Operations Practice

Jump-starting
resilient and
reimagined operations
COVID-19 has created an imperative for companies to reconfigure
their operations, and an opportunity to transform them.

by Edward Barriball, Katy George, Ignacio Marcos, and Philipp Radtke

© Xinzheng/Getty Images

May 2020
 The coronavirus pandemic has radically changed In our conversations with operations leaders, we
demand for products and services in every sector, find that many are energized and inspired by
while exposing points of weakness and fragility in the progress the crisis has forced them to make.
global supply chains and service networks. At the Production lines have achieved record levels of
same time, it has been striking how well and how availability and output: one automotive company
fast many companies have adapted, achieving found that manufacturing productivity actually
new levels of visibility, agility, productivity, and increased when it introduced physical-distancing
end-customer connectivity—while also preserving measures. After switching to daily planning cycles
their cash. Leading retailers have boosted their and gaining real-time visibility of their operations,
e-commerce capabilities, delivering food to managers don’t want to return to the old cadence
thousands of customers confined in their homes. of monthly planning and metrics that lag behind the
One European healthcare provider abandoned its situation on the ground. With physical stores closed,
two-year plan for the rollout of e-health services online and direct-to-customer sales are booming
and deployed the new remote treatment system to in many categories. That’s inspiring companies to
thousands of patients in only ten days. upgrade their sales and distribution capabilities to
meet this new type of demand.
The virus has shown that, when they align around
a common purpose, operations teams can achieve Across industries, companies are realizing that
goals that would have been considered impossible they can aspire to much more than simply a safe
before the crisis. As they plan their transition to return to work. They want to take what they have
GES 2020
the next normal, companies are looking for ways to learned during the COVID-19 crisis and create a
Jump-starting
maintain this senseresilient
of purposeand reimagined operations
and speed. new kind of operational performance. Our ongoing
Exhibit 1 of 3 discussions with leaders in multiple industries
suggest that this effort will focus on five key
themes (Exhibit 1).

Exhibit 1

Five themes shape post-COVID-19 recovery efforts in operations.

Building Accelerating Rapidly increasing Driving Reimagining a

operations end-to-end capital- and operating- the future sustainable operations
resilience digitization expense transparency of work competitive advantage
Review asset strategy, Accelerate customer- Apply digital accelera- Establish next normal of Step-change customer-
including geographic back Industry 4.0 digital tion tools for spend remote working centric development of
footprint and concen- and analytics as well as transparency and through digital new products, services,
tration risks digital services opportunity identifica- communication and and customer-service
capabilities to raise tion collaboration tools models
Reassess make-or-buy performance in
decisions for flexibility Reassess total Reskill the workforce to Establish collaborative
• customer experience operational cost accelerate transition ecosystems and rewrite
Transform for agility, • productivity structure from manual, repetitive value-creation role
eg, through asset • flexibility tasks to human-only relative to suppliers,
modularity and Establish robust capabilities customers, and
workforce upskilling cash and liquidity adjacent players
management Sustain new safety
Build robust supply- norms through Capture rapid value
chain risk-management Reassess capital physically distributed creation from M&A
function projects based on yet integrated
defined scenarios operations teams Embed sustainability
and frequent throughout operations
portfolio reviews

2 Jump-starting resilient and reimagined operations

Building operations resilience the long-standing trade-off between efficiency
Successful companies will redesign their operations and resilience. New digital technologies are already
and their supply chains to protect their business improving companies’ ability to predict problems,
against a wider and more acute range of potential make effective decisions, and rapidly adapt their
shocks and disruptive events. That calls for action operations in response.
on three fronts.

