Using a crisis nerve center to help reopen the economy

To manage the next phase of responses to the COVID-19 pandemic, government leaders can consider the skills needed to lead and contribute to the effort.
Using a crisis nerve center to help reopen the economy

A new approach in tracking travel demand

The scale of the current crisis in airlines is unprecedented. To recover, the industry will need better data on where and when demand is likely to rebound.
A new approach in tracking travel demand

Energizing industrial manufacturing through active performance management

A new approach can help industrials gain greater visibility into performance and capture lasting gains.
Energizing industrial manufacturing through active performance management

Checking the health of your business partnerships

Frequent, systematic assessments of joint ventures and alliances can reveal hidden problems and opportunities to create more value.
Checking the health of your business partnerships

Reopening and reimagining Africa

How the COVID-19 crisis can catalyze change across the continent.
Reopening and reimagining Africa

Amid volatile commodity prices, beware of cognitive bias

Advanced analytics can help overcome cognitive biases that can lead managers to make irrational risk-management decisions.
Amid volatile commodity prices, beware of cognitive bias

Telehealth: A quarter-trillion-dollar post-COVID-19 reality?

Telehealth has helped expand access to care at a time when the pandemic has severely restricted patients’ ability to see their doctors. Actions taken by healthcare leaders today will determine if the full potential of telehealth is realized after the crisis has passed.
Telehealth: A quarter-trillion-dollar post-COVID-19 reality?

Reopening safely: Sample practices from essential businesses

The safety protocols of hospitals, grocery stores, and other establishments that stayed open during the COVID-19 pandemic can offer ideas for businesses preparing to welcome employees and customers back.
Reopening safely: Sample practices from essential businesses

Startup funding in logistics

A new report looks at the impact of new money in an old industry—and what it means for incumbents, startups, and investors.
Startup funding in logistics

This Is Not (Digital) Business as Usual

The COVID-19 pandemic is disrupting humankind globally, as cities and countries have effectively shut down to combat the virus with physical distancing. Individually, people react differently in times of emergency: Some attempt a business-as-usual approach, while others switch into crisis mode. What we all share is at least some need to improvise in adapting to an unprecedented situation.

Organizations have also had to find their ways through the pandemic. Many businesses have had to shift rapidly to virtual work environments.

However, maintaining business continuity through this crisis does not simply mean substituting digital work for analog work. Organizations are being forced to deal with a disruption to their momentum as well as financial and other crisis constraints, alongside a sudden need to change work practices and routines. It is not (digital) business as usual.

There’s a silver lining in this situation: Both employees and customers recognize that we are in an extraordinary moment. Together we’re sharing a universal experience of experimentation and improvisation. Without anyone expecting perfection, space has opened up for opportunities that would not have been available under different circumstances.

We believe companies have a chance to use this time not just to react to the pressing demands of the crisis but to identify proactive strategies for future opportunities as well. We examine strategies companies can adopt to address how they manage their relationships; how they think about their reach; how they use this chance for reflection; and how to experiment with organizational renovation.

Four Organizational Strategies for Adapting in Crisis

The first two strategies are born out of necessity: They are reactive ways to cope with the COVID-19 crisis. The next two strategies encourage organizations to proactively seize this time as an occasion for contemplation and transformation.

Manage relationships, from in-person physical distancing to online socializing. Work in general and leadership in particular is relational. As working under COVID-19 increasingly means working from home, social bonds are strained. This requires managers to embrace a digital work culture with digital socializing like sharing stories and pictures or being together online when having lunch or coffee.

As organizations encourage employees to make their homes ready for business, those organizations also have to make themselves ready for home. This is the less-talked-about side of the social bond. With schools and childcare facilities in lockdown, organizations and their leaders need to respect home commitments, surroundings, and disruptions. Deliberately acknowledging this as a first step toward a more family-inclusive home-office culture will be beneficial not just to those with care responsibilities but to all employees, who will benefit from an increase in self-efficacy and autonomy. Existing employees will appreciate this, while new employees may be drawn to such a culture — theoretically widening the pool of potential hires.

Managers should actively embrace these challenges and accept that life will sometimes infringe on work, while still respecting separation when work begins to crawl into life. This will be valued immensely and lead to a work culture where work is at home, but not competing with it. It will also contribute to relationships that are respected and respectful over a distance in new ways — with distance even turning out to be an asset in the end.

Understand that local reach now has global scope. When in-person interaction is possible, it usually feels like the preferred option. In the past, remote employees who worked in environments with predominantly physically colocated workers commonly experienced a second-class participation. The prohibition against meeting in person now allows — and compels — organizations to truly focus on engaging with their virtual team.

In terms of companies’ reach to their customers, again, the near universality of the crisis makes a difference. Because offerings by all organizations within an industry have been hit in a very similar manner, customers are left comparing multiple digital experiences instead of in-person ones to digital ones. Online, organizations can reach completely new customers and customer segments with new and even improvised solutions.

We call this a “glocal” reach, meaning that local initiatives can have truly global scope. For many businesses, the global audience becomes the target group — as it is now the only group. Organizations may be able to reach completely new people, diversifying and widening both their employee teams and customer pools.

Embrace a chance for reflection. The fallout from COVID-19 may slow down some of the rush of work. When we physically can’t move from place to place and have to spend time at home or otherwise isolated, we become more secluded. This independence has the potential to be a good thing, offering long-term transformative potential.

For managers, distance working potentially means less chance for micromanaging and more focus on outcome and deliverables. Managers can accept and embrace not knowing what employees do in specific moments of the day and even cut employees some slack to encourage time slots for creative, exploratory musings. Managers can offer more autonomy to employees by checking in less frequently on progress in favor of evaluating outcomes. Facilitating self-managed time away from distraction will help employees to grow during this time.

Of course, this may be tough, especially if a manager has a negative mindset about home-office culture, or if managers create constant auditing trails. New ways of working can also result in short-term loss of productivity. Still, managers should offer leeway, observe novel ideas and practices, and use this disruption to try out new approaches — including following ideas that unfold from the bottom up.

Be ready for whole-scale renovation. Crisis moments require resilience: Organizations need to be able to bend without breaking. These moments may also present themselves as opportunities to transform while on the move, and to explore what should stay and what can go. Kurt Lewin, in his 1947 article “Group Decision and Social Change,” described these moments as being “unfrozen” from general customs.

Organizational structures that may have been based on physical situations like room size or proximity now are free of spatial constraints. Leaders can try out and test novel digital practices and tools. For instance, they may wish to test new means to brainstorm. Virtual work environments may also bring to light that some people who may be relatively quieter at the physical office are more active and conversant online.

More fundamentally, a new strategic orientation might shift the organizational structure from regional projects based on the closeness of team members to product-based projects. Now may be the time to explore future-of-work transformations such as self-managed virtual teams or collaboration with online-based communities. The barriers to change for these ways of working have been lowered.

The best time to begin transformation efforts will be when the crisis is still a universally shared experience. There will be a much higher tolerance for initial stumbles or the shortcomings that often accompany any substantial organizational change process.

