the “new normal” is a myth. the future won’t be normal at all · than in stable periods. 2...

Recovery from Covid-19 means building a company that can thrive in the face of continuous turbulence. By Hernan Saenz, Nate Anderson, Dianne Ledingham and

Michelle Supko

The “New Normal” Is a Myth. The Future Won’t Be Normal at All

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For a moment in history, every company shared the same simple mission statement: Protect our

people, our customers, and our business. The terrible human toll of coronavirus and the mounting

economic damage brought a singular clarity and urgency of purpose, forcing thousands of company

experiments in new ways of working and operating.

The lessons companies learned in the months after the outbreak were profound. Virtual, digital and

automation initiatives, for both customer interactions and internal operations, accelerated at astonishing

speed. Supply chains ruptured across the globe, signaling that companies have for too long sacrifi ced

resilience for effi ciency. Necessity demanded simplicity as unimportant products and unnecessary

processes were shunted aside. And almost every company—some intentionally, many unconsciously—

thrust Agile teams at the most diffi cult problems.

As leadership teams dig into the complex process of recovery, one truth is abundantly clear: We cannot

afford to go back to the old way of doing things. The companies that most aggressively adapt and

extend new ways of operating will turn this crisis to their advantage.

Our research shows conclusively that the biggest shifts in company fortunes, for good or for ill,

happen coming out of downturns (see Figure 1). They are moments of truth when management

teams can transform and reset their companies. Never before, though, has a downturn forced such

immediate transformation.

Figure 1: Crises and recoveries are moments of truth for management teams

Notes: Companies were assigned to quartiles based on operating margin percentage within S&P industry sector; rising stars are companies that moved from the bottom quartile to the top half between the beginning and end of the period; sinking ships moved from the top quartile to the bottom half; includes US S&P 500-listed companies with annual revenues of more than $2 billion; turbulent period defined as December 2007 to December 2014 and stable period as December 2014 to December 2017Source: S&P Capital IQ

Downturns and recoveries increase the risks of making mistakes and offer unique opportunities to outperform

Companies usually make more dramatic gains and losses during turbulence than during boom times

Getting the strategy or execution wrong will make winning after the recovery significantly more difficult

47% More “rising stars” during turbulence than in the stable periods

89% More “sinking ships” during turbulencethan in stable periods

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This recovery will not be a straight path. Employees will head back to work and operations will restart

on different timetables, following different curves across different countries, regions, industries and

sectors, shaping an asymmetric recovery for all companies with global footprints and value chains. In

addition, the pandemic will continue to test all of us, striking at the heart of communities and demanding

that we be prepared for subsequent rounds of reinfection and containment. Companies will advance

where they can, retreat when they must, often simultaneously, then adapt and start again.

Industry leaders in the next wave will use each advance to move toward a new future, not back to an

old and outdated idea of “normal.” The lessons of the past few months are as valuable as they were

painful. Now is the time to turn them into the business and operating models of the future.

A virtual, digital, automated world

Digital technologies and automation played a critical role in many companies’ initial response to

the crisis. The obvious example: white collar workers emptying out of skyscrapers and urban centers

and working from home on a vast scale. But it was not videoconferencing technology nor collabo-

ration software nor bandwidth to homes that was new. What was new was the sudden willingness

of every function in the company—IT, to be sure, but also legal, fi nance, compliance, sales and other

departments—to cut through any hurdle necessary.

Versions of this happened everywhere across every part of the business in every industry. Digital

roadmaps once measured in years accelerated rapidly in days and quickly proved their worth. This

was true even for areas like complex business-to-business (B2B) sales, long a bastion of in-person

interactions. Despite work-from-home restrictions, one global manufacturer of industrial equipment

continued to operate with virtually no interruptions during the crisis by moving the majority of its

transactions online through automation. Going forward, the company plans to triple the productivity

of its fi eld salesforce by further leveraging its marketing and sales technology.

