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africa|automation|building|business|cutting|environment|financial|service|services|sustainable|technology|training|products|solutions|environmental

Agile businesses most likely to weather pandemic well, PwC study shows

25th August 2020

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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More than 50% of Europe, Middle East and Africa (EMEA) private business respondents expect revenue to decline in the coming months, professional services firm PwC’s EMEA Private Business Survey shows.

Respondents believe that taking a strategic approach to resilience and operating sustainably will be key – 81% of agility champions say sustainable business practices are critical for future success.

Private businesses are seeing major impacts in the wake of the Covid-19 pandemic. Just 9% of respondents surveyed in February and March expected revenues to decline; in June, that number jumped to 51%.

Some private businesses are weathering the storm better, however, with the survey showing that agility is paying off in improved performance.

The latest survey, covering 53 countries, shows that some private businesses are performing better under pressure.

The survey identified companies that combine a number of traits – customer-focused, people-driven, tech-enabled and flexible – as agility champions.

These agility champions are taking a strategic approach to resilience and making tough choices around workforces and cost reduction, while continuing to invest in the key areas that will keep their businesses competitive, including training and upskilling and new technologies, says PwC.

“While private businesses in EMEA have seen a major impact due to the Covid-19 pandemic, agility is paying off in improved performance.

“The current operational and financial challenges that private companies are facing make this pandemic an agility stress test for their business models. Leaders whose companies have been able to combine flexibility with a focus on people, technology and their customers – known as ‘agility champions’, report better profitability and expect stronger performance in the future,” says PwC Africa private company services leader Gert Allen.

FUTURE-READY WORKFORCE

Given the impact of stay-at-home orders in some regions and the need to protect staff from the risk of infection, many companies have pivoted to work-from-home models, where possible – more than 60% of the private businesses respondents said they are enabling remote work.

PwC highlights that 79% of agility champions in Africa, compared with 65% of global respondents, are increasing their use of new technologies.

Some of these solutions are likely to support the shift to an increase in remote working, while maintaining business continuity. Others may also provide the technical backbone needed for other types of cost reduction, such as automation, or for new ways to interact with customers.

While business in Africa might be lacking somewhat more when it comes to technology than their global counterparts, the appetite for changes is stronger than ever, PwC says.

Agility champions are doing more to prepare their workforce for the future at the same time – 57% of these firms say they are training and upskilling workers, compared with just 40% of laggards. 

In Africa, 77% of respondents say they are training and upskilling staff.

Private businesses also favour options that keep staff on-board over staff cuts – 64% of private business respondents overall are mandating the use of holiday or overtime pay as a way of managing the impact of the pandemic versus the 34% that say they are reducing workforces through layoffs.

By keeping employees on staff where possible, private businesses will be able to emerge stronger from the Covid-19-pandemic, PwC notes.

“In our view, humanising remote work will be one of the biggest challenges private businesses face in the years to come,” Allen comments.

IMPROVING THE BOTTOM LINE

Meanwhile, maintaining liquidity has become increasingly important. Agility champions are more skilled at taking action to improve their cash position. Two-thirds (66%) of agility champions say they are enhancing their working capital management as part of their response to the recent crisis, compared with just 45% of laggards.

With the top line under pressure, private businesses are also looking for other ways to enhance the bottom line. Agility champions and laggards alike say they are using cost-saving measures, like cutting marketing budgets or cancelling non-vital services, as a way of managing the impact of the pandemic.

PwC emphasises that it is important to make cuts in a way that does not harm the business and to redirect costs to the areas that are critical for growth.

To do that, companies should revisit strategic priorities and understand differentiating points in their value chain when making cuts, it says.

Agility champions are leading the way, PwC notes. For example, while it may be tempting to slash technology investments as a quick way to cut costs, the majority of agility champions (58% compared to 41% of laggards) are actually increasing their use of new technologies.

“And while supply chain is often considered to be purely operational, true supply chain excellence can actually be a strong differentiator as well. More than half of agility champions (52%) are making changes to their supply chain strategies as part of their way of coping with the pandemic,” acclaims PwC.

FLEXIBLE STRATEGIES

One of the keys to success in a challenging environment is to understand the overall market landscape, notes PwC.

The survey shows that agility champions are looking to understand their markets and the customer segments they serve as a way to position their companies and emerge stronger.

The majority of agility champions see both expanding into new markets or client segments (58%) and exiting markets that do not prove profitable (57%) as critical to success in the future.

Some will use mergers and acquisitions as a way to jump-start growth, with 39% of agility champions saying these will be key.

African private businesses are also looking at working together with partners to achieve their business goals, whether through strategic alliances or by collaborating with startups.

Private business respondents are also introducing new products and services designed to meet customers’ needs. Nearly three-fifths of agility champions (57%) see this as critical, far more than laggards.

The same number, 57%, also believe that changing or adapting their business model will be vital to future success.

In Africa, 69% of respondents say they are taking a fresh look at their product and service portfolio, as well as their business model.

The most agile companies are also well-aware that it will be difficult to achieve success on their own. Agility champions are far more likely to see working together with partners to achieve their goals, whether via strategic alliances (58% versus 39% of laggards) or by collaborating with startups (29% versus 20% of laggards) as critical.

TOMORROW’S LEADERS

When it comes time to adapt the business model, it is important for leaders to drive forward change and set the “tone from the top”, says PwC.

Survey results suggest that for agility champions, this kind of tone is also coming from the next generation of leaders (NextGen), whether they be family members or up-and-coming young managers.

Half of agility champions believe that getting the NextGen more involved in decision-making and management will be critical for the future, compared to just around a third of laggards (34%).

NextGen leaders often bring with them a strong commitment to environmental and social issues, although this level of awareness is not unique to the next generation, notes PwC.

Agility champions are committed to taking a long-term view, and do not intend to transform their organisations at the expense of the environment or their community.

Agility champions ranked sustainable business practices higher than any other consideration as a must for future success, with 81% seeing these as critical, compared with 69% of laggards.

That puts sustainability above even technology as a prerequisite for building a strong foundation for future growth. Around three-fifths of private business respondents overall also believe that business has a role to play in achieving societal goals such as diversity and equality.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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