Getting There Eventually: Finding Equilibrium in Uncertain Times (Part 2 – Resilience Is the North Star)

Customer and Consumer Engagement

Changes in individual habits have already occurred and will continue to evolve in the post-pandemic world, resulting in significant impacts on customer and consumer behavior. Shifts in preferences for online shopping, home delivery, curbside pickup, contactless engagement, social distancing and even abandonment of the traditional business handshake are among the various behaviors seeded from the unique circumstances created during the lockdown period that could become mainstays. The companies that are most resilient will be the ones that challenge themselves to do everything possible to accommodate these evolving preferences and behavioral shifts. Following are questions relevant to this opportunity:

• How will the organization refine its business model to strike the optimal equilibrium in interacting with customers and consumers during the phased transition to the eventual post-pandemic marketplace?
• Has the company mapped the customer journey to understand the experience that customers are having with its brand from original engagement to the present, and how the current environment is altering that journey?
• Does management have the information needed to understand and act on customer and consumer behavior, including analysis of positive and negative feedback from social media and other venues regarding online shopping experiences? 
• Is the organization capable of reacting and pivoting as customer and consumer behavior and consumption patterns change and evolve? To that end: 
  • Are there enough channels offering flexibility to customers and consumers interacting with the company?
  • Is management focused on how the company’s offerings can be better positioned for success during the phases leading to the post COVID-19 world, including new or modified products and services and flexibility in how they are delivered?
  • Are frontline employees trained to interact with customers and consumers safely and effectively, communicate how the company can help them through the crisis, and convey empathy in understanding their needs? Are they empowered to make the necessary adjustments to satisfy those needs?

As there is no predictive utopian model for how aspects of market, customer and consumer behaviors will shake out, organizations must prepare themselves to be agile and adaptive.

Workplace Redesign

The experience of working from home has, by mandate, become the norm for those organizations able to adjust and, for many, has served as an object lesson that people can work from anywhere if they have the right video- and text-based collaboration tools. Videoconferencing platforms, virtual canvases, tablets with stylus pens, multiplayer editing, virtual whiteboards and voting tools are facilitating our ability to meet, share ideas and create. Once employees become familiar with these tools and how effective they can be, they may not want to return entirely to physical meetings requiring lengthy commutes or extensive travel even if they could. Leaders cannot afford to ignore this dynamic.

This way of working and collaborating has been in place for some time but is now more widely practiced and honed out of necessity and, in some organizations, is the preferred method. The emphasis on social distancing has changed the way we work individually and as teams. Some organizations may embrace this approach going forward to offer flexible options to attract and retain employees, and the impact is far-reaching. From recruiting to performance evaluations to even developing customer relationships, organizations are faced with defining the necessary processes, skills and tools for their employees to be effective in a remote workplace. For some roles, ambidextrous skills to work both remotely and in person may be required as this model evolves. These changes will impact the traditional human resources model and have unintended outcomes: 

• Will organizations recruit for “one office” versus geographical locations?
• How can organizations retain a sense of teaming and community in a remote workplace?
• How will the new environment impact employee loyalty and turnover?
• What type of remote work protocols are needed to enhance employee and team performance? 
• Can legacy approaches to business development resume and succeed in the “new normal”? If not, how will the organization’s model and incentives structure for sales personnel need to evolve?

From recruiting to performance evaluations to even developing customer relationships, organizations are faced with defining the necessary processes, skills and tools for their employees to be effective in a remote workplace.

As companies transition from the lockdown, their messaging to employees should encourage the kind of flexibility, engagement and agility that will engender excitement in the ranks for adapting to new roles, hours, processes and work locations.

