Business unusual

This moment is a uniquely testing time for us all. The speed at which Covid-19 has spread across the world and the severity of the disruption to the global economy have been unprecedented.

With the pandemic affecting every element of business, from the robustness of supply chains to the stability of the financial markets, the availability of workers and the threat of waning customer demand, organisations are being challenged to manage on multiple fronts.

In the face of this unusually complex crisis, organisations are experiencing stress like never before.

To navigate the uncertainties, businesses need to prioritise policies and actions to make effective decisions to meet different needs. Those that get this right will both weather the storm and lay the foundations for a sustainable future.

The most critical challenge for businesses now is to create a more resilient and adaptable organisation, experts say.

"Adapting to the new business reality will be the biggest and most immediate challenge for businesses," said Matt Young, senior vice-president and head of Asia Pacific and Japan of the cloud computing company Nutanix.

"Covid-19 has created a new normal, which requires businesses to rapidly reassess their entire ecosystem: business, organisation, technology and alliances," he told Asia Focus. "It will take empathy, trust, decisiveness, strategic decision-making and above all, adaptability to succeed and survive. The challenge: there is very little time to do it."

Decisiveness, he says, is the key in planning for the future. Leaders must identify primary revenue sources as this will provide the key set of actions that need to be taken before the recovery starts in full. But while plans and strategies are important, without cash, "none will see the light of day", he stressed.

As the pandemic takes its course, official responses evolve. Direct interventions by local and national governments, such as border closures, business restrictions and new legislation and policies, are having a huge impact.

Now that governments have started to ease lockdown measures, manufacturers need to start adapting to the "new normal", including new safety, sanitation and hygiene procedures. These necessary changes will bring added expenses, coupled with lower anticipated volumes. The result could be tight liquidity even if sales demand strengthens, says the consultancy KPMG.

Many companies, though, may be looking at reduced demand and sales as customers lose confidence and the economic recession begins to be felt.

In any case, manufacturers are going to operate differently, and employees will need to learn new processes in order to adapt. Production efficiency could be affected by distancing measures, while cost of quality will rise because of increased parts handling.

"Manufacturers need to not only focus on operational improvement but also look at their balance sheet to find ways improve their cash flow despite the challenging operating environment," said Charoen Phosamritlert, CEO of KPMG in Thailand, Myanmar and Laos. Effectively balancing these production dynamics while simultaneously managing liquidity will be critical, in his view.

As the business embarks on the restart phase with a weakened balance sheet and lower cash reserves, higher costs and lower volumes present a challenge for management, even more so with many working remotely.

As a result, the priority focus will be on management of capital and resources to support critical product relaunches.

"While operational changes needed to manage the new normal are costly, getting it wrong will be even more detrimental," Mr Charoen said.

"Just one case of Covid-19 could force a plant to shut down. An approach that creates the safest environment for employees while finding ways to innovate and improve processes can create an environment that sets your plant up for success today and into the new normal."

Atsushi Taketani, president of the Japan External Trade Organization (Jetro) Bangkok and chief representative for Asean, said the short-term impacts of the pandemic have included a drastic demand decrease, exacerbated by supply chain disruption. The financial challenges for business are also profound.

"The long-term impacts show a little different picture," he said in an email to Asia Focus. "The demand will come back and people will spend again. But the question is, how will people spend?

"The way we act and consume will change. The biggest challenge for corporations is how they can adapt to this huge change of consumption patterns, which will occur all over the world.

"It reminds me of a famous quote by Charles Darwin that it is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. This seems to imply that even if we are strong and intelligent, we are not adaptable to change."

SMALLER IS BEAUTIFUL

Covid-19 showed that traditional organisational structures and technology were not suited to unpredictable and fast-moving events. As uncertainty becomes the norm, businesses will be required to be as fluid as the circumstances they find themselves in.

To ensure adaptability and flexibility, organisations need to replace traditional centralised management and control with a decentralised, flatter organisation with authority and responsibility devolved to the individual.

The new structure will ensure that as economies, business and customer profiles and demands change, businesses will be equally responsive and able to execute as swiftly as required.

"Thinking and acting like a startup will be the key," said Mr Young. "Whether it is rapidly replacing lost revenue, or adapting to fast-changing customer demands, executing in real time will require traditional large enterprises to adopt smarter and more nimble practices like action over strategy and testing over research."

These changes will provide the foundation to be more aggressive and competitive -- especially as companies get ready for the real fallout from Covid, he added.

Jetro's Mr Taketani agreed, adding that one attempt made by Japanese companies to tackle the ongoing challenges is to divide the organisation into many teams that each have relatively small numbers of people.

"Each group is responsible for its profit and loss. A leader builds a plan and members participate in the planning. Under this system, each member has a sense of responsibility and participation in the corporate planning and operation," he explained.

