“The pandemic also had a deadly effect on economies: international mobility of both people and goods screeched to a halt, debilitating industries like tourism and breaking global supply chains. Even locally, normally bustling shops and office buildings sat empty for months, devoid of both employees and customers.”
“…. However, a few countries did fare better—China in particular. The Chinese government’s quick imposition and enforcement of mandatory quarantine for all citizens, as well as its instant and near-hermetic sealing off of all borders, saved millions of lives, stopping the spread of the virus far earlier than in other countries and enabling a swifter post-pandemic recovery.”
No, this is not what you think. This is not a real-life account of the pandemic-stuck world of 2020. These are, in fact, extracts from a report (Scenarios For The Future of Technology and International Development) prepared by philanthropic organisation, The Rockefeller Foundation, along with the Global Business Network (a Deloitte group company), published in May 2010. The scenario planning exercise created a fictitious pandemic-hit world of 2012. The idea was to examine the impact that a virulent virus could have on individuals, communities, countries, businesses, governments; the disruptions it would cause on global supply chain, livelihoods and lives. The exercise was devised to help the foundation come up with philanthropic intervention strategies should such an event occur.
Cut to 2020, and The Rockefeller Foundation has been in the thick of action since the virus outbreak. In April the Foundation, along with other experts, devised a national Covid-19 testing action plan for the United States. This has subsequently been revised to account for the intensity of the virus spread. Over the next three years, the Foundation intends to spend up to $1billion on initiatives that help mitigate the adverse impact of the pandemic on the livelihood of the economically weaker and marginalised sections of society.
Surely, the institutional memory of going through a scenario planning exercise would have come in handy for the Foundation but what has increasingly become evident across businesses and institutions is this: no amount of strategic planning or predictive exercises could have prepared any organisation for the unprecedented impact of the Covid-19 pandemic. Over the last eight months, business plans and corporate strategies have all been rendered irrelevant. Struggling to recover lost ground in such an uncertain environment, managements have realised that many of the strategies that got them here, may not take them forward. Not just the substance of the strategies, but also how they were formulated.
Managements are now looking at business expectations over the next six to 12 months. Scenario planning has become critical, as are strategies that would help strengthen a company’s ‘foundational’ or ‘core’ value propositions in the market. “The short-term is un-modellable, so the urgent will tend to crowd out the important,” says Manish Sabharwal, chairman of staffing firm Teamlease India. But for the longer term, they have realised the need for a frictionless, contactless business model; the ability to act and react with agility and speed; and a rethink on their cost base. Experts say this is making many companies ask the question: ‘What is my competitive advantage in the market?’
Over the last eight months the pandemic has altered consumer preferences; led to rapid digitisation of processes and systems in organisations; acerbated the shifting sands of global geopolitics; and left a lasting impact on the contours of regulatory oversight. All of this is forcing businesses to take a hard look at their corporate strategies. “Till now an inherent assumption of the future would largely be an extrapolation of the past,” says S. Anjani Kumar, partner and practice head at Monitor Deloitte. However, the future is no longer as simplistically projectable, he adds.
The context has changed and “a lot of people have started questioning their business models and whether it can be changed,” points out Harsh Mariwala, chairman of FMCG major Marico Ltd. Experts out that businesses are now taking a more dynamic view of strategy. And here, the role of the board of directors is set to undergo a change. “Corporate strategic planning will evolve to scenario planning where the boards will consider a number of scenarios, and how the company may respond, survive and thrive in each situation,” says Arun Duggal, independent director, and non-executive chairman at rating firm ICRA. The good-old practice of looking at business trends of the last 15-20 years to extrapolate strategic action points for the future are certainly numbered.
Managements are now looking at business expectations over the next six to 12 months. Scenario planning has become critical, as are strategies that would help strengthen a company’s ‘foundational’ or ‘core’ value propositions in the market. “The short-term is un-modellable, so the urgent will tend to crowd out the important,” says Manish Sabharwal, chairman of staffing firm Teamlease India. But for the longer term, they have realised the need for a frictionless, contactless business model; the ability to act and react with agility and speed; and a rethink on their cost base. Experts say this is making many companies ask the question: ‘What is my competitive advantage in the market?’