Any crisis can be regarded as an opportunity. This does not in any way mean the crisis is good in itself, but it appreciates how humans — and organizations — deal with adversity. By necessity and commitment, organizations can reactively and proactively transform themselves in this unprecedented and universal situation of organizing under COVID-19.

This Is Not (Digital) Business as Usual

The Best of This Week

Identifying Longer-Term Opportunities in the Midst of Crisis

A recent survey of global executives offers important insights for managing and setting strategy in the current business environment. In the rush to manage immediate priorities, leaders can overlook the importance of identifying longer-term opportunities that could contribute to recovery and acceleration after the crisis. But exploiting these opportunities will require leaders to look beyond short-term impacts and to take some risks in a very challenging environment.

Five Steps for Making Decisions in a Time of Rapid and Unwanted Change

Distinguishing between crisis and disaster can help you make better leadership decisions in an unprecedented time. For The European Business Review, academic researchers Axelle Bagot and Houman Harouni trace five interrelated steps to help leaders reconsider their work, align with stakeholders, and steward their organization’s mission.

Reaching a New Generation of Consumers in a Gender-Inclusive World

As traditional views of the male-female binary evolve toward a more inclusive, individualized concept of gender, brands can no longer rely solely on outdated tropes to connect with increasingly diverse and culturally aware consumers. Astute brands, especially the upstarts, have been quick to perceive and respond to these societal shifts. What is a marketer to do to ready her brand to operate under a different set of gender rules?

How an MIT Simulation Model Aims to Cool the Planet

In The New Yorker, Bill McKibben explores the En-ROADS Climate Interactive simulation (developed in part at MIT Sloan), which allows users to tinker with different variables to determine how to reduce greenhouse gas emissions to meet goals set in the Paris climate accords. Pandemic lockdowns have reduced emissions a bit, but more meaningful progress could come from halting fossil fuel-based infrastructure.

Deciding Who Gets What Amid Supply Chain Disruption

The COVID-19 pandemic has upended normal life and many supply chains, severely limiting the supply of some products. When disaster strikes, suppliers, original equipment manufacturers, and retailers may find that they can't offer all their products or fulfill all their customer orders. They must decide who gets what — but how? Leaders need to set clear decision criteria and the mechanisms to back them up.

What Else We’re Reading This Week:

• No amount of tech investment can outweigh closing the human performance gap — the best defense against cyberattacks
• How did King Arthur Flour pivot to meet skyrocketing demand from homebound bakers?
• You can bolster good working relationships and interpersonal networks, even when working remotely

Quote of the Week:

“If we come out of this only focused on whether our people should be working in the office or working at home, then I think we’ve missed a big opportunity to redesign our employee experience. Space really matters, but only when it’s an integrated part of the employee experience strategy moving forward.”

— Kristine Dery, research scientist and program manager at the MIT Center for Information Systems Research, in this week’s Three Big Points podcast episode, “Making Remote Work Work”

The Best of This Week

The toughest leadership test

CEO microhabits can help leaders seize the moment, stay ahead, and take care of themselves during the COVID-19 pandemic.
The toughest leadership test

Through a different lens: A McKinsey perspective on separations

To succeed, companies need to view divestitures in a way that goes beyond the traditional M&A approaches.
Through a different lens: A McKinsey perspective on separations

Plugging in: What electrification can do for industry

As the prices of renewable electricity and electric equipment continue to drop, industrial companies can capture cost-saving and GHG-emission-reduction opportunities by planning the electrification of their operations.
Plugging in: What electrification can do for industry

Reckoning with the overlooked business risks of climate change

Experts from the Woods Hole Research Center discuss how companies are missing the scope of mounting physical risks from climate change.
Reckoning with the overlooked business risks of climate change

A Mediterranean basin without a Mediterranean climate?

The Mediterranean’s signature climate drives tourism and agriculture in the region. What impact is climate change likely to have?
A Mediterranean basin without a Mediterranean climate?

Marketing Beyond the Gender Binary

From Philip Morris’s 1954 introduction of the Marlboro Man to promote a “universally masculine appeal” to Dr Pepper Ten’s 2011 launch of a diet soda that was proudly “not for women,” marketers have long capitalized on traditional gender beliefs to sell their products. But now, a decade after Old Spice’s “Smell Like a Man, Man” campaign, brands can no longer rely solely on outdated tropes to connect with increasingly diverse, empowered consumers. Traditional Western views on gender — where people fit neatly into predefined concepts and behaviors of masculinity and femininity — are giving way to inclusivity that allows more individualized and authentic manifestations of gender beyond the binary model.

The winds of change are at our doorstep: According to an Ipsos study in 2019, 34% of all Americans disagreed with the statement that “there are only two genders — male and female — and not a range of gender identities.” Around the world, in 35 countries, 40% disagreed with that binary perspective. Younger consumers are at the vanguard of ushering in change: According to Pew Research, almost 60% of those aged 13 to 21 (“Gen Z”) believe forms that ask about gender should include options besides “male” or “female.”

Older consumers also are no longer locked into binary gender tropes: More than three-quarters of parents look favorably upon encouraging girls to play with toys or participate in activities typically associated with boys.

Marketers Must Ready Their Brands

Astute brands, especially the upstarts, have been quick to perceive and respond to the shift in gender zeitgeist. Women’s shaving brand Billie (recently acquired by Procter & Gamble) satirized how traditional women’s razor brands (many, ironically, also owned by P&G) shied away from showing female body hair. Milk Makeup showcases its products using transgender models as well as cisgender male and female models. Even more indicative of a broader societal and brand strategy shift is that legacy companies, too, have taken bold steps to transcend the binary model of gender, as noted in the examples below.

What is a marketer to do to ready her brand to operate under a different set of gender rules? Using a first-principles approach is the best way to craft a brand strategy along the four axes of marketing:

• Product. Marketers must revisit their product portfolio to assess its relevance to consumers’ shifting expectations. This process has been underway for some time in the personal care category, especially for men’s products, where traditional retailers now stock aisles with products like under-eye and cuticle cream that would have been unimaginable a decade ago. Clothing, especially for children, has evolved for several years with brands like Carter’s, Gap, and H&M offering gender-neutral options. Mattel, often under fire for its overly sexualized Barbie representations, has introduced a gender-neutral doll.
• Pricing. The notorious “pink tax” reflects the higher price women pay for many everyday items; one New York city study pegged it at 13% for personal care items. Burger King’s candid-camera version of selling “chick fries” (the usual chicken fries in a pink box at an inflated price) exposed the absurdity of this price discrimination strategy. Marketers must strip pricing strategies of gender distortion. Online bulk products retailer Boxed took up the challenge to undo gendered pricing, and by March 2019, redistributed $1 million in offset discounts among customers. The brand also sells products like tampons and women’s razors at prices that are cheaper than those of their competitors.
• Promotion. A brand must adapt its communication to both reflect the new thinking about gender and to speak to a society that has shown to have a very different gender identity than in the past. In 2018, Coca-Cola gave a subtle nod to gender-neutral pronouns in its Super Bowl commercial. In an Argentinian ad, the company’s Sprite brand went much further, showing a parent helping a transgender child dress. In the U.K., the Advertising Standards Authority, an independent regulatory body, has established guidelines about perpetuating harmful gender stereotypes and has even banned ads from Volkswagen and Mondelez for violating them.
• Place. The shopping experience, whether it takes place at a physical location or a digital one, is evolving to reflect a new gender reality. Target has always been active in this regard, stripping kids’ toys and bedding sections of gender identifiers. Stockmann, Finland’s largest department store, has an entire floor dedicated to gender-neutral fashion. For online shoppers, Birchbox has changed both how it bundles its products and its website navigation from man/woman to beauty/grooming to reflect choice rather than impose gender expectations.

