Pre-crisis, transformation was high on the corporate agenda. These plans have been paused for many companies. But they will restart, possibly with added energy, once the situation stabilizes. The case for change is never stronger than when adapting to a crisis — and in many ways the unwelcome and unexpected emergence of COVID-19 will further cement transformational strategies in the boardroom.
Managing through the downturn requires operational focus to preserve revenues. Planning for recovery will see greater focus on raising profitability and attracting and retaining customers. Transformation requires a shift in strategy. But that strategy itself should always encompass an ability to transform. Agility, flexibility and resilience today are the foundations of success tomorrow.
Accelerating strategic and portfolio reviews will underpin the journey into “next.”
At some point, executives will move from crisis mode to refocusing on strategic and portfolio reviews to plan for the future. Companies have acclimatized to operate in a world that is changing at a faster pace than ever before. Once some sense of normality resumes, businesses will readdress more conventional challenges: products and services coming to market faster.
Startups challenging business models across all industries; regulatory regimes evolving and changing the rules of the game — the need for companies to reimagine, reshape and reinvent their future business fundamentals will once again be top of the agenda.
Most respondents still recognize the need for more frequent portfolio and strategic reviews.
Portfolio reviews should underpin the capital allocation process. They should also identify assets that are at risk of disruption or that face future growth challenges that may make them better off owned by another company or private equity fund.
Overall business strategy is set by the CEO and the board. This top-down view can sometimes conflict with a bottom-up review process, especially with regard to assessing synergies and the value of business units as stand-alone entities or potential divestitures. The cause is often business unit management bias, which, while understandable, does provide a barrier to the holistic view of the whole business that the review process should yield.
- An always-on strategic and portfolio review process will allow companies to identify areas of growth at the earliest opportunity and surface areas of underperformance sooner. This will also enable them to prepare to divest and reinvest should the need arise. Divesting stressed/distressed assets is a typical trend during a crisis and recovery that we should also expect post-COVID-19.
- Many companies have been finding that yesterday’s competitors are no longer the primary threat to their future growth plans. Obviously, nobody foresaw the current international health crisis, but understanding evolving industry ecosystems, and spotting emerging challenges earlier, will enable companies to protect current operations through investment. They will also be able to identify areas of immediate concern and to acquire potential rising champions at their inception.
- Effective portfolio reviews always require good data. Companies need to combine their own proprietary internal data with the highest-quality external assessments of their market to surface unique insights. And they need the tools and technologies to consider future scenarios for individual business units as well as at the portfolio level.
- With faster change, predicting the future becomes inherently more difficult. A scenario-based approach can identify potential opportunities so management can start planning for them today. With greater uncertainty about potential evolution of markets, companies need to bring all parts of their workforce into the review process. This will help companies challenge internal assumptions and explore fundamental questions about the future of the business.