Supply Chain Rethink

The COVID-19 pandemic has exposed the risks of concentrated sourcing and overdependence by jurisdiction and geography like no other incident before it. This puts a hyperfocus on the fragility of a supply chain that is not diversified, and mandates that organizations reconsider how they safeguard their ability to produce products and services. Organizations should rethink their strategic just-in-time relationships to avoid disruptions going forward and perhaps, in cases involving certain critical parts, materials and supplies, consider vertical integration options. They also must be resilient and anticipate the practices and trends that will influence the global supply chain, including: 

• Marketplace interest in reduced reliance on narrow availability of suppliers and/or exposure to geographical and jurisdictional oligopoly
• Government programs and legislation, including tax relief and tariffs, intended to incent reshoring and energize domestic production
• A sharper policy focus on national security, emphasizing the availability of certain products domestically or regionally as well as product quality and safety and marketplace stability
• A shift in customer preferences for products made domestically (including raw materials and component parts) accompanied by a willingness to bear a higher cost, if necessary, to support that preference
• Concerns for the occurrence of another disruptive event (e.g., weather, political unrest) affecting key suppliers

The COVID-19 pandemic has exposed the risks of concentrated sourcing and overdependence by jurisdiction and geography like no other incident before it.

These issues may also place a company’s existing partnerships under pressure, as nationalism can spring up anywhere on the planet. Therefore, supplier reliability and transparency will likely be closely monitored in the global marketplace. It is clear that organizations dependent on the global supply chain will have to prepare for these and other scenarios to remain competitive in the post-pandemic era.

Digital Urgency

There is an immediate need to connect with customers, sustain a remote workplace and rethink the supply chain to gain the equilibrium that is possible in each of the successive phases following the COVID-19 lockdown. However, for many organizations, pre-pandemic technology planning may not have emphasized a sufficiently robust strategy for connecting with customers and suppliers, fulfilling orders, streamlining and automating processes, using data more effectively to improve performance, and supporting the current work-from-home models, and even much less for what’s to come as the post-pandemic market evolves. Upgrades to digital equipment, transmission speeds, digital offerings and defined workspaces are becoming standard fare. But instead of making do with the tools at hand, organizations must act with greater urgency to advance their digital maturity. In fact, the COVID-19 experience is making a compelling case that digital maturity is fundamentally about positioning the organization to compete effectively against digital leaders having hyper-scalable business models featuring a lower fixed-cost base and dependency on people.

From a macro perspective, countries may move rapidly to a sustained 5G environment — across the whole country, not just metro centers — in anticipation of future stay-at-home orders as well as the realization of the benefits from and requirements of working from home. These are reasons management should resist postponing digital and automation initiatives as part of cost-cutting efforts and recognize that these investments are integral drivers of the company’s resilience as the economy recovers.

If digital initiatives, including automation and robotics, are in fact a lifeline to achieving equilibrium in whatever state the market evolves into next, soon and eventually, organizations should consider their needs and the needs of customers, employees and suppliers to create a future-state digital blueprint. This includes governance and oversight to assess the appropriate boundaries for establishing adequate protections of confidential information and intellectual property. If not already developed, policies should be articulated to define and guide appropriate actions and address key opportunities and issues: 

• Where are the company and its suppliers on the digital maturity continuum, and in which areas should digital capabilities be advanced to compete effectively in the market segments it targets?^[2]
• Is management thinking boldly enough in digitizing the organization’s products and services as preparations continue to position the firm’s offerings for a post-pandemic market?
• How is the organization taking advantage of new, emerging and maturing technologies such as robotics and artificial intelligence, including computer vision, natural language processing, translation services and machine learning, to improve processes and speed decision-making for the purpose of not only enhancing the customer experience but also making the company more resilient? 
• Does the company have the level of data security needed to support digital offerings and secure remote access?
• Is there information that should not be accessed remotely, and, if so, is that information secured? 
• Are the new collaboration and other tools deployed to support a remote work environment appropriately secured? Are remote workers adequately trained to recognize sophisticated phishing schemes? 
• Is management effectively addressing legacy systems and technical debt, as well as leveraging the cloud, and, if not, what more can be done?

The COVID-19 experience is making a compelling case that digital maturity is fundamentally about positioning the organization to compete effectively against digital leaders having hyper-scalable business models.