Brands Must Embrace a New Gender Paradigm

It’s not enough to string together a series of initiatives to tackle gender. And brand building is much more than a tagline and a campaign (often poorly thought through — there’s no brand in the world that wants to replicate Pepsi’s fiasco with their widely condemned ad of Kendall Jenner handing Pepsi to a police officer in the middle of a protest). Bringing pervasive cultural change into your marketing strategy needs to be both relevant and authentic.

Be relevant to the changing needs of your customers. This starts with doing the groundwork on how perceptions are changing, then growing the brand to embrace this evolution, all while continuing to remain useful and meaningful to your core customer. Mastercard’s “True Name” feature — which allows transgender and nonbinary persons to have their true names on their cards without having to go through a legal name change — demonstrates recognition of the importance, and the diversity, of identity. In a similar vein, when booking a flight on United Airlines, customers now have the option to select U (undisclosed) or X (unspecified) as their gender of choice.

Be authentic to your brand essence and credibly demonstrate that you stand by your values. Opportunistic positioning will backfire. The Hallmark Channel ran an ad depicting a lesbian couple, then pulled it in response to complaints from a conservative group. This upset LGBTQ advocacy groups, so Hallmark restored the ad, only to face even harsher criticism from the conservative group. A brand must look within and act on what it believes is right. After coming under evangelical fire for an inclusive bathroom policy, Target, for example, leaned into its commitment to allowing transgender customers to use the bathrooms that match their gender identity by investing $20 million in expanded bathroom options.

Smart Marketing Can Replace Obsolete Gender Proxies

Until now, marketers have been taught not to question the concept of binary gender; it’s firmly programmed into muscle memory. Outdated gender constructs still shape organizational thinking — they’re in our biases, personas, databases, insights, and more. Consider, for example, the volume of market research conducted with strict sampling requirements for male and female respondents, with nary a thought to the explanatory power of the full spectrum of gender.

As data proliferate, marketers grow intimate with every desire of their customers and acquire the behavioral and attitudinal insights to hypercustomize products, services, and experiences. Gender is a proxy, and no marketer should have to build a brand based on guesswork that relies on a faulty construct. Smart marketing is about harnessing the intelligence of data and analytics to build a brand that understands and serves the unique and individual needs of customers, no matter where they identify on the gender spectrum.

Marketing Beyond the Gender Binary

COVID-19: Implications for business

Our latest perspectives on the coronavirus outbreak, the twin threats to lives and livelihoods, and how organizations can prepare for the next normal.
COVID-19: Implications for business

Treating COVID-19: A pharmaceutical executive’s view

Cedric Francois, the CEO of pharmaceutical company Apellis, discusses possible approaches to treating COVID-19 patients.
Treating COVID-19: A pharmaceutical executive’s view

Reflections in crisis

How the lockdown is helping us rediscover what’s important
Reflections in crisis

The future of brand strategy: It’s time to ‘go electric’

Data shows that as choices and channels increase, brand trustworthiness is more important to consumers than ever.
The future of brand strategy: It’s time to ‘go electric’

Rev up your growth engine: Lessons from through-cycle outperformers

Your decisions now will determine how strongly you come out of the COVID-19 crisis—and how well you perform in the next normal.
Rev up your growth engine: Lessons from through-cycle outperformers

COVID-19’s effect on minority-owned small businesses in the United States

Already vulnerable, minority-owned small businesses brace for disproportionate impact. Here’s how to help.
COVID-19’s effect on minority-owned small businesses in the United States

How a post-pandemic stimulus can both create jobs and help the climate

The $10 trillion in stimulus measures that policy makers have allocated could be decisive for the world’s low-carbon transition. Here’s how organizations can bring economic and environmental priorities together.
How a post-pandemic stimulus can both create jobs and help the climate

Why governments need an AI strategy: A conversation with the WEF’s head of AI

The strengths and weaknesses of individual economies vary. But if artificial intelligence is to fulfill its promise, every country needs a plan for how best to use it.
Why governments need an AI strategy: A conversation with the WEF’s head of AI

Who Gets What When Supply Chains Are Disrupted?

The COVID-19 pandemic has upended normal life and many supply chains. Between hoarding (such as toilet paper), unexpected demand surges (such as yeast, for baking), and spot supply shortages (because of factories or warehouses closed due to infection or mandate), some products are in short supply. The most tragic examples, of course, involve shortages of ventilators, personal protective equipment, and pharmaceutical supplies required to care for people infected with the coronavirus.

When disaster strikes, suppliers, original equipment manufacturers, and retailers may find that they cannot offer all their products or fulfill all their customer orders. They must decide who gets what. But how?

Past disruptions reveal the ways companies on both ends of the supply chain have handled such challenges, both in terms of the tactics they employed and the considerations they used for their decisions. These examples illustrate the diverse approaches executives can use to determine who gets what.

Six Tactics for Managing Supply Shortfalls

The main tactics executives have chosen for prioritizing products and customers when they are unable to fulfill all orders involve some type of allocation. Regardless of the specific approach employed, there are always competing priorities that have to be taken into account, leading to the need for careful consideration.

Favor the most important customers. During several disruptions to microelectronics supplies over the past 25 years, the largest PC makers, including HP, Dell, and Apple, were high on suppliers’ priority lists. Differentiated allocation policies favor some customers while impeding others.

A related allocation criterion is to direct supplies to the highest-margin products and customers. For example, General Motors scrambled to find scarce materials in 2011 after a trifecta of disasters — an earthquake, a tsunami, and a nuclear meltdown — hit Japan and devastated factories there. In GM’s crisis room, “Project J” had supply chain professionals scouring the globe to find sufficient parts to keep all of the company’s car factories running. Despite the frantic search, at one point GM could not find enough airflow sensors for its trucks. The team decided to prioritize full-sized trucks over small trucks because the larger vehicles were both more profitable and had smaller retail inventories.

Maximize short-term revenues. Economists often argue that a well-designed auction improves economic efficiency by allocating scarce resources to those who can create the greatest value with that resource. (This is the usual justification for government auctions of electromagnetic spectrum.) Moreover, high prices after a disruption encourage more-flexible buyers to forgo the scarce commodity, thereby conserving supplies for those who have no other options.

The danger in auctions is that customers may perceive them as price gouging. In the wake of the flooding that inundated the plains in Thailand and devastated an industrial cluster of electromechanical parts suppliers and hard-disk makers in 2011, Seagate Technology became the No. 1 disk-drive maker, taking the crown from its more disrupted rival, Western Digital. Because Seagate could not replace all the lost supply, it decided to auction some disk drives to the highest bidder. Seagate also used the threat of these auctions to compel customers to sign long-term agreements. However, customers perceive auctions during a disruption — despite their theoretical appeal — as profiteering. Indeed, after the flood receded and Western Digital recovered, it took back the lead. Unfortunately, the COVID-19 pandemic has given rise to cases of naked profiteering by suppliers of needed medical supplies.

