CEO mission: lean into the unknown

This is a moment no one expected. To contain the COVID-19 epidemic, economies around the world have come to a halt. Even now, as CEOs try to stabilize their businesses to get through the lock-down—and amid massive uncertainty--there is an urgent need to plan for what may be several quarters of recession and a very different competitive environment on the other side. While this downturn is unprecedented in its speed and severity, there are valuable lessons from previous recessions. The most important: companies that use the downturn to rethink strategy and focus on the future do far better than companies that simply “hunker down.”

How should CEOs move ahead? To start with, they can frame their thinking around two key factors: access to capital and customer inertia—the degree to which customers will stick with a company and follow it when it adds new offerings or goes into new areas. We emphasize the customer connection because of long-term trends that will likely accelerate as a result of this economic shock. For example, apparel makers may need to double down on direct-to-consumer marketing because shopping habits may have changed forever. Access to capital, of course, gives companies a wider range of choices, and CEOs may want to think about what businesses might be sold to fund investment in future strategy.

In the coming months, companies will make difficult decisions about how to cut costs and continue to operate.  Companies that want to exit the recession in fighting shape will make these decisions with an eye to the future—taking strategic cuts rather than across-the-board reductions, maintaining investments in R&D, streamlining and automating processes, etc. We offer a framework for moving ahead, starting with resilience (ensuring the company is in shape to withstand the downturn), recovery (taking steps to weather the recession), and new reality (preparing for the post-recession world).