Real Estate Configuration

For the providers of commercial real estate, this crisis challenges them to meet the changing needs of existing tenants and to attract new tenants. It also presents an opportunity for businesses to rethink their real estate requirements, based not only on location but also on business operating practices that have changed as a result of the pandemic experience. Traditional space configurations may give way to more hoteling, common areas with meeting space and significant technology upgrades. Space requirements may shrink due to an increase in remote work and new ways of reaching consumers but could also maintain or increase due to required social distancing. That means there is a possibility the net effect could be offsetting on space and a boom for reconfiguration-related services such as office design and construction.

Since real estate markets are locally influenced, the renaissance will depend on the vibrancy of the local marketplace and multiple open issues as well as opportunities:

• Will existing lease terms prevail in this evolving marketplace?
• Can retooling of existing space be a positive disrupter for the real estate industry?
• How will market trends alter traditional real estate demographics (e.g., migration patterns, population growth and occupancy rates)? For example:
  • Even if square footage remains intact, the geography mix could change — particularly as correlations are drawn between population density and COVID-19 transmission rates. 
  • How will office design (e.g., the “look and feel” and key features of workstations) change for organizations combining virtual working with office-based working? (Note: Many of the tools being used during the lockdown are working well because everyone is virtual; it is harder when some people are remote and others are operating in the same room.) 
  • If the workplace goes virtual, will lower-cost markets become much more attractive?
• If there is a migration from expensive, downtown high-rise office space in high-cost markets in favor of new office parks in near-shore locations or a transition to a remote workplace, will there be a significant negative impact to municipalities from a reduction in the tax base due to reduced occupancy rates and business activity?
• Will excess commercial space shift to residential units to energize neighborhood development?

Space requirements may shrink due to an increase in remote work and new ways of reaching consumers but could also maintain or increase due to required social distancing.

Changing and Emerging Business Opportunities and Risks

The market realities of the post-pandemic world will drive a sea change as organizations rebuild or reorganize their respective businesses. These changes will spawn both opportunities and risks that will require resilience to keep pace with emerging issues. It is important to recognize that this is not a time for caution. In this environment, digital leaders are much more likely to embrace risk and even question whether they are undertaking enough risk. Old school thinking to freeze technological innovation to cut costs and “reduce risk” at a time when the world is changing rapidly is not a pathway to success. 

Innovative thinking will generate better ways to do business and create new sources of revenue, as well as consider and either accept or mitigate associated risks. In seeking equilibrium, the lines in the sand for risk appetite and return will be drawn and redrawn to take advantage of windows of opportunity. 

That is why opportunities as well as risks must be considered as organizations embrace the change they can’t control and choose to be resilient in response to market developments. To determine the next generation of their business models, organizations should consider the evolving trends of recent weeks:

