The Business Building Imperative in the Current Crisis
The global health crisis created by COVID-19 has forced organizations to rethink their sources of revenue, customer relationships, business models, and innovation strategies.
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The global health crisis created by COVID-19 has forced organizations to rethink their sources of revenue, customer relationships, business models, and innovation strategies.
We spoke with Ralf Dreischmeier, the global leader of Leap by McKinsey, to learn how companies can apply business-building strategies during the current crisis. Dreischmeier explains the importance of preparing for the post-crisis period -- the “next normal” -- by putting innovation plans in place today.
Ralf Dreischmeier is the global leader of Leap by McKinsey and a leader of McKinsey Digital. With more than 25 years of experience in offering business- and technology-advisory support, he understands technology-enabled transformation and the development of businesses that thrive. He works closely with executives to develop transformation strategies and take sweeping steps to build digital businesses. He has pursued this goal repeatedly with global banks, international insurers, and leading companies in the media, telecommunications, and technology sectors.
- Business-building during a crisis
- Six archetypes for business-building during crisis
- What is the next normal?
- Advice for business leaders on innovation during crisis
This transcript has been lightly edited.
Business-building during a crisis
Michael Krigsman: During times of crisis, business-building remains an imperative that every senior leader must consider. Ralf Dreischmeier is a senior partner at McKinsey & Company. He is also the global leader of Leap by McKinsey, the firm's business-building capability.
Ralf, why is business building so important today when we're in the midst of this global health crisis?
Ralf Dreischmeier: The crisis itself has created immediate needs for consumers, for us as individuals, but requires some innovative, business building-type thinking. Establishing grocery delivery, establishing e-commerce channels for organizations that haven't done that before, that's something that is needed now in these times and it's needed very, very quickly. We're talking about days and weeks rather than months.
I think the second aspect is that, clearly, there is an element of, this crisis will be over at some point. Having the mindset saying, "What is the next normal?" is also an important element of where business building clearly comes into play.
Michael Krigsman: Innovation remains a fundamental activity today to survive the crisis and then to prepare for what comes next.
Ralf Dreischmeier: Absolutely. Let me give you an example. In one of the European countries, there was a situation where a certain part of medical equipment was not available.
The manufacturer of this equipment, which was actually a valve for ventilators, could not be produced for months. Innovation -- business building -- created a new business around printing these 3D valves so each Italian hospital had now 3D printers installed to print valves and, therefore, enable the ventilators to function.
That is an immediate need. That is business-building. There are absolute necessities that have to happen now and, without those innovations, it will be simply impossible to respond to the crisis.
We've got many examples, whether that's in the healthcare system where, within days, a whole healthcare system switched from a traditional GP seeing patients to now a completely digitized, virtual experience doing telemedicine and the like. I think what we would see is that the emergency needs creates business model changes that, in many organizations, would have thought could never be done or it would have taken years to get them done.
Michael Krigsman: Isn't there a temptation, Ralf, for CXOs, business leaders, to put innovation on hold and focus on the current needs of employees and just staying in touch with customers? In other words, maintain the status quo.
Ralf Dreischmeier: You're right in terms of focusing on the employees as absolutely a really important priority for any organization and any business leaders. Clearly, we have also seen that happening in basically any one of our clients.
However, you mentioned the customer needs. I think, how can you stay in touch with the customer without having a digital channel to reach out to them? Even if you focus on the core of your business, you need innovations in order to actually do exactly that: stay in touch with your customers, keep your supply chain up and running, keep your manufacturing businesses up and running.
Michael Krigsman: What's the shape of business building, the characteristics of business-building during this crisis period?
Ralf Dreischmeier: I think the two or three items that are completely different now and the paradigm shift that we've seen are, one, we need to do it remotely. In the way that we are all at home and having to live remotely, we're also building businesses remotely. That is something that might sound odd but is actually doable and we've done it many times now.
The second thing is, we feel that there is an element of a need for pace, need for speed. That is even more increasing than it had been before. Things where we said you have months we now have to do in weeks. Things that were done in weeks are now being done in days.
Six archetypes for business-building during crisis
Michael Krigsman: You've developed six archetypes for business building during crisis times. What are those archetypes? Why were you thinking about it in terms of this structure?
