06 Jun

COVID-19: Proactive Response Strategies to Business Challenges

Response strategies that match organizational infrastructure with emerging market trends offer significant opportunities.

Since the COVID-19 crisis struck, organizations in vulnerable sectors worldwide have seen their revenues drop substantially in a matter of weeks — in some cases, dwindling to almost nothing. Countless companies have taken reactive steps to ward off major losses, such as establishing remote work arrangements, securing supply chains, reducing employee workload, cutting costs, and applying for government support.

After a burst of frenetic activity, some organizations finally have time to think about capturing opportunities. But where to start?

We have identified three generic response strategies to match organizational infrastructure with emerging market trends. Significant opportunities are available to those organizations agile enough to adjust their infrastructure, their product/service portfolio, or their route to market.

Strategy 1: Same Products, Different Channel

One proactive business response to COVID-19 is to offer the same (or similar) products and services through an online channel. This may occur through the digitization of physical products or, in the case of services, through a technology-mediated delivery solution.

When Chinese cosmetics company Lin Qingxuan was forced to close 40% of its stores, including all of its locations in Wuhan, sales plummeted by 90%. However, the company redeployed its beauty advisers as online influencers, leveraging digital tools such as WeChat to engage customers virtually and drive online sales. On Valentine’s Day, Lin Qingxuan launched a large-scale, livestream shopping event featuring more than 100 beauty advisers; one adviser’s sales in just two hours equaled that of four retail stores. The company’s February sales climbed 120% over last year’s.

When Nike was forced to shut more than 5,000 of its 7,000 directly owned and partner-operated stores across China, its offline business ground to a halt — but its online operations did not. Nike’s staff engaged with Chinese consumers digitally by offering at-home workouts. Between December 2019 and the end of February, Nike reported more than 35% growth in its online sales in greater China over the same period the previous year. As stores began to reopen across the country, Nike’s digital business accelerated even more, approaching triple-digit growth levels. Nike now has a road map to follow as the virus makes its way across Europe and North America.

Meanwhile, vineyards from Burgundy to Napa Valley are offering online wine-tasting lessons in combination with wine purchases and have seen sales explode. Similarly, London’s Bimber Distillery, a whiskey maker, has canceled its distillery tours, instead delivering tasting kits to customers and running events online.

As more and more people are confined to their homes, there is a golden opportunity for educational institutions to proactively expand the scale and scope of their operations. While many schools, universities, and private-sector education providers have temporarily closed their doors, others have quickly shifted their instruction online. For example, Zhejiang University (ZJU), a renowned university in China, officially started online teaching on Feb. 24 — in line with the original term calendar. Contingency teaching covers all ZJU students, including international students, and many courses are open to learners worldwide. Two weeks into the experiment, the university was offering more than 5,000 courses to both undergraduate and graduate students. The course hub Learning at ZJU attracted 570,000 visits, and its livestreaming app achieved a total audience of 300,000. Meanwhile, around 2,500 graduate students at the university are expected to defend their theses online this spring.

Strategy 2: Same Infrastructure, Different Products

COVID-19 is dampening the demand for many products and services, resulting in an underutilization of organizational infrastructure. Factories run under capacity; restaurants, bars, and hotels sit empty; service providers go unused.

While the need for some products and services has fallen, however, demand for others is high and even growing. Some organizations are taking advantage of this shift by deploying existing infrastructure to produce different products or to offer new types of services.

As soon as it became clear that hand sanitizer was in short supply worldwide, companies such as LVMH (perfumes), Pernod Ricard (alcoholic beverages), and Skyrora (rockets) switched to producing it within a few days. Meanwhile, car manufacturers such as GM and Ford have modified some idle production lines to manufacture medical devices like ventilators. With sales of cars in China down 90%, automotive giant BYD Co. switched to producing millions of surgical face masks per week. James Dyson, founder of Dyson, announced that the company had designed and built an entirely new ventilator in just 10 days, after receiving a request from British Prime Minister Boris Johnson.

