COVID Impact is like a toothbrush: Everyone has their own
Since the beginning of March 2020, Covid-19 has disrupted many aspects of our lives and societies. Most non-essential businesses have slowed (at least temporary) or closed down, and more than 140 countries have imposed travel bans and border closures which has plunged the world into a severe recession. Health epidemics have been there for centuries and the world has experienced several episodes even in recent history. Nevertheless, neither the 2008 financial crisis, the 9/11 terror attacks, epidemics such as H1N1 or SARS, nor natural disasters in the last century are comparable to the Covid-19 crisis.This crisis has emerged as a massive storm front, threatening companies in the energy, transport, life sciences, event, media, financial sectors and more. How should companies face this planetary crisis concretely now? How to recover from such an event which triggered not only financial but also organizational and societal impacts? How can we get back to sustainable businesses or take the opportunity to create new ones?
There are and will be losers. That’s for sure.
The COVID-19 pandemic is driving the travel industry in a “coma”, causing massive job and revenue losses. The energy sector is also facing strong difficulties. Overall, the electricity demand has decreased and is expected to remain lower since commercial buildings, factories and other energy intensive users have slowed down operations which does not cover the increase of residential segment. Banks are under pressure and see some of their clients’ liquidity melt like snow in the sun which pushes them to rethink the ways to address risk management. The Oil & Gas industry is facing its biggest price crash over the last 30-years due to dramatic fall of demand while societal pressure is growing for a more sustainable world. The automotive industry is punched by a 3-factors sentence with factory closures, supply chain disruption, and a fall down in demand. The public sector is seriously challenged and has a first role to play in providing services to population in such period while having to choose the “right priorities” and seeing the economic crisis dramatically affecting public finances. A large segment of the (non-food) retail industry knows critical repercussion falling in the category of non-essential spending for consumers (Fashiong, Luxury goods, etc.). And there are many other examples.
But there are and will be also winners.
We started painting a very negative picture of the Covid-19 crisis, yet it also makes way for opportunities to improve inefficiencies. Digitization is of course one topic but employee’s well-being, supply chain optimisation, suppliers dependency, or lack of crisis readiness can also be mentioned. Some industries, although they may represent a minority, are seeing a positive impact in this crisis, being direct or indirect. Among others, Amazon recently announced new hires. 100.000 warehouse and delivery workers are required to face the demand during the COVID period. Less obvious perhaps, Domino’s Pizza announced 10.000 new hires. The success of Zoom (Video conferencing company) has also been commented with a 50% increase in sales and doubling of the tech company’s shares. Benefiting from the Coronavirus doesn’t necessarily mean having an increase in revenue and market shares. It can also be a fortunate opportunity to strengthen a company’s image and create more empathy and attractiveness towards the brand thanks to its social impact. Pharmaceuticals present an evident example since they actively communicated about their efforts and researches, but also other companies manage to hold their own. Examples are numerous. Decathlon launched a marketing action for the donation of tens of thousands of scuba masks to hospitals. LVMH converted its Paris atelier into medical clothing workshop to create mouth masks and provided free hand sanitizer to French hospitals. Vodafone provided free unlimited data to half a million of its pay monthly customers. Brewdog decided to use its distillery to make hand sanitizers. In the automotive industry, seven Formula 1 companies (among which Aston Martin, McLaren, Mercedes-AMG, Renault) decided to use their skills in rapid designing, prototyping, testing, and assembling to manufacture and deliver respiratory devices.
The change is there for sure and both companies having a positive and negative impacts need to adapt.
We often talk about the U, V, W and L-Shape recovery economy. Howhever, wether the economy will be a U- or V-shape, it might not be relevant for industries to take the right measures. Even less for companies. Just as an example, vaccines producers and hospitals both belong to the Life Sciences industry but the way they are impacted will be very heterogeneous. Producers can be seen positively where hospitals will have both operational and financial pressures. Similar trends can be noticed in the medical devices industry. While some companies are luckily positioned in product/markets which are directly related to COVID-19 treatments, some other or experiencing sales drops due to the rescheduling from hospitals of their equipment purchase or the obvious drop of demand for traditional care, diagnostics, surgeries and other medical interventions.
