How to maintain resilience now and capture the growth opportunity ahead

by Abhik Sengupta

by Gabrielle Lukes-Mooney

Most organisations have now responded to the immediate implications of COVID-19; employees are staying safe, working remotely where possible and the handbrake has been applied to discretionary expenditure. To avert the worst of the economic impact, Governments across the world have announced a broad array of fiscal and monetary stimulus of size, scale and immediacy never seen before.

However despite these actions, world stock markets – fuelled by expectations of decreased revenue and increasing bad-debts – have factored in significant downgrades. Since first hearing about COVID-19 in late 2019, global stock markets have fallen around 25% in the 1st Quarter of 2020.

In order for this to improve, leaders must now move quickly out of the ‘Respond’ phase and shift their focus to ‘Reconfiguration’. For some, this means surviving the very real and existential threat to business continuity, while for others it will lead to a total reset of their business model. For the lucky few who are well-placed to continue operating in this climate – it will mean reconfiguring to capture the market opportunity that currently presents itself. Industries such as Biotech, Online Pure-Plays and Food, Beverage and Tobacco have fared better than the remainder of the market with less than 15% decline in value; we call these sectors relatively Advantaged. Others such as Banking, Traditional Retail and Professional Services have fallen by around 25%; these can be viewed as Disadvantaged. Businesses who have been hit the hardest such as Leisure & Hospitality, Media and Travel have seen a decrease of more than 35%, and are considered Distressed.

Another important factor is the level of organisational omni-channel maturity. Those more mature (existing digital and remote engagement with customers, a wealth of data and the capability to execute successfully) have an advantage as they are already set up to operate in the new world. Organisations who are less progressed, therefore starting from the back foot, are having to quickly build digital engagement and in some cases completely redesign the business model.

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To pass through the ‘Reconfigure’ stage and emerge out the other side, there are four strategic approaches organisations can take. Here we will explore the ‘no regrets’ actions that sit within each.
 

1. Defend & Diversify

Organisations in this quadrant, such as Media, Travel and Hospitality have been severely impacted by the pandemic. They also typically have relatively low levels of channel maturity, with significant reliance on face-to-face mediums. As a result, the disruption – however temporary – could easily prove terminal. The first and foremost priority here, is to survive the downturn, before contemplating the path to set up for the rebound:
 
  • Minimise CapEx and OpEx to ensure immediate survival

Many at-risk organisations have already scrambled to reduce costs; standing down teams, closing physical outlets and cutting discretionary expenditure. Whilst the Government stimulus packages we have seen pumped into the economy are unprecedented, accessing the cashflow needed to continue operating is a very real challenge for these businesses. Immediate survival will be determined by precise review and reduction of spend, whilst protecting brand reputation, employee loyalty and capabilities required to grow in the future.

  • Leverage core capabilities into adjacencies for alternative revenue sources

We have seen many cases of revenue streams practically switched off overnight. The Tourism industry as an example saw drastic and immediate revenue reductions due to border closures along with travel and quarantine restrictions. Whilst most airlines have stood down their crew to ensure they make it through this time, focus has been shifted to supporting alternative revenue sources through loyalty schemes, such as cross-selling Insurance and Wine. If we look at the Media sector, we are seeing businesses double down on subscription models to offset falling advertising sales. Some organisations are significantly better positioned than others, where the alternative stream was in existence before and it is now purely a matter of capitalising on it, whilst others rush to build new and innovative offerings to endure the pandemic.

  • Prioritise high-value customers through digital channels

With a rapidly shifting environment, the customer segments that were previously considered the most attractive have fundamentally changed. Organisations need to actively reprioritise their segments to ensure that they are targeting the highest-value groups with customer value propositions and experiences aligned to new priorities. In order to engage with these new or different segments, businesses should also expand their digital capabilities. Physical channels, for the time being are redundant, and organisations should look to either repurpose these resources into remote / digital channels or choose to stand them down.
 

2. Disrupt Selectively

Businesses in this quadrant such as Banking, Insurance and Diversified Financials have been heavily impacted by COVID-19 but possess mature omni-channel capabilities. The opportunity for these organisations is to rebalance the customer portfolio and disrupt the industry to realign with their advantaged capabilities.
 
  • Resolve immediate pain-points of high-value customers
Organisations must focus on improving the experience of high-value customers and segments by identifying and resolving their immediate pain-points. If these customers are experiencing difficulty with any aspect of your product or service – make no mistake, a competitor will be there shortly to take that pain away. The historical evidence is glaring; business banking market leaders were made during the GFC based on prioritising customers and continuing lending. Now is the time to over-deliver to these segments and make them loyal for life.
 
  • Proactively disrupt conventional ways-of-working
The ‘selective disruption’ recommended for this quadrant comes in the form of aggressive changes to existing business models. The reality is that traditional methods will not emerge from this situation unscathed, so the time is now to make radical and fundamental shifts to the current status quo. For example, full-service banks may use this as an opportunity to move away from high-cost, resource-heavy branches, and repurpose the investment into customer-centric online models, re-entering the market with Neobanks.
 