In fact, Bain research shows that more than 70% of B2B buyers—and a growing number of sellers—

feel that virtual sales calls are as effective as in-person calls for complex products, even those involving

a high degree of customization or confi guration. A leading global technology company, also experi-

enced in inside and online sales, was prompted by Covid-19 to migrate a sizeable and growing portion

of its fi eld sellers to a new class of virtual sellers, while also formalizing a “virtual expert” as a new

service offering.

Similarly, automation took on the work of some employees who were sent home and helped companies

quickly respond to surges in demand. For example, faced with the sudden need to fi ll 100,000 job

positions, Amazon turned to automated systems to screen more than a million job applicants. To

ensure that its customers’ credit ratings were not damaged by late payments amid the economic stress,

Banco de Guayaquil in Ecuador built and deployed bots to automatically halt late fees and refi nance

loans in a fraction of the time and cost of doing so manually. Similar automation efforts took place

across industries (see Figure 2).

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Figure 2: During the crisis, companies relied on automation to support a range of functions

A recent Bain survey of IT buyers shows that more than 80% of companies are accelerating their

automation initiatives in response to Covid-19 (see Figure 3). Yet if history is any guide, fewer than

50% of these companies will achieve their automation performance goals. As the recovery proceeds,

companies need to quickly lock in and extend the success of their tactical, crisis-response experiments

by grounding them in a broader vision of what the post-Covid-19 future looks like and how they

must transform to succeed. Long-term success will depend not on automating a list of tasks, but

on redesigning the work and processes with an eye toward automation and digitalization where

they will provide the greatest value.

The agility, innovation and resourcefulness that IT leaders demonstrated at the start of the crisis will

need to become the norm, as will the willingness of other departments to look beyond their own

functional concerns.

Key questions for executive teams:

• How did you deploy incremental technology during the crisis, where did it work, and how can

you scale those results?

• Do you have a suffi ciently bold and transformative vision for digitalization and automation in the

context of broader transformation?

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Figure 3: More than 80% of companies are accelerating automation in response to Covid-19

84%69%

82%95%

81% 83% 90%80%

Source: Bain Covid-19 IT buyer survey, May 2020

Percentage of companies taking action to accelerate automation initiatives

Overall Consumerproducts

Education Financialservices

Healthcare Industrials/manufacturing

Retail Techservices

• How will you prioritize your technology investments across sales, customer interactions, operations

and the back offi ce?

Resilience for a turbulent world

Although effi ciency across functions and business models has been prized for decades, Covid-19

exposed the reality that it often came at the cost of resilience—the ability of companies to quickly

recover from shocks. Many shared-services centers, for example, struggled to adapt when all of their

employees were forced to work from home. Some companies had operating models that allowed them

to quickly train and redeploy idled employees to other crucial needs, such as moving retail store fl oor

employees to digital fulfi llment roles. But many others fl oundered. Perhaps nowhere was the lack of

resilience more obvious than supply chains.

Over the years, increasing market pressures on cost competitiveness have translated into continuous

pressure on supply chains. Companies have deployed all the tools at their disposal in a highly global

economy to drive effi ciencies and reduce costs, optimizing every step in the chain. Well before this

pandemic, supply chain leaders were beginning to see the limitations of these cost-effi cient but brittle

supply chains in the face of increasingly frequent disruptions, including natural disasters, escalating

trade barriers, demand shocks and labor strikes. The scramble to reestablish supply chains during

the pandemic further underscored the limitations of infl exible, opaque supply chains.

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The data on the damage caused by supply chain disruptions is stark and compelling. One study, based

on more than 800 disruptions, reported an average 7% decrease in sales and an 11% increase in costs,

with long recovery periods ranging from months to more than two years. Share prices tend to follow

this pattern and magnitude of deterioration and recovery time. One of the clear lessons from the shocks

associated with Covid-19 is that today’s supply chains are too complex and too infl exible, and that the

future will demand both more visibility and traceability.

