How to reset costs
and reshape
your business
for growth
A Fit for Growth guide
to respond to and
emerge stronger from
the COVID-19 crisis
CEOs were already juggling cost challenges
before the COVID-19 outbreak. Then the world’s
20 largest economies went on lockdown within
an eight-week window. Optimism for a quick
recovery has evaporated and one big question
looms: How to prepare for a future that will be
forever changed, but is still not fully known?
Most companies will work to protect the bottom
line, while also building more resilience and
agility into the organization.
But while cost-cutting is necessary, it will not
be enough. Even worse, done the wrong way,
it can harm a company’s chances of survival.
Leaders also have to pivot value propositions,
gure out ways to grow and identify new
sources of revenue to nd their place in
the future. This involves cutting costs in a way
that doesn’t harm the business, while
redirecting costs to the drivers of growth:
the capabilities that differentiate a company.
The global pandemic has upset past beliefs
and models about costs. On one hand, costs
that were once xed in the minds of business
leaders have become more variable (think
ofce space), while capabilities that might have
been differentiators in the past are now just
table stakes (automation and collaboration
technologies). So much has changed that
strategies may need to shift in new ways to
redesign the business and cost structure for
more enduring strength and agility.
www.strategyand.pwc.com/gx/en/
respond-and-emerge-stronger.html
Dr. Michael Wagner
Partner, PwC Strategy& Germany
+49 170 2238 539
Matt Mani
Principal, PwC US
+31 6 22 79 19 63
Deniz Caglar
Principal, PwC US
+1 312 420 8569
Contacts
Introduction
Our global Fit for Growth* leadership team is ready to help
Vinay Couto
Global leader,
Fit for Growth Platform
+1 312 213 6753
vinay[email protected]
*Fit for Growth is a trademark of PwC registered in the United States.
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 1
Fit for Growth for the new normal
Fit for Growth provides a powerful and complete approach to be
ready for the new normal and emerge stronger
Accelerate your
cultural evolution
Double down on
your differentiating
capabilities
Reimagine your
operating model
Radically transform
your cost structure
Sustain your focus on your
strategy growth pillars/
must-haves that will be
relevant in any economic
environment
Revisit your entire cost
structure to establish
short-, mid-, and long-term
actions to fundamentally
adjust for the future
Reimagine how you
organize and collaborate
– using technology
accelerators and
strengthening resilience
Actively engage the
organization to dene the
required behaviors to
build on cultural strengths
and own the actions
to shape the future
Develop a clear-
eyed strategy
Revisit your strategy and
be clear on your must-
haves to win in the future
– regardless of any eco-
nomic scenario
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 2
Develop a clear-eyed strategy
New normal considerations will require all businesses
to reassess strategic priorities across the value chain
Commercial
strategy
Pricing adjustments to account
for increased costs and/or
changes in volumes
Evolving sales processes and
tools for increased remote
selling and digital channels
Optimizing discounting, incentives
and credit terms to enable restart
and glide path to the new normal
Revisiting and refreshing product
and solutions portfolio to ensure
relevance in post-COVID-19 world
Assessing if any industry and
market trends have accelerated
(e.g., e-commerce, digital models)
Evaluating life cycle and
protability of business
and market positions
Identifying opportunities to pick
up growth-enabling assets
Portfolio
strategy
Quantifying changes in real
estate and workforce strategy
(e.g., increased remote
working, facility utilization)
Assessing supply chain strategy
(e.g., supplier resiliency, revisit
make vs. buy, distribution costs)
Adding resiliency into the business
model (e.g., reevaluate footprint
and manufacturing strategy)
Designing new employee health
and wellness policies and
guidelines (e.g., tracking of
potentially impacted staff, paid
sick leave policies, healthy
working guidelines)
Implementing changes in shift
policies, work hours, working
norms and practices and
remote work policies
Workforce
strategy
Operational
strategy
Financial
strategy
Resetting nancial targets given additional costs of operations
(e.g., due to new health and safety norms, operations costs)
Establishing cost and cash management discipline the across company
Optimizing the balance sheet to build sustainability
Evaluating government programs to assess pros and cons of
participation and impact
Incorporating potential long-term shifts in policy that may impact
choices on footprint, workforce, tax and overall strategy
Regulatory
strategy
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 3
Zero-base your entire cost structure to reset future cost
and clarify where to invest and how to pay for it
Double down on your differentiating capabilities
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 4
15–20%
Differentiating activities
Activities that provide you with a
competitive advantage and/or are
needed for future differentiation
Not required
Legacy investments and activities
that no longer support the go-
forward strategy
“Lights-on”
Bare minimum activities needed
to “keep the lights on” in the
business
Table stakes/entry ticket
Basic competencies/activities
required by everyone to
participate in the industry
Online commerce
360˚ customer experience
management
Digital operations
Performance management
Invest at levels above
peers to gain a
competitive advantage
Eliminate
Current-
state cost
structure
Possible
new cost
structure
Real estate
HR and nance back-ofce
Indirect procurement
Customer call center
Aim for cost levels
below competition
Quality management
Customer insights
Collaboration technology
Web-based self-service
General accounting
Cut costs to keep a
“good enough” quality
30–40%
50–60%
5–15%
15–25%
30–40%
30%
Executive travel benets
Local IT help desk
Local call center
Manual order management
Warning: What you thought was
differentiating may now be table stakes
Be better than benchmark
Warning: Benchmarks will shift in this
period – aim to be the benchmark, not
a follower
Resist the temptation to continue because
of a commitment to legacy
Radically transform your cost structure
Carefully structure cost actions over the short-, mid and long-term
to prevent excessive and/or insufcient reactions
Time
Top levers
15–25%
Respond to the crisis
Quick wins and cash
management focus
Top-line stabilization
Customer engagement
Supply chain stabilization
Working capital optimization
Aggressive focus on cash
Immediate extime measures
for the workforce and
government programs
Immediate operational cost
measures (“quick wins”)
Elimination of non-core activities
30–45%
Transform for the future
Transform to a more resilient
operating model
M&A to reshape portfolio
and gain assets at a lower
cost post-crisis
Rationalization of products
and markets
Consolidation and centralization
of supply chain functions
Logistics and supply chain
automation
Operating model revamp
Optimization of technology
landscape
Operating model redesign
Digitization, automation,
offshoring and outsourcing
across the value chain
Est. cost impact
(cumulative)
Top
line
Balance
sheet
Overarching
Bottom
line
20–35%
Optimize post-crisis
Optimize for operational
excellence
Service offering rationalization
Pricing optimization and
resetting
Sales and marketing
footprint reset
Optimization of supply chain
processes
Supply chain resilience
Organizational restructuring
Outsourcing and offshoring
Restructuring across the
value chain
Operational efciency focus
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 5
1
2
3
What products and services
should we deliver?
