This article was first published on October 6, 2020.
With more than 50% of the world in lockdown of various forms, a nosedive in global trade, forecasted 3.8% decline in GDP, the covid-19 pandemic has brought an unprecedented halt to normal life. This has led to fundamental changes in behaviour, accelerating many trends that were underway pre-crisis, such as digital adoption, as well as catalysing new changes, particularly around the way we work. These provide an opportunity for a radical refresh, however, the window to realize opportunities is narrow. Additionally, whilst there are opportunities emerging, the crisis is also making change mandatory.
Contracting economic activity, growing loan provisions, and expense increases for additional customer support and resilience requirements are already taking a toll on bottom lines. These headwinds exacerbate existing commercial challenges for financial institutions, from low interest rates to stiffer competition from market disruptors. The crisis has also revealed material vulnerabilities in operating models and supply chains. Taking all these factors into consideration, defining how firms can find growth, efficiency and resilience will be at the heart of rethinking a ‘New Normal.’
Defining a ‘New Normal’ for business operations has implications across strategy, operating model and organizational design. Whilst many responses are not new, for example in technology around process digitisation, or adoption of more scalable, front-to-back architecture, the level of management attention and pace at which institutions are looking to achieve the transformations has changed significantly. Meanwhile, other initiatives such as shifting to hybrid location strategies are a direct consequence of the pandemic. As changes are made to both business model and operating model, it will be essential to completely rethink talent and organization to support the transformation, including how to build flexibility into organizations, ensure the right talent and track and measure productivity.
Whilst we are seeing organizations focussing on specific initiatives, for example accelerating the pace of digital transformation, reviewing branch networks, and exploring remote working models, we have not observed many undertaking a comprehensive back review. This misses opportunities arising from the high degree of synergy and linkage between potential initiatives. That businesses must remodel is clear: those who take time to review the myriad design options and their ramifications as a single, strategic review of the connected whole, will be those who emerge strongest from the crisis.