First, companies will revisit their global asset foot- Accelerating end-to-end digitization
print. In consumer services, for example, we expect Before the coronavirus hit, most companies were
the crisis to significantly increase the adoption of already accelerating the digital transformation
online and omnichannel delivery models. As leading of their customer journeys and value chains. We
banks restart their retail operations, some are expect digital technologies to be at the core of the
considering substantial changes to their branch next normal, enabling organizations to better meet
networks to better match reshaped demand patterns. the needs of their customers, and improving the
agility and responsiveness of operations without
The trend for product value chains to become increasing their costs. Research by the World
more regionalized is also likely to accelerate, as Economic Forum, in collaboration with McKinsey,
companies reassess the risks of globally integrated shows that companies often achieve significant
asset networks and supply chains. For example, to and simultaneous improvements across multiple
increase agility in the event of regional shutdowns, performance measures when they integrate
a leading fashion company has already started to advanced digital technologies across the value
develop new supply sources beyond its current chain (Exhibit 2).
network in Southeast Asia.
During the crisis, many companies have been able
Second, companies will likely reassess their make- to overcome staff shortages by automating pro-
versus-buy options. A leading consumer company cesses or developing self-service systems for
has accelerated the outsourcing of manufacturing customers. These approaches can accelerate
and logistics for some products to specialized workflows and reduce errors—and customers often
players in different regions. This approach improves prefer them. One telecom player found that it could
security of supply, thanks to increased local content, apply robotic process automation (RPA) to more
while also reducing costs and allowing the company than 50 percent of its back-office and invoicing
to ramp volumes up or down more rapidly. tasks. And in its technical call centers, up to half of
all tasks could be automated, freeing up agents to
Third, more companies will set up dedicated deal with the complex queries where they could add
supply-chain risk-management functions. Working the most value.
alongside the manufacturing, procurement, and
supply-chain functions, these units assess Digital approaches can transform customer
vulnerabilities across supply nodes and apply experience and significantly boost enterprise value
robust risk-mitigation frameworks to address those when applied end to end. Before the crisis, one
vulnerabilities. The resulting actions might involve North American insurer recognized that it needed
accelerating decentralization, deploying inventory to fundamentally change its offerings and the way it
closer to customers, and developing crisis-response engaged with customers and agents. The company
plans and capabilities. rebuilt its entire operating model, starting with a
deep understanding of customer needs, a refreshed
To win in the next-normal environment, companies product shelf, and an integrated set of changes
will need to achieve this step-change in resilience (including digital, analytics, and lean management)
without unsustainable increases in their costs. The to meet those needs. The organization invested
acceleration of end-to-end operations digitization, in a strategic set of hires and the development of
which is described next, will be critical in resolving design, digital, and advanced-analytics capabilities.

Jump-starting resilient and reimagined operations 3

 Jump-starting resilient and reimagined operations
Exhibit 2 of 3

Exhibit 2

End-to-end digitization creates a more agile, customer-focused organization.

Key-performance-indicator improvements for end-to-end digitized manufacturers

End-to-end digitized manufacturer

Impact range observed, %

0 100
Productivity Factory-output increase

Productivity increase
OEE¹ increase

Operating-cost reduction

Sustainability Water-consumption reduction

Energy efficiency
Agility Inventory reduction

Lead-time reduction
Change-over shortening

Speed to market Speed-to-market reduction

Design-iteration-time reduction
Customization Configuration-accuracy increase

0 100

1
Overall equipment effectiveness.
Source: World Economic Forum; McKinsey Lighthouse analysis

It continued to weave the same digital thread products. The system uses robots, advanced control
through all back-office operations, redesigning and systems and Internet of Things (IoT) technologies,
automating its processes and outsourcing activities built into interchangeable hardware “blocks” that
where it made sense to do so. The new approach allow the rapid configuration of production lines.
dramatically increased the speed and efficiency of Dedicated simulation software accelerates the
the company’s operations: policy-servicing tasks qualification of new production lines and the scale-
that used to take 20 days are now completed in two, up of production. Finally, as discussed later under
and products are brought to market three times “Reimagining a sustainable operations competitive
faster. Overall, the holistic transformation has put advantage,” companies are using digital platforms
the organization on a path to $1 billion in additional that connect the entire value chain to create
enterprise value. innovative business models.

A leading healthcare company has employed

digital tools across its entire value chain, offering Rapidly increasing capital- and
user-friendly product evaluation and selection operating-expense transparency
software for patients and medical professionals and The economic fallout from the COVID-19 crisis will
using advanced analytics and real-time planning outlive the pandemic itself. We know companies will
to control its complex direct-to-customer supply need to build their next-normal operations around
chain. The company has also built a modular digital a different cost structure. They will need to make
platform to accelerate the introduction of new these changes quickly.

4 Jump-starting resilient and reimagined operations

Organizations can begin with a
review of their operating costs.
Technology-enabled methodologies
can accelerate cost-transparency work,
compressing months of effort into
weeks or days.

