Covid-19: McKinsey’s business insight
At almost ten months since the beginning of the pandemic, companies’ profits and consumer demands are far from a positive outlook. The global management consulting firm McKinsey & Company recently gave its opinion with concern to Covid-19 and its possible effects on businesses in the next few months. Executives most often agreed on the likelihood of the following scenario: virus recurrence and slow long-term growth with muted recovery.
What does this imply for businesses in the Next Normal? The answer is Transformation. Harry Robinson, a senior partner at McKinsey & Company, argued that “Transformation is one of the most overused terms in business”. Indeed, 70% of business transformations are unsuccessful because the cut costs recur. What is the advice for businesses? Activating a “crisis mode” as an organizational response to the pandemic will allow businesses to shift to a long-term, sustainable operating model during the recovery period.
Concretely, it means following the example of the New York Fire Department after September 11th: “shifting the operating model from one based on immediate response to one that could handle continuing fires at the World Trade Center site and sustain recovery activities for months”. To such extent, the “Integrated nerve center” is a key element: a small group of managers with decision-making authority throughout the crisis.
Given the extreme uncertainty of information, current statistical models are hardly resilient to the subtle changes in the world economy. The role of these managers would be to correct the business model by implementing dynamic responses.
In conclusion, it is to stress the importance of the learning-redesigning cycle. Innovating the existing processes rather than speeding them up is the essential element to effective transformation. Scaling up from weekly to daily meetings will be necessary to address the effects of Covid-19, but only to the extent that the core assumptions of the business model are questioned and adapted to the current circumstances.
McKinsey & Company (2020), “COVID-19: Implications for Business”. https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for- business
(accessed on 9 November 2020)