Consulting Firms must address (not that new) clients’ issues
To overcome the crisis, some specialized consulting firms might need to further diversify their services to adapt to the situation and to the new challenges. Obviously, sectors such as transports, events and tourism will be seriously impacted for a long time because travel and grouping bans might well continue beyond deconfinement. Consulting firms specialized in these sectors must quickly reinvent themselves and potentially enlarge their portfolio to support growth opportunities in sectors benefitting from the situation.
At the end of day, consulting is (or should be), by essence, here to support their clients. While some are fighting for financial liquidity and/or are reinventing themselves to keep their business, others – more fortunate – are also likely to have drastically changed their organization to meet the (upcoming) increase in demand. However, this is not the first time consulting firms are having clients facing difficulties or requiring help to transform. This time, the supplementary difficulty might be that everything come at the same time and be more intense:
- Planning the future will be a tricky exercise: how can I valuate the impacts of Covid-19 on my organization? What will my industry landscape look like in the future? Will there be a coronavirus cure? If yes, when? Do we have an idea of what the regulations in the future will look like? How will those regulations affect my product, services, and operations in the short and long terms?
- Companies will fight for Financial Liquidity: with declining revenue, what will my Profit & Loss statement look like? How can I optimize my cash flow position? How and where should I reduce costs, and to what extent? How to make sure that the impact on product/services/operations is minimal to acceptable? Are there any subsidies I can apply for?
- Distribution, Logistics & Supply of Product and Services will be disturbed: How can I better predict interruptions in the supply and react accordingly? What are my supply sourcing alternatives? How can I optimize my logistics to make sure my products are delivered on time? What will be the impact on the pricing of products and shipping?
- Managing talents and their expectations will be a fierce war: How to retain my talents while the economic situation is uncertain? What will be the impact of temporary unemployment on my resources? How can I reduce the fear of future unknowns? How to attract new talents/competencies to face new challenges?
- Customer loyalty and trust will be seriously challenged: Will the post-pandemic situation generates structural behavioural, cultural, or societal changes? Will my product or services be still a priority in their disposable income expenditure? Will my customer still trust my brand? Will they see my product or service as safe (which might become their priority)?
- Operations will be disrupted due to public policy measures: When should I restart my activities? How to protect my workforce in the operations environment? How can I reassess and re-structured my operations? How far should I go in the transformation? What do we have to do to limit the impact? How to ensure that today’s actions are adequate for tomorrow?
- Digitization will no longer be an option (e.g. Digital WoW, Digital Customer Experience, etc.)
So many questions to which consulting can answer thanks to their understanding of organization, performances, their external view and their industry benchmarking capabilities.
Due to many uncertainties linked to the pandemic, it can be hard for clients to dissociate urgent actions which need immediate implementation from developing long-term strategies for the future. According to World Economic Forum studies , done together with Reuters, we will not return to the “normal” situation before 2021. It would therefore be recommended not to make overhasty decisions, which could cost a lot of effort and money for things that be ineffective afterwards.
Yet, a number of consulting projects have been paused, postponed or have faced a hard stop because of the financial difficulties of their sponsors. In times of crisis, we often see disparate reactions from companies towards their consulting spend. Internalization of consulting projects, reallocation of resources, freeze of new investments and contracts, are some of the realities that can negatively impact consulting. Nevertheless, some companies are taking the opportunity to launch new initiatives. Their main concern is then to focus their investments on high added-value services, specific knowledge the company cannot provide internally or critical activities that need business continuation, and transformation programs which need to be launched and supported (e.g. accelerating the company’s Digital Transformation).