Organizations can begin with an in-depth review Most companies have paused their capital plans
of their operating costs. Technology-enabled as they assess the rapidly changing economic
methodologies can significantly accelerate cost- environment. When they start investing again,
transparency work, compressing months of effort they will need to be smart and careful in their
into weeks or days. These digital approaches approach. Leading organizations are adopting
include procurement-spending analysis and increasingly sophisticated techniques in their
clean-sheeting, end-to-end inventory rebalancing, capital planning, assessing each project’s return
and capital-spend diagnostics and portfolio on investment against multiple scenarios, and
rationalization. One leading retailer has used the continually reviewing their capital-project portfolios
drop in activity triggered by the crisis to conduct a as the environment changes and new data emerge.
systematic, cross-functional review of its network, Companies will likely want to rethink the way
logistics operations, and procurement model. The projects are executed, too, redefining their scope
company has applied advanced analytics to slim to reduce initial capital requirements, accelerating
down its product assortment, trim its warehouse construction and commissioning, and managing
and logistics requirements through optimized risks across the full project life cycle.
planning, and significantly reduce its procurement
costs. It is now ramping up its new operating model, In similar fashion, many services organizations have
which it expects will cut overall operating costs by already moved away from the construction of capital-
around 30 percent. intensive data centers, preferring the more flexible
option of leasing capacity from commercial cloud
Operations functions can also play a central role providers. We expect this trend to accelerate in the
in companies’ cash- and liquidity-management services sector, and to expand into other industries.
activities. Optimizing an organization’s cash position
in the potentially volatile postcrisis environment
will require companies to increase their visibility Driving the future of work
of the cost structure of their own operations and Many people’s jobs have been fundamentally
those of suppliers. A leading chemicals player has changed by the COVID-19 pandemic. With access
set up analytical tools to anticipate changes in to workplaces limited to essential staff, employees
raw-material prices, allowing it to manage potential have had to learn how to complete tasks remotely,
supply–demand imbalances proactively. A leading using digital tools to communicate and collaborate
automotive player has established a permanent unit with colleagues.
within its finance function to monitor liquidity across
its business.

Jump-starting resilient and reimagined operations 5

 The transition to the next normal is likely to Reimagining a sustainable operations
accelerate trends that were already underway competitive advantage
in many industries, with a marked reduction in Dramatic shifts in customer expectations, demand
manual and repetitive roles and an increase in the patterns, and industry structures create the
need for personnel with analytical and technical opportunity for equally dramatic shifts in companies’
skills. Experience in large-scale digital operations operations and beyond, as leaders reexamine
transformations demonstrates that these programs the role that operations plays in connecting with
are highly worker-centric and rely on high work- customers and building an entire corporate strategy.
force engagement to achieve results. This shift
to the future of work will therefore require an We are already seeing multiple ways in which
unprecedented wave of reskilling, with operations organizations can adapt their operations to
roles affected more than most. create lasting competitive advantage and to meet
environmental and social-responsibility goals.
Some companies have already used this period as an Informed by customer insights, some companies
opportunity to boost skills, encouraging people not will reinvent themselves entirely in the coming years,
fully occupied by the crisis response to participate in focusing on specific technologies or market niches—
remote learning and coaching programs. Postcrisis, or repositioning themselves within their industry’s
organizations will need to ramp up their reskilling value chain by ramping up direct distribution while
and upskilling programs significantly to develop a increasing delivery speed and flexibility. A number
workforce with the capabilities needed to run their of companies in the food-service sector are working
next-normal operations. to create “one-stop shop” online B2B portals, for
example. Offering hotels and restaurants rapid
One leading steel company is applying advanced- delivery of everything they need, these portals allow
analytics approaches at scale to improve the customers to hold less inventory and reduce their
productivity of its global operations. In support of procurement costs.
this effort, the company has established a dedicated
internal training academy that equips process Other companies will transform the way they
engineers with the skills they need to run analytics develop products, using agile processes and digital
projects. The academy is also retraining staff to links to improve their connection with customers
fill new roles, such as data scientists and data and the speed at which they can introduce new
engineers. And, when technological and strategic and customized designs. A leading carmaker in
shifts led to major changes in its operating footprint, Asia has already launched a large-scale consumer-
a European bank used a combination of e-learning, to-business program for new-vehicle development.
classroom training, and on-the-job coaching to The company uses online 3-D tools to share ideas
reskill and redeploy nearly 10,000 people over a five- and gather feedback from thousands of customers
year period. The approach helped to lift employee- during product development. Their inputs are
satisfaction scores by ten percentage points. used to shape the final design of vehicles and to
tailor the organization’s marketing and after-sales
The recovery from the crisis will also be a catalyst service offerings.
for changes in where work is done. With the need
for physical-distancing measures likely to remain in Relationships based on close collaboration and
place for some time, remote working may become data sharing won’t just involve companies and
the norm for many employees. As organizations their end customers. We expect entirely new
master the challenge of managing physically ecosystems to emerge that also include suppliers
distributed operations teams, they may adapt and adjacent industry players. The public–private
their operating models accordingly, with staff on collaboration that allowed the US healthcare supply
the ground in local markets able to draw upon the chain to improve the supply of critical equipment
expertise of specialist colleagues who provide during the peak of the coronavirus crisis shows just
support remotely via digital connectivity tools. what such ecosystems can achieve. In a matter of