"Such small groups can more easily change, and a motivated employee can work as a good sensor to a change. A company that consists of such small units, as a whole, can adapt more easily to a change with so many 'sensors' of employees working."

Top-down management may be quicker, the Jetro chief continued, but employees might not have the sense of participation and be less motivated. With bottom-up management, employees might be more motivated, but decision making may be slower, and might not rapidly adapt to changes.

"There is no simple answer to this issue. An organisation has to find a right balance of these conflicting factors by looking at the changing reality," said Mr Taketani.

Gary O'Brien, principal consultant and organisational designer at the global software consultancy ThoughtWorks, agrees that organisations must learn a new type of operating model. Work "packets" will be smaller to maximise early feedback and create more moments for change.

Such a structure allows money and headcounts to be moved frequently within the business toward high-value activity regardless of budgets, he said. It also builds disruption tolerance into operations so that supply chains and workforces can flex as markets and dynamics change. This removes single failure points or dependencies.

"The capability to work in smaller chunks sounds basic and simple but companies are not designed for this," Mr O'Brien told Asia Focus.

"Our cadence for decision-making is largely longer-term, the funding allocations are largely 'one and done' and so they are hard to change after the fact, architectures are designed for stability and to resist change, so frequent, smaller work breaks them.

"So we need to approach investments in smaller pieces of autonomous value, build adaptable architectures that can handle frequent changes and shorter release cycles and create teams where the skills match the work rather than deciding work to match the skills."

WORK FROM ANYWHERE

As the pandemic evolved and remote working became a necessity, the reality of working from home helped many companies realise that employees can be just as productive with remote working. A number of companies have begun to embrace this shift and make flexible working arrangements permanent.

According to Mr O'Brien, a two-year study by Stanford professor Nicholas Bloom showed that the reduction in commuting time and the flexibility of actual working hours led to improved productivity as measured by the amount of time actually spent on high value activity.

"Many are experiencing higher productivity during WFH (work from home) requirements," Mr O'Brien said. "What is actually occurring is people are working more effectively, focusing on the higher-value activity rather than the 'busy' business-as-usual type of work."

But having technology that supports remote working is the first step to take. "This means security concerns are managed, rich collaboration tools and home-based work environments are consciously created to support teams and informal interactions," he said.

"Remote workers still require soft-skill support and to not be isolated from human interaction and creativity."

Mr Young of Nutanix has long been a believer in the "work from anywhere" (WFA) approach. The technology is tried and tested and for the most part available off the shelf, but using it most productively will require a fully decentralised strategy. Employers also need to review related policies and guidelines and ensure redundancy and backup options are available.

"Nutanix has had a WFA policy in place for years. Our staff are familiar with the technology and frequently go above and beyond what is required. We have devolved responsibility, trust and accountability to them, and they repay us with improved efficiency," he said.

"During Covid-19, our staff were able to concentrate on customers because everything else was second nature to us."

Asian companies are also embracing the work-from-home approach to adapt to the new business environment, says David Jou, CEO and co-founder of Thailand-based Pomelo Fashion.

"As the Covid-19 situation evolved and remote working became a necessity, the reality of working from home helped many companies realise that employees can be just as productive with remote working," he said. "We have begun to see a lot of companies embracing this shift and implementing permanent flexible working arrangements."

However, he noted, it is important to have a culture that is open and transparent. "At Pomelo we've been holding monthly town hall meetings through video conferencing as well as encouraging our leadership team to have weekly catch-ups with their teams," he told Asia Focus.

"Work from home implies more independence and freedom for the employee. Crafting a culture and workplace context that empowers the employee to make decisions and execute on projects independently is key to making it work."

Another more practical key success factor, he said, is consistent communication as well as arming everyone with the right tools and resources. Pomelo uses a comprehensive and anonymous employee survey so that the leadership team can identify and address any areas where working from home might be failing.

Citing statistics from the Tokyo Metropolitan Government, Mr Taketani said the ratio of companies in Tokyo that have introduced working from home jumped to 62.7% in April from 24% before the Covid outbreak.

If this trend continues, businesses will need to change the way they manage indispensable infrastructure, with an additional focus on IT security as people will be accessing their systems from many locations.

As well, the mindset and skills of employees and managers will also need to change, while there will have to be constant communication with staff to avoid major disruptions.

"I anticipate that work styles will shift in the future with many more people sometimes working in the office and at other times working from home," he said, adding that employers will need to provide good guidance to managers on how to deal with this new approach.

"This is not just an issue for corporates. Governments all over the world also need to change, and support companies with labour regulation changes, and of course, protecting workers' rights," he stressed.

"Each individual and the whole social system needs to adapt to this new reality of work from home."