Treat everyone equally. Some companies insist on “fair” or uniform allocations of volume for commercial, cultural, or legal reasons. With a uniform allocation policy, all products or customers get identical treatment, such as the same fraction of ordered volume or the same change in prices. After the 2011 Fukushima nuclear disaster, many Japanese companies gave every customer the same fraction of their orders. Likewise, Intel, as a large supplier in the PC industry, generally uses a similarly uniform allocation approach to avoid the appearance of favoritism.

But being fair isn’t easy when customers try to game the system by artificially inflating their orders. To combat this, some companies allocate product based on a portion of pre-disruption historical order volumes. With COVID-19, many retailers have implemented fixed-volume allocations, such as limiting all shoppers to two cartons of eggs.

Shape demand. In several instances of PC parts shortages, Dell raised the price of computer configurations that required scarce parts. The company, though, balanced those price hikes with lower prices on other machines that used more plentiful parts — and promoted these more readily available machines. This balance of pricing changes can help manage a shortage without damaging customer relations.

Such demand management is akin to the revenue management practices used by airlines to fill their seats — allowing price-sensitive leisure travelers to buy some tickets while reserving other seats for customers who will more readily pay higher prices.

Alter products. Rather than raising prices or cutting off customers, some companies turn to reformulating their products. Intel, for example, diluted some of the chemicals used in chip making during the 2011 crisis in Japan, but the company followed a strict quality control protocol that enabled it to maintain its manufacturing yield and chip performance.

Alterations that result in quality downgrades, however, are risky. In February 2013, the boutique distillery Maker’s Mark faced a shortage of its premium bourbon. The distiller decided to add “a touch more water,” diluting its spirits from the historic 90 proof to 84 proof. Outrage ensued. “My favorite bourbon is being watered down so they can ‘meet market demand,’” one superfan, called a brand ambassador, told Forbes. “I’ll help lower their demand by not buying any more.” The company quickly reversed its decision.

Take care of the vulnerable. Customer vulnerability may sometimes be a consideration, especially if the quantities required to keep a customer from going under are not large. Verifone, a maker of credit card processing equipment, wasn’t a large customer for the electric motors made scarce by the same 2011 floods in Thailand mentioned above, but the company’s absolute dependence on these motors led suppliers to fulfill its (small) orders.

Similarly, during COVID-19, some retailers are catering in special ways specifically to vulnerable customers, such as by giving the elderly their own early morning shopping hours to get to freshly restocked shelves first.

Weigh the Scope and Time Horizon

As companies consider their options for dealing with supply shortages, they need to consider both the scope of the analysis and its time horizon. How will their choices play out for both themselves and their customers in the short and long terms? (See “What Drives Resource Allocation During a Supply Shortfall?”)

What Drives Resource Allocation During a Supply Shortfall?

Leaders allocating scarce resources during a supply chain crisis have a number of tactics to consider. When weighing each course of action, they need to keep in mind both scope (do they prioritize the impacts on the company or how the decisions affect customers?) and time horizon (do they need to center on short-term outcomes, or do they have the luxury of focusing on long-term considerations?).

The scope of the analysis can be driven by the impacts on the company itself (profits, market share, reputation) or the impacts on customers (survival, ethics, long-term value, growth opportunities). The time horizon can focus on maximizing near-term outcomes (survival, quick financial returns) or include long-term effects (strategic goals or focus).

So how does a supplier pick the scope and the time horizon to consider first? Clearly, executives in companies fighting for survival have a fiduciary duty to maximize their companies’ short-term financial outcomes and bias the decisions accordingly. In contrast, executives enjoying a strong balance sheet and good credit have the luxury of more options, including making long-term decisions with an expanded scope of how the decisions could align with customers to promote growth. The comfort of working from a position of strength enables stronger companies to pursue their values and strategic imperatives.

There can be an upside to a supply interruption: Many companies decide not to “let the crisis go to waste” and use the disruption to implement reorganizations that would have been difficult to carry out in regular times. By the same token, some companies use the crisis to cull products, channels, or customers that are underperforming or that no longer align with the strategic direction of the organization. Of course, any customer divestiture should be handled with care, because other customers may defect, fearing they are going to be next.

Regardless of the weakness or strength of a company going into a disruption, properly managing who gets what can help it suffer the least damage from supply interruptions. In the end, well-deliberated decisions about tactics, scope, and time horizon can help a company come out ahead.

Who Gets What When Supply Chains Are Disrupted?

Sustaining Employee Networks in the Virtual Workplace

Image courtesy of Leo Acadia/theispot.com

The coronavirus pandemic has led to a surge in virtual work across companies, with many or even all employees working from home for an extended period of time. One of the key unintended consequences of this widespread switch to virtual work is the impact on the relationships and interpersonal networks within organizations. By better understanding how working remotely can damage connections, trust, and cooperation, managers can act to mitigate those effects.

One of the biggest drivers of who interacts with whom in organizations is physical proximity — a phenomenon that’s been observed from the U.S. Senate1 to the Google campus.2 Amazingly, even a distance of a meter or two can make a big difference. When everyone goes virtual, though, employees can no longer casually run into someone in the hallway or one desk over. They do still keep in touch with the people they feel closest to and with coworkers they’re required to work with on particular tasks, but with everyone else, the level of interaction is drastically reduced. And when interactions do occur, they are intentional, not serendipitous encounters. Inevitably, going all virtual means that many interactions diminish, relationships recede, work networks shrink, and the organization becomes less interconnected.

Day to day, the work interactions and relationships that do continue — especially if those ties were not strong to begin with — are harder to engage in effectively when all work is being done virtually. Ironically, the need for creative problem-solving (such as redesigning key processes to be online) is greater than ever, yet the ongoing crisis makes this more difficult. After all, virtual communication, not to mention the experience of being in crisis mode, makes people more negative, more distracted, less willing to cooperate with others, less likely to share useful information, less trusting, and less willing to listen to new ideas.

The problematic effects on relationships due to working virtually, whether via email, text, phone, or video, include the following:

A less-interconnected network of relationships among employees reduces the sense of commitment to one another and to the organization. Trust and cooperation are harder to achieve when the people you talk to do not also talk to one another.3 As networks get sparser — with fewer such interconnections — during periods of only virtual work, this feeling of connection to fellow employees and to the organization may wane. And yet it is precisely when employees and organizations are working under unusually difficult circumstances that a sense of commitment is needed more than ever.

