Published: 02 April 2020
Analyst(s): Mark McDonald
The health crisis created by COVID-19 presents unique challenges. Technology general managers need a framework for acting now and making decisions for the future.
A global pandemic touches every aspect of personal, commercial, organizational and economic life. Individuals and organizations can feel powerless to improve their situation.
Public health and personal concerns to protect your people require actions that do not immediately support shareholder value.
Recovery will not happen overnight; leaders need to pace actions in concert with customer and market developments. Leaders need to keep people focused on the now while preparing them for the future.
Uncertainty, future shocks and volatility occur at high levels in a health crisis. Leaders need a way to systematically process disruptions as they occur.
Business plans, strategies and initiatives no longer apply. Leaders must mobilize people and customers to a future vision without fully defining that vision.
Faced with new realities in the COVID-19 environment, you will need to lead your product strategy by adopting new practices and imperatives:
Adopt a phased approach to recovery — keep the organization focused on making measured progress toward immediate goals.
Take a two-track approach: While performing actions in one phase, make decisions about the future phases. This will keep the organization focused on the now while you decide what is next.
Build stronger customer and partner relationships through active engagement and consistent communications.
Reallocate resources, budgets and people to fuel investments in new growth opportunities.
Evaluate and acquire talent, products and companies selectively to capture opportunities — not every company will recover to the same degree.
Guide the organization with an ambition to create a compelling future case that is flexible and adaptive to changing market conditions.
The COVID-19 health crisis disrupts personal, social and business situations. It is unlike an economic recession, technology disruption or other challenges leaders face. Given its unprecedented nature, technology general managers need a structure for leading their company through the crisis.
Each company and industry will experience its own challenges. This four-phase model in Figure 1 offers a framework as a starting point for creating your own way of thinking about how to lead through this disruption.
Figure 1 is not a Hype Cycle. It reflects Gartner research into leadership patterns observed in times of significant change. Leaders in this pattern recognize the reality of the situation, believe in their customers and organization’s future, focus on that future and their ambition, and take action to achieve it. In the context of COVID-19, these phases can be described as:
React and respond — Lasting a few weeks to a month after the initial event. Leaders stabilize the organization and get it working again. In the COVID-19 context, the event was public health requirements to “stay at home,” which required the closure of nonessential business and for employees to work from home. This phase ends as companies reorient to working in the changed environment.
Redirect to new realities — Lasting a few months to quarters. In this phase, customer demand falls as companies seek to control cash and expenses in the face of continued public health closures and crisis. Markets slow down and business opportunities concentrate on current products and customers. Sluggish growth can be expected even when governments lift public health closures as it will take time for companies to adjust. This is the time when aggressive firms may begin to target other companies or products for acquisition. This phase starts once the company’s operations stabilizes. The time spent in this phase depends on the effectiveness of public health, government programs and overall economic activity.
Rebound to the future — Lasting a few months to quarters. Here, business activity begins to shift as the economy recovers. This is most likely tied to relaxing public health restrictions and government stimulus. There is no guarantee that there will not be local or regional outbreaks, but overall economic activity is returning and, with it, customer interest in new solutions and value. This phase starts with increased demand, particularly for new solutions. It can be expected to last from a few months to quarters and it ends when activity reachesprecrisis levels.
Accelerate opportunity—Open-ended and ongoing time frame. This represents when markets recover and grow beyond a return to precrisis levels. Customer demand for new solutions is strong, and investments in new growth opportunities will pay off. Markets are best able to accelerate when the potential for future disruptions due to the health crisis appears manageable.
A health crisis is unique, reaching into every part of our lives. Individual economics, industries or companies will move through the phases due to different factors. Regardless of speed, technology companies will face the actions and decisions described in each of these phases. The final section of this report highlights three scenarios for how companies might experience these phases.
