Even As Covid-19 Rages, CEOs Face More Enduring Crises

Arguably, the pandemic’s biggest impact has been that it exacerbated a set of dire challenges for CEOs that were set in place well before the virus outbreak. Now is the time to act.

The Covid-19 pandemic is, of course, a game changer for virtually every business around the world. Each chief executive and their organizations will have to address the very real issues arising from Covid-19 and the economic consequences of the shutdown itself. They must fix tattered balance sheets, rebuild supply chains, coax customers to come back and address employee safety concerns. But I would argue the pandemic’s biggest impact has been that it exacerbated a set of dire challenges for CEOs that were set in place well before the virus outbreak.

To capsulize these challenges — arrived upon after hundreds of conversations with leaders in politics, business and civil society — I designed a framework called ADAPT, an acronym to represent the preeminent forces acting on the world today, which are causing the systemic crises that leaders confront:

• A(symmetry). Increasing wealth disparity and the erosion of the middle class. As of 2019, 44% of the world’s wealth was held by less than 1% of the world’s population.[1]

• D(isruption). The pervasive nature of technology and its impact on individuals, society and our climate. As technology-driven models transform industries, it is estimated that 30% of UK jobs, 38% of US jobs, 35% of German jobs and 21% of Japanese jobs could be at risk of automation by the early 2030s.[2]

• A(ge). Demographic pressure on business, social institutions and economies. By 2030, the old age dependency ratio (the ratio of people over 65 to those 15-64) in Japan is expected to top 53% and other developed nations are not far behind. This will put increased pressure on working age populations to support the elderly.[3]

• P(olarization). Breakdown in global consensus and a fracturing world, with growing nationalism and populism. Over the last 30 years the number of people migrating to Europe and North America has continued to grow, causing a political narrative in those regions about identity and availability of resources, and leading to support of a more nationalist agenda.[4]

• T(rust). Declining confidence in the institutions that underpin society. According to the Edelman Trust Barometer, the general population of many major countries – including Australia, France, Russia, South Africa, the U.K., and the United States – distrust their national institutions.[5]

Corporations, big and small, are affected by each of these challenges – and each one has worsened since the pandemic began. Indeed, these remarkably acute issues shape the future of every firm directly, by completely changing the context in which we do business, and indirectly, by affecting the institutions that we rely upon to make our societies work.

From my many conversations with CEOs, I also know that a large number of them are uncertain about what to do about these issues. Here are some steps you can take immediately to lead your company through today’s global crises:

• Rethink your entire business model at the same time that you repair the damage wrought by Covid-19. Massive, disruptive change has already been ushered in by the pandemic: use this tumultuous period as a one-time opportunity to prepare for a fast-arriving future. Ask and answer these questions: Is your wage structure and workforce model defensible in a world focused on inequity? Do you have a supply chain strategy that is both agile and robust? Is the business built to compete in a world driven by large technology platforms? Do you have a clear path to net zero carbon emissions? Are you improving trust in your company and the institutions that your company and stakeholders depend upon?

• Reconfigure your organization to uniquely serve each of the locales in which you operate. The Covid-19 crisis and associated concerns about national security and resilience has put even greater weight on moves away from globalization.  As we emerge from the pandemic there will be increasing pressure to localize manufacturing and services from all countries. The world will fracture even further.  For that reason, you should refocus your organization’s structure and attention to tailor activities directly upon the locales in which you operate. Make sure that the political and social institutions in these areas are in sync with what people in the region need to live a good life and be productive citizens – and, if they are lacking, be in the forefront of repairing these shortcomings. Forge relationships that improve quality of life and the surrounding environment. Companies seen as part of the solution will not only reap economic gain and local stability, but also significant brand benefit.

• Think of one or two big things you can do at scale and very quickly that will alter the trajectory of your business for decades to come. Most of the truly remarkable efforts that we have undertaken have been massive, fast and seemingly impossible. The Marshall Plan. The moon shot. Shutting down the global economy almost overnight to contain Covid-19. This may include completely rethinking the relationship between people, real estate and technology in your business and work model.  Or it could be making the change you always wanted to, but felt it was too hard. Others may decide to introduce a whole new set of products or offerings. Whatever the big thing is, identify it and do it – fast.

• Reflect on your own leadership and that of your leadership team. To deal with the crises effectively a new leadership model is necessary, one that requires leaders to be adept at balancing attributes that seem quite at odds with each other. We need to be astute students of technology, but also know a lot about human systems and how they work. Leaders must have the heroic courage to take action when a problem is ambiguous and the right answers not obvious, and the humility to engage others and correct course when our decisions are wrong. We must be deeply committed to the purpose and core principles of our organization, but strong innovators capable of reimagining our companies from top to bottom. Most of us have been given the advice to play to our strengths. The future will require us to be able to shore up our greatest weaknesses.

Each of these steps is complex and requires persistence and high levels of engagement by CEOs. There is a good reason why wage asymmetry or localization or massive and fast efforts have not generally been undertaken; they are difficult and often painful for the organization and its leaders. But it is, in fact, ten years to midnight and time is running out to deal with the most critical issues we face or we will be confronted by ever deepening crises that will ultimately be beyond our ability to address. That perhaps sounds dire; yet, for those who act with urgency and seize the opportunities in front of them, it will be possible to design a new dawn. The stakes are simply too high for you not to.

 

[1] Credit Suisse Global Wealth Databook, 2019

[2] PwC UK Economic Outlook March 2017

[3]  United Nations, World Population Prospects: The 2019 Revision.

[4] ibid.

[5] 2020 Edelman Trust Barometer, https://www.edelman.com/trust barometer