Coronavirus: Five strategies for industrial and automotive companies
To rebound from the coronavirus pandemic, industrials must undertake a journey that begins with resolve and ends with fundamental reform.
By Joe Dertouzos, Heike Freund, Michael Mischkot, Asutosh Padhi, and Andreas Tschiesner – We are still in the early stages of a global health crisis resulting from the coronavirus pandemic. Protecting lives is the first priority, but we must also protect our livelihoods. For automotive and industrial companies, surviving and emerging stronger at the far end of this crisis will require thinking beyond the next fiscal quarter. Success in the long run will require a journey across five stages: Resolve, Resilience, Return, Reimagination, and Reform.
The first stage, Resolve, involves determining the scale, pace, and depth of action required. To do so, companies in advanced industries must take the following steps:
- establishing a nerve center to steer the organization, serve as the information hub, manage risk and responses, and align all stakeholders
- protecting employees by making their health the paramount concern and adjusting production as needed
- screening and safeguarding the supply chain by understanding risks and taking action to address disruption
- adapting marketing and sales by identifying and mitigating the risks of declining sales while meeting critical customer needs
- maintaining financial health by improving liquidity, reducing costs, and establishing a spend control tower
During the Resolve phase, companies must also make difficult choices, such as suspending production facilities, suspending discretionary spending, and furloughing workers. These decisions will require a comprehensive understanding of the situation, including data-driven scenarios for market evolution.
Consider the automotive industry. It is difficult to predict how the pandemic will affect sales in the European Union and the United States, two regions where coronavirus penetration is still emerging. We draw insights about potential developments by looking at the evolution of auto sales in China over the first quarter, since this country has already “bent the curve” and begun to recover from the coronavirus.
As industrials experience virus-related shutdowns and economic pressures, they should move quickly to address near-term cash management challenges and broader resiliency issues. more>
Posted in Business, Economy, Education, Healthcare, History, How to, Nature, Science, Technology
Tagged Business improvement, Earth, Financial crisis, Health, McKinsey, Pandemic, Skills
We’re not going back to the ‘normal’ we had before coronavirus
Our global managing partner Kevin Sneader joined Andrew Ross Sorkin on CNBC’s “Squawk Box” Wednesday, March 25, to talk live about the business implications of the coronavirus pandemic. The full interview is available now at CNBC.com. You can read all of our material on the crisis at our coronavirus insights page.
By Kevin Sneader – One thing is clear from all the conversations I’ve had: nothing is going to be the same. This is a new normal, a different way of operating.
I think for our clients, they’re worried about their employees, their customers, and cash—in that order. And they are worried about cash. Even in the health care sector, there are providers who are not getting paid right now, and they’re worried about cash flow just as players in several other sectors are.
Another reality they’re all dealing with is that people keep sending them scenarios as to how this could play out. The message we’re hearing is that the scenarios are helpful, but leaders are wondering what’s going to be true across all these scenarios. Because if it’s not going back to the way it was before, what’s the next normal? What’s the way in which we’re going to have to operate?
The reality is that consumer behavior is changing fundamentally, and so much else is changing, and the question is, “will it go back?” I think the answer in many cases is “no.”
If you think about a lot of what’s happened in the last few years, some of it’s going to be reinforced. The shift [to working] online has now been given a boost, and it’s hard to see that being taken back to where it was before.
At the same time, I think one of the biggest shifts will be the way that products reach us. For many years, we and others have been focused on efficiency: how efficiently can I run my supply chain? I think now there’s going to be a lot of conversation about, how resilient is my supply chain? more>
Posted in Business, EARTH WATCH, Economic development, Economy, Education, Healthcare, How to, Nature, Science, Technology
Tagged Business improvement, Health, Internet, McKinsey, Pandemic, Skills, Supply chain, Technology
How to restart your stalled digital transformation
Most digital initiatives sputter before they take full effect. A new survey finds that organizations stand a good chance of recovering lost momentum because slowdowns typically happen for reasons within their control.
McKinsey – At organizations pursuing digital transformations, more than seven in ten survey respondents say the progress of these efforts has slowed or stalled at some point. In the latest McKinsey Global Survey on the topic, we set out to understand what organizations can do to prevent burnout or to restart their engines if burnout occurs during these transformations, which previous research has found have a lower success rate than do more traditional transformations. The good news is that in most cases, organizations can prevent or overcome a loss of momentum.
More than 60 percent of respondents who report stalled digital transformations attribute the problem to factors that—with the right discipline and focus—organizations can control in the near term to medium term. This finding runs counter to widespread assumptions that external pressures, such as market disruptions or regulatory changes, pose the biggest threats to digital initiatives. More commonly reported sources of derailed progress include resourcing issues, lack of clarity or alignment on a company’s digital strategy, and poor quality of the digital strategy to begin with.
If a digital transformation stalls, the results suggest that organizations can regain momentum by implementing rigorous change-management and internal-communications programs and clarifying the transformation’s projected impact, which can help build alignment and commitment. For scaling digital programs beyond the pilot phase—the first stumbling block in a transformation’s execution—clarity on the time frame and expected economic impact is important, as is partnering with operations. Should an intervention be needed to reenergize a transformation, having the CEO step in appears to be advantageous. Further lessons come from respondents at companies that avoid stalling in the first place. They often say their organizations maintain momentum by obtaining strong alignment and strategic clarity before a transformation gets under way. more>
Posted in Business, Economic development, Economy, Education, How to, Net, Science, Technology
Tagged Business improvement, Capital, Digital transformation, McKinsey, Productivity, Skills
Resilience in transport and logistics
The transportation-and-logistics sector is especially susceptible to economic shocks. Here’s how to prepare your operations for a smoother ride.