Leaders guide the organization in phases. Research by social and organizational psychologists and medical professionals point out that recovery is a process rather than an event. That process has distinct phases as individuals and organizations work their way through a crisis event and its implications. The phases presented here are based in part on those observations and research. COVID-19’s influence on economic conditions influences how companies move through these phases.
The COVID-19 health crisis is a global humanitarian crisis. It influences economic conditions differently from recessions, price shocks or other disruptions. In general, this health crisis influences a cycle of factors, placing downward pressure on business activity. These forces include:
Increasing uncertainty in society and among consumers. A loss of confidence, coupled with the rising number of cases, fatalities and job losses, places downward pressure on consumer and corporate demand.
Restricting the movement of people. Closing nonessential businesses and stopping events as a public health measure further restrict economic activity for some industries while creatinghyper demand in others.
Declining business activity and cost-saving measures. Public health measures and lower consumer demand reduce business activity and limit the supply of goods and services. This limited supply slows down the speed of recovery as companies have to gear back up to serve recovering consumer and business demand.
Changing public policy. Government public health, fiscal, monetary and regulatory/public policies add another factor in executive decision making.
Lingering uncertainty. Finally, uncertainty remains, with the health crisis influencing future decisions as the likelihood of further regional and seasonal outbreaks remains. Disruptions from future outbreaks cannot be expected to significantly abate without the widespread availability of effective treatments and vaccines.
The world cannot be summarized in a few bullet points, but these forces can be expected to influence business strategies, purchasing decisions and the economy for some time. That is the reason for presenting this model.
The COVID-19 health crisis requires leadership across each of these phases. Leadership is not optional. The following principles apply for leaders and their organizations working across all phases of a disruption:
Focus on people, leading them — not processes or strategies, budgets, or plans. Leaders know that people make things happen. Numbers matter, but people make the numbers. Keep your workforce informed, engaged and skilled to handle the changes required in a disruption.
Confront reality with information obtained from internal operations, external customers, industries and third parties.
Avoid creating either/or decisions that paint a company into a corner. Such binary decisions readily fail in times of uncertainty. Consider creating multiple options, scenarios or conducting premortems to improve success. Favor reversible decisions over one-way options.
Maintain customer engagement. The nature of customer relationships will change, but the criticality of customers is the starting point for every future.
Take action in one phase while making decisions and investments for the next phase. Leaders need to be in two places at once — being here now and having a response to the question, “what is next?”
Communicate frequently in simple, clear, transparent and engaging ways. Leaders mobilize customers and the organization into the future; neither can move forward if you confuse them.
Applying these principles, leaders pursue a strategy for returning to growth in stages. Once a company stabilizes its operations (Phase 1) it focuses on growth in three distinct ways:
Phase 2 growth concentrates on current customers and products. Customer spending is declining as they conserve cash and reduce budgets. This requires getting closer to and into a critical position with customers. The need to survive reduces appetite for and increases skepticism of new products, services or ideas. Use the time to create new solutions for the coming market recovery.
Phase 3 growth strategies reflect renewed customer demand based on new needs. Shape and meet that demand with the new products created during Phase 2. Use them to expand the customer base and your share of customer spend.
Phase 4 growth accelerates Phase 3 growth by expanding the value delivered through intelligent products and services. New solutions should open new markets and customer opportunities.
Figure 2 highlights the areas of focus for the growth strategies in each phase. It is a guide to the details of each phase that follows.
The first phase covers the period immediately after the crisis becomes critical. This began with the imposition of public health restrictions in the case of COVID-19. This phase starts the cycle of significant change as leaders know current conditions are not the “new normal.” Phase 1 persists as long as the level of uncertainty keeps leaders focusing on responding to the initial event/shock. See for additional details.
Leaders pay attention to the feeling that nothing can be done to make the situation better. Organizations must avoid becoming hopeless or pass through this stage quickly — a matter of days — to regain the view that it has the power to improve its situation. This phase can be short-lived.
