senior client partner
This Week in Leadership
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Last March, and even by last fall, it was mostly a guessing game. Now some experts believe they can more accurately predict when the pandemic will end or largely fade. The only problem: they don’t agree.
With vaccine programs now rolling out and COVID cases dropping rapidly, a leading expert from the Johns Hopkins School of Medicine recently predicted “there may be very little COVID by April.” For his part, Dr. Anthony Fauci, President Biden’s chief medical advisor, followed with an estimate closer to fall. And while both predictions come with a lot more data behind them than anyone had last fall, they leave business leaders in a bind on how best to plan.
Indeed, for them, the difference in such predictions is critical—for budgeting, inventory, marketing, and other operations. Betting too late could result in massive product shortfalls and missing out on a spending surge. Betting too early could lead to oversupply and unnecessary cash burn.
As it currently stands, Melissa Hadhazy, a senior client partner in Korn Ferry’s Industrial practice, says supply chains in many industries are still recovering from pandemic-induced backlogs, leaving them with little capacity to hold inventory or increase production. She’s advising leaders to think in two- to three-month cycles to allow for maximum flexibility. This guards against overcommitting now and further straining already stressed supply chains, while providing a path to quickly adjust if indicators show demand is returning faster than anticipated. “Now more than ever, it’s important to listen closely to the consumer voice before flooding your supply chains,” Hadhazy says.
For leaders across industries, the latest predictions don’t appear to be helping. Retail leaders, for instance, knew last March that a return to normal wasn’t in the cards for 2020, whereas now it is a lot closer, heightening the importance of precise predictions to enable rapid responses to sudden changes in business conditions. “It’s a crapshoot for retail,” says Craig Rowley, Korn Ferry’s global practice leader for the consumer sector. Walmart’s chief financial officer, Brett Biggs, echoed Rowley’s sentiment in response to a question about fiscal guidance on its earnings call last week, saying: “We know less than we typically do in a normal year about what’s going to happen with the vaccine, what’s going to happen with economies, what’s going to happen in other parts of what’s going on.”
Rowley says retail leaders know consumers have surplus savings and that there is pent-up demand to spend discretionary dollars. What’s harder to predict, however, is when the virus will dissipate to a level where people will feel safe about resuming normal activity. “Once people feel safe, demand will ramp up fast, and the challenge will be that supply chains will have to ramp up fast as well,” Rowley says. That means companies have to be very careful with their orders and realign shipping processes to get products to both distribution centers and individual stores.
For airlines and the hospitality industry, which are a lot less able to pivot their businesses quickly, an accurate reading of booking trends impacts everything from the number of airplanes in service to staffing levels at hotels. But with people now booking flights and vacations weeks instead of months in advance, making those forecasts is exponentially harder.
Radhika Papandreou, a Korn Ferry senior client partner and leader of the firm’s North America Travel, Hospitality, and Leisure practice, says companies in these sectors can’t afford to wait until they are sure the environment will return to normal—the fact that it will at some point in the near future means they have to start launching programs, rehiring staff, and marketing promotions now. Following a year of plummeting top-line revenue, she says whether a return to normal happens this summer or fall doesn’t really matter. What matters is that organizations are ready for when it does. “It is less risky to just gear up now and wait rather than try and time it perfectly and for some reason miss the acceleration in travel,” Papandreou says.