Hotel chains such as Best Western and Hilton have pivoted, offering their rooms to hospital staff and COVID-19 patients in the United Kingdom. Limited to no-contact takeout and delivery services, restaurant sales have plummeted, while grocery stores have had to limit items per shopper due to high demand. The Panera Bread chain, aligning to the changed market, has increased the range of products it sells from its cafes, now including staple groceries along with salads and sandwiches in a new Panera Grocery service.

Chinese company Huami, manufacturer of the Xiaomi fitness-tracking band, is shifting its current focus from fitness to data. Reviewing its data on 115,000 users in Wuhan and neighboring areas from July 2017 to February 2020, Huami found an anomaly in January’s sleeping heart-rate data. (Similar patterns were found in other Chinese cities coincident with the virus’s local spread.) Huami is now developing an early-warning system to flag similar future anomalies and possibly preempt another major pandemic.

Strategy 3: Same Products, Different Infrastructure

Suddenly struggling to meet the demand for their products and services, some companies need to quickly augment their infrastructure to increase production and/or delivery capacity. Finding new infrastructure is easier said than done and often requires collaboration with external partners, but a number of organizations worldwide are taking inventive steps to bridge such gaps.

Amazon recently announced that it is looking to hire an additional 100,000 employees in the United States to meet increased demand from homebound online shoppers. It has now partnered with the ride-booking company Lyft as both demand and fares for Lyft trips have fallen dramatically. Lyft is encouraging its drivers to pursue positions as warehouse workers, delivery people, or grocery shoppers to earn additional income, and applications for Amazon positions are available through the Lyft driver web portal.

Walmart, meanwhile, hopes to hire up to 150,000 temporary employees in the United States to meet increased demand. The company also plans to pay $550 million in bonuses to its current employees. The application process for temporary employees will shrink from two weeks to a single day, and the company is reaching out to the hospitality and restaurant sectors to hire people facing layoffs.

In Sweden, over 1,000 laid-off Scandinavian Airlines workers were offered fast-track training to help the country’s health care system fight the coronavirus pandemic. In the U.K., easyJet and Virgin Atlantic crew and staff — including thousands trained in CPR — were offered jobs in temporary NHS Nightingale hospitals.

The sharing economy has been a popular business model in China for some time, as enterprises have embraced shared bikes, cars, portable batteries — and, most recently, employees. When Alibaba’s supermarket chain Hema found itself in urgent need of labor to meet demand, it turned to an innovative “employee sharing plan” to “borrow” more than 3,000 employees made temporarily redundant from jobs in restaurants, hotels, and movie theater chains. Borrowed employees were trained to work as either goods sorters or packagers, and Hema worked out an employee salary split with employers.

In Germany, McDonald’s staff have been given permission to work at Aldi stores while the fast-food chain’s restaurants are shut. Aldi has been overwhelmed by demand as grocery shopping has significantly increased during the pandemic. The employee-leasing agreement is for a limited period only, and all those who apply can simply return to McDonald’s once their restaurants reopen.

From Reactive to Proactive

Out of short-term necessity, organizational responsiveness to COVID-19 has been largely reactive. The following decision tree can help executives to more proactively and strategically think through their potential COVID-19 response options.

As organizations move from a reactive to a proactive approach to dealing with COVID-19, they should ask themselves the following three questions:

  • First, can we offer a version of our products and/or services through an online channel? Going online is the closest equivalent to low-hanging fruit in the current environment.
  • Second, can we use our existing infrastructure to produce products and/or offer services that are in demand? This question is especially relevant for organizations facing reduced consumer demand. Many organizations have allocated infrastructure to produce goods and services to support the fight against COVID-19, but some strategic companies are thinking beyond the crisis to future changes in consumer needs.
  • Third, how can we rapidly increase our capacity to produce and distribute products and/or services? This question is most relevant for organizations that are struggling to keep up with virus-fueled demand. Turning to partnerships with other companies can boost capacity in a crunch.

Answering these questions and responding strategically to the current crisis requires a high degree of creativity, an openness to challenging assumptions, and a willingness to look beyond the obvious in addressing the threats — and embracing the new opportunities — created by COVID-19.

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