Ralf Dreischmeier: When we looked at these archetypes, we look at them very much as kind of the first indication of some of the key paradigm shifts that we will see in the next normal. The first one is the remote service provider.
We have so many examples where we've now got a fully digitized, fully remote service to customers, which, in the past, was unthinkable. That's not the traditional retail grocery world. It's also things like lawyers. It's other services that are now moving into a completely remote world and it does work.
That has got such a fundamental shift in terms of B2C engagements that we believe will have a lot of business build opportunities for organizations.
The next one that we've discovered is collaboration platforms. I think these collaboration platforms have many, many more opportunities to create the next normal in many, many aspects of business and of our day-to-day life.
The third one, we describe it as a dynamic talent deployer. This crisis, because it is a crisis across all industries, very different from the financial crisis in 2008 and '09, has created certain situations where some sectors, some industries were really hit hard. Let's take travel. Let's take the airlines.
You have had a lot of airline staff, baggage handlers, who simply didn't have any work anymore. On the flip side, you've got other sectors like the grocers who have got an increased spike of demand. Now, what do you do? You try to redeploy the talent dynamically. People who have handled baggage are now handling groceries.
The fourth one that we've got, we call it a high-touch digital retailer. I think what we mean by that is a little bit of what we see in sectors like the estate and property area. There are some examples in China where developers move, within days, from a clearly traditional, go and see, physical type of engagement model to a completely, 100% remote, digitized one using virtual reality, using robots and drones who will show properties. That business, within two months, increased by about 118%.
The fifth one is data. We call it data visionary. Data has become something even more important in our lives. I think what we're seeing is that both data services that are needed, the epidemic data that we've got that is used by businesses to predict certain trends, that is definitely new.
But also, the personal data that some believe individuals are now more willing to share in order to protect themselves to become more resilient as a society, that has changed as well. The testing, tracing, tracking is a new sector that just didn't exist before but will play a big role going forward.
The last one, we call it the resilient but flexible operation supply chain management leader. What we mean by that is, how can you optimize your supply chain from a cost and productivity perspective but, at the same time, make it very, very resilient?
What is the next normal?
Michael Krigsman: You've used the phrase "the next normal" several times during our conversation. What does that mean?
Ralf Dreischmeier: The next normal is a recognition that we believe things will not go back to the old normal and that there will be a significant shift of things that will change in society and also in businesses. The next normal means that that is the next horizon, which business leaders have to focus on and really reflect on what does that mean for my business? Where do I need to pivot? Where do I need to build new businesses?
In many instances, also, the recognition that a traditional way of transforming to get to the next normal might not be sufficient. Hence, the business building as a new way to create the next normal.
Michael Krigsman: What advice do you have for senior business leaders whose organizations do not have that kind of business building mindset and, today, they're faced with the challenge of addressing the current situation and looking forward to that next normal?
Ralf Dreischmeier: As always, within the executive team, there has to be a belief that they're thinking about the next normal in terms of building new businesses to transform. There has to be a belief that that is part of the strategy.
Secondly, I would expect that, in many instances, actually, the CEO should own the business building agenda and should drive and believe, as part of his or her strategy, the role that business building will play going forward.
Advice for business leaders on innovation during crisis
Michael Krigsman: What advice do you have for organizations that already possess that innovative, business building, cultural mindset? What should they be doing today?
Ralf Dreischmeier: Many organizations do have pockets of innovation and do have pockets of people who can think about the next normal. It's just important that they will be enabled and empowered to do that thinking and are not being restricted in terms of day-to-day work and clearly a day-to-day job that most of them will have.
Michael Krigsman: For organizations that already are actively engaged in business building, how can they best take advantage of the opportunity to change, develop, and evolve even more rapidly?
Ralf Dreischmeier: There's an even greater urgency and need for speed. I think there's also a greater need for more radical, more disruptive, more fundamentally different thinking in order to create real true business model innovation.
Michael Krigsman: Ralf Dreischmeier, thank you very much for speaking with us about this important topic during a difficult time.
Ralf Dreischmeier: My pleasure. Thank you, Michael.
Michael Krigsman: We've been speaking with Ralf Dreischmeier. He is a senior partner at McKinsey & Company.