5 minute read 14 Jun 2021

How are companies reframing the future beyond the pandemic?

By Marc Herlant

EY Belgium Strategy & Operations Partner (EY Parthenon)

More than 25 years experience in industry and consulting.

5 minute read 14 Jun 2021

How will your company fit into the new normal? By strategically repositioning your organisation, you can become tomorrow’s market leader.

In brief

  • The pandemic has accelerated pre-existing trends.
  • Although CEOs aim to transform their organisations, they also face key capability and execution gaps.
  • Companies need to quicken the pace of strategic organisational change, so that they can position themselves to capitalise on emerging opportunities.

One year into the crisis, business leaders have navigated their organisations through the turmoil of the COVID-19 landscape. Some companies merely survived, others are thriving. But are they prepared to grasp the business opportunities that lie ahead?

At the initial start of the pandemic, companies needed to act fast ‘now’, but also prepare for what came next and build resilience for the first 18 to 24 months, as well as take a long-term perspective to capture the opportunities beyond the crisis. One year later, what’s the status?

Now and next: swift response and more resilience

In the early days of the crisis, many organisations reacted swiftly and successfully to absorb the initial shocks of the pandemic and to guarantee business continuity. Teleworking became the norm, operations were adapted and virtual platforms and channels were implemented to improve customers’ access to products and services. All within the constraints of strict safety regulations.

Very quickly, companies also successfully solidified their tactics to build a more resilient organisation for the next 18 to 24 months. The economic climate against the background of a global pandemic created more openness to embrace change and allowed companies to accelerate, restructure and implement cost reduction programmes. By reorganising their cost structures in the short term, business leaders ensured they had access to vital cashflow.

At the same time, stocks and production had declined, keeping more cash in and less going out. Combined with the government’s tax and financial relief measures, cash reserves were high. This has led to a somewhat unexpected strong gap between sectors that have been hit really hard by the crisis and sectors that overall performed well or even prospered.

Beyond the crisis: increased inorganic growth …

With interest rates at a record low and a volatile stock market, investment options were scarce in 2020 and in the first half of 2021. Add to this a high rise of liquidity in the market, and it becomes obvious why companies with strong treasury capabilities became less risk averse to actively use M&A as part of their business strategy. This is no different today. There is still a general upward trend in consolidation within several industries and a higher volume of acquisitions, with companies willing to pay for increased transaction multiples. Inorganic growth usually leads to synergies, creating even more options to scale and reduce costs, which in turn positively impacts the cashflow.

… but new business models and innovation are attention points

Inorganic growth is one way to reposition your company for the future. Another one is organic growth through the creation of new products and services in combination with pioneering business models and innovation. This requires actively transforming the organisation. The pandemic has accelerated pre-existing trends from digital transformation to changes in consumer behaviour to a growing focus on long-term value. It’s crucial that business leaders respond decisively to new value drivers to seize opportunities, or they risk being left behind. Yet EY’s  most recent CEO Imperative Study revealed that although CEOs aim to transform their organisations, they also face key capability and execution gaps. The reasons why vary:

  • Incomplete digital transformation efforts

  • Actions not meeting intentions when it comes to generating long-term value

  • Data and data trust shortfalls threatening transformation objectives and investments

  • Culture and organisational structures inhibiting agility

  • Underinvestment in ecosystem business partnerships, impacting agility and resilience

DNA of the future enterprise

The DNA for thriving enterprises is built around transformations that break down silos, increase agility, improve innovation and leverage data to become closer to customers. Business leaders need to reorientate their organisations for continuous transformation so that they can generate sustainable growth and deliver long-term value for all stakeholders. This exponential value can be realised through three interconnected value drivers:

  • Putting humans first: radical customer centricity in combination with a purposeful, nurturing company culture to create the agility to adapt to the speed of market and customer changes.

  • Accelerating technology adoption responsibly: leveraging technologies to advance business models, as well as customer and employee experiences.

  • Thoughtfully scaling innovation: acquiring agile innovation competencies, setting up collaborations within continuously evolving ecosystems and moving quickly into new markets. 

Now, next and beyond

Companies need to quicken the pace of strategic organisational change, so that they can position themselves to capitalise on emerging opportunities. But it’s also important to keep the complete picture in mind. In the months to come different challenges will arise that will differ from sector to sector, but will also be influenced by the geographical context an organisation operates in. Now, next and beyond have merged together:

  • Now and next – In Europe and the US society is gradually reopening, but on a global level the pandemic continues to impact countries, economies and sectors. It remains important to stay vigilant and build up resilience and optimise costs for the next 12 to 24 months.

  • Beyond – Inorganic growth opportunities continue to arise with a very active M&A market. This offers great possibilities to create synergies and expanding your product offer. But the world continues to change. How will your company’s organisation structure, way of working, activities and assets fit into the new normal? Start to reengineer your business, so that your company is fully prepared to develop tomorrow’s products and enter new markets.

It’s vital that business leaders take a long-term perspective and develop a strategy that captures emerging opportunities for the fundamental changes that lie ahead. This will help companies to respond to market demand and increase their future market share. However, agile companies that reframe and transform their organisations now are uniquely positioned to not only become market leaders, but even more importantly to become market makers, creating exponential long-term value for all stakeholders.

Reshaping your organisation for a sustainable and successful future

EY’s Connected Capital Solutions help clients drive inclusive growth by focusing on their business, capital and transaction strategy through to execution to drive fast-track value creation.

EY-Parthenon experts support companies in complex, critical or urgent situations to rapidly solve business challenges, sustainably improve results and help clients reshape for a better future. We therefore work closely together with our clients and focus on value creation, preservation or recovery.

 

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Summary

There is a general upward trend in consolidation within several industries and a higher volume of acquisitions, with companies willing to pay for increased transaction multiples. Yet, initiatives to develop new products and services in combination with pioneering business models and innovation remain scarce. It’s vital that business leaders respond decisively to new value drivers to seize emerging opportunities, or they risk being left behind.

About this article

By Marc Herlant

EY Belgium Strategy & Operations Partner (EY Parthenon)

More than 25 years experience in industry and consulting.