By Sal Arora, Wigbert Böhm, Kevin Dolan, Rebecca Gould, and Scott Mcconnell – The transportation-and-logistics (T&L) sector has benefitted from many of the most important business trends of the past half century. Globalization, the evolution of sophisticated just-in-time supply chains, and the rise of e-commerce have all helped the sector grow at a rate broadly similar to the overall economy.
But it hasn’t all been smooth sailing. Economic downturns tend to hit the sector particularly hard. Our analysis of the past five US recessions shows that T&L companies suffer more on average than the economy as a whole. And in recent cycles, the problem may have worsened. Truck transportation, for example, experienced little contraction in the recessions of 1980, 1982 and 1991. In 2001, by contrast, the industry shrank by 6 percent, and the 2008 recession triggered an 18 percent contraction.
As in all industries, sector averages don’t tell the whole story. Some companies ride out downturns much more successfully than others. When McKinsey analyzed the performance of around 1000 large, publicly traded companies through the 2007-2008 global recession, we identified a subgroup of “resilient” organizations that outperformed their peers by a significant margin over the cycle. The performance of these companies dipped less overall during the recession and improved faster during the ensuing economic recovery.
By 2017, resilient companies had delivered a cumulative total return to shareholders (TRS) that was more than 150 percent higher than their non-resilient counterparts. Among the logistics and transportation players in the study, the gap was even starker, at 267 percent. more>
Posted in Business, Economic development, Economy, Education, How to, Science, Technology, Transportation
Tagged Business improvement, Manufacturing, McKinsey, Resilience, Skills, Technology, Transportation and Logistics
Skill shift: Automation and the future of the workforce
Demand for technological, social and emotional, and higher cognitive skills will rise by 2030. How will workers and organizations adapt?
By Jacques Bughin, Eric Hazan, Susan Lund, Peter Dahlström, Anna Wiesinger, and Amresh Subramaniam – Skill shifts have accompanied the introduction of new technologies in the workplace since at least the Industrial Revolution, but adoption of automation and artificial intelligence (AI) will mark an acceleration over the shifts of even the recent past. The need for some skills, such as technological as well as social and emotional skills, will rise, even as the demand for others, including physical and manual skills, will fall. These changes will require workers everywhere to deepen their existing skill sets or acquire new ones. Companies, too, will need to rethink how work is organized within their organizations.
his briefing, part of our ongoing research on the impact of technology on the economy, business, and society, quantifies time spent on 25 core workplace skills today and in the future for five European countries—France, Germany, Italy, Spain, and the United Kingdom—and the United States and examines the implications of those shifts.
- How will demand for workforce skills change with automation?
- Shifting skill requirements in five sectors
- How will organizations adapt?
- Building the workforce of the future
Over the next ten to 15 years, the adoption of automation and AI technologies will transform the workplace as people increasingly interact with ever-smarter machines. These technologies, and that human-machine interaction, will bring numerous benefits in the form of higher productivity, GDP growth, improved corporate performance, and new prosperity, but they will also change the skills required of human workers.
To measure skill shifts from automation and AI, we modeled skill shifts going forward to 2030—and found that they accelerated. While the demand for technological skills has been growing since 2002, it will gather pace in the 2016 to 2030 period. The increase in the need for social and emotional skills will similarly accelerate. By contrast, the need for both basic cognitive skills and physical and manual skills will decline. more>
Posted in Business, Economic development, Economy, Education, How to, Technology
Tagged Broadband, Business improvement, Jobs, McKinsey, Skills, Technology
Nudge, don’t nag
With such a fine line between a nudge and a nag, it’s important to acknowledge and understand the subtle differences between the two.
By Bill Schaninger, Alexander DiLeonardo and Stephanie Smallets – In recent years, nudging has been hailed as the latest trend in HR and a novel, new scientific management approach. And for good reason: using nudges has improved everything from customer retention and employee safety to organizational commitment and innovation.
When nudges are executed with care, they have remarkable results. However, in many cases there is a misconception about what a nudge actually is – organizations often launch initiatives that either miss the mark or are just reminders in disguise. When that happens, the nudge is actually a nag, and it risks losing its impact and becoming downright annoying. What can you do to ensure you’re using nudges and not nags?
If your nudges check the three boxes below, you’re well on your way.
Before we dive into what makes a good nudge, it’s important to note what a nudge is. According to Harvard professor Cass Sunstein and Nobel prize winner Richard Thaler, a nudge guides choice without removing options or changing incentives. It’s like leading a horse to the water and framing its options such that the horse is empowered to and actively chooses to drink it – rather than eat the grass or lay in the sunshine.
It’s also just as important to highlight what a nudge is not. A nudge is not a reminder to do something, nor is it a call to action. Nudges aren’t mandatory and they don’t have consequences. If you’re constantly reminding or commanding the horse to drink, it’s not a nudge. It’s also not a nudge if the horse isn’t brought to the water the next day for forgoing the water the day before.
A good nudge is all about choice. At its core, nudging is all about choice. The reason why nudging is so impactful is that it gives people control over their destiny: They can choose whether or not they proceed with the “desirable” option.
A good nudge is easy to follow. Good nudges are easy to understand and empower people to be well-informed. Providing irrelevant, complex or confusing information is difficult to process and can make people feel like they were hoodwinked into making the choice.
A good nudge is personal. By far, the best nudges are those that use technology and analytics to tailor them to the audience. Nudges that take into account individuals’ mindsets, preferences and behaviors ensure that the most desirable option overall is also the most desirable option for that specific individual – a true win-win. more>