• Distribution and delivery: Expanding (if not exploding) demand for delivery and distribution businesses and channels.
• Collaboration and communication: Increased use of videoconferencing platforms, virtual canvases, online whiteboards and other virtual interaction and brainstorming tools, and social distancing protocols, resulting in reduced need and demand for commuting and business travel. 
• Retail channels: As consumer behavior continues to reach for contactless fulfillment options, “brick and mortar” retail venues double down on experiential retail and multiple channel retailing. 
• Service industries: Contactless systems dominate the service industries, including enhanced delivery services, online payment requirements and remote service options.
• Education models: Traditional higher education and public education are on the cusp of facing the most radical re-engineering in history of their products and processes, with higher education expecting reduced enrollment (especially international), more commuting and an emphasis on virtual classrooms, smaller class sizes, social distancing, and evaluating the viability of and continued need for resource-draining programs.
• Healthcare delivery: Telehealth visits, drive-through testing, remote care and touchpoints through patient portals become mainstays in healthcare systems to include traditional processes of patient registration, eligibility checks, cost estimations, claims billing and various additional revenue cycle activities.
• Experiential activities: Content, experiences, and entertainment activities are disseminated virtually in creative ways to limit physical interactions due to public health restrictions and inability, hesitancy or unwillingness of people to gather and herd. 
• Mass transit exodus: Reduced mass transit demand dramatically alters the model’s fundamentals as well as its impact on the environment. 
• Societal protocols: Emphasis on social protocols to transition, as appropriate, from lockdown status to evolving societal guidelines for reducing risk of viral infections from engaging in business and social interactions. 
• Pressure on fossil fuels: Price volatility during the pandemic underscores the reality that the oil and gas industry is changing, particularly the pressure on companies to reduce their carbon footprints and offer more transparency on their progress.
• Economic and financial impacts: The unforeseen impacts of massive fiscal and monetary stimulus on the macroeconomy (e.g., future growth, inflation, availability of debt capital, cost of borrowing and calls for social reforms).
• Legislative winners and losers: How individual companies fare as governments offer relief and attempt to stimulate product and service creation will significantly influence the market. For example:
  • Some businesses will be eligible for government-supported loans and others won’t.
  • Others must balance the possibility of increased demand from government purchases or regulations encouraging reshoring against the risk of scaling or taking action for orders that may never come (e.g., investing billions to develop COVID-19 treatments that may not be needed if a vaccine — or another more effective treatment — is available first).

In this environment, digital leaders are much more likely to embrace risk and even question whether they are undertaking enough risk.

These illustrative examples suggest that the full implications of COVID-19 across various industries are not susceptible to a reasonable forecast, at least at the present time; however, organizations still need to seek equilibrium even as these trends evolve. Such efforts may generate unintended outcomes, including the need to reskill and upskill the workforce. 

Concurrently and for a long time to come, the potential for a virus rebound and the continuation of shutdowns in specific markets will keep pandemic planning at the top of the list of concerns for government agencies at all levels, healthcare institutions and businesses. The resulting confluence of challenges should be counterbalanced with focused efforts to embrace disruptive innovation and change to become a more resilient organization.

Climate Change and Sustainability

From issues of carbon footprint size to the impact of climate change on virology to contributing to society to make the world a better place, the pandemic has heightened the global focus on sustainability concerns. While higher energy demand is certainly expected during the recovery, it is doubtful it will approach pre-pandemic levels given likely reductions in commuting, mass transit and business travel. With increased public awareness of bluer skies and cleaner air due to the COVID-19 lockdowns, institutional investors are likely to double down on pre-pandemic calls for a stronger emphasis on environmental, social and governance (ESG) issues, making them an integral part of the new reality of business planning. 

Also, pressure on companies is likely to come from other stakeholders, including customers through their preferences and consumption choices, the public sector through calls for increased transparency, and employees through their choices of the types of companies at which they aspire to work. As a result, it may become increasingly difficult for companies successful in working through the lockdown to rationalize the benefits of business travel and long distance commutes in the post-pandemic marketplace.

While expectations will vary by industry and stakeholder role, there clearly will be more pressure to demonstrate a committed effort to support sustainability. As the pandemic eases, there will be choices to be made around the cost of safeguarding the environment versus the return to pre-pandemic norms and behaviors.

• How will marketplace expectations evolve for ESG initiatives, and is management proactively considering ESG-related objectives and targets in strategy-setting?
• How can organizations derive value from their ESG efforts?
• Does the organization have a clear long-term vision regarding sustainability? Is that vision responsive to investor and stakeholder expectations regarding socially responsible behavior for the industry? If ESG issues are not presently an integral part of the corporate strategy, is it time to rethink that? 
• What is the expected tipping point for the return on ESG investment in the industry? Is the company prepared to pivot should competitors significantly alter their strategy to emphasize ESG priorities?
• Does the company’s sustainability reporting provide enough insight into its nonfinancial activities related to ESG matters? Is it sufficiently focused on the ESG criteria that investors and asset managers following the industry use?

While expectations will vary by industry and stakeholder role, there clearly will be more pressure to demonstrate a committed effort to support sustainability.