Companies are now taking steps to construct fl exible networks of suppliers and manufacturing

partners. That means setting up alternative suppliers, manufacturing sites and assembly nodes and

making the most of Industry 4.0 tools to optimize cost, improve visibility across the network, and

accelerate reaction times. It means moving some offshore manufacturing onshore or closer to core

markets to improve response time. Toyota, for example, reduces risk by having one supplier produce

60% of the needed parts, while two additional suppliers each produces 20%.

Resilience also requires piercing the opaque veil that shrouded yesterday’s supply chains. Companies

are using cloud-based supply chain applications and other tools that can share information with their

networks of suppliers and partners. During the Covid-19 crisis, many manufacturers demanded

greater visibility into their supplier’s own supply chains—a practice worth continuing. Likewise,

“control tower” solutions that integrate data across the entire supply chain, along with 5G technology

and blockchain, offer leadership teams real-time visibility and allow them to calibrate supply and

demand during normal times, as well as react to supply and demand shocks. The ability to compare

production capacity with real-time demand signals will be a critical to choreographing advance-retreat-

adapt-repeat during the recovery.

Resilience does not come without cost. The chief question facing operations leaders going forward is

not whether they will invest in resiliency, but where it is needed and where the cost will pay off.


• Have you been able to identify the likely failure points in your end-to-end supply chain and their

root causes?

• Where and how have you already built fl exibility at a reasonable cost, and where else do you have

to extend that resilience?

• Do you have real-time and end-to-end visibility and traceability from origin to production line,

and then forward to end user?

The need for simplicity

The Covid-19 crisis and the need for greater resilience also confi rmed another lesson many executives

already suspected: The supply chains of the future should not support yesterday’s complex product

portfolios. The allure of increased customization and product complexity has long been hard for large

organizations to resist, even as the cost and complexity to support it grow.

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But faced with Covid-19, companies did whatever they had to do to keep up with spiking demand or

the challenges of running plants and warehouses with fewer employees and fewer inputs. They focused

on their hero SKUs—the profi table products customers needed most—and cut the rest. Simplicity

took over because it had to. And the long tails of less-profi table products that companies always planned

to cut were fi nally taken out. Many companies report surprising increases in productivity as a result.

A manufacturer of personal care products reported that by reducing the number of specialty SKUs, it

produced more than it ever had before or even planned to produce.

Now is the time for companies to look at the products that they do not need and discard them. And,

when tempting new product opportunities arise, as they will, companies need to balance the obvious

revenue opportunity against the hidden cost of complexity. Many of the best companies rely on a

simple rule: Do not add a new product without subtracting an old one.

Simplifi cation in the face of necessity goes beyond product ranges and into organizational priorities

and processes. Business and product complexity begets organizational complexity, which in turn

begets process complexity. Now, companies have the opportunity to focus and simplify. And the

emerging data is encouraging. A Bain survey of executives and workers across the globe conducted

from late April to late May found 69% of respondents reported “increased focus on initiatives that

matter most for our organization.” Another 61% reported a reduction in noncritical meetings and

54% the elimination of low-value activities.

Without intentional intervention to maintain this simplicity in the future, business and product

complexity—along with all the processes, initiatives, meetings and reports that prop them up—will

come creeping back in and proliferate.


• How have you streamlined your product offerings to improve relevance and service in response

to Covid-19?

• Have you streamlined your processes and organization to refl ect a less complex product offering?

• Do you have a plan for managing the invisible costs of complexity as you restart and rebuild your

business model?

Agility that lasts

Simplicity was not the only unexpected effect of the pandemic. In two short months, Covid-19 rammed

through behavioral changes many executives had tried to coax from their companies for years. Rapid

innovation. Decisions made fast. Bureaucracy bypassed. Urgent needs tackled. Unimportant tasks

shelved. Small teams on the front lines, each experiencing different phases or different effects of the

pandemic in their markets, typically led the way. Quick, stand-up meetings focused on the demands

of the day and the immediate goals of the week.

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In other words, thousands of companies adopted Agile methods almost overnight. Amid the tragedy

of Covid-19 is a marvel of collective human adaptation. According to a survey by Bain’s Organization

practice, respondents who reported an increase in agility during the crisis were 2.5 times as likely to

report an increase in productivity, along with better decision making, more innovation and more

cross-functional teaming.

