June 2020
4 minutes

6 Trends out of the Crisis Summarized for You

At the Pulse of Time – the Evolutionizer Trend Radar

The hard lockdown seems to be over for the moment. Although the consequences of the crisis are not yet fully visible, clear trends are emerging.

The hard lockdown seems to be over for the moment. Germany and Europe are awakening again. Although the consequences of the crisis are not yet fully visible, clear trends are emerging due to major consulting firms. We, as well, observed these changes, combined them with our practical experience and summarized the most important trend topics for you:

Trend #1: Massive Impact on Profitability & Increase in M&A Activity

Major companies expect the Covid 19 pandemic to have a massive impact on their profitability. This is the result of the Capital Confidence Barometer by Ernst & Young, for which more than 2,900 managers worldwide - including in Germany - were surveyed. According to the results, the entrepreneurs see not only risks, but also the opportunity of mergers and acquisitions to increase their own market share. It is also becoming clear that co-operations and partnerships are gaining in importance and that there is a greater willingness to sell off parts of the company.

Trend #2: More Independence From and Rethinking of the Supply Chain

With the shutdown, forecasts for economic growth were revised sharply downwards. Even though economic stimulus packages have been passed, a severe recession is to be expected.

Some of Germany's most important trading partners, such as China and northern Italy, are particularly hard hit by the Covid 19 pandemic. As a result, production and consumer goods could not be imported into Germany - further processing of the products was paralysed. Developments such as these lead to a rethink about shorter transport routes or greater independence from the world market, e.g. through the regional production of supplier products and components. Just-in-time production with low stock levels is also being reconsidered.

According to Ernst & Young's Capital Confidence Barometer, one in two companies wants to rethink their own global supply chains. Just under half of German companies are accelerating their own transformation and relying on automation and digitization. The automotive and transport sectors, but also the consumer goods industry and the life sciences sector are, according to the respondents, disproportionately affected by the effects of the Covid 19 crisis.

Trend #3: Digitization Pressure in the Healthcare and Public Sectors

Gaps in human resource management, medical care and digitization have become apparent in the health care and public sector. The crisis has forced organizations to take the next step in digitization, and within a very short period they have been able to implement digital projects that were originally planned for 2022 or later. At the same time, gaps were identified with regards to digitization potentials in processes, structures, knowledge and skills.

For example, the stationary retail sector has had to radically rethink its approach to stay in business. The companies that already have an online shop and resilient IT infrastructures had advantages.

The public sector in particular has a lot of catching up to do in terms of mobile working, video conferencing and scalability. Security risks and vulnerabilities must be reduced. Cloud-based solutions can help here: they can be deployed quickly, are scalable, take account of data protection requirements and ensure stable processes.

Trend #4: New Importance and Increased Responsibility of the CIO

With the crisis, the importance and role of the CIO is changing - he is becoming a "critical success factor" and his area of responsibility is becoming even more extensive.

Now it is no longer just a question of creating the infrastructures, providing the corresponding hardware or technologies. The CIO has to ensure on a daily basis that the critical infrastructures, systems and processes run stable even with changing and increasing requirements. From now on, he will be an even stronger link that keeps the business running during the crisis and ensures that new ways of working are actually lived and turn effective. It is also the driver for further technological transformation and has to ensure that organizations are better able to master crisis situations of this kind in the future.

Trend #5: Robust Shared Services as Competitive Advantage

Shared services concentrate functions or activities that would otherwise be distributed among various units. In order to bundle these resources, the internal tasks are combined centrally. This centralization makes sense and saves costs across business and departmental levels, for example in accounting, IT services or personnel administration.

In the current crisis, established shared services with a certain degree of digital maturity have proven to be an advantage. Technically well prepared, they enabled mobile working without major interruptions. Future crisis plans will increasingly take into account modern working methods and procedures, so that mobile working will result in no or only minor productivity losses. It has been shown that a high degree of digital maturity in core processes leads to higher stability and robustness against disturbances.

Trend #6: Diversity & Inclusion are and become a Critical Success Factor in the Crisis

The business success of a company depends significantly on the diversity of its employees and managers. McKinsey & Company was able to confirm what many had long suspected in their study in May 2020*: Diversity wins. According to the study, a high level of gender diversity leads to advantages - including above-average profitability.

Mixed management teams perform better in times of crisis: people who think and act differently ask different questions and discuss issues from different perspectives. The assessment of the initial situation thus gains in sharpness and diversity leads to a more holistic view.

*For the study, data from more than 1,000 companies from 15 countries were analyzed.

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