There aren’t many certainties at the moment. One thing I am sure of, however, is that leaders in our sectors haven’t had time to ‘make the most’ of lockdown – no baking sourdough, learning a new language, or binging on the latest Netflix series! From hundreds of conversations with CEOs and ExCo members over the last few months, it is clear that leaders of consumer sectors have been busier than ever grappling with never-before-seen challenges, ensuring the safety and wellbeing of their people, feeding the nation, and ultimately trying to ensure the survival of their businesses.
In our discussions with business leaders in the sector, we’ve found that most executives today are spending most of their working day – and often beyond – dealing with immediate and direct responses to Covid-19. Managing cash, restructuring, renegotiating covenants, investor management, lobbying government and constant communication all seem to have become time-consuming norms. Indeed, most leaders we speak with are still having full ExCo daily Covid-19 response calls, lasting in and of themselves between one and three hours.
If this weekend’s announcement does start a gradual re-opening of our sectors, then we will once again need to make time to focus on traditional day-to-day trading – on top of the Covid-19 survival actions that will undoubtedly continue into the next phases of lockdown. Safely re-opening sites, re-starting supply chains and re-engaging furloughed colleagues who will possibly be returning to very different working environments will all be items on the agenda – each with a continued focus on cost. This new trading phase will be hugely challenging – if nothing else, much of the data we usually rely on to drive usual commercial decision making is unlikely to be hugely useful, at least in the short term, as we respond to new consumer realities and changed consumer behaviours. Indeed, in the short term, we will return to more intuitive commercial decision making – with leaders in our sector prioritising ‘walking the floor’ and engaging directly with customers to inform commercial priorities.
“One of the great things coming out of Covid-19 has been the volume of new ideas, channels and products: we have proved, once and for all, that innovation doesn’t need to take years – it can take days. As consumer sectors, we will start to adopt innovation processes the tech and digital sectors have followed for decades – we will fail ‘fast’ and often – but continue learning and iterating.”
Additionally, as short-term commercial performance becomes key, we are going to need to engender a much more entrepreneurial and agile approach to product and proposition in the consumer sectors. One of the great things coming out of Covid-19 has been the volume of new ideas, channels and products: we have proved, once and for all, that innovation doesn’t need to take years – it can take days. As consumer sectors, we will start to adopt innovation processes the tech and digital sectors have followed for decades – we will “fail fast” and often – but continue learning and iterating.
On top of Survival and Trading, ExCos must also apply two new critical new lenses:
Firstly, Transformation as a new normal: businesses will require a ruthless and ongoing focus on ‘cost out’ – examining how to strengthen the balance sheet and putting in place measures to bolster bottom line, including looking at people, property and processes. Over the medium term, effectiveness here might mean the difference between businesses surviving and falling victim to the crisis. Whilst short-term actions taken at the start of the Covid-19 crisis may have removed some costs from businesses, ongoing cost transformation will involve fundamentally re-examining property portfolios, organisation structures and re-structuring the balance sheet to ensure enough cash in the event of a phase two or three of lockdown.
“Whilst short-term actions taken at the start of the Covid-19 crisis may have removed some costs from businesses, ongoing cost transformation will involve fundamentally re-examining property portfolios, organisation structures and re-structuring the balance sheet to ensure enough cash in the event of a phase two or three of lockdown.”
There may also be short-term opportunities during the crisis. This may be the time to accelerate M&A, make acquisitions of low-value assets or to lead difficult restructurings which weren’t possible prior to the pandemic. Likewise, companies may need to rapidly establish defense strategies to ward off unwelcome takeover attempts.
In addition, businesses will need to drive a more forward-looking transformation – such as digital acceleration, which has proved itself to be a defining trend of Covid-19 within the consumer-facing sector. In our nearly two months of lockdown, we have seen countless businesses speed up digital innovations to introduce new and more effective channels to market. Going forward, we can only expect this trend to continue. In the US, for example, first-time usage of digital grocery methods surged 28% in March as shoppers sought to avoid stores, and in the UK, over half of consumers have used a new cashless payment method since the outbreak of Covid-19.
Additionally, many businesses will have to rethink their entire business proposition and operating model in the short-to-medium term. While the lockdown may possibly be easing in the not-too-distant future, we can expect social distancing measures to be in place for some time and this will have a significant impact on the foodservice and hospitality sector specifically. Businesses like cinemas, theatres, restaurants and airlines will need to think about how to enact social distancing within confined spaces. Pubs will need to learn to make better uses of their beer gardens. Retailers will need to enact queuing systems. Foodservice businesses will continue to pivot to direct to consumer models and restaurants/QSR businesses will need to significantly upweight their takeaway and delivery provision. The ‘new normal’ will require constant innovation and self-disruption in order to survive.
“The ‘new normal’ will require constant innovation and self-disruption in order to survive.”
Secondly, businesses will need to find the head-space to focus on Visioning the Future. It is difficult to predict how Covid-19 will shape our society, but history tells us that crises cause fundamental shifts in both social attitudes and the way businesses operate: WWII brought women into the workforce, 9/11 redefined security policy and the SARS outbreak sparked an increase in ecommerce, for example. Businesses need to think holistically, strategically and calmly about their future, and determine where their business fits within the ‘new normal’ for consumers – whatever that may look like.
Many companies, for example, will be forced to reconsider their entire proposition, and reposition themselves in a new market or for a new demographic. In short, they will need to identify where the opportunities lie amid the uncertainty. It is plausible to expect, for example, a long-term lull in international travel, dining out and experiential-led buying. On the other hand, AI-led businesses, ecommerce and payment platforms are likely to thrive in our post-Covid world. Businesses in the consumer-facing space must think strategically about their next moves, and establish an agile proposition that can change and adapt as customer behaviours shift.
Businesses will need to conduct rapid research in order to predict what that ‘new normal’ will look like – as there is currently very little data available which can be used to predict future consumer behaviour.
Executive committees therefore have four specific tasks in the coming years. Firstly, Survival – active and evolving responses to the pandemic, and its effects. Secondly, Trading – business as usual activity, infused with an entrepreneurial, commercial and agile spirit. Thirdly, wholesale enterprise-wide Transformation – a mix of ‘cost-out’, adapting business models for social distancing, and digital / AI acceleration. Fourthly, Visioning the future – speedily establishing an understanding of the customer of the future, and the right proposition or business model to meet their needs.
CEOs and their boards are already understandably stretched leading the Survival and Trading phases of this pandemic – and many do not have the capacity, or indeed the head-space, to devote sufficient time to the longer-term Transformation or Visioning priorities need to be addressed. In the short term, we can expect to see many companies elevating a Chief Transformation Officer and a Chief Strategy Officer to the main board to lead these aspects of change. The Chief Transformation Officer would take full responsibility, in partnership with the CEO, to create the right long-term cost base and infrastructure (in particular technology) for the company. As a counterbalance, the Chief Strategy Officer, who is relentlessly insights-driven and forward looking, will be critical in understanding your customer and direction for the future – which may be very different from today. After all, amid the uncertainty, there is opportunity – and it is your Chief Strategy Officer’s job to determine what your business can offer beyond the crisis.