The COVID-19 pandemic has not only upended society and inflicted tragic losses; it has also been a defining moment for business. The crisis has accelerated the use of modern technology, radically altered customer behavior, short-circuited business operations and revised how employees get things done. Many of the practices that have become commonplace during this time — online commerce and banking, remote working and healthcare, digital learning and entertainment — will continue long after the crisis subsides.
To get a sense of how senior executives are responding, we commissioned ESI ThoughtLab to conduct a survey of 500 senior executives at U.S.-based companies. (To gain a fuller understanding of this research, including its methodology, see our white paper, “COVID-19: The View from the C-Suite.”)
We learned that the pandemic has been a stress test for businesses, exposing failings in the way they operate. Management teams had to rush to close facilities and offices, rethink supply chains, defuse rising cyber threats and preserve their bottom lines as the world economy tanked. Business continuity planning, scenario analysis and corporate cultures strained to meet this unprecedented challenge.
The resulting fallout has impacted companies and industries in different ways, our research reveals. But regardless of industry, management teams are reconsidering how to do business in today’s interdependent world, in which market shocks can cascade quickly and unpredictably. Although most companies believe business will eventually recover — after a wrenching period of lost business and job cuts — C-suites recognize the imperative for longer-term business reinvention. Here are some of the powerful changes that business leaders are anticipating:
Digital-first replaces brick-and-mortar
The migration of commerce, entertainment, education and socializing to online channels — as well as the move to remote working — has turbocharged interest in shifting processes, interactions and workflows to digital mechanisms and making better use of the intelligence that can be gleaned from the resulting data. Almost two-thirds of companies plan to focus on accelerating digital initiatives over the next year or two.
Similarly, just under half will focus on increasing use of e-commerce in coming years. In fact, more than a quarter of companies say the crisis will cause them to replace their brick-and-mortar business with digital business.
If it weren’t for digital ways of doing business, most companies would have been paralyzed during the crisis. So it’s not surprising that they plan to invest more in such enabling technologies as cloud, the Internet of Things, artificial intelligence and e-payments. Half of the enterprises in our study plan to increase their advanced-technology budgets this year, and nearly two-thirds plan to do so next year.
Digital solutions: Not just for millennials anymore
The pandemic has moved daily living, shopping and working online — not just for younger consumers but also for seniors. It also has placed a higher value on safe and sustainable products, a trend most companies think will continue in the near future. At the same time, the crisis has fanned demand for better information on products, and has increased expectations around rapid delivery.
Companies see the use of digital channels and payments continuing to widen to a cross-generational customer base, with new segments emerging, such as home offices. Yet more than one-third expect customers to rein in their spending, particularly on discretionary items, while allotting more to health and essentials. The same number believe consumers will avoid living and shopping in areas with many people.
Working becomes virtual and healthier
The trend toward increasing the ranks of remote-working employees will become permanent for one-third of businesses surveyed, including half of the financial firms and educational institutions in our study. About two-thirds expect to place greater emphasis on employee health and well-being, while under half will focus on workplace health and hygiene, including changes in office design.
Within the workplace itself, over 40% anticipate shifts from physical to digital jobs, more automated workflows, and increased employee training on digital skills. Slightly fewer expect business travel to decline, even while seeing an uptick in virtual collaboration. One in three also expect growth in the gig economy, particularly among education and healthcare respondents. Finally, about 20% anticipate headcount reductions and increasing use of automation to replace workers; this number rises to more than 30% for companies with over $10 billion in revenue.
The rise of on-demand supply chains
Another important long-term consequence of COVID-19 will be a global rethink of supply chains and ecosystems, which were severely disrupted during the crisis. Over the next few years, many companies — particularly in manufacturing, retail and life sciences — plan to focus on improving and diversifying their supply chains, driving innovation in logistics, and building more effective partnerships and ecosystems.
The goal is to create more agile, demand-sensing supply chains that are less vulnerable to crises and can deliver products to customers when and where they need them.
Industries change course
Naturally, the pandemic is affecting industries differently. Manufacturers are enduring acute short-term disruption, and they expect it to last at least another few years. Businesses in this sector are the most likely to make significant cost reductions and the least likely to accelerate digital transformation (37% vs. 60% on average). With six out of 10 manufacturers pausing their strategic plans because of COVID-19, these companies face a rocky road.
Education organizations have had a wake-up call, as they’ve borne the brunt of a complete shutdown of facilities and a rapid shift to remote learning. Education institutions expect the digitization of learning to continue. More than 40% say closure and remote working will remain pain points in coming years; 42% foresee an acceleration in remote working; and half forecast an increase in working from home. As a result, education is more focused than other industries on accelerating digital business, with 85% saying it’s a top priority and over half also citing improving customer engagement and experience.
With the shutdown of all but the most essential outlets, retailers have experienced an acceleration in e-commerce. Many that were suffering before the crisis (such as JC Penney, J Crew and Neiman Marcus) filed for bankruptcy. It’s no surprise that retailers are more focused than other industries on fast-tracking their e-commerce strategies over the longer term, with almost three-quarters expecting to increase their digital spending next year.
Financial services firms see the pandemic as a call to action. More than any other industry surveyed, financial organizations believe the pandemic will be transformative: 42% say it will be, and only 13% disagree. Seven out of 10 financial services firms are making digital and cybersecurity long-term priorities. They will need to build up their cyber defenses, since they are more likely than other industries to continue working remotely after the pandemic ends — and the most likely target of cybercriminals.
Looking at the big picture, we believe that the coronavirus will make business change a greater imperative — but also more difficult to accomplish because of budget cuts and related capital constraints. To stay successful in a post-pandemic world, CEOs and their teams must rethink their strategies, business models and missions.
While companies will undoubtedly become more digital, they will also become more socially responsible as they strive to meet the morphing attitudes and increasing desire of customers and employees for a healthier, safer world.