The main strategies and priorities of CxOs post the crisis

Digitalisation, cost improvements and reinventing the work structure are top of mind for CxOs post the Covid-19 crisis, according to a new report by Horváth & Partners.

The German management consultancy surveyed more than 200 CxO executives across more than six countries, taking the comprehensive approach of drawing in-depth interview responses from each participant rather than one-line survey answers. The qualitative approach yielded more insights into the issues and strategies that are in focus for executives under today’s unprecedented circumstances.

CxOs were asked about their expectations of economic development post the crisis, as well as the present challenges, their priorities over the long term and expectations for their specific industry. Interestingly, although most are aware that the current challenges will persist over the medium to long term, many have a clear idea of where they want to focus in the “post-corona agenda.”

For one, Horváth & Partners found that digitalisation across functional areas is top of the list for two-thirds of CxOs – an outcome that can be attributed to the reliance on digital infrastructure during the crisis. Many European businesses were dragging their feet with regards to digital investments before the crisis, until virtual working and the need for agility under the circumstances spurred them on.

With accelerated digital agenda’s, most are now looking to take an integral approach to digitalisation and extract maximum potential from their tech investments. Ramping up investments aside, many are also tweaking their digital portfolios in favour of value generation, which leads into the next item on the agenda – cost cutting.

No doubt, the crisis and the resultant recession has put a strain on cash flows for many a business. Cost cutting has been an immediate crisis response. However, Horváth & Partners found that business leaders see cost cutting as more than just a reactionary measure, with many looking to reinvent their cost structure to generate long-term benefits.

Third on the priorities list is a change in working structure. For businesses that have managed to sustain operations in the virtual space, the crisis has been an eye-opener in terms of remote working potential. Many have realised that there is a tremendous saving opportunity here, as remote collaboration tools minimise the need for office and travel costs, among others.

Horváth & Partners points out how this can be a “win-win” situation for businesses and employees, as the former has the chance to save costs while the latter benefits from a more flexible working arrangement and learning the skills required to sustain the same.

Other priorities

So digitalisation, cost-cutting and reinvented work structures are the top priorities for most businesses in the medium to long term. The firm found that this is largely consistent across all sectors, with minor variations based on the nature of the business and the immediacy of the pandemic’s impact. Other priorities include a focus on improving liquidity – in preparation for future revenue shocks – as well as realignment of strategy with operational models, a focus on sustainability, and an improvement of risk management mechanisms.

At the other end of the spectrum, the issues that fall at the bottom of the list for most businesses are mergers & acquisitions (M&A), changes to the supply chain, and price adjustments. The attitude to some of these is more surprising than others, according to the authors.

When it comes to M&A and divestments, CxOs are understandably hoping to tide over the crisis with a focus on managing cash flow, while M&A is – despite divestitures being part of it – still regarded as a growth strategy. Similarly, the approach to managing profits is mostly focused on changes to the cost structure and investing in technology, which makes pricing less of a focus area.

What is most surprising in Horváth & Partners’ study is that CxO’s indicated minimal disruption to their supply chains from the crisis, which is contrary to what many experts have expected to be a direct fallout from lockdowns across the globe. As a result, supply chain adjustments have fallen lower down the list of priorities. That being said, some reinvention of supply chains is planned, although these are mostly motivated by other factors than the crisis, according to the firm.

Underlying all these priorities is a focus on efficiency. Horváth & Partners reports that most businesses expect a ‘U-shaped’ economic recovery, expecting things to get back to normal by 2022. While many have taken steps to ensure business continuity during the crisis, businesses are also positioning themselves to be strong competitors once the economy hits its stride again. 

“We strongly believe that managers should seize opportunities from the Corona crisis, both through acute crisis management activities in adjusting cost and profit structures, as well as a clear focus on long-term strategic developments such as targeted digitalisation initiatives,” concluded the authors.