lessons arising from the global virus crisis · constantly rising qualities of life ... however,...

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Business Model Design • Process Improvement • Change Management

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Lessons arising from the Global Virus Crisis

Bevington Resilience Series

June 2020

US, Australia and NZ patents apply to XeP3, Canadian patents pending© Copyright Bevington Group. All rights reserved.US, Australia and NZ patents apply to XeP3, Canadian patents pending© Copyright Bevington Group. All rights reserved.US, Australia and NZ patents apply to XeP3, Canadian patents pending© Copyright Bevington Group. All rights reserved.

❑ Bevington Group is a specialist productivity services provider with deep expertise in Operating Model Design and Process Reengineering

❑ In response to the COVID-19 crisis (or Global Viral Crisis) the Bevington Group has prepared an initial series of six webinars to provide valuable management and leadership informationon the response

❑ All the webinars reference leading research and practice

❑ The webinars in the series are

1. Strategies and tactics for turbulent times (introducing the core concept of a “Balanced Response”)

2. Short-term actions that can be taken to get you through the crisis

3. Restructuring for cost and capacity

4. Productivity improvement for cost and capacity

5. Organisational resilience theory and practice

6. Lessons arising from the Global Virus Crisis

7. Personal resilience and leadership

❑ Each webinar is supported by materials published at www.bevingtongroup.com under the Articles tab

The Bevington Resilience series – An overview

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http://www.bevingtongroup.com/


❑ Markets are suffering, the world is in a state of high anxiety, supply chains are being disrupted and many companies are already being driven into deep losses

❑ In short, we are in the middle of the most extreme economic turbulence or our lifetimes. At the same time, many of our loved ones are at risk. Yet now, more than ever, we need to take rational and disciplined actions

❑ In an earlier article and webinar* we have described a "Balanced Response”, which considers research on learnings from the GFC, and recommends the best approach for responding to such an extreme scenario

❑ Subsequent presentations provided practical advice on some early actions you might take, before moving promptly on to structure and productivity improvement methods for both cost management and capacity creation

❑ The latter presentations focus on the critical topic of resilience, at an organisational and personal level, looking at how we can prepare our businesses and ourselves for known scenarios and best adapt to unexpected events (as we are all dealing with now)

❑ However, today we will consider the important question of what lessons can already be learned from the GVC, even though it may be far from over

The series should be taken in context of the “Balanced Response” described in the first webinar on “Strategies and tactics for turbulent times”

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* Visit www.bevingtongroup.com/articles or search for “turbulence” from our home page

http://www.bevingtongroup.com/articles


Many of the themes discussed today relate to two key messages from our last webinar on resilience

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Fortifying the organisation Increasing organisational adaptability

This is done in a similar way to that considered for specific risks but now you

are thinking about much more generic strategies such as having reserve cash -

because money buys you time

When faced with an unexpected challenge the organisation can develop and

implement plans to survive, even thrive –agility and adaptability are forms of

resilience


❑ In a world with such tight connections and so many people and systems – the unexpected willeventually happen – these are the long tail or low probability “black swan” events

❑ Strangely, it often seems obvious that there was a problem – but only after the event

❑ So, in this world, resilience becomes as important as many factors

▪ Efficiency

▪ Constantly rising qualities of life

▪ Discretionary activities (such as overseas holidays) etc

Our first lesson is that, in a complex world, the unexpected will eventually happen

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Reference: Taleb, N. (2007). The Black Swan: The Impact of the Highly ImprobableGraph: https://theoryofinterest.blogspot.com/2017/01/the-outside-context-problem.html


Such resilience thinking is all the more important give we have been made painfully aware of fragilities in our systems

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Our way of life was, and perhaps still is, supportive of

rapid transmission of viral material

We have become somewhat reliant on goods and services from

offshore (not all of this is bad)

Our internet services are good in some places and

desperately lacking in others

When children cannot go to school it threatens the ability of

critical workers (who are also parents) to do their jobs

Many of our universities have material financial

fragilities

We have millions of people who are vulnerable to entertainment and hospitality industry collapse


There have been pleasing “agile” responses we have all seen

❑ Politically - We built a national cabinet

❑ We managed to work from home (mostly)

❑ We organised testing clinics in car parks

❑ GP and psychologist appointments were held digitally

❑ Other face-to-face services such as financial planning switched to “work from home”

❑ Waiters became “home delivery” specialists.