Online communication may foster a more negative tone, as well as more self-serving behavior and even dishonesty. People don’t seem to bring their best selves to online interactions. Even early studies of the “flaming” effect in email communication4 noted that people seem to feel free to be more negative with others online. Since then, many subsequent studies have shown that people tend to make harsher judgments of others online (such as in professional evaluations5). There is also less cooperation when groups interact online instead of face to face.6 In studies where people had the opportunity to misrepresent the value of goods to be shared, self-serving behavior was far more rampant online, even compared with using paper forms (and not just when compared with being face to face).7

The increased potential for distraction can damage the quality of communication. Attention has become one of the scarcest commodities in the modern age. With the advent of handheld devices, claims on our attention have multiplied relentlessly. It is hard enough to ignore pinging mobile alerts and keep focused on other people when they’re right in front of us, but the temptation to slip away from the current conversation into other channels (checking messages, for instance) magnifies when interactions are virtual. Distraction is a reality of everyday life, but what is less well appreciated is the toll it takes on professional relationships. Yes, people notice when they hear you take an extra beat to respond during a real-time interaction or, worse, when they can see you looking at something else entirely. And yes, they judge you for it, deeming you less trustworthy and not wanting to work with you again.8

Less information is shared in online communication, increasing the likelihood of poor decisions. When people type instead of speak, they just end up saying less. In negotiations, for instance, this means people are less likely to ask good diagnostic questions of the other side, and they are less likely to open up and reveal information about their own situation that might help craft the most beneficial deals.9 People also feel more distant from others online (which can bleed into actual distrust10), and this limits the amount of information they spontaneously decide to share. Finally, people lose the rhythm of normal spoken conversation when typing, even synchronously, with others. This decrease in normal “turn taking” lessens the sense of trust and rapport with others. Even feeling out of sync with someone else’s mood — which may be more likely to happen online — can make people less willing to listen to what that person has to say.11 All this together leads to a downward slide in the value people create and the quality of the decisions they make when communicating online.12

How Managers Can Reinforce Trust and a Sense of Connection

Given the many relationship-damaging traps that can undermine people’s ability to work together virtually, what can leaders do to mitigate these negative effects? With a better understanding of potential pitfalls, managers can be alert to signs of dysfunction and act to keep networks and relationships healthy. Here are some suggestions:

1. Actively cultivate feelings of solidarity and shared mission. Research shows that work ties that have been dormant even for many years can be reactivated very quickly, with little or no loss of trust or feelings of closeness.13 So letting ties become dormant during a crisis is not necessarily a problem for the long-term survival of those ties; they can be reconnected when things return to normal. But in the meantime, managers should look for other ways to boost the feeling that “we’re all in this together,” even in the absence of actual interconnections. For example, asserting the organization’s commitment to treating all employees fairly even under trying circumstances, demonstrating transparency with people about how and when changes are going to occur (even before certainty is reached), and directly acknowledging the difficult circumstances that employees are working through can go a long way toward maintaining loyalty. Even in the absence of actual interactions (virtual or otherwise), companies can and should proactively maintain the esprit de corps of employees for the duration.

2. Be a useful and helpful network broker. In normal times, sparse networks can provide advantages to the brokers — the people who act as the bridges between otherwise disconnected groups. Being a network broker gives you greater access to novel and useful information and greater control over resources.14 Even when the network becomes sparse only temporarily, there may be more opportunities to serve as a broker between people who aren’t currently in touch. Be strategic in reaching out to others who are not in your close circle. Connect people when they (or their groups) can benefit from it. These are actions you should be taking anyway, but they become even more beneficial to you — and the company — when the level of interconnectedness among everyone else is artificially suppressed for any duration.

3. Use a variety of communication channels. Putting things in writing is often necessary (for example, for efficiency or flexibility or to organize complex information), but trust increases when people can hear your voice instead of just reading your words. Although videoconferencing is useful for sharing visual information and having brief moments of connection, trust does not necessarily increase further when people switch from audio-only communication (phone calls) to videoconferencing (which can actually reduce trust if, for example, speakers don’t look directly into the camera).15 All channels, even text, can be used to provide moments of human connection (such as sharing a story or something humorous16), which increases the odds of having a positive and productive interaction. Thus, using a combination of channels — and paying attention to the relationship risks of each — provides the best opportunity to both work effectively and bolster relationships.

4. Preserve teams with long working relationships. The better we know each other and the longer we’ve worked together, the more we can buffer the effects of any one interaction that might lead to a negative judgment. Colleagues and teammates who have worked together for longer periods develop a more intuitive understanding of each other, what they mean when they speak, how they work as individuals, and how they work together most effectively, leading to higher performance.17 However, there is also a tendency in organizations to assemble new teams for every new project, choosing members based on who has the right skills for the job. Though this approach has merit, it may be advisable to consider existing relationships when forming ad hoc teams that will interact virtually.

5. Foster communication norms that value the need for focused attention. Expectations that we should constantly monitor and respond to multiple channels of communication are at odds with the need to be fully attentive and present when engaged in interactions with others — and with our own important work tasks. For most people, remaining focused on only one thing also requires turning off alerts for new messages: Just seeing the alert is as distracting as actually checking the message itself, because the mind wanders to imagine what information the new message contains. Encourage employees to turn off notifications during calls and videoconferences and, where possible, establish the norm that it’s acceptable to schedule periods of heads-down work during which they are not expected to respond immediately. Remember that your undivided attention is a gift to others and will bolster relationships when you aren’t able to interact in person.

When a company goes all virtual, many if not most work relationships and networks will tend to become restricted and suppressed. This is unlikely to be a problem, though, as long as managers take care to address the relationship difficulties associated with virtual work. Keeping your own and your organization’s ties positive and productive through periods of sustained virtual work will allow these valuable interpersonal networks to survive and even thrive.

Sustaining Employee Networks in the Virtual Workplace

Cash preservation in response to COVID-19

How to establish a cash culture that balances urgent short-term needs with longer-term competitive considerations
Cash preservation in response to COVID-19

Why ESG is here to stay

The growing evidence that sustainable corporate practices link closely to performance is focusing investor and acquirer attention on ESG scores. But how reliable are they?
Why ESG is here to stay

The pivotal factors for effective external engagement

Survey results show that senior leaders have increasingly prioritized stakeholder engagement, which remains a challenge for many companies. Certain capabilities distinguish companies that have met the challenge.
The pivotal factors for effective external engagement

Five Fifty: The other global crisis

Can the world pay attention to climate change—even while fighting the coronavirus? Experts say we can’t afford to do otherwise.
Five Fifty: The other global crisis

Mining companies’ response to coronavirus

Mining companies enduring the first wave of COVID-19 effects on their operating models need to think about responding across five horizons.
Mining companies’ response to coronavirus

Beyond COVID-19: Rapid steps that can help machinery and industrial automation companies recover

With COVID-19 disrupting the equipment and services markets, machinery and industrial automation companies need a rapid recovery strategy.
Beyond COVID-19: Rapid steps that can help machinery and industrial automation companies recover

Adapting healthcare to COVID-19: An interview with the CEO of Boston Medical Center

Kate Walsh shares how Boston Medical Center, New England’s largest safety-net hospital, has had to adapt to the pandemic—and why there’s no going back.
Adapting healthcare to COVID-19: An interview with the CEO of Boston Medical Center

Shaping the next normal of packaging beyond COVID-19

As packaging companies emerge from the COVID-19 crisis, they need to readjust their focus and raise their game—while negotiating ongoing shifts in the industry.
Shaping the next normal of packaging beyond COVID-19

The Unaddressed Gap in Cybersecurity: Human Performance

An employee at Maersk, the world’s largest shipping conglomerate, saw computer screens suddenly turn black and irreversibly lock in late June 2017. A highly engineered malware worm exploited company computers in Ukraine lacking the latest Microsoft Windows security patches. With this small foothold, the worm breached the company’s IT system and blocked access to all computers and servers worldwide, ultimately halting shipping operations for several days. The incident cost Maersk over $200 million in lost revenue, caused unquantified costs in perished goods and recovery efforts, and created a slew of unhappy customers.

