

Perspective means the way an organization sees the world and itself. In all likelihood, your culture and identity will change as a result of the pandemic. A crisis can bring people together and facilitate a collective spirit of endurance — but it can also push people apart, with individuals distrusting one another and predominantly looking after themselves. It’s crucial to consider how your perspective might evolve. How prepared was your organization culturally to deal with the crisis? Will the ongoing situation bring your employees together or drive them apart? Will they see the organization differently when this is over? Your answers will inform what you can achieve when the pandemic ends.

4. What new projects do you need to launch, run, and coordinate?

Your answers to the questions above should point you to a set of projects for tackling your coronavirus-related problems. The challenge is to prioritize and coordinate initiatives that will future-proof the organization. Beware of starting numerous projects that all depend on the same critical resources, which might be specific individuals, such as top managers, or specific departments, such as IT. With too many new initiatives, you could end up with a war over resources that delays or derails your strategic response.

5. How prepared are you to execute your plans and projects?

Finally, you need to assess your organization’s preparedness. Are you ready and able to accomplish the projects you’ve outlined, particularly if much of your organization has shifted to remote work? We see big differences in preparedness at the individual, team, organization, and national levels. The resources at hand, along with the speed and quality of decision-making processes, vary greatly, and the differences will determine who achieves and who falls short of success.

We have created a worksheet around the five strategic questions. It can help you plot your current and future moves. Be aware that consumers will remember how you reacted during the crisis. Raising prices during a shortage, for example, could have a significant effect on your customer relationships going forward.

The coronavirus has had unprecedented impacts on the world — and the worst is yet to come. Companies must act today if they are to bounce back in the future. Doing so will help the world as a whole recover — and, we hope, become more resilient in the process.

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