COVID-19 Reboots Enterprise Cost Board And Performance Strategies From 'Save-To-Transform' To 'Save-To-Thrive': Study
The Deloitte survey finds that organizations that invest in key capabilities today to navigate a post-COVID business environment can position themselves to thrive in the new normal
Emerging from the pandemic, tomorrow’s successful businesses will make themselves more resilient to unforeseen crises. They will intensify the use of digital technologies in cloud computing, cybersecurity, cognitive and artificial intelligence tools, and the Internet-of-Things. Empowered with these tools, they will also have greater flexibility in managing costs and the agility to engage more effectively with their customers as changes occur in the way goods and services are delivered and consumed.
These are the key takeaways from a new Deloitte Consulting report titled Enterprise transformation and performance improvement strategies amidst the pandemic: November 2020.
The study offers a close-up to the ‘resilience’ of businesses, which Deloitte classifies under three broad phases as organizations cope with the fallout of the pandemic: respond, recover, and thrive.
The study groups respondents by the stages of “respond,” “recover” and “thrive” that they saw themselves in at the time the survey was conducted. They begin with the “respond” phase where they are sizing up the impact of the pandemic, after which they move to the “respond to recover” and “recover” phases. They begin consolidating their fortunes in the “recover to thrive” and “thrive” phases. According to the survey results, companies spend a little over three months in the “respond” mode, a further six months in the “recovery” mode, and then expect to be in the “thrive” mode for about 10 months, said the report.
In the wake of the pandemic, the share of respondents who expected positive revenue growth in the next 12 months fell from 90 per cent to 50 per cent. India is still behind the globe in response to the COVID-19 crisis, with maximum respondents of 71 per cent in the ‘respond’ or ‘respond to recover’ stage. However, with the stage-wise unlock in the country over the last two-three months, Indian respondents have started taking actions towards stabilizing operations under COVID-19 conditions thereby, moving to the ‘respond to recover’ stage. Indian respondents expect to move to the ‘thrive’ stage faster than the average time expected by other APAC (Asia-Pacific) and global respondents, the report stated.
The report believes that APAC has the highest number of respondents in the ‘respond to recover’ or ‘recover’ stage by 65 per cent mainly due to China-Mainland and China-Hong Kong SAR. Around 78 per cent of respondents globally see themselves already responded to the current crisis and are now progressing towards the ‘recover’ stage.
In terms of ‘transformation actions,’ two-thirds or more of the companies listed automation at the top. The stress on automation is mainly to achieve productivity growth and to gain agility in operations and their operating models and not primarily to replace workers, as talent becomes a focused area emerging from the pandemic, the report clarified. Companies want to be able to use automation to grow markets and develop new products and services.
Beyond automation, the priorities for transformation varied by region and the recovery stage they were in, across actions such as cost reduction, divestments, and revamping of business processes or supply chains. The “save” in “save-to-thrive” is to underline the importance of businesses saving up to finance their transformation to rebound stronger after the pandemic, a statement from the report further explained.
The survey pointed out that when businesses were first hit by the pandemic, their initial need was for liquidity, credit, and cash to be able to pay their bills. Self-funded transformation is essentially about saving money in one part of the business to be reinvested elsewhere that might have more value.
According to the survey results, the fastest-growing revenue sources in the future will be digital channels (vs. physical channels) followed by domestic operations, and pre-COVID core products and services portfolio. Practices such as social distancing and shelter-in-place that restrict access to the physical world, the COVID-19 crisis has greatly accelerated the shift from physical to digital channels. It has also revealed the limitations and risks of globalization and global supply chains, leading many companies to re-prioritize domestic operations over international operations.
As per Deloitte’s recent report on Resilient leadership in the face of COVID-19, the digitalization of the following areas will help organizations in ‘thrive’ and ‘next normal’ is to gain business transparency on demand and sales processes and transaction areas, and customer engagement and adopt technological interventions wherever possible to make the process more efficient and resilient for better and quick decision making, such as Sales Control Tower.
Despite the pandemic’s massive impact on the global business environment, many companies continue to expect positive revenue growth–particularly in the ‘thrive’ stage when they have successfully responded to and recovered from the early challenges of the crisis.
Decisions that companies make today to cope with COVID-19 can help or hinder their positioning for the future. Before the pandemic, the prevailing mindset for strategic cost management was ‘Save-To-Transform’—using the strategic levers of cost, growth, talent, technology, and digital enablement to transform how companies do business. Now, we are seeing that the ‘Save-To-Transform’ mindset evolves into ‘Save-To-Thrive,’ with the crisis highlighting and accelerating changes in key transformation areas, such as technology and talent.
By using cost reduction strategically to transform the enterprise and improve competitiveness—which includes investing in key capabilities, such as automation and remote work that align with the new realities of a post-crisis business environment—companies can leverage their cost-savings efforts to not only transform how they operate but to position themselves to thrive in the next normal.