The Maersk story is not uncommon. In 2015, 80 million customer records were stolen from Anthem because an unsuspecting employee responded to a phishing email. In 2017, the United Kingdom’s National Health Service suffered a ransomware attack that resulted in 19,000 canceled appointments due to the use of, once again, an outdated, unpatched version of Microsoft Windows. In 2019, data on 106 million Capital One customers was stolen via a misconfigured Amazon Web Services firewall. And the list goes on.

With cybersecurity high on the corporate agenda, falling victim to a catastrophic breach is the dreaded nightmare scenario. Amid the COVID-19 crisis and a sudden increase in remote work arrangements, cybercrime is surging. Boards are looking to CEOs to prevent cyber incidents — but how?

“More advanced technology” is a common answer, but even that would not have prevented the Maersk incident, where a small human oversight — not installing a software update — led to catastrophic consequences. Technology is clearly the focus of industry investment and such spending is forecast to be $133 billion per year by 2022. But while choosing the right technology is essential, the majority of incidents relate to gaps in human performance, a persistent and often overlooked cybersecurity issue in most organizations.

Without addressing this issue of human performance, a vicious cycle perpetuates. (See “A Technology-Led Cycle Leads to Increased Cybersecurity Incidents.”) As companies bring on board new technologies — each one potentially addressing an emerging threat — they also add more corresponding people and processes. As this continues, the interactions between technology, processes, and people pile up, and the level of complexity increases geometrically. At some point, this complexity overwhelms the cybersecurity infrastructure and obscures emerging threats — until, weighed down by legacy systems, the business finds itself less agile than cybercriminals, and an attack occurs. In response, the business seeks out the technological patch for that specific threat, and the cycle repeats.

A Technology-Led Cycle Leads to Increased Cybersecurity Incidents

Adding discrete processes and technologies can create an overwhelming burden of complexity and decrease cybersecurity effectiveness.

Enter the High-Reliability Cybersecurity Operation

Closing the human performance gap — embedding new behaviors and shared understanding as part of the culture and normal course of business — is no small undertaking, but it’s ultimately the best defense against cyberattacks. And fortunately, an analog exists for addressing this type of risk and leveraging human performance as a critical layer of defense: the high-reliability organization (HRO), which we define as an organization that has a remarkably low number of mishaps consistently over a sustained period of time yet performs highly complex and inherently hazardous tasks.

The HRO concept stemmed from practices that originated more than 60 years ago with the United States’ Naval Nuclear Propulsion Program, which recognized that unique organizational practices were needed to put a highly complex nuclear reactor on a boat, under the ocean, and operate it safely with a crew of young sailors. This meant eschewing the traditional military culture that had existed for centuries: Follow orders, do what you’re told, and don’t ask questions. Following NASA’s loss of the space shuttle Columbia, the Columbia Accident Investigation Board looked to the United States’ nuclear navy as the preeminent model for a high-reliability organization. HRO ideas later gained prominence as part of the energy industry’s response to growing complexity and catastrophes such as the Deepwater Horizon disaster and then spread to the health care, manufacturing, and now cybersecurity fields.

HROs are different from non-HROs in three specific ways:

• Mindfulness. HROs exhibit chronic unease — a state of hypervigilance and watchfulness for early danger signals.
• Responsiveness. HROs identify emerging issues early and respond quickly to arrest the development of the incident.
• Learning capacity. HROs learn from every event and quickly disseminate knowledge to rapidly improve the system. (In the U.S.’s nuclear navy, this means that every submarine that goes to sea represents the cumulative lessons of over 6,200 years of reactor plant operations.)

These characteristics of an HRO have been well studied and well characterized in academia, but less well understood are the pillars of the program — the individual operational pillars that, when enacted, collectively result in an HRO’s superior performance. These pillars are formality, level of knowledge, integrity, questioning attitude, and active team backup. We have focused on the pillars in our research while developing a mechanism for measuring a company’s alignment with HRO characteristics.

High-reliability cybersecurity operations (HRCOs) employ these same HRO pillars to close the human performance gap and add a critical, additional layer of cybersecurity. Long gone are the days where cybersecurity was solely the responsibility of the IT department — cybersecurity is now everyone’s business. The table “HRO Pillars and Their Application in Cybersecurity” further describes each HRO pillar and how it can be applied in HRCOs.

HRO Pillars and Their Application in Cybersecurity

Applying the five pillars of high-reliability organizations can help an organization become a high-reliability cybersecurity operation.

HRO Pillar	Description	Example Application in HRCOs
Formality	• People follow authorized procedures (not workarounds). • They communicate in a disciplined manner to ensure information is consistent and reliable.	• Processes are in place to manage privileged identities, accounts, and information. • Rules are clear for why privilege is conferred, who is responsible, and how it is reviewed.
Level of Knowledge	• People understand not only what they do but why they do it. • They continually expand their understanding of systems, processes, and hazards around them.	• Users understand how easily passwords can be compromised and the risk of unauthorized access. • Everyone uses unique strong passwords and password vaults and supports periodic password changes.
Integrity	• People can be relied upon to do what they say they will and what is expected of them. • They hold themselves and others accountable.	• Employees willingly operate within security policies and use tools as designed/intended. • They do so even if it changes how they do their work (using company-provided devices, limiting downloads or access, regular backups, etc.).
Questioning Attitude	• People anticipate problems and are alert to unusual conditions. • They ask: What could go wrong? What has changed? What might I or others be missing?	• Given the limitations of antivirus filters, employees have a chronic unease about the validity of emails. • Employees check URLs prior to clicking on links and are suspicious of requests for personally identifiable information.
Active Team Backup	• People actively look out for one another. • They understand they are part of something larger than themselves and must work in concert to be effective.	• When configuring new firewall access, team members cross-check/test the updates. • They do so in a planned and structured manner — not out of mistrust but to provide a check to ensure completeness and accuracy.

Let’s consider what an HRCO looks like in practice. Everyone in an HRCO has a high level of knowledge. They understand how easily passwords can be compromised and the risks of unauthorized access; because they recognize that cybersecurity is everyone’s job, they read and take seriously the warnings that the cybersecurity department sends out each week. There is a level of formality in how security processes are managed — a clear protocol for managing privileged accounts and information, which only works when coupled with integrity, the willingness to operate within security protocols even if personally inconvenient. This formality also highlights when something is out of place or out of the ordinary, enabling a questioning attitude that keeps employees from clicking on an email or questionable URL that looks suspiciously like a phishing attack. Finally, people in an HRCO always have each other’s backs — active team backup — so when configuring new firewall access, team members cross-check and test the updates, not out of mistrust but to provide a check on completeness and accuracy.

