Half measures won\u2019t work when your company emerges from a crisis.<\/p>\n
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Digital article b<\/strong>y<\/strong>\u00a0<\/span>Kevin Laczkowski<\/span>,\u00a0<\/span>Martin Hirt<\/span>, Justin Sanders, Becca Bauman, and\u00a0<\/span>Keith Martin<\/span><\/p>\n As CEOs look ahead <\/span>to 2021 and develop their\u00a0<\/span>COVID-Exit strategies<\/span><\/a>, one concern looms largest: \u201cHow do we get this right?\u201d, McKinsey spoke with multiple CEOs across industries, geographies, and situations, from companies that are still in survival mode, to those that have regained their footing and are ready to leap, to those that have found ways to thrive during this period of unprecedented adversity. Almost to a person, these leaders spoke about how they are now looking to hit the right trajectory out of the pandemic, and make the right COVID-Exit.<\/span><\/p>\n Like so much relating to COVID-19, \u201cheading for the exit\u201d is not straightforward. Achieving the right trajectory calls for making tough choices, including whether to transition from survival mode to normalcy\u2014or, ideally, to something even better: an \u201coptimized state\u201d for the post-COVID-19 world. How much should your organization pivot, and how fast? Amidst so much tumult and disruption, how far should you go to change your steady ship to adopt faster and more agile approaches? In fact, as we\u2019ve found,\u00a0<\/span>agility and stability<\/span><\/a>\u00a0go hand in hand. If your organization doesn\u2019t move quickly, it will lose balance; the race,\u00a0<\/span>especially\u00a0<\/span><\/i>over the long term, is to the quick.<\/span><\/p>\n All of which begs the question: If you are ready to transform, what does change actually look like? Our research on the\u00a0<\/span>\u201call in\u201d approach to transformation<\/span><\/a>\u00a0illuminates what we\u2019ve found to almost always be the best way forward: full speed ahead. Our\u00a0<\/span>findings from past downturns<\/span><\/a>\u00a0confirm, as well, that companies that take an all-in approach emerge stronger and sustain that competitive advantage for almost a decade afterward. Whether your organization\u2019s transformation should be primarily or equally about portfolio moves or performance improvements misses the point. To succeed, you need to consider both, and your transformations need to go big.<\/span><\/p>\n In this article, we dive deeper into the \u201chow\u201d of a successful COVID-Exit strategy and highlight two organizations that found success by going all in on their holistic transformations.<\/span><\/p>\n Organizations that successfully manage portfolio and performance moves simultaneously in a transformation begin the process by investing in three foundational steps:<\/span><\/p>\n In assessing a business\u2019s full potential, empirical evidence clearly shows\u00a0<\/span>the importance of setting a high aspiration<\/span><\/a>. Our\u00a0<\/span>recent research has shown<\/span><\/a>\u00a0that companies that set gross transformation targets at 75 percent of trailing earnings (or higher) were more likely to create value in a sustainable way.<\/span><\/p>\n As counterintuitive as this may seem, incrementalism is especially risky, particularly for organizations trying to break out of what feels like a COVID-19 perpetual crisis. Management teams seek safety to confront the prevailing uncertainty and, as a result, drift toward the familiar and avoid the discomfort associated with choosing this time to go for\u00a0<\/span>big moves<\/span><\/a>. This might well be your best chance to put the \u201cfull\u201d in \u201cfull potential,\u201d\u00a0<\/span>challenge assumptions<\/span><\/a>, and overcome the social factors that so often block bold moves.<\/span><\/p>\n It\u2019s essential to your transformation that you follow through on the hard questions, particularly:<\/span><\/p>\n As you mind the balance between portfolio and performance moves, you\u2019ll also need to mind the sequencing. In practice, portfolio and performance initiatives need to be complementary\u2014each move must be considered by defining the magnitude of impact, understanding the timing of impact, and evaluating the potential risk of impact.<\/span><\/p>\n Across a large sample of companies, we\u2019ve found that stand-alone portfolio moves capture less than half of the value creation, typically through areas such as performance upside, deal premiums, or by growing new businesses. Even so, stand-alone performance moves still present an opportunity to capture significant upside, although they can take time and may be outweighed by acquiring the wrong businesses if your strategy is ill-conceived.\u00a0<\/span><\/p>\nThree steps toward successfully optimizing for a post-COVID-19 future<\/b><\/h1>\n
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