A Trust-Based Culture

In Part 1 of this discussion of finding equilibrium in uncertain times, an innovative and agile culture was noted as a critical attribute.^[3] Right now, our societal culture, as well as every organization’s culture, is being tested and stretched in unprecedented ways, and the outcomes encountered will reflect what is valued most. Many organizations have been forced to innovate during the pandemic. The question is, how can management sustain the culture that fostered that innovation?

A trust-based culture requires engagement at all levels to align with evolving customer, consumer and employee preferences. Therefore, as an organizational culture adapts and changes, the behavior that leaders, employees and policymakers hope to see in our society and across the organization should be articulated explicitly and modeled.

Building trust with employees and customers in uncertain times is an important currency that cannot be mandated and must be earned. Trust comes from remaining loyal to long-term customers, even to the point of limiting new customer acceptance to ensure that service levels for existing customers can be sustained at their time and point of need. Trust also comes from leadership articulating a compelling vision and demonstrating the discipline to act decisively with intention to do whatever it takes to find equilibrium in the marketplace while providing transparent communication to employees. From this resilient approach, employees will more likely view the organization and its leadership as trustworthy versus an organization that resists the new realities of the post-pandemic world and hangs on to the status quo. Employees want and need to trust their leaders to be motivated and engaged, and organizations must build and retain employee trust as they refine their business practices to pivot successfully toward equilibrium. 

While a trust-based culture was a perpetual aspiration before the COVID-19 pandemic, it has an especially important role in teaming during and after this crisis:

• How is management engaging employees continuously with empathy and compassion so that everyone is knowledgeable of the situation, where the organization stands and what their respective roles are in the firm’s recovery and ultimate success? 
• How is the organization supporting the flow of communications up, down and across the company with enough speed to ensure that decision-makers are in direct contact with the unvarnished truth, staying in touch with the customer, and fostering a resilient organization that embraces change? 
• How are compensation and other incentives aligned with the goal of balancing short- and long-term performance?
• What roles are senior management and the board actively undertaking in shaping the desired culture? 
• What trending metrics and early warning capabilities are available to keep the company apprised of changes in the market, customer preferences, supplier performance, and other developments relevant to the strategy so that decision-makers can act timely to respond? 
• How and when does the company formulate resilient options for decision-makers for potential scenarios? How are those options considered and converted to timely and actionable refinements to the strategy and business model when the scenarios transpire?

Building trust with employees and customers in uncertain times is an important currency that cannot be mandated and must be earned.

Summary

Today, COVID-19 is most certainly a “strategic inflection point” for virtually every industry and company. While this term was coined almost 25 years ago, it remains relevant today as “a time in the life of a business when its fundamentals are about to change.”^[4] In the case of COVID-19, every business recognizes what has happened. The question is whether management is fully mindful of the various outcomes emanating from the pandemic and is prepared to keep pace with and even anticipate the speed of change to achieve equilibrium for each of those outcomes.

In summary, leaders and employees have no choice but to recognize that their business and personal lives have been irreversibly impacted, and a posture of standing pat and hoping for a return to the pre-pandemic world will not foster the resilience needed to survive and thrive during and after the crisis. It’s time to be comfortable being uncomfortable. Organizational resilience and individual resiliency are dependent upon accepting the need to change and finding value in new ways of living and doing business.

Our very humanity should guide the parameters for decision-making, as leaders and companies accept accountability for their actions and mistakes and learn in readiness for the next iteration of change.

It’s time to be comfortable being uncomfortable.

1. “Getting There Eventually: Finding Equilibrium in Uncertain Times — Part 1: Build on Your Strengths,” Protiviti, Volume 7, Issue 7 of The Bulletin, May 2020.

2. See Protiviti’s free digital self-assessment tool.

3.“Getting There Eventually: Finding Equilibrium in Uncertain Times — Part 1: Build on Your Strengths.”

4. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company, by Andy Grove, New York: Currency/Doubleday, 1996.

(The Bulletin: Volume 7 Issue 8)