Has COVID-19 Permanently Changed Business Strategy? What Experts Say
MIT SMR Strategy Forum
The COVID-19 pandemic has had sweeping effects on the way we work, manage, and live our lives. Since early 2020, people have gone from daily commutes to working in their pajamas, entire industries have been upended through government lockdowns, stores have struggled to meet customer demand in a logjammed global supply chain, and millions of people have left their jobs. The changes have been swift, but are they permanent?
For many, including those who have transitioned into hybrid or remote office environments or changed career paths entirely, the answer might be yes. But even if the pandemic has brought many lasting changes to working life, has it permanently changed how companies should think about business strategy?
This was the question we asked our panel of strategy experts from across the globe to weigh in on this month in our 2021 relaunch of the MIT SMR Strategy Forum.
For those who agree that COVID has permanently reshaped strategy, two leading drivers emerge as themes: flexible work and supply chain resilience. As Melissa Schilling, professor at NYU Stern writes, “The response to the pandemic has shown us that we can (and should) be more flexible in thinking about how, where, and when we work together.” Likewise, Erik Brynjolfsson of Stanford University notes that many of the major changes in work arrangements are likely to have lasting effects, including “the use of digital technologies, the geography of work, and the nature of interactions.”
“Work-from-home in the U.S. went from 16% before COVID-19 to over 50% at the peak of the pandemic, spurring big changes in the use of digital technologies, the geography of work, and the nature of interactions. After the pandemic, some of these changes will persist.”
On the supply chain side, many panelists point to the fragility of the supply chain and the lack of robust response and resilience throughout many industries and organizations as an indication that permanent lasting changes to strategy must be underway. As Ivan Png notes, previous natural disasters have been effective case studies in how particular industries and geographies can be affected by crisis, but “by contrast, the COVID-19 pandemic cut off supplies across all industries. All businesses (not only manufacturers) must rethink their just-in-time strategies.”
Olenka Kacperczyk of London Business School says that to gain resilience in uncertain environments, “both strategic and operational agility will gain greater ground across many firms and many industries, even those traditionally operating in less volatile conditions.”
“In times of uncertainty, the ability to adapt is an important source of a firm’s competitive advantage. Therefore, I would expect the pandemic to increase the critical importance of strategic and operational agility. In terms of the former, I anticipate that business strategy will be more frequently used to detect and to navigate unanticipated shifts in the market, such as shocks to the demand of products and services or disruption of established business models. In terms of the latter, operations will have to be reinvented to increase resilience to environmental jolts.”
London Business School
Those who disagree that COVID-19 has permanently changed business strategy (making up 31% of responses) point to the fact that despite disruptions and some permanent changes for workers and businesses, the fundamentals of strategy remain consistent for organizations. As Bruno Cassiman, professor at IESE Business School, puts it: “The principle of creating value and developing a competitive advantage to capture part of this value has not changed.” Lori Rosenkopf of Wharton agrees, noting that while the content of strategy has likely changed, “it’s the role of a great strategist to be anticipating a wide variety of outcomes and building contingency plans.”
“The way that companies should think about business strategy has not changed; processes of strategy formulation and implementation remain the same. Of course, the content of strategy is likely changed, as the pandemic has shifted demand patterns, affected supply chains, and transformed employee desires; some of these changes will be permanent.”
The University of Pennsylvania
Neither agree nor disagree
“Many things have changed permanently — for example, people’s willingness to work at home or to travel, or firms’ perceived need for expensive office space or face-to-face interaction. But these may be better understood as features of the environment, not aspects of strategy. In some sense, the pandemic has just nudged us into the future that has been inevitable since the arrival of the internet and digitization.”
University of Minnesota
Caroline Flammer of Boston University disagrees that the pandemic has permanently affected business strategy (yet) — but points out that it should. As she writes, “the current pandemic is one among several other system-level crises that the (business) world is facing. Others include climate change, social injustice, and poverty, to name a few.” Flammer argues that in order for businesses to remain competitive and address grand challenges, companies need to start making more permanent shifts in thinking and “adopt a system-level approach in their business strategy.”
A common thread through responses, across the spectrum of agreement, is that the forced experimentation of COVID has brought many necessary shifts in business thinking. As panelist Joshua Gans concludes, “The takeaway should be that businesses were doing too little experimentation before.”
Whether the pandemic has fundamentally shifted the practice of strategy, all companies and leaders must be thinking proactively about how to sense and respond to future disruption and answer to the pressing societal challenges the crisis has highlighted.
Dr. Rabindranath Bhattacharya