Supply chains fractured by COVID-19 have led to a greater focus on operational resilience, as delicately balanced production networks—often built over decades—have revealed their vulnerability. With companies now looking to reopen or restart, executives tell us they need better ways to increase operational agility and responsiveness without increasing costs.
In crises and times of turbulence, a considerable movement in market often occurs. Companies that thoughtfully shape their strategy and move quickly are more likely to capture a disproportionate share. While the Great Recession of 2008 affected all companies, those that remained more resilient during the downturn—and took more decisive action as they emerged—did considerably better.
As many states start to open across the U.S., we know companies are deeply focused on returning to work while protecting employees and customers. And that will mean deepening capabilities that they’ve already built—often in record time.
Planning for the long term, now
As one strategy leader recently told us: “We had a lot of disaster-recovery plans, but what those plans didn’t contemplate is that everyone would have the same problem at the same time, both here and everywhere where we had outsourced some of our operations.”
Companies are realizing just how global and broad their supply-chain dependencies are, uncovering more vulnerabilities than were previously known. In response, inventory may be moved closer to customers, and crisis-management capabilities more thoroughly evaluated. Longer term, companies may look to shift away from globalized to more regionalized supply chains, and in some cases, greater self-sufficiency. Make-versus-buy decisions, outsourcing, and offshoring decisions may shift towards greater internal resilience and flexibility. A more comprehensive supply-chain risk assessment will be needed, with more modeling of extreme potential shocks.
Beyond the immediate safety, cash-flow, and supply chain considerations, however, digital and analytics are fundamentally reshaping customer experience and companies’ future strategy even more strongly than before. Contactless customer experience and sales is becoming more important. Many customers who preferred in-person experiences before are now downloading apps and interacting virtually. These digital interactions have increased significantly in most industries, from online claims submissions in insurance, to depositing checks electronically at a bank, to tele-medicine, and last-mile grocery delivery.
Moreover, in light of their digital investments, including analytics, many organizations are wondering how they can generate even more value from digital to better meet customer needs, automate manual processes, overcome staff shortages, and adapt to the very different world of the “next normal.”
Digital and analytics transformation takes sprints, not marathons
COVID-19 wasn’t a sudden spark for digital transformation, as digital and analytics have been significantly increasing in importance over the last decade. What has changed with COVID-19 is the speed of adoption and adaptation. Multi-year analytics roadmaps are now rapidly becoming plans that need to be achieved in a few months or even days.
Old analytics are out of date and often making recommendations that are quite inaccurate. Machine-learning models that adapt recommendations based on rapidly changing environments are now more critical than ever. Static models of the past, if adapted for the pre-COVID-19 world, would be too clunky to update to current and post-COVID-19 environments. General consumption, fulfillment, and ordering models will incorrectly predict demand for consumer goods in panic-purchase categories such as toilet paper, flour, and yeast. In contrast, machine learning models adapt quickly to recent trends and real-time demand, without requiring reworking.
“We had been working on our digital distribution strategy for years” said one executive in financial services. “But we were always concerned about the channel conflict and security challenges. When COVID-19 happened, we literally launched within days what we had been discussing for years. I wish we could operate this way all the time.”
COVID-19’s lessons frame a digital roadmap
Executives are looking to preserve a faster and more nimble way of working. They have asked us: “How do I lock in this more agile way of working that we have had over the last few months?” “What is the right org structure that will help us move faster on digital and analytics, while being more flexible in what roles and what work can be done from home?”
Research by the World Economic Forum, in collaboration with McKinsey, shows that companies often achieve significant and simultaneous improvements across multiple performance measures when they integrate advanced digital technologies across the value chain. In contrast to fears that digital and analytics may lead to job loss, many of these same cutting-edge companies had higher levels of employment after applying digital and analytics, given the greater growth and profitability that they had achieved through their initiatives.
Leadership teams that have not taken a hard look at their digital and analytics roadmap in the last month risk falling behind. As companies plan for a safe return to work, we can’t afford to wait and see what the future holds. Now is the time to act with speed to reimagine operations, make the most of digital and analytics, and emerge stronger and more resilient than before.
About the Author
I am a senior partner at McKinsey & Co. and a leader in our global Operations practice dedicated to client success. I lead companies through global transformations using next-generation levers, helping them drive growth, productivity, customer experience, and employee engagement. I also write about the impact of global trends on companies and industries and explore how companies successfully increase diversity across the talent pipeline. I have three young daughters and a husband who works in finance. Follow me at @KweilinE. For more McKinsey insights, please visit www.mckinsey.com. McKinsey & Company’s policy of client confidentiality prevents us from disclosing whether we have or have not worked with companies mentioned.
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