China appears to be in the early stages of an economic comeback thanks to Chinese companies that quickly rolled out appropriate customer and employees focused responses to ease the impact of coronavirus outbreak on Asia’s biggest economy.
Boston Consulting Group (BCG), headquartered in Boston, USA has measured high-frequency data on proxies for the movement of people and goods, production and confidence in the world’s second-biggest economy and forecast early signs of growth in economic activities, based on the consulting firm’s experience helping Chinese companies respond to the pandemic.
High-frequency data is based on rate that is monthly weekly, daily, hourly, minutely and second (then divide seconds into fractions).
Although this recovery is still vulnerable if a new wave of local infections surface, many Chinese companies have moved past crisis, recovery and are now at a post-recovery stage.
Martin Reeves, a senior partner and managing director in the San Francisco office of BCG and chairman of the BCG Henderson Institute, BCG’s think tank on management and strategy has outlined steps some Chinese companies took to keep their doors open; Nigerian companies can take notes as the countries number of new coronavirus cases rise to five in four weeks.
A caveat though is that China has its own distinct political and administrative systems, as well as social customs, but many of the lessons here seem broadly applicable.
Chinese companies that were able to come out ahead of the crisis anticipated shifts
Master Kong, a leading instant noodle and beverage producer, reviewed dynamics on a daily basis and reprioritised efforts regularly.
It anticipated hoarding and stock-outs, and it tilted its focus away from offline, large retail channels to O2O (online-to-offline), e-commerce, and smaller stores. It continuously tracked retail outlets’ re-opening plans and adapted its supply chain in a highly flexible manner.
This process is fast and must be chief executive officer led to overcome complex internal coordination processes in order to move quickly in responding to changing situations. Its supply chain had recovered by more than 50 percent just a few weeks after the outbreak, and it was able to supply 60 percent of the stores that were reopened during this period — three times as many as some competitors.
Adapting to unpredictable change, with distinct dynamics in different local communities requires decentralised initiative-taking but this needs to be controlled by top-down leadership. Some Chinese companies effectively balanced the two approaches, setting a top-down framework within which employees innovated.
Huazhu, which operates 6,000 hotels in 400 cities across China, set up a crisis task force that met daily to review procedures and issued top-down guidance for the whole chain.
The companies communicated clearly and made employees security top priority
Highly infectious disease such as the coronavirus has proven to be spread at an exponential progression. Communicating rapid changes in information and in clear terms to employees is an asset.
China’s largest kitchenware manufacturer Supor instituted very specific operational guidelines and procedures for its employees, such as instructions for limiting exposure while dining in canteens and emergency plans for abnormal situations.
Labour mobility was used by the Chinese companies to quickly respond to the coronavirus pandemic
Creative Chinese enterprises proactively reallocated employees to new valuable activities such as planning, and in some cases loaned them to other companies, rather layoffs.
More than 40 restaurants, hotels, and cinema chains optimised their staffing to free up a large share of their workforces. They then shared those employees with Hema, a “new retail” supermarket chain owned by Alibaba, which was in urgent need of labour for delivery services due to the sudden increase in online purchases.
The companies optimised sales channel mix
As person-to-person and bricks-and-mortar retail was severely restricted in affected regions, agile Chinese enterprises rapidly redeployed sales efforts to new channels both in business-to-customer (B2C) and business to business (B2B) enterprises.
Chinese companies also learned how to leverage social media organise employees and partners
Many Chinese companies took to social media platforms, such as WeChat, to coordinate employees and partners to deal with remote working and a new set of complex coordination challenges.
The most proactive companies in China prepared for a fast recovery
Only six weeks after the initial outbreak, China appears to be in the early stages of recovery. Congestion delays currently stand at 73 percent of 2019 levels, up from 62 percent at the worst part of the epidemic, indicating that the movement of people and goods is resuming.
Coal consumption appears to be recovering from a trough of 43 percent to currently 75 percent of 2019 levels, indicating that some production is resuming. And confidence appears to be coming back as seen in real estate transactions, which had fallen to 1 percent of 2019 levels but have since bounced back to 47 percent.
For example, a premium Chinese travel agency, facing a collapse in its short-term business, refocused around longer-term preparations. Instead of reducing headcount, it encouraged employees to use their time to upgrade internal systems, improve skills, and design new products and services to be better prepared for the eventual recovery.
Chinese companies that came out of the coronavirus outbreak stronger looked for opportunity amid adversity
While the crisis in China impacted all sectors to some extent, at a more micro level, demand increased in many specific areas.
These include B2C e-commerce (especially door-to-door models), B2B e-commerce, remote meeting services, social media, hygiene products, health insurance, and other product groups. Some Chinese players mobilised rapidly to address these needs.
For example, Kuaishou, a social video platform valued at $28 billion, promoted online education offerings to compensate for school and university closures. The company and other video platforms partnered with the Ministry of Education to open a national online cloud classroom to serve students.
Adapt your recovery strategy by location
Regional public health policies, disease dynamics, and administrative guidance will create recovery dynamics that vary by location — likely not following the geographical structure of companies. This requires a flexible approach.
A leading Chinese dairy company (a $10bn business with a wide production base and deep national distribution in China) developed a segmented approach based on regional and city recovery dynamics, as well as on its own supply chain infrastructure and salesforce density. The planned supply from factories in severely impacted areas was allocated to factories in other regions in a phased approach.
Rapidly innovate around new needs
Beyond the rebalancing product portfolio, new customer needs also create opportunities for innovation. When threatened by crisis, many companies will be focused on defensive moves, but some Chinese companies boldly innovated around emerging opportunities.
The insurance industry is notoriously conservative, but in response to the crisis, Ant Financial added free coronavirus-related coverage to its products. The action served a customer need while promoting awareness of the company’s online offerings and improving customer loyalty.
Spot new consumption habits being formed
Some shifts will likely persist beyond the crisis, and many sectors will re-emerge to new market realities in China and elsewhere.
The Severe Acute Respiratory Syndrome (SARS) crisis is often credited with accelerating the adoption of e-commerce in China. It is too early to say for sure which new habits will stick in the long run, but some strong possibilities include a leap from offline to online education, a transformation in health care delivery, and an increase in B2B digital channels.