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How companies can rise to the challenges of COVID-19 recovery

Office workers seen during lunch hour in Singapore’s central business district on 2 June 2020. (PHOTO: Dhany Osman / Yahoo News Singapore)
Office workers seen during lunch hour in Singapore’s central business district on 2 June 2020. (PHOTO: Dhany Osman / Yahoo News Singapore)

By Michaël Bikard, Chengyi Lin and Andrew Shipilov

SINGAPORE — In the middle of the COVID confinement, many companies asked their senior executives to conduct scenario planning. Now that many countries have flattened the curve, people are anxious to get back to work. What actions should they consider? Here we present three broad categories of actions for the short-, medium- and long-term success of your businesses.

Short-term: Prioritise social impact

Businesses must contribute to the recovery effort. This presents an opportunity for firms to show that they are not only committed to their shareholders, but also to their employees, clients and to the broader society.

First, firms must look after the health of their employees. Those that do not protect their employees not only run the risk of damaging their reputation, but they might also encounter legal troubles. In France, Amazon has been ordered to shut down warehouses employing about 10,000 people after a court ruled that the firm was putting some of its employees in danger linked to COVID-19. In contrast, Chinese e-commerce firms have worked with insurance companies to increase COVID-related healthcare cover for their front-line workers.

Second, many firms are seizing the opportunity to make a positive difference in the fight against the virus. In Japan, Toyota joined forces with other carmakers to produce medical ventilators. In Italy, the jewellery and perfume firm Bulgari has been collaborating with its historical partner in perfumery, ICR, to produce large quantities of hydro-alcoholic gel.

Medium-term: Rebalance your business and develop scenarios

COVID confinement has put many businesses on hold. The soaring cost of physical interaction has made many firms unprofitable while others were forced to shut down entirely. Nimble firms are rebalancing their portfolio of activities toward those activities that involve little physical interaction. For example, major airlines have shifted passenger flights to freight-only services. While Delta hadn’t operated cargo-only flights since 2009, it is now flying between Shanghai and Detroit three times a week. This shift allows airlines to redeploy their expensive resources — pilots — and generate revenue to keep the companies afloat.

For companies like Zoom Technologies and many e-commerce firms as well as manufacturers such as 3M and Clorox, the shift may be at the level of the activity rather than the business offering. Those firms no longer need to focus on growing their customer base. Rather, they must strive to meet the demand for essential items. This includes securing supplies, coordinating manufacturing activities and increasing logistics capacities.

As they rebalance their business, companies need to develop financial plans for different scenarios. Companies could develop three kinds of plans: optimistic, pessimistic and disaster. An optimistic plan can assume some form of a U-shape recovery, a pessimistic one assumes more of an L-shape and disaster plan envisages no recovery.

While the optimistic and pessimistic scenarios require adjustments to a company’s business model (mostly in the form of cost cutting and looking for new revenue models), the disaster plan forces organisations to fully reconsider how they operate and suggest profound changes to the business model.

Long-term: Anticipate a new equilibrium

Although the “new normal” remains to be defined, it is possible to anticipate altered consumer behaviours and business practices in the future. The new world will likely rely less on direct physical contact than the old one. As compared to the pre-pandemic world, we are likely to see greater e-commerce penetration, virtual meetings and digital engagements. However, compared to the extreme measures taken during lockdowns, there will also probably be a swing back. It is important for businesses to anticipate the new equilibrium and to prepare their resources now.

Zoom and other digital solution providers in high demand during the crisis have spent much effort expanding infrastructure and workforce. While some of the activities such as virtual meetings will stick, demand for other products and services might sputter out or even disappear after the pandemic ends. Businesses that have flourished in this time need to explore new opportunities to grow even as the crisis ends.

For example the travel sector may need to anticipate the reduction in business travel in the “new normal” and re-construct their profit formula. There will certainly be higher costs (and airport taxes) to cover the expenses of testing passengers for the virus either upon arrival or departure as well as the maintenance of social distancing on planes and in lounges.

It is impossible to know exactly which way we are heading, but one thing seems clear: Those companies left standing after COVID-19 will be the ones whose strategies best balanced the demands of today, tomorrow and the highly uncertain world to come.

Michaël Bikard is an Assistant Professor of Strategy, Chengyi Lin is an Affiliate Professor of Strategy and Andrew Shipilov is a Professor of Strategy. They all work at INSEAD.

The story was updated since it first appeared on Insead Knowledge.