What should
be central
vs.
decentral?
Organization design
Performance
management
End-to-end
processes
Automation and
digitization
Risk management
and resiliency
Workforce development
Data management Change enablement
Culture and
behaviors
What should
be common
vs.
custom?
What should be differentiated
vs. commodity?
What should
be in-house
vs.
outsourced?
What should
be best cost
vs.
low cost?
FoundationalVariable
Value
Reimagine your operating model
The crisis provides the opportunity to consider improvement
levers to reset and accelerate your operating model
How well
what we
do gets
executed
Where work
gets done and
how we organize
to do work
What we do and
where we want to
differentiate
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 6
Accelerate your cultural evolution
Actively engage the organization and own
the actions to shape the future
Source: Strategy&’s “Leadership in a Disruptive Age”
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 7
Finally, successful
execution hinges
on engaging the
organization to
understand the
new normal
and sign-on
Acknowledge how people
feel – understand the
human impact on them
Visibly demonstrate care for
people in the decisions you
make and how you implement
actions for change
Share the “why” behind your
business decisions
Take personal ownership of
the required transformation
Acknowledge reality and focus
on the next best decision
Align leadership incentives
to push for performance
Show empathy
Assume
responsibility
Stand in your purpose
and values to help
defeat fear and uncertainty
Take bold decisions
Use the opportunity
to accelerate
necessary actions,
even if unpopular
Drive toward actionable
insights and analyses
and be decisive
Use the future to shape the
present – act deliberately
Be willing to adapt strategies
and align resources quickly
Be courageous
Act with urgency
Be transparent in sharing the
situation, challenges and
opportunities
Invite people to shape the ideas
and contribute solutions
Involve leadership at all levels
to engage and communicate
Keep employees connected
and engaged
Continuously frame the case
for change and communicate
authentically with straight-talk
Reassure stakeholders with
actions, but also showcase
realistic outlook
Engage the team
Be transparent
Shape structural
transformation
Secure
business
and
people
Accelerate
diagnostics
Stabilize the
business
Launch short-
term actions
Shape mid-
term actions
Plan for the future
Launch mid-
term actions
Understand
cash/liquidity
positions
Support
employee
physical
well-being
Establish crisis
management
PMO
Scenario plan
Baseline and
analyze spend
Identify immediate
cost actions
Implement immediate
cost actions
Shape pricing and
customer terms actions
Tighten working
capital execution
Optimize working
capital position
Engage risk
customers/
receivables
Stabilize supply
chain and
operations
Assess activities and zero-
base cost structure
Shape product portfolio
and organization actions
Assess automation agenda
Complete opportunity
assessments
Design operating model and
detail organization structure
Develop implementation plan
Detail structural transformation
Launch transformative M&A and
asset measures
Design target processes and
execute technology agenda
Execute and manage plan
An accelerated approach
The Fit for Growth approach helps generate rst results quickly −
while shaping the path to emerge stronger
Week 0
W1 W4 W6 W12 W24
Launch priority “no regrets” actions
(e.g., sourcing and automation)
Initiate portfolio actions
Shape footprint redesign, including operations,
shared services and real estate utilization
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 8
The power of digital assets
The Fit for Growth approach leverages a suite of digital assets,
deployed virtually, to enable rapid analysis and actionable insights
Spend
analysis
Deconstruct general
ledger data to
identify where, when
and how you can
optimize spend
Process
analysis
Highlight white spaces
for process
standardization
and automation
in technology
Organization
analysis
Identify opportunities
in operating model
and in spans and
layers; benchmark and
simulate scenarios
Capabilities
analysis
Assess and identify
differentiating
capabilites required
to implement
your strategy
Strategy& | A Fit for Growth guide to respond to and emerge stronger from the COVID-19 crisis 9
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part without written permission of PwC. Disclaimer: This content is for general purposes only, and should not be used as a substitute for consultation with professional advisors.
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Strategy& | A Fit for Growth guide to respond and emerge stronger from the COVID-19 crisis 19
