What now? Decisive actions to emerge stronger in the next normal. September 2020 Cover images Getty Images: Jetta Productions Inc, RichLegg, Xsandra, Hybrid Images, Klaus Vedfelt, Phil Boorman, 4x6, Maskot, Maria Fuchs, LaylaBird Copyright © 2020 McKinsey & Company. All rights reserved. This publication is not intended to be used as the basis for trading in the shares of any company or for undertaking any other complex or significant financial transaction without consulting appropriate professional advisers. No part of this publication may be copied or redistributed in any form without the prior written consent of McKinsey & Company. What now? Decisive actions to emerge stronger in the next normal Six months into the COVID-19 pandemic, it is time for companies to act, not react. September 2020 Introduction As many business leaders return from a summer that was far from normal, they may be asking themselves: What now? Over the past six months, they have reorganized supply chains, set up remote operations, and made tough financial decisions. But without a COVID-19 vaccine yet available, not much feels different, and the summer pause hasn’t done much to relieve fatigue. One priority, then, is to reenergize the organization—to act rather than react. Even as the COVID-19 crisis continues to create a world of uncertainty, the goal must be to rebuild for the longer term. Companies that are strong and resilient will be better placed to survive and prosper. Those are qualities that can’t be taken for granted; they need to be cultivated. There are many different ways to lead, but regardless of the type of business or geography, we believe that the ten actions detailed here are those from which a path to emerge stronger can be found. Not only do leaders need to act now, they need to act boldly. Previous McKinsey research has found that companies that made substantive changes fared better coming out of downturns than those that didn’t. In this compendium, our latest curated collection from among the more than 530 articles McKinsey has published on the COVID-19 crisis since March 2020, we present a selection of articles related to Reform, the last of the five stages on the path leading from the current crisis to the next normal. The previous four are Resolve, Resilience, Return, and Reimagination. All ten of the actions we describe in this compendium what companies can—and perhaps, should—be doing. But there is a particular sense of urgency now; moreover, there is also a new sense of possibility. What we labeled as “Reform” back in March may now be considered more accurately as the start of a significant Reset. Companies have had to make so many changes so quickly—often with startling success—that leaders have every reason to believe they can do even more. Of course, not every company needs to take all ten actions; conditions differ. But we believe that they cover the range of possible activities that fit with the situations in which today’s leaders find themselves. We start with an idea—that returning is a muscle that needs to be exercised, not a plan to be executed once or a date to be achieved. We go on to more specific considerations, such as the need to make big moves fast and to be willing to rethink entire portfolios, including where work gets done. People management will be critical both in ensuring that workplace learning gets its due and in taking care of people. The next normal may also mean resetting how companies relate to their governments and how they should address environmental issues. Finally, having a sense of purpose knits everything together. Knowing what your company stands for—and living those values—provides a framework for sound and ethical decision making. You can download the other compendiums we curated on the first four stages on the path to the next normal from McKinsey.com/pathbeyondcovid-19. Our entire collection of individual insights related to the next normal is at McKinsey.com/thenextnormal. Kevin Sneader Shubham Singhal Bob Sternfels Managing Partner Senior Partner Senior Partner Hong Kong Detroit San Francisco 2 Contents 1 Think of the return as 5 Make bold 8 Take the lead on climate a muscle portfolio moves and sustainability 5 Return: A new muscle, not just 59 A blueprint for M&A success 95 Confronting climate risk a plan 106 Addressing climate change in a postpandemic world 2 Focus on high-impact 6 Reset technology plans actions 66 Building the vital skills for the 12 The COVID-19 recovery will be future of work in operations 9 Think about the digital: A plan for the first 90 days role of regulation and government 7 Rethink the global 113 ‘And now win the peace’: Ten 3 Rebuild for speed footprint lessons from history for the next normal 21 Ready, set, go: Reinventing the 75 Supply-chain recovery in organization for speed in the coronavirus times—plan for now COVID-19: Strategies for getting post-COVID-19 era and the future 127 ahead of the pandemic crisis From thinking about the next 29 Rapid Revenue Recovery: A road 83 normal to making it work: What to map for post-COVID-19 growth stop, start, and accelerate 10 Make purpose part of everything 133 Igniting individual purpose in 4 Reimagine the times of crisis workforce from the top down 144 The CEO moment: Leadership for a new era 37 Adapting workplace learning in the time of coronavirus 43 Reimagining the postpandemic workforce 51 HR says talent is crucial for performance—and the pandemic proves it 3 1 Think of the return as a muscle 5 Return: A new muscle, not just a plan 4 © Maskot/Getty Images 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.” by Mihir Mysore, Bob Sternfels, and Matt Wilson Return: A new muscle, not just a plan 5 In less than four months, COVID-19 has upended it’s unclear whether once the pandemic recedes, almost all expectations for 2020. Beyond the loss of these customers will return to their old ways or if the life and the fear caused by the pandemic, businesses pandemic will create new types of consumers. around the world have faced disruptions at a speed and scale unprecedented in the modern era. Given these and other uncertainties and the need for experimentation and fast learning to navigate Companies everywhere are now wrestling with the through them effectively, we believe that the next question of how to reach the next normal safely. step in the response of businesses cannot be Many talk about a return to the workplace as a plan thought of as a phase at all. It will be open ended that needs to be implemented: a series of systematic rather than fixed in time. A better mental model steps to reach some kind of stable operating model, is to think about developing a new “muscle”: an in a world where vaccines are adequately available enterprise-wide ability to absorb uncertainty and or herd immunity has been reached. In many cases, incorporate lessons into the operating model these plans suggest a return to some relatable quickly. The muscle has to be a “fast-twitch” one, version of the past. characterized by a willingness to change plans and base decisions on hypotheses about the future— Yet the intrinsic uncertainties that might scupper supported by continually refreshed microdata such plans continue to mount. Executives readily about what’s happening, for example, in each retail admit, for instance, that it is tough to write a deter- location. And the muscle also needs some “slow- ministic return plan because of the likelihood of twitch” fibers to set long-term plans and manage a resurgence, discoveries about how the virus is through structural shifts. transmitted and whom it affects, the nature and duration of immunity, and continued changes in Many companies are trying to hang on until a full the quality and availability of testing and contact reopening, perhaps made possible by a vaccine tracing. The best possible plan today is merely or herd immunity. Meanwhile, they are configuring a strawman that will need near-continuous their resources to be ready by then. That’s risky; recalibration and change. despite promising news from early clinical trials, a full reopening could be many months away—months Another critical uncertainty is the future of remote when companies must adapt to reality if they are to work. Some feel that recent events have driven survive. Already, signs of viral resurgence in Asia a real productivity gain they do not want to lose. are causing companies fixated on plans to rewrite However, they recognize that a wholesale shift to them hurriedly. remote work has had many false dawns. Silicon Valley has experimented with it most extensively, but In this article, we will outline four forces whose after many attempts to implement telecommuting, uncertain outcomes will shape the years to come, as our research found that at 15 top firms, only 8 well as the steps needed to build the return muscle percent of the employees work remotely. These to grapple with these forces—especially the nerve companies do not want to try this again only to roll it center that powers the muscle. Once the center has back in a few years. been built and incorporated into a new operating model across the organization, muscular companies Customer behavior is a third unknown. Companies will be ready for a new era of competition.