It is counterintuitive, but leaders should avoid making big decisions during the initial response. This is particularly important for decisions that are difficult to reverse. These include budget cuts, layoffs and deciding which core products will carry you through the crisis. It is not that you don’t know what you don’t know, but many of those unknowns are not accessible to you in the initial response.
Why do you need to wait? Because too much is going on to make a good decision. A health crisis touches everything and everybody personally, socially and professionally. It’s unlike a recession that can be compartmentalized between work and home. Work is now home. At the start, there is not enough good data and too much uncertainty to make high-quality decisions. These issues are important and among the first considerations in Phase 2, but now the focus is on getting into a position to make those decisions and take those actions.
Leaders accomplish this through:
Acknowledging the event, what has happened, its impact on individuals and the organization, and recommitting the organization to protect its people and customers.
Getting the organization back into operation. A shock stuns people and changes the work context. The move to remote working is an example of this action.
Focusing people on what they can do and doing it. Drive out fear with action. Embed empathy into all of these actions.
Freezing decisions, spending and new activities temporarily until operations settle down and leaders can assess prospects with data.
Building a new fact base to update and extend your situational awareness. Reaction will dominate this phase, but it is time to be open to evolving your understanding.
These actions reflect the demands of companies and industries facing negative consequences in the crisis. In the case of COVID-19, industries such as healthcare, groceries and medical devices must cope with spikes in demand that can be just as disruptive.
The response and recovery phase is not the time to make decisions that go beyond now. Critical decisions in this phase include:
Who are the critical customers that you need to engage immediately? What are the immediate customer commitments that you must meet now? How do you mitigate risks and the risk to your customers?
How do you demonstrate genuine empathy and commitment to customers and employees? How do you communicate with sincerity and credibility?
What is the fact base needed to lead beyond the immediate impact? How do you adjust immediate product and revenue plans? How do you raise agility through multioption and reversible decisions?
This phase subsides as the organization begins to improve its situation. It is no longer hopeless in the face of changing events. Shocks will continue and performance may continue to drop, but the organization and its people have their hands at the controls. Once this happens, the organization is ready to redirect its efforts to new realities.
The phase covers stabilization to the initial customer recovery. Company performance, markets and revenue may continue to fall, particularly at the beginning of the phase, which can last anywhere from several months to more than a year.
Two topics head up the leadership agenda. Generating revenue by working with existing customers is one topic. Current revenue generation requires meeting customers where they are in their own recovery. Success in this area requires an emphasis on serving customers with current products and services. Setting the next ambition is the other agenda item.
An ambition expresses the company’s or product’s overall goals. The ambition defines the new core growth opportunities coming out of the crisis. It sets a destination and milestones for achieving those goals. Ambitions are more forward-looking and less detailed than strategies. They allow leaders to go beyond current challenges in deciding about the future. Figure 3 provides an example of an ambition statement.
Leaders need to get the most out of their current products in the current situation while redirecting resources to building future products for the broader recovery. Leaders consider the following actions while in the curve:
Meet customers where they are. Recognize customers’ limited risk tolerance to adopt new solutions as customers cut their budgets. Target customers who are underserved by your competition or are your high-value prospects.
Define the core products and services that will carry you through the crisis. Align resources and investment around them to build the products and services in support of future growth.
Build market relevance by emphasizing the most powerful aspects of your products to change customer perception of product value. Think of it as “refitting” customers’ needs to your product.
Extend agility and efficiency by streamlining operational experience, policies and authorities to make it easier to do business with customers and inside the company.
Upskill personnel to play new roles and work with new technologies. Adjust skill maps, role descriptions and the organization to align with new realities. Consider nontraditional workforce options.
Conserve cash and budget through smarter spending and realigning resource requirements to new realities. Avoid simple cost cutting — that is the path to becoming a zombie tech company.
Be open to accretive product, talent, technology or company acquisitions, particularly if your company is moving through this phase faster than your peers.
Reallocate product investments and operations to invest in new products that will be the source of future revenue. Fund those investments through reducing, deferring or retiring products that have a weaker fit with your ambition.
