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Capabilities-driven response to COVID-19 - seven business archetypes

Bernd Jung Partner, Strategy& Germany
April 16, 2020

The COVID-19 challenge

The impact of COVID-19 on individual businesses is unprecedented, unpredictable, and to a large degree dependent on each company’s ability to handle the crisis. While there are a few businesses (such as manufacturers of respiratory equipment or providers of remote working technology) which are actually enjoying an upturn right now, most companies find themselves in full crisis mode.

Managing the short-term effects of the crisis is of course critically important. For example, companies need to ensure that their people are safe, that their supply chains remain relatively intact, and that they manage their financial liquidity in an efficient way. However, companies also need to start thinking about what the new normal is going to look like, and how they can position themselves to succeed over the long term. The goal should not just be to float with the tide, but to design a winning strategy. That strategy will in all probability need to undergo significant change, as it should reflect both the company’s resilience and the new market environment in the wake of the COVID-19 outbreak.

The new normal after COVID-19

The new normal after COVID-19 will be very different from what we were familiar with before the crisis. Change for companies won’t simply entail replacing some business travel with continued virtual teamworking.  In order to make businesses more competitive in the post-COVID world, many business models and strategies will need to be challenged and potentially overhauled. Companies should first consider the following questions:

  • How will the memory of COVID-19 impact business behavior?
  • How is customer and end-user behavior going to change?
  • Where will the biggest shift from the physical to digital world be seen, and what will be the impact on our business?
  • Is this crisis going to have a significant impact on global megatrends, and how is that going to change our company’s priorities?
  • What will a detailed risk assessment of our supply chain look like?
  • How will our main competitors be affected by the crisis? How will they now reposition themselves? Will there be opportunities for acquisitions or partnerships?
  • How can we improve our crisis resilience in the light of the COVID-19 pandemic?

The COVID-19 pandemic is going to accelerate some of the trends we have observed for some time, while changing the direction of travel in other areas. Understanding the new normal will mean breaking with many preconceived notions, and keeping an open mind in response to fresh ideas.

Understanding business archetypes

How can you prepare your company to be ready for the new normal? While every company’s situation is different and therefore demands a unique response, it is helpful to think of business archetypes. These archetypes are clusters of businesses that share common attributes and are expected to come through and recover from the crisis in largely similar ways. This structured thinking can give companies a good sense of what is required so that they can develop an appropriate strategy.

We have identified seven such archetypes. We have assessed how businesses in each archetype will fare at the peak of the crisis, how they are likely to progress during their industry’s recovery period, and what they may need to do to return to growth.

  1. Surfer: These businesses benefit from a temporary boost in demand, making them even stronger. Their path to sustainable growth will involve reinvesting the profit from this short-term upsurge into strategic areas, while giving renewed thought to how their expanded enterprise should now operate.
  2. Ascender: These businesses profit from an ongoing increase in demand, enabling them to become more resilient. They will need to define and communicate their unique selling proposition clearly in order to fully unleash the potential of new sales, while sustained growth will allow them to bolster their resilience in a systematic way.
  3. Fighter: After striving to withstand a stagnating economy, these businesses are capable of flourishing in the new normal. They will need to cut costs and manage cash efficiently in order to facilitate investment into new opportunities.
  4. Rebound: These stable businesses will be able to rebound after having been hit hard by the crisis and temporarily weakened. Their strategy should include reducing cost and shifting priorities within their portfolio and footprint in order to boost their resilience after recovery.
  5. Struggler: Given the severe and lasting hit they will take, these businesses will flounder for quite a while before slowly recovering their strength. They will need to reduce costs in the short, medium, and long term by streamlining their processes and organization, and by investing in new technologies to increase efficiency.
  6. Weakened: These businesses entered the crisis in a weak position, and experience further decline and even possible failure. They need to take drastic measures with respect to cash and structures to engineer a complete transformation. The only alternative is to terminate the business.
  7. Doomed: These businesses were previously in a very precarious state, and collapse soon after the crisis hits.

Gain a head start

The key to being one step ahead of your competition – relevant for all business archetypes – is to take action that is countercyclical. Instead of slamming on all brakes, companies will need to strike a balance between restructuring and making selective investments with regard to management time, brainpower, or indeed, financial resources. The crisis may actually open up unforeseen opportunities to recruit new talent that is now flooding the job market, or acquire the technologies needed to thrive in the new normal. If companies get themselves ahead of the competition in preparing for the new normal, they will find themselves in a winning position once the overall economic picture starts to look brighter.

I would encourage you to invest this thinking time now.  Assess where your business stands, which archetype it is most closely aligned with, and how it is likely to progress during the crisis and into the new normal. You can influence that progression, and your future in the post-crisis world, by defining and executing a strategy tailored to your unique situation.

Carina von Heimendahl has also contributed to this article.

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Bernd Jung

Bernd Jung

Partner, Strategy& Germany

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