What’s happening: Having learned hard lessons from past crises, CFOs acted quickly during COVID-19 to conserve cash and contain costs.
Yet short-term cost-cutting alone won’t be enough to enable companies to emerge stronger from the COVID-19 crisis. We expect industry leaders to pivot their value propositions, figure out ways to grow and find new sources of revenue for the future. This means managing cost containment now in a way that doesn’t harm the business and redirecting costs to the drivers of growth — the handful of capabilities that differentiate a company in the market.
Part of this challenge is that beliefs and models about costs have changed. Costs that were once fixed (think office space) have become more variable, while others that might have been differentiators in the past are now common (digital operations and automation).
Why it matters: Companies that emerge stronger after recessions are not those that cut faster and deeper. To emerge stronger, you should redirect costs to the right growth drivers.
What now? Resetting costs and reshaping businesses for growth can begin with three actions:
1. Revisit strategic priorities to find those that will work moving forward.
2. Look for what's different across the value chain in both “no-regrets” moves that help in any scenario and “strategic bets” that are high-reward moves in growth scenarios.
3. Bring your people with you into the new way of operating.
At every step, identify what’s changed for good and how the business should respond. Opportunities to reset costs and reshape businesses for growth will be in four broad areas:
Dr. Deniz Caglar
Principal, Financial Services, Strategy&, PwC US
PwC's Strategy&, Principal, PwC US
Partner, PwC US