6 Jump-starting resilient and reimagined operations

weeks, medical-device manufacturers, component approach to transformation. Teams involved in
suppliers, government officials, logistics companies, the transformation will need to respond quickly to
and advisers came together to deliver quality rapidly changing circumstances, modifying their
equipment in record time. planning, design, and execution as new information
becomes available.
In some cases, companies will go further than
ecosystem coordination by restructuring through The nerve centers or control towers that many
mergers and acquisitions. Depending on the industry, companies have already established to navigate
M&A opportunities may be informed by the potential the first phase of the crisis will provide a model
value generated by reimagined operations, either for a more robust and agile type of operations
through creating operational synergies or by building management. As companies transition to the
new, competitive capabilities through vertical or next normal, they can retain these powerful and
horizontal integration. Operations can therefore play effective structures, which have helped many
an essential role in identifying new ways to drive organizations achieve unprecedented visibility
competitive advantage up or down the value chain. and cross-functional agility in their operations,
For example, investing in local producers of crucial rather than dismantle them. Indeed, they can
raw materials can help manufacturing companies digitize, industrialize, and scale up this new way
ensure continuity of supply. of working. One option is to create a strategy
and transformation office, including a cascading
Under lockdown, cities experienced significant network of three types of teams (Exhibit 3).
increases in air quality, something that was noticed
and appreciated by citizens. As people seek First, a plan-ahead team develops scenarios, a
to retain the few benefits of the pandemic, the vision, and a set of initiatives to enable the change.
sustainability imperative will return to the top of the Some initiatives are no-regret moves, appropriate
corporate agenda. Operations plays a decisive role for all scenarios, such as accelerating end-to-end
in an organization’s environmental performance, digitization efforts. These will form the backbone
with the opportunity to adopt manufacturing of the organization’s transformation and can begin
technologies and supply-chain arrangements immediately. Other actions will be initiated by
that consume less material, use less energy, and specific triggers, such as altering the company’s
generate less waste. Consumer companies are at product mix as evidence emerges of changing
the forefront of this trend, launching major initiatives consumption habits.
in packaging to move from single-use plastics to
more sustainable materials, formulating healthier Second, a number of design teams work in sprints
products, and developing sourcing strategies that to develop concepts and design the initiatives to
minimize negative environmental and social impact. be executed. These teams can then be ramped up
and down on an ongoing basis as defined by the
transformation office.
Transforming operations to win in
the next normal Third, an implementation team coordinates across
To prepare for a different economic and business the operations teams to execute changes on the
environment, operations leaders are looking to ground. This team helps to scale operations up or
transform their organizations urgently—and they down by coordinating workforce capacity, raw-
want to maintain the momentum that has carried material supply, and transport and distribution
them through the early phases of the pandemic. networks. It collects and analyzes data to make
fact-based decisions, establishes the pace of
With the likelihood of prolonged uncertainty change, follows up rigorously to ensure timely
over supply, demand, and the availability of implementation of actions, and tracks the actions’
resources, we believe that COVID-19 will be the impact against the organization’s objectives.
trigger for operations functions to adopt an agile

Jump-starting resilient and reimagined operations 7

 Jump-starting resilient and reimagined operations
Exhibit 3 of 3

Exhibit 3

The next-normal team structure blends scenario thinking with agile

implementation.
Develop scenarios Monitor external and internal Scenario
for multiple versions signals to identify trigger trigger
Plan-ahead Team focused on
of future points or add new scenarios point
transformation long-term vision
team and control

Mobilize expert
design teams Several teams
Design team working in agile
at trigger point
Plan up front which expert design sprints designing
teams are required per scenario and piloting new
concepts and ideas

Implementation
Bold
teams roll out
moves
piloted designs
Implementation
team
No-regret moves
“No regrets” implemented since
actions the start to
improve a robust
operations
backbone

essence. Companies that are willing to maintain

their momentum while also setting new standards
As business operations make the transition to and upending old paradigms will build long-term
the next normal, speed will continue to be of the strategic advantage.

Edward Barriball is a partner in McKinsey’s Washington, DC, office; Katy George is a senior partner in the New Jersey office;
Ignacio Marcos is a partner in the Madrid office; and Philipp Radtke is a senior partner in the Munich office.

The authors wish to thank Agatha Chantalou, Joseph Dufresne, Christophe Francois, Richa Gupta, Tom Hamers, David
Hamilton, Christian Johnson, Curt Mueller, Marta Rohr, Alex Singla, Daniel Swan, Brian Tkach, and Jonathan Ward for their
contributions to this article.

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8 Jump-starting resilient and reimagined operations