What does COVID-19 mean for business management practices?
In this blog, Rebecca Edwards and Jonathan Cook discuss the role of management practices in supporting businesses’ responses to the COVID-19 pandemic, and the implications for future support as firms adapt to a changing context.
How have businesses responded to COVID-19?
Businesses have experienced significant pressures as result of the COVID-19 pandemic and the associated economic conditions resulting from the government restrictions – including reduced cash flow, limited access to markets and suppliers, and restrictions to operations, to name a few. As a result, companies have been forced to respond and adapt quickly to the changing economic context. In a review undertaken for Innovate UK, we identified six main areas of response.
- Changes to employee working arrangements
- Focus on upgrading and/or using new-to-firm technology to facilitate new/changing working arrangements
- Greater emphasis on risk management and management of business finance
- Changes to business operations/production
- Business pivoting
- Greater online presence/ offer
One key strategic measure, which this blog post focuses on, was to innovate and pivot the business model. This has been important for short-term survival, and for some businesses, will support long-term growth. Examples include the following:
- Short-term, and likely to be temporary pivots, were illustrated by distilleries that started making hand sanitizer gel. Psychopomp, a micro-distillery in Bristol, made 100ml bottles and supplied people with them in return for a donation, as reported in an article by the BBC.
- Adaption of an existing model was exemplified by Deliveroo, which rolled out its ‘Essentials by Deliveroo’ range including convenience items such as cereal, rice, biscuits and tinned goods that can be delivered with no contact. An article by Reuters suggested that this could assist in long-term growth for the company.
- One business that demonstrated a more radical pivot was The Furniture Practice, a contract furniture dealer and consultancy for commercial spaces. In response to the government guidelines to work from home, the company launched a new sister business, curatd., a fully-integrated online platform designed to simplify the selection, delivery and long-term management of furniture. An article published by UK Tech explained that the platform allows companies to better support staff who are working from home. Through a custom procurement platform, employees can purchase or lease pre-approved and fully compliant furniture and equipment for their homes.
What management practices are key for effective responses?
To ensure effective responses to the pandemic, a range of management practices were identified as important. These included: having wide networks amongst business leaders to ensure open-mindedness to new ideas and perspectives; flexibility, including in structures and managing resources; and encouragement of experimentation.
For pivoting and effective innovation, three practices were found to be key. These were based around understanding markets, agile innovation and flexibility.
Scenario planning and market forecasting
Deepening a business’s understanding of its existing customers and opportunities for new markets is critical to facilitating an appropriate business response. The literature highlighted the importance of distinguishing between short-term opportunities and longer-term shifts in consumer preference, with the latter more likely to require strategic changes. For example, businesses may be required to part with products or services (or indeed brands) which have become less relevant, and instead concentrate marketing activities on maintaining relevance to customer preferences (HBR, 2009). For example, an article in the Harvard Business Review described how, during the crisis, Unilever pivoted to prioritise its packaged food, surface cleaners, and personal hygiene product brands over other products, such as skin care, where demand had fallen. The company does not yet know which changes might become permanent. Businesses should be prepared to maximise on market opportunities where this may represent a long-term preference shift, or where it may be possible to create a long-term preference shift (Grady, 2020; HBR, 2009). For example, a blog by Creative England highlighted how Northcoders, one of the UK’s coding schools, pivoted from classroom training in Manchester and Leeds, to offer online classes to students across the UK. This enabled the company to access a larger market, and they are expecting to continue this offer beyond the reopening of their campuses.
Agile innovation in products/services and marketing strategies
Agile innovation, whereby products and services are developed through short design and feedback cycles, is key to meeting changing customer preferences, particularly where there is uncertainty and where contexts rapidly change. For example, in response to COVID-19, agile innovation ensures that businesses are able to react to government restrictions and the changing economic context by continuously adapting products and services to maintain their relevance in the market. Adapting products for digital consumption was particularly important to maintain the existing customer base while broadening reach to new audiences (McKinsey, 2020). For example, many gyms enabled members to access gym classes from home. One example, set out in an article by Fleximize, was Psycle London, which posted live Instagram workouts every day and saved these to their Instagram story, making the workout videos accessible at any time.
Adoption of flexible management structures
The avoidance of rigid and conservative management structures was identified in the literature as important in encouraging business model and product/service innovation (Huang et al., 2013; Doz and Kosonen, 2010). By adopting flexible management structures, businesses can adapt and experiment in specific units of the business, whilst retaining stability in the wider organisation. Through experimentation and review, businesses can identify alternative, viable business models for specific sub-units of the business, or for the entire business. Businesses can also flexibly redeploy resources across business units as and when necessary. For example, in response to the pandemic, the John Lewis Partnership transferred employees from its department stores to its supermarkets to meet customer demand – as highlighted in an article by Frontier Economics.
What does this mean for support on management practices?
We found six key areas where businesses may require external knowledge or support to implement the management practices required:
- Leadership and management skills and support
- Agility in product/service innovation
- Management of flexible resources
- Online products and services
- Agile and digital marketing
- Performance management data and business analytics
Leadership and management was found to be a key focus and was relevant (to a greater or lesser extent) to all six areas in which businesses may require external support. The knowledge and skills at a senior level are crucial in identifying opportunities for pivoting and innovation, facilitating innovative ideas across the business, and ensuring that changes are implemented appropriately, at the right time, to achieve maximum success.
Three key areas were identified in which leaders/managers may benefit from knowledge and skills development:
- Approaches to identifying and tracking opportunities for pivoting or changes in the business model, and how to distinguish between short-term and long-term shifts in customer preferences
- Mechanisms to encourage and develop an experimental, innovative culture across the business
- The use of flexible management structures within the business and ways in which decision-making can be decentralised.
The review also suggested that businesses that implement strategic change most successfully will have an increasing focus on agile approaches, and will be able to use business analytics and flexible resourcing most effectively.