❑ Our supply chains (domestic) kept up

❑ We started to collect and analyse better data

❑ We moved rapidly to support vaccines

❑ We accelerated our operating model changes! (Just over 70% of our clients have accelerated changes)

Yet, we should not be complacent

❑ If we had an early peak we would have had a medical supply problem

❑ Some offshore service and contact centres failed or had large service standard impacts

❑ It took too long for us to change some of our rules and practices – e.g. gaps in practice related to the Ruby Princess

❑ We didn’t always redirect redundant services to higher priority activity (e.g. school buses arriving daily at an empty school)

❑ We still have cumbersome business-as-usual planning processes (unless directly related to the GVC response)

❑ While many businesses have done well, others are struggling to collaborate to get to the next phase of recovery planning (meeting emergent customer needs and growth planning)

Fortunately, we have a level of agility that has surprised many managers

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We learnt that many of our limits had in fact been self-imposed – just look at what we actually did (and could have done at another time!)

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We have seen massive shifts of employees into different roles

We have seen long-delayed changes deployed in weeks rather than years

We have moved years up the technology adoption curve in one fell swoop

We have gone paperless

We have rapidly on-shored services

We have changed our manufacturing outputs

We have found ways to get great support and help from one part of the country to another without leaving home


We have seen better State and Federal collaboration

Yet we have learnt that we can collaborate in surprising ways

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We have seen government agencies share personnel

We have broken down silos in our businesses to work together to save jobs

We have phoned each other to check we are okay

We have worked flexibly to help each other out (actually productivity is being reported as materially higher in most of our clients)

When Christian met Sally

Christian Porter (Industrial Relations Minister) and Sally McManus (ACTU Secretary) met in the early days of the

pandemic – critical to finding a workable approach to the

major reforms for the IR landscape needed to help

protect the economy


We have learnt that behavioural change is possible with the right incentives

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✓ We have stopped hand-shaking

✓ We have social distanced

✓ We have improved our hand hygiene

✓ We sneeze into our elbows

✓ Some are covering their mouths with face-masks when they have a cough (thank-you)

✓ We are disciplined in meetings

✓ We have sometimes not got (fully) dressed!


We have also found ways to be more productive

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❑ HOWEVER, working from home with young children has been a real challenge for many

❑ OTHERS have had mental health issues with the lock-down

Working from home simply saves time

For many, certainly not all, home is quieter

It reduces the potential for other forms of sick-

leave

It can both build and/or damage home based

relationships

There may be a genuine desire to do more to

help

Some meetings may be more efficient

We are interrupted less at home


If we want to stay agile, we need to plan to do so, because we still don’t know what is coming next

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01

02

0304

05

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Geopolitically the world is increasingly tense

We still don’t know if a second outbreak will

happen (or third or fourth)

We don’t understand the responses of populations to this crisis (what are

the political implications?)

These only add to other uncertainties that were already

present

We don’t know the implications for solving other problems

We don’t know how long the recovery will take


The major Christchurch earthquake of 2011 demonstrated that the agility of collaboration can return to the ossification of silos

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Systems thinking addresses the reality of “interconnectedness” e.g. economic system, health system, transport system, agricultural system

A “system” needs 3 parts Systems thinkers understand

Fortunately, many of our leaders are now closer to being real “systems thinkers”

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✓ The importance of multiple perspectives (simple cause and effect is insufficient)

✓ “Normal” is often a “balance” which can be easily disturbed

✓ Responses can be delayed and non-linear

✓ The underestimated importance of connections

✓ That an outcome can have many causes

✓ How unexpected consequences can arise in tightly connected systems

✓ That the more tightly connected the system the faster transmission happens

✓ That feedback loops are important

✓ That reinforcing feedback loops can quickly drive the system out of control

✓ That time-lapse data helps us to understand

Elements

Purpose

Interconnections


Systems thinkers are on the lookout for virtuous and vicious cycles – these can happen in any "system"

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Households & businesses

reduce spending

Credit tightensBank losses

increase

House prices decline &

delinquencies increase

Credit loosens

Household & businesses

increase spending

Asset prices rise &

delinquencies decrease

Bank losses decrease

Vicious cycle Virtuous cycle


❑ Over-claiming on Job-Keeper

❑ The introduction of moral hazards

❑ The 'punishment' of retail shareholders during capital raisings

❑ Keeping critical care workers at home when closing schools

❑ Reduced capabilities when we rush to cut costs too hard

Similarly, we have become increasingly aware of unintended consequences

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We now know that operating models have to be resilient not just efficient

What is an Operating Model?