These pillars can be effected by each individual in the organization and therefore serve as the basis for helping it transform into an HRCO. While cultures are often described in aggregated or descriptive terms, impacting individual behaviors is the only way you can truly move a culture.

The first step is to develop a baseline understanding of how individuals view the culture around them and what they deem to be their ideal target culture. If there are looming gaps in how a culture currently performs, but there exists strong organizational alignment about how a culture aims to transform, then the battle is half won. Conversely, if front-line workers and senior management have very different views of what is ideal, then it will be hard to move to HRCO practices until that dissonance is resolved.

In our research, we assess a company’s alignment with HRCO pillars by having individuals rank a group of 40 cultural descriptors by best fit. Each descriptor — “do what you’re told,” “anticipate problems,” “pay attention to hierarchy” — is a simple phrase that corresponds to one of the five pillars and has been honed to tease out to what degree an organization acts like an HRCO. This analysis yields a quantitative assessment of its cultural alignment with HRCOs — a critical insight into what is traditionally a data-free area of study. Such an analysis helps it understand the behaviors that represent the greatest source of potential risk, the parts of the business that bear these potential risks, and the organization’s alignment to HRCO principles by level and role.

It’s worth noting that some descriptors reflect behaviors that on the surface seem “right” but can actually undermine the resiliency of an HRCO. For example, when employees are expected to “be results-oriented” and/or “do whatever it takes,” they aim to deliver great outcomes and be rewarded for it. But these behaviors can lead to workarounds (counter to formality) and going “outside the system” (counter to integrity). Similarly, superiors who tell their teams to “bring solutions, not problems” may intend to encourage employees to proactively solve problems and take ownership, but in practice this solution-focused mindset discourages them from quickly alerting others to an issue (counter to having a questioning attitude).

The cybersecurity community is awakening to the yawning gap in human performance. In February 2020, “the human element” was the central theme for a major cybersecurity conference. The key emerging ideas were familiar: Technology alone is insufficient; things are changing too quickly; we need to tap organizational practices as a key additional line of defense.

Even the best technology will fail or become obsolete in the face of ever more sophisticated hacks. The billions spent on cybersecurity technology have not, and will not, solve the problem. Strong protocols and procedures are imperative but cannot account for every scenario. We recommend that managers turn to the lessons of HROs — organizations that have been able to operate in decentralized, high-risk environments, with a remarkably low number of incidents — and begin their journey to becoming an HRCO.

Ultimately, inculcating HRCO behaviors offers an irreplaceable benefit: When technology and process fail, human performance is all that stands between you and a cyberattack.

The Unaddressed Gap in Cybersecurity: Human Performance

Helping US healthcare stakeholders understand the human side of the COVID-19 crisis: McKinsey Consumer Healthcare Insights

Healthcare stakeholders on the front lines of the COVID-19 pandemic must understand not only the disease itself, but also consumers’ questions, concerns, and behaviors. Our recent rapid-research effort in the US provides some early insights.
Helping US healthcare stakeholders understand the human side of the COVID-19 crisis: McKinsey Consumer Healthcare Insights

Elevating customer experience excellence in the next normal

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Accelerating analytics to navigate COVID-19 and the next normal

Organizations are standing up analytics capabilities in a matter of weeks to inform business responses to COVID-19 challenges and prepare for the future. Here’s how.
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As physical doors close, new digital doors swing open

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As physical doors close, new digital doors swing open

Agile, reliable, secure, compliant IT: Fulfilling the promise of DevSecOps

By integrating security into DevOps, companies can step up the speed and frequency of software releases without compromising controls or increasing risk.
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A transformative moment for philanthropy

Here’s how the positive changes in individual and institutional philanthropy sparked by the COVID-19 pandemic can take root and grow.
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The implications of COVID-19 for vulnerable populations

McKinsey’s open-access dashboard looks at individuals with physical or behavioral health vulnerability and their risk for developing COVID-19.
The implications of COVID-19 for vulnerable populations

Evolving CIOs: The Customer Experience Priority

The 21st-century CIO must prioritize customer experience; it’s essential to competitive advantage. To do that, CIOs should embrace two roles: keeper of infrastructure and digital facilitator of business value. They must use levers of influence that are both internal and external.

Related Reading

Stephen J. Andriole, “Seven Key Steps for the Evolving CIO,” MIT Sloan Management Review, Oct. 17, 2019.

Please join Stephen J. Andriole, author of “Seven Key Steps for the Evolving CIO,” as he examines those levers and counsels CIOs on how best to employ them for optimum customer experience.

In this webinar, you’ll learn:

• The seven key steps CIOs should take to improve customer experience.
• How internal levers enable CIOs to pursue optimal customer experience applications through processes and best practices.
• Why shadow IT should be encouraged — and funded.
• Why CIOs must shift from a focus on projects to a focus on programs for business value.

Evolving CIOs: The Customer Experience Priority

The Best of This Week

Communicate Empathy and Authority in Times of Crisis

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A Behavioral Scientist’s Guide to Getting Through COVID-19 Chaos

Accept it? Find a distraction? We can’t overcome rational fears borne of a global pandemic using either technique alone, but a combination of these strategies can help us get through distressing times. Behavioral scientist Matt Wallaert discusses two recent studies and explains how to apply their findings to get through the chaos in a healthy way.

Deliver Value and Delight Customers With Data Wrapping

Companies seeking to distinguish themselves from the competition can “wrap” their products with data analytics features and experiences that increase profitability and delight customers. Four design characteristics make data wrapping unique.

Training and Running AI at Scale — With Reduced Carbon Emissions

Powering AI operations at scale requires a huge amount of electricity and results in significant carbon emissions. A recent paper published by MIT researchers outlines the “once-for-all” network — a new method for training and running a neural network that produces a tiny fraction of the carbon emissions generated by the techniques typically used today.

Build Teams With Diverse Expertise for Better AI Systems

Computer scientists often play the lead role in AI development, but systems that actually get the job done are built by better-rounded teams with a diversity of expertise. English and other humanities majors contribute a valuable perspective, but “hire English majors” is too generic to be useful advice. Joseph Byrum details how managers can hire, train, and integrate diverse thinkers into AI teams.

What Else We’re Reading This Week:

• The kinetic leader: Deloitte presents new findings from its 2020 Global Technology Leadership Study
• To best support employees, lead with “we” and “us”
• Why it’s important to ignore “productivity propaganda”

Quote of the Week:

“In these anxious times, when loss is all around, leaders must do more than peddle the illusion that putting up a fight with tips and tech — the ammunition of the virtual workplace — will eventually bring us back to normal.… We can’t fight our way back to normal right now.”

— Gianpiero Petriglieri, associate professor of organizational behavior at INSEAD, in “Your People Need Care, Not a Battle Cry”

The Best of This Week

Looking for Opportunity in the Midst of Crisis

In nature, stampedes occur when herds of animals are fleeing the threats of predators. Likewise, among humans, we have countless examples of herd behavior, including riots, sporting events, and the hoarding of goods in times of crisis. As researchers who study organizations, we wondered whether the current economic panic concerning the COVID-19 pandemic was also leading to some (understandable) herd behavior among leaders.