Repatriate or realign global resources to reduce geographical risk, for example, in sales and support. Prepare for future recurrences of the health crisis, although lightning rarely strikes twice, but viruses are seasonal and regional.
Forge new alliances and partner relationships according to the ambition. These should be increased market access now, so expand the company’s reach for the next set of products, services and value for your customers.
Complete the process by reviewing key performance indicators (KPIs) to ensure they align with revised priorities or define new performance goals and targets.
This is the time for leaders to make big decisions. Start the decision-making process early, formalizing actions because data clarity and facts overcome uncertainty and rumor. The types of decisions made in the curve that set up the next phase — rebounding to the future — include:
Where are customer needs and values expected to be as things improve? Is your current product fit still relevant to those future needs? What product investments are over- or underweighted against what customers will notice and value in the future? What trends and competitive actions will shape the customer’s next expectations?
Where are the opportunities for product/service innovation based on new technology capabilities, business models and channel engagement? What are the new business and monetization models in support of new value propositions and products? What are the new technologies that will become the foundation for future growth and delivery vehicles?
How can you spend smarter, mobilize, simplify the organization and be agile enough to gain advantage in the rebound? Where do you reallocate investment, budget, people and other resources toward future opportunities?
When customer and market realities return to growth, it’s time to shift emphasis to Phase 3. The phase starts as prior product investments enter the market and shape new customer needs. Growing into the next set of customer values is the goal of the rebound. It is the start of the next growth cycle that can last from a few months to about a year, based on how fast customer demand returns and moves to new value propositions. Lifting public health restrictions or the effectiveness of government policies can hasten the start of this phase.
A rebound requires two things: A return of customer demand with a focus on new solutions and companies being able to supply those solutions. The paradox is which comes first?
Leaders cut through the paradox by taking action. Ongoing customer engagement helps create new value statements, messaging, expectations and products. Leaders use stronger customer relationships to influence and evolve customer and market expectations. In this way, and through focused investments, companies seed new customer needs that result in future demand.
Leaders in the Phase 3 concentrate on putting their company into the best position as demand grows beyond recovery purchases. It is no longer time to compete based on the status quo. Customers change their values and thinking. They look for new ideas, innovations or breakthroughs from products and services. Leaders take action including:
Generating demand through messaging to set new expectations of customer value. This establishes new ways of thinking and positions your products against competitors and emerging high-value needs.
Delivering on new expectations with customer outcomes tailored through applied intelligence and delivered through scalable services.
Selectively completing the product portfolio through targeted acquisitions, alliances and partnerships.
Increasing operational resilience and efficiencies in support of new business and revenue models. New value propositions often entail new revenue models, products and services.
Renewing product and service delivery vehicles (cloud, SaaS, services) to scale. This includes expanding relationships and ecosystem-based capacity and capability.
Evolving the ambition, targets and capabilities in response to market response to new value propositions, products and services. Realign the organization and its KPIs as needed.
Decisions in this phase concentrate on expanding and strengthening new sources of competitive advantage and being readily able to move to accelerating revenue in the next phase. These decisions include:
What are the opportunities to enter new markets or acquire customers with new product value? What are the new channels, relationships or activities that give you access to these new markets? How does your value proposition and messaging evolve to gain traction in new markets?
How do you prepare to achieve revenue scale in a cost-effective manner? What is the most efficient way to achieve the required scale? With scale, what are the efficiencies you can pass onto the customer in support of deeper relationships?
How will your operations, relationships and position in the ecosystem change as you achieve scale? How will you use enhanced customer relationships, market share and market power in support of customer value and competitive advantage?
How do you best understand, anticipate and shape market dynamics? What actions raise your market awareness, conversion and selection? How do you work with customers to extend your mutual advantage?
The company competes now with new products and customer value. The pivot to new value reflects a shift in market realities and customer considerations. These set up the final phase of a disruption — accelerating to achieve their ambition.