  • Target weaker competitors with attacker strategies
These industries, more than any, will have a range of outcomes based on their market position and individual capability maturity. Those with less attractive customer bases, lower channel maturity and poorer execution will face distress. That opens the opportunity to actively target weaker competitors, either through acquisition or by taking market share through scaled demand generation.

3. Fast-Track Omni-Channel Capabilities

Sectors such as Pharma, Alcohol and Tobacco along with Transportation / Distribution are fortunate in not having the immediate threats facing other industries. However, many organisations in this quadrant have immature or emergent omni-channel capabilities, with an overreliance on face-to-face, product-centric sales models. While these businesses may be disadvantaged, they equally have an opportunity to capitalise on the situation, if they are able to build remote and digital engagement channels with their customers. 
 
  • Identify and respond to emergent customer preferences
Customer preferences and behaviours are changing at a rapid pace, often out of necessity. As an example, we are now moving fully online for most of our needs. Close monitoring of these shifts, alongside agility and speed in response, will stand organisations in good stead to survive and set up well for the rebound. Maintaining a business-as-usual mindset is frankly dangerous at this time, organisations need to rapidly respond and build new capabilities, offerings and services to meet the customers when and how they want to.
 
  • Accelerate and prioritise the build out of digital channels
The shift online has been monumental. Whilst physical channels may have previously been considered the lifeblood of some of these organisations, the fact that sales teams are currently working remotely starts to diminish historical value. Take Pharma as an example, the incumbent model is a field-force based on coverage and frequency, with repeated Doctor visits to educate and reinforce messaging, typically supplemented by more infrequent remote engagement. The pendulum has been shifting towards online interaction for a while, mostly thanks to the demand on Doctors’ time, evolving channel preferences and regulatory pressures. However, the current situation has shifted the field force online indefinitely, and the industry is unlikely to return to the old ways-of-working. Organisations must accelerate the omni-channel build to maintain relevance now, and once the crisis has passed.
 
  • Ruthlessly prioritise CapEx and OpEx to high-value customers, channels and capabilities
The omni-channel build should not be a catch-all. Organisations need to discriminate and solely focus efforts on areas that generate the most value. The review and re-prioritisation of customers, channels and capabilities deemed high-value is essential, all other investments and outgoings should be redirected. For example, primarily B2B logistics freight companies may choose to pivot some of their omni-channel capabilities to B2C deliveries, depending on assessment of customer segment potential. Efficiency, effectiveness and ROI should be the measures of success.

4. Accelerate Growth Plans

Industries such as Online Retail and Online Education have an unparalleled opportunity, with comparatively low levels of impact from the crisis and already possessing relatively mature omni-channel capability. Organisations who will capitalise on this possess the ability to pivot quickly, capturing their natural share of growth segments and prospects​.

  • Prioritise real-time customer insights, to align value propositions and experiences with changing preferences for high-growth segments
Now is the time for organisations in this sector to build discipline into their customer insights, proactively target high-growth segments and scale demand generation activities. Customer preferences are changing at lightning speed, and if organisations are to capitalise on the situation, they need to stay ahead of the pack. This means capturing, analysing and actioning real-time customer behaviours – allowing organisations to develop the next channel, product or service to remain relevant in a rapidly shifting environment.
 
  • Invest ahead of the curve to increase capability advantage over competitors
To establish themselves as clear market leaders, organisations will need to reinforce those existing capabilities that are still relevant, but also look to build additional ones in potentially new segments or offerings. Now may also be the time to target weakened competitors that will help scale and increase market share. These organisations should be using customer insights to evaluate the next opportunity and design the path forward to acquire new capabilities with speed and efficiency.
 
  • Upweight resourcing against demand generation activity through digital / remote channels
Finally, whilst organisations in this quadrant are likely to have sophisticated demand generation capabilities, now is the time to upweight resourcing against these digital / remote channels and start to build a dominant market position. We are currently seeing organisations increase their capacity in call centres to cope with inbound demand. However moving into the next phase, a balance needs to be struck between handling inbound queries and ensuring outbound demand generation activity.

Conclusion:

The ‘Reconfigure’ stage is a pivotal moment in time. There is a window of opportunity to reset business models, reprioritise investments and build new capabilities. The actions that organisations take now will define success or failure, both in staying resilient through the downturn, but also in capturing the growth opportunity ahead. To maximise the odds for success, businesses need to fully understand the impacts on their industry and exactly how their competitors have or have not been impacted. A cold, hard assessment of current omni-channel capability will identify the quadrant most relevant to your organisation, whilst a nuanced view of decisions and recommendations here will set out the immediate next steps. Above all, decisiveness, agility and innovation should not be underestimated in action plans and execution.

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