But executives cannot afford to admire this spur-of-the-moment agility for long. Without intervention,

it will fade quickly when the perceived threat has passed. We know that next crisis is already on the

way; setbacks are one of the few certainties of Covid-19. As companies advance, retreat, adapt and

repeat, they cannot retire and restore Agile each time.

A spasmodic approach will burn out the very heroes who pulled it off in the fi rst place. Executives

need to systematically support and bolster innovation by creating more Agile teams and spreading

the principles of Agile throughout the organization.

With customers’ needs shifting rapidly and employees in heightened learning mode, executives

should move quickly to install closed feedback loops with both customers and employees, then use

them to test, learn and adapt. Cement the new cadence as the norm—short, focused bursts of activity

focused on moving forward today. That is more energizing, as we have seen, than monolithic moon

shots. But couple that activity with a vision of the future, so that each problem is solved in a way that

moves the organization toward that future.

Covid-19 broke plans and budgets. Executives can use that to their advantage as well. Instead of trying

to right and refl oat the annual and three-year plans that foundered, replace them with quarterly sprints.

The newfound focus on reducing complexity and simplifying SKUs offers the perfect opportunity to

start with a clean sheet and zero-base the budget. Understand who your future customers are, what

they need and which highest-priority products will meet those needs, then budget for and fund the

organization and processes to support them.


• What have you learned from the forced experiment of Covid-19 in terms of focus, faster decisions

and less bureaucracy?

• Where and how have you deployed Agile teams to deal with the crisis and beyond?

• Have you prepared your organization for the future of advance, retreat, adapt, repeat?

Back to the future

Every company must fi gure out how to restart operations. But the long path to recovery is beginning

to separate companies into two distinct groups. The fi rst group wants to go back to normal, following

the path of least resistance. Having weathered so much risk, these companies are reverting to the

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tried and true, restarting in predictable ways and settling back into yesterday’s organizational charts.

Understandable and reassuring, but destined to result in mediocre performance—even failure—in the

new world.

The second group is committing to a harder path. These companies recognize there is no normal to

go back to. Instead, they advance into the new future, resisting the gravitational pull to their former

state and capitalizing on the gains from testing and learning through the crisis. They view their strategy,

their customers, their operations and their cost structure through this new lens (see Figure 4).

These companies are not simply navigating the restart, but positioning their companies for a world

of continued turbulence and regular shocks to the system, where adaptation and resilience will create

the most value.

Which path will you follow?

Figure 4: Successful recovery programs need to navigate the restart and position the company for success in the new world

Source: Bain & Company

Strategic priorities Customer Cost and cashOperations

• How do you stimulate demand and ensure customer relevance?

• How do you meet the evolving needs of your customers, including digital?

• What are your strategic priorities during the recovery and beyond?

• How does this affect your portfolio of businesses?

• Where should you pursue M&A?

• How do you plan for the uncertain timing of revenues and costs, and liquidity implications?

• How do you restructure your costs now to compete in the new world?

• How do you manage a complex, variable recovery across the entire supply chain?

• How do you build a more flexible, resilient and sustainable operation?

Scenarios• What are the likely recovery scenarios in your industry and geographies?

• What actions would you take in each scenario? Which actions apply across scenarios?

Organizationalchange

• When and how can you bring people back to work safely?

• Which new ways of working should you lock into your new operating model?

• How do you embed digital and automation into your entire business model?

• How do you mobilize to ensure success?

Bold ideas. Bold teams. Extraordinary results.

Bain & Company is a global consultancy that helps the world’s most ambitious change makers define the future.

Across 58 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster and more enduring outcomes. Since our founding in 1973, we have measured our success by the success of our clients. We proudly maintain the highest level of client advocacy in the industry, and our clients have outperformed the stock market 4-to-1.

For more information, visit www.bain.com

the “new normal” is a myth. the future won’t be normal at all · than in stable periods. 2...

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