Authors: Kevin Bolen, U.S. Leader, Strategic Investments; Steve Hill, Global Head of Innovation; Jim Negus, U.S. NMP, Clients & Markets
As COVID-19 continues to spread, more than three-quarters of the world has engaged in some degree of social distancing.1 These circumstances are not what we expected just 60-90 days ago, and significant aftershocks are still to come.
The pandemic has redefined business-as-usual for nearly all companies, regardless of industry, size, or geography. All are dealing with some level of disruption and will continue to grapple with the business implications of managing remote workforces, accelerating digital transformations, building more resilient supply chains and strengthening connections with customers in the weeks and months to come.
Given the level of disruption, most organizations are largely still reacting or moving into ‘Resilience’, the second of what we see as a four-phased journey from Reaction to Resilience, then Recovery and eventually to a New Reality.
The initial panic-driven behavior is starting to subside, communities are contemplating easing certain social controls and consumer demand is constrained by lost wages. Companies should consider cash management through the Resilience phase as it will form the basis of their eventual ability to restart during the Recovery. But we also believe that organizations further along in their digital transformation will have an edge– their data-driven insights into emerging customer preferences and an ability to rapidly pivot their offerings and pricing will yield faster returns. Eventually, in Recovery, consumer demand will bounce back as jobs are restored or created and general anxiety will ease up. And then comes our New Reality, which no one can predict with any certainty, but in which we can expect some current trends and behaviors to be sustained.
Throughout this journey, companies must think and act strategically and continuously assess their strategies and business plans influenced by economic, sector and company predictions.
Alphabet soup of recovery patterns, based on industry
Although companies will experience similar overall trajectories driven largely by the curve of the pandemic, the impact will differ by industry, geography and company. For example, brick-and-mortar retail and hospitality–two sectors dominated by small- and medium-sized firms with razor thin margins and low cash buffers– were the first to see severe impacts.2
We see an ‘alphabet soup’ of recovery patterns emerging, influenced by many factors, including how quickly demand will recover (from slow to fast) and the degree of permanent change to the industry’s underlying economics or value chain (from low to high):
With so much uncertainty, it can be difficult for leaders to feel confident in their actions. Understanding the trajectory of the disease, the recovery path in an industry, and the potential vision for the New Reality can help leaders assess their current positioning and adjust their strategies to eventually thrive.
Leaders refreshing business strategies and forecasts should therefore consider the following:
We will be providing more industry and sector-specific perspectives over the coming weeks and months. Please reach out if you would like to discuss
1 As of April 14th. A Bridge Past COVID-19 – Economics on the Great Lockdown. KPMG. April 2020.
2 A Bridge Past COVID-19 – Economics on the Great Lockdown. KPMG. April 2020.
3 Industry positioning is based on averages of all players in a segment. Every company and sector will exhibit independent impacts of disruption, recovery timelines and level of effort to restructure/transform to a new reality.