This is particularly relevant given that the pandemic has not just accentuated trends, like the digital transformation, but also thrown up new growth opportunities. Of course, as Sabharwal says, “The pandemic is making strong hands stronger, and the big, bigger. This clearly favours incumbents.” At the same time, though, he points out: “A counter force is that the pandemic is reducing resistance to change and accelerating change; this creates windows for insurgents.” As a result, companies are looking at making ‘bets’ on some of these emerging opportunities that are likely to bear fruit over the next two-three years.
That apart, experts expect businesses to speed up the seeding of innovative practices. Large established players are likely to promote internal start-ups, and also invest in external ones, to gain speed to market and experiment with new ideas. Most of these bets are likely to play out over a five- to seven-year time frame.
Good CEOs and good strategy teams will have to learn and unlearn faster than others. We have to be open to tweaking processes and business models to make them work better and more effectively.D. Shivakumar, group executive president, corporate strategy and business development, Aditya Birla Group
In the new normal, “instead of linear short- and long-term strategy plans, companies have to manage a portfolio of initiatives across time horizons,” says Alok Kshirsagar, senior partner, McKinsey & Co. In many respects business leaders may need to operate like portfolio managers in this environment, with a close eye on leading indicators, and not the lagging ones, he adds.
What is also going to influence corporate strategies going forward is the pace and scale of business recovery. For instance, if recovery is slow and disparate—given the acceleration of trends in digital transformation, fundamental changes in supply chain and technological changes in the raw material—companies may have to find new ways to do business. From a strategy point of view, this would be more akin to a reconstruction effort rather than just recovery of lost business ground due to the pandemic. “The choice is between rebuilding an old house versus making a new one,” explains Kshirsagar.
Beyond leveraging competitive advantages, strategy will now have to factor in building resilience, say academicians. This has become a business imperative in a post-pandemic environment and, according to Anand Nandkumar, associate professor of strategy at Indian School of Business, “Businesses will have to figure out how this would affect their competitive advantages.” What will also alter is the risk-reward equation for corporate strategy managers since incentives are mostly geared towards maximizing competitive advantages.
The need for agility in organisations to respond and pivot along the way, irrespective of their size, is also likely to become core to corporate strategies going forward, feels Paul Dupuis, managing director and CEO at recruitment firm Randstad India. Take how most businesses have had to fast-forward their digital transformation journey. But as businesses rallied to build a contactless business model, the ripple effect, say experts, will be felt in due course in the way organisations are structured, and the manner in which people and other resources are managed.
Also, there will be no allowance for taking one’s feet off the digitalisation accelerator. In fact, says Sabharwal, “boardrooms should force leadership to accelerate digitisation as a first priority. They must diversify supply chains as just-in-time gets complemented with just-in-case.” At the same time, companies should not make the mistake of labelling digitisation of processes and systems as digital transformation, warns Kshirsagar. Digital transformation involves a far more fundamental shift in how business is conducted.
At the end of the day, though, for India Inc’s strategies to be effective in a post-pandemic world, people will be the most important brick on which the whole edifice would stand. As Mariwala puts it, to build a culture that is agile, organisations would need to have the right and diverse talent, empower and allow them to take risks. “Good CEOs and good strategy teams will have to learn and unlearn faster than others. We have to be open to tweaking processes and business models to make them work better and more effectively,” says D. Shivakumar, group executive president, corporate strategy and business development, Aditya Birla Group.
In a recent interview to McKinsey & Co, Laxman Narasimhan, global CEO, Reckitt Benckiser, neatly sums up the turbulence in the strategy rooms across corporates as: “When all this ends, we will see things emerge that we never thought were possible. There is a renaissance underway. It is just not visible yet.”