The customers using new products and services become the basis for accelerating toward your ambition. Expanding new realities to drive revenue is the theme of this phase. This phase is open-ended. It completes the company’s transition to expanded and new business and product models.
Acceleration unlocks new sources of growth and competitive advantage. This is the time when the company raises its growth rates as prior marketing and customer relationships fuel expansion. The following activities dominate this phase:
Stay in front of and continue to shape customer and market expectations of value. Define what you want your customers to become, shaping the customers’ expectations and your ambition for the future.
Focus investments to build upon initial successes, expand your engagement and build sponsors throughout the organization. Setting new standards for customer value, engagement and innovation is the goal.
Invest in the next generation of technologies, information, and insight-enabled products and services. Now that you know what works, move beyond simple expansion into enduring relationships.
Optimize the organization, people skills and processes to support the acceleration and ready them for a new ambition.
How do you enhance your value and position with customers? What are the next sets of needs that will elevate our position in your customers’ value stack. How will you use the intelligence and insight gained from working with new customers to attract and retain all customers?
What is the next level of customer engagement and experience? How can you move from knowing customers to building the mutual confidence to act?
What is your next ambition? How will you move from strength to strength? What is the next source of competitive advantage and how best do you bring it to market?
Acceleration completes the response to a disruptive crisis and sets the stage for the next ambition. The company is in a strong position. It is setting new levels of performance, proving new customer successes, and generating resources for further investment and growth. It is no guarantee of success, but navigating a disruptive crisis gives the organization the confidence to respond to future challenges, whatever they might be.
Each company and industry will recover in their own way. Their individual recovery gives shape to overall economic return to growth. The shape of that return describes different scenarios and movement through the four phases.
U-shaped recovery occurs when economic activity returns following a brief period of disruption. In a U-shaped recovery, firms move quickly through Phases 1 and 2 as the crisis passes relatively quickly and the future is readily understood. U-shaped recoveries are associated with natural disasters or individual disruptive events that have a limited enduring impact beyond their initial disruption.
L-shaped recovery occurs when economic activity is slow to recover. The crisis disrupts economic systems and tests consumer and business confidence. Companies can expect a longer time in Phase 1 and particularly in Phase 2. In this type of crisis, recovery cannot commence until institutional and systemic issues are addressed, often through governmental reforms. Companies enter Phase 3 once reforms happen and as consumer and business confidence increases and demand resumes. Economic activity, however, remains at a lower level than before, with recovery to past levels taking multiple years.
W-shaped recovery, also known as a double dip, occurs when initial recessions begin to recover often following a U-shaped model. The recovery is interrupted by additional factors, such as rising inflation, interest rates or credit restraints that push the economy back into recession. Companies in a W-shaped recovery find themselves either stuck in Phase 2 or tentatively bouncing back and forth between Phases 2 and 3 until a broader recovery occurs.
These are a subset of the possible recovery scenarios involved with COVID-19. Regardless of the scenario, recovery will require effectively handling the immediate humanitarian crisis, reducing uncertainty/fear and raising the population’s resilience to future outbreaks. These actions can lead to recovery as consumers and businesses learn how to handle future disruptions. Longer-term recovery rests, in part, with developing treatments and vaccines that reduce both the severity of the virus and its ability to spread.
The COVID-19 health crisis is a humanitarian crisis. It represents a significant disruption in social and economic conditions. Leading in this type of disruption requires leaders to make decisions and take actions beyond business-as-usual responses.
A health crisis represents a unique type of disruption, one that touches everyone personally and professionally. The job of leaders in times of disruptive change centers around taking appropriate action and making tough decisions to bring the organization forward. This framework provides a starting point for leaders to think through not only what they do now, but also what they need to think about next to achieve their ambition.
“Processing Information During a Crisis,” Centers for Disease Control and Prevention.
J. Goldman-Wetzler. “Optimal Outcomes.” HarperColins. 2020.
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