Consulting firms are used to market changes
Whatever happens, companies must quickly (re)act both to ensure business continuity and get (p)repared for the future. Consulting firms like Avertim are, by definition, more familiar with changing environments and can use their experience in various industries to perform cross-benchmarks and share best practices as well as help companies make quick pivots and adaptations. Therefore, the consulting industry has a key role to play during these difficult times. And we are here to help. We can support companies reach their (new) objectives, with concrete actions from building a strategic plan to ensure business continuity and creating the right environment for a sustainable future. Making sure that both can be implemented without being in conflict remains the key challenge.
Today more than ever, we, as a consulting firm must and will continue to fulfil our role as advisor/ partner to our clients and remain fully operational despite the changes caused by the COVID-19 crisis.
8 actions to take to make it happen on which Avertim is working:
- Staying connected with our clients by providing them with regular updates on our Covid-19 measures, our products and services, on the benchmarking insights we may collect, on initiatives we take to reorganize ourselves to better fit their needs and even on actions we take to support society.
- Using our strengths of being a consulting company by providing our different areas of expertise, analytical capacity, and objectivity. Using our clients’ portfolio to perform benchmarks is a very good way of providing information to our clients that they cannot get by themselves. When they don’t know what to do, they like to know what others do.
- Helping clients manage profitability and not just costs. Companies must balance cost reduction yet keep the capacity to scale-up fast as soon as the market returns to “normal”, including the company portfolio reprioritization.
- Helping them set the right priorities by addressing the questions (the ones we raised in section two) that need to be answered. Protecting employees, developing contingency plans to keep activities, streamlining operations to generate savings and improve liquidity, adapting to consumer demand shifts, and re-prioritizing investment projects are all activities to be considered as first priorities.
- Helping our clients structure their response plan to make wise decisions today and plan future actions. All remediation activities are inter-connected. Therefore, most of clients might not know where and how to start. Take our role of advisors by giving direction and provide the relevant methodologies to find the equilibrium between structure and agility.
- Reshaping our services offerings, and preferably opt for services that can be leveraged to a wide customer segment (e.g. Operational readiness, resilience, digitalization transformation, compliance towards regulations).
- Proposing new revenue models by reviewing collaboration models. Given their potential liquidity difficulties, invoicing and payment terms may be affected.
- Performance- or Cost-saving-based contracts. If not mandatory, proposing models to the clients where they will pay, in full or in part, consulting services based on their gain/lost-reduction will become a key differentiator. It will assure them to get a return on investment. Of course, proposing such a contract does not come without risk and a good preparation and alignment with clients is key.
- Freemium solutions are not only relevant for software. Is it better to push new services to get immediate revenues or rather to support your clients by giving them free off-the-shelf solutions and advice, and gain powerful sponsorship afterwards? Having a sharp sales approach might bring consulting firms to lose confidence and credibility. There is nothing better than a client thinking “They were there during the hard times”. Freemium solutions will help to understand your clients’ challenges and provide the required support afterwards.
- Taking care of our teams and future employees by training them, updating them regularly on digital working skills and best practices, protecting them, and showing them that we are concerned by their wellbeing and care for a sustainable future of the company and society. If post-COVID will create a war for talents for your client, it will be even more true for consulting firms (both to attract and retain them).
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Avertim is a uniquely positioned Management Consulting Group that assits you in defining and implementing solutions for effective alignement between Business, Technology and Management. We bring our clients' ideas and projects to life through a profound understanding of strategic business benefits, and then accelerate their performance with a pragmatic ‘doing’ mindset and approach. Avertim is specialized in selected high-level services across a diversified range of sectors including Life Sciences & Chemicals, Banking & Insurance, Telecommunications, Transport & Mobility, and Energy & Utilities.
By making the bridge between strategy and operations, we firmly believe we can be your right partner to face the COVID impact and find the right balance between short-term remediation goals and sustainable long-term adaptations. Our objective is to manage the continuity of your activities, increase your value, help you emerge stronger and return to the normal situation. We can support you in crisis management, technology use, digitalization of processes and tools, performance improvement, and implementation of new regulatory directives.