Responding to Crises: Emerging Lessons from COVID-19

The COVID-19 crisis is still unfolding and has now reached a new critical phase where health systems need to act decisively to prevent the growth of new epicenters outside China.  Clearly the main emphasis is and should be on containing and mitigating the disease and its impact on human health. But the economic impacts are also significant and companies are feeling their way in understanding, reacting to and learning lessons from unfolding events. No doubt new unanticipated twists and turns will be revealed with each news and data cycle, and we will only have a complete picture in retrospect. Nevertheless, given the very different degrees of preparedness across companies, the further potential for disruption internationally and also the value of being prepared for future crises, it’s worth trying to extract what we have learned so far. Based on our ongoing analysis and support for companies around the world, we have distilled some tentative lessons for detecting and processing  signals, reacting to unfolding events and extracting lessons for future benefit. 

1) Update intelligence on a daily basis

The crisis is unfolding with astounding speed such that the picture changes on a daily basis. Only a few days ago, it looked like the outbreak was mostly confined to China and was being brought under control. In the last 48 hours, a number of fast growing epicenters of infection have sprung up beyond China, potentially signaling a new phase and necessitating new strategies of mitigation rather than containment. Our team initially decided to run a 72 hour update cycle, but this rapidly provided not granular enough to capture such inflection points. 

2) Don’t assume that information is knowledge 

In today’s connected world, employees will have direct access to many sources of information. You might reasonably conclude that there is so much information and commentary available externally that you don’t need to do anything additional on intelligence gathering and synthesis. We have found however that its very hard for people who are embedded in a particular function or geography, and with many pressing issues to deal with, to have a big picture and for this to be synchronized across the firm. Creating a regularly updated summary of facts and implications is therefore invaluable. 

3) Beware of hype cycles / news cycles

Judging from previous epidemics, we have a systematic tendency to first overlook weak signals, then to overreact to emerging issues before we eventually take a more calibrated view. And news organizations inevitably focus on new news and sometimes don’t distinguish between hard facts, soft facts and speculation. Yesterday’s news is likely to frame the way your organization frames and processes the crisis and it’s therefore necessary to create a balanced and broader perspective combining different sources. 

4) Use experts carefully

Experts in epidemiology, virology, public health, supply chain resilience and other disciplines can clearly help interpret complex and shifting information. But it’s clear that expert opinions differ on critical issues like optimal containment policies and it’s good to consult multiple sources. Also, each epidemic is unique and we are still learning about the critical features of the current one, like the ability of asymptomatic individuals to infect others. Furthermore, the complex system of disease dynamics, human behavior, health policies, organizational behavior, information, consumer behavior, supply chain effects and broader macroeconomic issues is fundamentally unpredictable. Therefore we need to employ an iterative, empirical approach to understanding what’s going on and what works, albeit one guided by expert opinion. There is no pre-determined right answer – we need to learn as we proceed. 

5) Constantly reframe your understanding reflecting the latest information

A big picture synthesis of the situation and a plan to deal with it, once captured on paper, can become a source of inertia.  A famous Chinese proverb informs us that great generals issue commands in the morning and change them in the evening. But large organizations are rarely so flexible. Managers may resist putting out interpretations and plans until they are sure, and will then be reluctant to change them, for fear of looking indecisive, misinformed or creating confusion in the organization. But constantly refreshing a date-stamped  “best current view” in the form of a living document, is necessary to learn and adapt in a rapidly changing situation 

6) Beware of bureaucracy

Controversial, sensitive or impactful issues will typical require review by senior management, corporate affairs, legal, risk management and a host of other functions. Each will have suggestions on how to best craft communications, leading to an overly generalized or conservative perspective and a very slow process. But overly managing communications can be damaging in itself when each 24 hours brings new and significant information to light. It is therefore necessary to take a number of precautions to prevent this happening. One is to look at the clock speed of external events and use this as a guideline for pacing the internal process, rather than starting with the latter as a given. A living digital document can both enhance speed by avoiding the rigamarole of issuing and approving documents, and reduce risk, since it can be updated or withdrawn easily. Furthermore,  distinguishing clearly between facts, hypotheses, questions,  scenarios and policies can help in communicating a fuller and more nuanced picture. 