In recent weeks, we surveyed 460 global executives on how they expect COVID-19 to affect their organizations in the short and long terms, where they have been focusing their attention, and what actions they have been taking. (See “The Research.”) We supplemented this with more in-depth discussions with a select group of 50 executives to better understand the nuances at play across different companies navigating the crisis.

The Research

• The survey of 460 global executives focused on both organizational and personal challenges.

• The sample was from a cross section of industries and different types of organizations (publicly traded, privately held, nongovernmental, governmental), ranging from single-person businesses to organizations with over 50,000 employees, and across the full range of hierarchical levels.

While many responses reflected concerns commonly held amid the pandemic, other responses were unanticipated and provide important insights for managing and setting strategy in the current environment. In particular, we identified key opportunities for leaders to support preserving organizational culture and capabilities — the combination of skills, processes, and technologies that differentiate a company — in the short term and to develop new capabilities.

Predictable Concerns About the Future

We found that the magnitude of the impact of the COVID-19 crisis on companies varied by respondents’ industries in predictable ways. (See “Severity of COVID-19’s Impact on Selected Industries.”) Their concerns were greater for the short term (within the next six months) than the longer term by roughly 15% across all industries.

We also looked at how the size and type of company was affecting perceived impact. Our research found that large organizations felt less threatened by the crisis than smaller ones in both the short and long terms. (See “Severity of COVID-19’s Impact on Organizations of Different Sizes.”) Just 55% of respondents from companies with more than 50,000 employees reported that effects in the next six months would be very high or extremely severe versus 73% of solo practitioners and 60% of those from organizations with two to nine employees.

In addition, leaders from privately held companies felt less secure than those from publicly traded companies, with 66% of the former anticipating very high or extremely severe impacts, versus 58% of the latter. (See “Severity of COVID-19’s Impact on Different Types of Organizations.”) One potential implication is that larger, publicly traded companies might be better positioned not just to weather a crisis, but to pursue opportunities in the midst of one. Given their relative financial strength and the weakness of some smaller competitors in the current context, bigger players that have greater relative resources may be well positioned for acquisitions or other strategic investments. In other words, it’s a buyer’s market.

Yet when we looked at the data, we saw no significant differences between large, publicly traded organizations on the one hand and smaller, privately held companies on the other in terms of how they were seeing strategic opportunities in the midst of the crisis. To some extent, this reflects a common problem within organizations around strategic thinking: When you are in the midst of a major crisis, the natural tendency is to remain vigilantly focused on assessing the situation, developing response plans, and mobilizing the organization for immediate threats. In the rush to manage the immediate priorities, there is not enough focus on identifying longer-term opportunities that could contribute materially to recovery and acceleration postcrisis.

A Short-Term Focus, but More at the Top

Given this common problem, it did not come as a surprise that the primary concerns of leaders were around survival. (See “Respondents’ Rating of the Major Types of Impacts on Their Organizations.”) These primarily consist of dealing with loss of revenue, cash flow difficulties, and damage to employee morale, all of which see relatively sudden, quick impacts that are more variable over the short term, with concern dropping significantly after six months.

However, a significant minority of respondents registered concerns about damage to organizational culture and existing core capabilities, as well as the need to develop new capabilities. More than a third of respondents rated the need to develop new capabilities as a very high or severe concern. Unlike the concerns about revenue, cash flow, and employee morale, these were viewed as equally worrisome beyond six months out as they were in the short run.

Interestingly, however, it was junior-level leaders who were much more concerned about capability loss and insufficient capability development for future success than senior executives. (See “Employee Concern for Current and Future Capabilities Across Organizational Levels.”)

Why is this the case? Perhaps top-level execs are more attuned to the bottom line. Perhaps they are less attuned to shifts in the market that will require new capabilities. We can’t reach definitive conclusions, but the gap between the perceptions at the different levels of the organization is in itself something that leaders need to understand and attend to.

Looking for Opportunity in the Midst of Crisis

For several decades, many Western business leaders and politicians have pointed out that the Chinese character for crisis is composed of the symbols representing danger and opportunity. Although it’s a handy story motivationally speaking, it’s not actually true. Mistranslations aside, the basic idea still holds: Most crises create longer-term opportunities as well as threats because they produce rapid, sustained shifts in organizations’ external and internal environments. The implication is that the COVID-19 crisis is likely to generate opportunities to acquire competitors and suppliers, as well as top talent, at a fraction of the price of only months ago. Exploiting these opportunities will, however, require leaders to avoid getting fully consumed by the short-term impacts of the crisis and be willing to take some risks in making investments in a very challenging environment.

Concerning talent acquisition, there are unquestionably many opportunities. Job-loss fears are three to seven times larger in organizations of fewer than 100 employees compared with organizations with over 10,000 employees. The implications for leaders of small organizations is clear: They need to be highly attentive to the insecurity in their organizations.

But the less obvious implication for larger businesses is equally important. While only months ago there was a war for talent, the current, sudden shifts and downsizing happening across industries means new opportunities for recruiting top talent.

The concerns about culture and core capabilities, and the opportunities that the crisis is creating, highlight a key question for leaders: How can you pursue opportunity in the midst of crisis? We are already seeing organizations establish separate postcrisis planning teams. These teams should be responsible for assessing the longer-term impacts and how their organizations should prepare to accelerate out of the crisis, with a year from now being a reasonable planning time frame for emergence. Specifically, they should be asking these questions:

• What is likely to change permanently as a result of the crisis?
• What existing trends is the crisis likely to slow or accelerate?
• Do these sorts of changes create opportunities and/or threats postcrisis that can be capitalized on if we rapidly and effectively pursue the right actions?
• If so, what needs to happen to lay the groundwork to do this?

Of course, capitalizing on postcrisis opportunities should not come at the cost of dealing effectively with the immediate challenges. Companies and leadership teams must focus first and foremost on doing an effective job of responding to the crisis. However, good organizations usually have the capacity to do this sort of parallel processing if they understand how valuable it is. For leaders today, even modest investment in shaping the postpandemic reality could reap huge potential benefits for your organization.

Looking for Opportunity in the Midst of Crisis

COVID-19 and US higher education enrollment: Preparing leaders for fall

A college’s first-year class helps define the student experience and heavily influences the institution’s finances. Higher education leaders are concerned about what will happen in the fall; our latest survey insights can help.
COVID-19 and US higher education enrollment: Preparing leaders for fall

The coronavirus effect on global economic sentiment

Economic sentiment has improved since last month, per our latest survey of global executives on COVID-19 and the economy. Still, their near-term outlook remains more negative than positive.
The coronavirus effect on global economic sentiment

Return: A new muscle, not just a plan

Return is not a phase; it’s a way of operating. A nerve center can help build the capabilities that businesses need in the “next normal.”
Return: A new muscle, not just a plan

Welcome to Disruption 2020

Related Reading

Karen Dillon, “The Original Disrupter,” MIT Sloan Management Review, March 10, 2020.

On April 21, 2020, MIT Sloan Management Review celebrated its special spring issue on disruption, featuring Clayton Christensen's last interview. Paul Michelman, editor in chief of MIT SMR, kicks off the virtual event alongside co-moderator and guest editor Karen Dillon.

Welcome to Disruption 2020