▪ Operating Models answer the big

questions in how organisations are

organised effectively

▪ An Operating Model is the combination

of roles, skills, structures, processes,

assets and technologies that allow any

organisation to deliver on its service or

product promises

▪ It is in effect the way the organisation is

set up to deliver VALUE – both in terms

of the customer and in terms of the

business

Customer

Process design Role

design

Metrics

Information

Technology

CoreFunctions

StructureGeography

Culture

Mgmt. discipline

Workforce capability

Sourcing

Policy

Customer


Operating models which are fragile tend to have common attributes

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Tightly bound systems

e.g. processes that have no ‘plan B’ capability

Outsourced and offshored critical services

without a backup (or matched) capability onshore

No ability to rapidly change systems

Long and inflexible service contracts

No optionality built into the business or operating model

Heavy reliance on narrowly trained personnel

e.g. cross-training weakness

No ability to adapt automated workflows

No ability to scale up or down

e.g. fixed workforce, bandwidth, technologies or

critical supplies

Tightly integrated supply chains

e.g. no route alternatives or safety stock

Heavily centralised functions

Heavily bureaucratic processes

e.g. multiple signoffs and decisions by committee


Organisations are changing their models as we speak

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Some typical changes – Business Model and Operating Model

The results may depend on speed

❑ Restructuring (e.g. for greater role clarity or for new models such as agile operating models)

❑ Virtual centralisation for resource levelling and resilience

❑ Virtual service offerings

❑ Rapid digitisation and faster data science deployment

❑ Re-shoring (partial or full)

❑ Changing footprint

❑ Exiting markets / Entering markets

❑ Consolidation – e.g. merger activity enhanced

❑ Rebuilding customer propositions

❑ Wholesale cost re-baselining

❑ Changes in metrics to focus on the mission and leading indicators

❑ Some markets will be more competitive

❑ The winners are likely to be those who can quickly

▪ Implement required productivity changes

▪ Sense the market's needs

▪ Respond with meaningful propositions

▪ Distribute flexibly

❑ In other words, quickly follow the four steps of a “Balanced Response”

▪ Adjust costs

▪ Move to productivity actions

▪ Plan for growth

▪ Adapt for changing customer needs


So, we have learnt a great deal…

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In a complex world – the unexpected is in fact inevitable

Building agile (as well as fortifying) is important

We have shown that our reluctance to change might have been self-imposed

We have shown that we can change our behaviours

Many leaders have become “systems thinkers” – this is a good thing in a highly connected world

The world is a more volatile and fragile place than we might have assumed

We have shown that we can be agile

We have collaborated in many different ways

Yet to stay agile we need to make a conscious decision to do so

We now understand that resilience is a critical consideration in any operating model design

❑ MOSTLY we have learnt that we are more adaptive than we thought – the question is, how can we keep, then use, our new superpower?

❑ Is conscious human adaptation something that improves with practice?


Now let’s use it wisely

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Contact details and disclaimer

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Contact points for any questions or clarification of the content of this report can be directed to:

Report authors

Roger Perry +61 3 9663 5522 [email protected]

Jan Kautsky +61 419 432 404 [email protected]

Other enquiries can be directed to

Bevington Group Office

+61 3 9663 5522 [email protected]

Bevington Group is a specialist consultancy providing the following services:

This report has been prepared in good faith on the basis of information provided by client staff and other sources of information available at the date of publication without any independent verification. It is the responsibility of the client management to ensure that their staff provide accurate information and that management are not aware of any issues that may impact the usefulness of the data for its intended purpose. Bevington Consulting Pty Ltd does not guarantee or warrant the accuracy, reliability, completeness or currency of the information in this report. Readers are responsible for their interpretation and actions based on the content of this publication. Bevington Consulting will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person or organisation using or relying on information in this report for purposes other than its intended purpose.

Disclaimer:

mailto:[email protected]



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