7) Use resilience principles in responding to and planning for unpredictable, material events

In a stable world with no surprises, efficiency reigns. Such an efficiency mind set is often dominant in large corporations. But the key goal in managing dynamic and unpredictable situations like the Covid-19 crisis is rather resilience – the ability to survive and thrive through unpredictable and potentially unfavorable events. Our research on resilient human and natural systems shows that they generally have 6 common characteristics:

• Redundancy: buffering capacity in case of deviation from expected norms. Buffer stocks or access to spare manufacturing capacity to cover supply chain shortages or fluctuations are an example of this.
• Diversity: Multiple ways of reacting to events. Unanticipated events create new challenges and a diversity of ideas or approaches can greatly enhance solution development. Cognitively diverse teams will have more ideas about potential solutions, especially if the corporate culture encourages expression of and respect for diverse perspectives. Equally, having multiple approaches to fulfillment can be inefficient but flexible and resilient.
• Modularity: highly integrated systems are vulnerable to avalanches of knock-on effects or even total system collapse if disturbed. In contrast, a modular system where different factories, organizational units or supply sources can be combined in different ways, offers greater resiliency. When a key brake valve supplier for Toyota was burned to the ground some years ago, supply was restored in just days because of the ability to swap production between suppliers, even for unfamiliar components. 
• Evolvability: systems can be built for optimality and then operated at peak efficiency or they can be built for evolvability -  constant improvement in the light of new opportunities, problems or information. Responses to dynamic crises like Covid-19 put a premium on evolvability. There is no known right answer and any pre-determined answer is likely to be wrong. But it is possible to iterate and learn towards more effective solutions. One head of innovation observed to us that the best products were rarely the ones which were analyzed to be so at inception, but rather the ones which had “the most chances to evolve”.
• Prudence: we cannot predict the course of events or their impacts for Covid-19, but we can envision plausible downside scenarios and test the resilience of our supply chains or systems under these circumstances. The once in 25 years event is unlikely to happen tomorrow morning but becomes inevitable on longer time spans. Now that the focus has shifted from containment of the Covid-19 epidemic in China to preventing the take off of new epicenters overseas, we have arrived at another inflection point, with very high uncertainty. It would be prudent for companies to look afresh at worst case scenarios and developing contingency strategies against each.
• Embeddedness: while companies are busy preparing their own responses, it is good to remind ourselves that companies are stakeholders in wider industrial, economic and social systems which are also simultaneously under stress. Solutions which solve for an individual company at the expense of others, will create mistrust and damage the business in the longer term. Conversely, support to customers, partners, healthcare and social systems in a time of adversity can potentially create lasting goodwill and trust. A key element of dealing with economic stress is to live one’s human and societal values precisely when we are most likely to forget them. A small minority of companies explicitly view adversity, as an opportunity to strengthen relationships, at the very time when competitors become inward looking. A variant on Warren Buffet’s maxim of “Be greedy when others are fearful and fearful when others are greedy” might be “Be supportive when others are preoccupied with their own troubles” - a sort of golden rule for adverse times.

8) Prepare now for the next crisis: 

Covid-19 is not a one off challenge. In an increasingly interconnected world, we should expect further epidemics in the future. And beyond the domain of human health, we will face similarly unpredictable and material challenges, be they from cyber attacks, terrorist attacks, climate events, public trust crises, political crises or other causes. Our research on the effectiveness of organizational responses to dynamic crises indicates that there is one variable which is clearly most predictive of eventual success - preemption. Preparing for the next crisis (or the next phase of the current crisis) is likely to be much more effective than to an ad hoc, reactive response when the crisis actually hits. 

9) Intellectual preparation is not enough

Many companies create intellectual preparedness for unexpected situations by running scenarios. Sometimes scenarios are standardized and baked into the strategy process. Scenarios must be updated and customized however in the light of the most material risks to a business at any time. Intellectual preparedness even in this way is not enough though. Something can be well understood but unrehearsed as a capability. Scenarios should therefore ideally be backed up by war gaming to simulate and learn from behaviors in a crisis. 

10) Don’t waste a crisis 

A crisis must be coped with and in trying to coping with it, many successes and failures will be generated. Rather than heaving a sigh of relief when the crisis is over and returning to normal routines, efforts should be made not to squander a valuable learning opportunity. So even while the crisis is unfolding, responses and impacts should be documented to be later reviewed and lessons distilled. Airline safety is one of the most effective learning systems globally in this respect. Each time there is an unfortunate airline safety incident, root causes are investigated in forensic detail according to pre-agreed protocols and binding recommends made. It’s not surprising that flying is today one of the safety forms of travel, thanks to cumulative learnings and adaptations from previous misfortunes. 

These emerging lessons on how to deal with an unfolding crisis too will likely change as events unfold and will update them as new learnings come to light. 

Martin Reeves and Nikolaus Lang