Bain Covid 19 situation report & action agenda

Covid-19:
Situation Report and Action Agenda
Southeast Asia CEO Webinar | April 23, 2020
Karen Harris James Allen Jean-Pierre Felenbok Praneeth Yendamuri
Managing Director,
Bain’s Macro Trends
Group
Senior Partner,
Leading Expert in Global
Strategy & Author of The
Founder’s Mentality
Managing Partner,
Southeast Asia
Partner, Leader of
Consumer Products,
Retail and M&A,
Singapore
SPEAKERS MODERATOR

Topics for today
How might the
Covid crisis play
out?
What macro trends
might emerge or be
accelerated?
How can you retool
your company for
the future?
Q&A
What are your top
of mind questions?
What are CEOs in
the region thinking/
doing?
How should you
lead through the
crisis?
01 03 0402

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Context
Covid-19 is a
humanitarian crisis
and a global challenge
In this interconnected world we have seen
the virus spread rapidly, and are still
gathering information to understand its
causes and effects
We are grateful for
the businesses,
governments, non-
profits, and individuals
around the world that are working to
protect those that are sick or in danger of
becoming so and to “flatten the curve”
There is a lot that is
still unknown about
Covid-19
these materials are an attempt to shed
light on what we know so far to help
businesses make informed decisions
• The top priority for all businesses is
to protect the safety and health of
employees and customers, for which
there are WHO, CDC, and other
national guidelines
• Bain is not an expert on epidemiology
and containment policies, however
given our 45+ years of experience
advising companies during both
economic booms and busts, we are
committed to spreading accurate
and timely information to reduce the
unknowns for businesses and
business leaders
Our focus is to
enable companies
to make rapid and
practical decisions
we are committed to helping
business leaders navigate the
path forward

How long
will “this”
last means
both the
pandemic
and the
policy
responses
Epidemic
begins
Source: Bain Macro Trends Group analysis, March 31, 2020
Containment
(maintained)
Suppression
Ongoing testing,
surveillance and isolation
of infected
Policy: Late but effective
aggressive action after
virus gets out of control
(e.g., Wuhan or Italy
model)
Policy: Aggressive
ineffective action as
attempts to halt virus are
economically damaging
but ineffective
Policy: Weak action as
virus runs unimpeded
(e.g., Iran)
Major damage from
policy effect, moderate
mortality loss, financial
crisis possible,
unknown duration
Major damage, high
crisis likely, unknown
duration
Major damage, high
crisis likely, short
duration
Treatment or
vaccine
Herd immunity
achieved
Containment
achieved
Treatment or
vaccine
Herd immunity
achieved

Coronavirus impact scenarios
Faster
Recovery
• US infections rapidly rise in March, peak
and subside in Q2. ~+80% of pre-crisis
activity towards end of Q2
• EU most adverse epidemiological
outcome among advanced economies
• China slowly loosens restrictions in
March, full acceleration towards normal
in Q2
• US/China/Others deploy minimally
tested treatment by end of Q2
Moderate
Recovery
• US/W Europe/China engage in high social
distancing for ~1 year until vaccine or
treatment can be deployed
• Extended impairment of business activity;
containment of damage entirely contingent
on broad government backstops
• People movement across borders minimal
for duration of epidemic
• Public anxiety and social distancing policies
keep infections rising but at a manageable
rate
Slow
Recovery
• Strict mitigation efforts in many
economies to keep infection rate under
control for longer than a year
• Public anxiety prevents resumption of
normal activity until vaccine or herd
immunity achieved (verified by
serological test)
• Financial crisis and solvency crises likely
• Quasi-command economy structure (as
in war time) required
Q1 2021Q1 2021 Q1 2021
-25-30%-4-6% -10-20%
/ A S O F M A R C H 3 1

Pre-Covid trends
Globalization has been called into question this decade; it will be
called to retirement
next decade
[ G E O P O L I T I C S ]
Plentiful global labor becomes labor scarcity, boosting capital
investment next decade
as well as inequality
[ D E M O G R A P H I C S , A U T O M A T I O N , A N D I N E Q U A L I T Y ]
The decades long downward march of interest rates reverses next
decade
[ E N D O F C A P I T A L S U P E R A B U N D A N C E ]
In advanced economies, the growth of cities slows as a confluence
of technology trends decrease the cost of distance
[ S P A T I A L E C O N O M I C S ]

The pandemic will accelerate shifts that were already
underway (1/2)
Post-PandemicPre-Pandemic
Reduction in labor
force leads to
capital investments
in automation
Globalization called
into question
• The declining number of working-age adults along with rising wages along with technological innovations was
already enabling the acceleration of automation, particularly in the service sector
• Recessions historically have accelerated automation, and the shutdown is creating a laboratory for testing the
potential for the elimination of human labor. Capital investments post-pandemic will likely create even more rapid
uptake of automation
• The deterioration of relations between the US and China and trade wars had already prompted the reconsideration
of supply chain resilience, particularly for tech hardware companies
• The first phase of the pandemic, which locked down China, accelerated this trend and extended it to other industries
(e.g., pharmaceuticals)
• Post-pandemic, blame will likely be lobbed in many directions, but particularly at China where it originated; volatility
could lead to another potential supply shock
• Large investments to bail out companies will have political limitations or explicit requirements for domestic
investments; or companies may face backlash if they expand abroad with taxpayer funding
• More muscular governments are likely to remain – powers gained in a crisis are challenging to strip rapidly post-
crisis
• Potential public recriminations against businesses for creating economic as well as health risks due to globalized
travel and supply chains

The pandemic will accelerate shifts that were already
underway (2/2)
Post-PandemicPre-Pandemic
Spatial economics
The decades-long
march downward
of interest rates
begins to reverse
• The rising cost of urban real estate, particularly in tier one cities, combined with a confluence of new technologies
prompted/enabled middle class families and some rich families to migrate to the exurbs.
• The perceived danger of close living during the pandemic will likely accelerate this trend.
– May also create a boost in car ownership as the value on independent transit rises
• Demand for new capacity in health care system may create expansion out of cities, further supporting the ability of
families/elderly to leave denser urban areas
• Falling supply of capital from demographics shifts as older populations draw down savings.
• Falling supply of capital as global geopolitics fractures capital markets
• Rising demand for capital for capital replacement of labor
• Rising demand for capital to restructure supply chains post-pandemic, including acceleration of automation
• Rising inflation from supply destruction in some categories

Inputs/
Commodities
Value-added
transformation
Experiential
delivery
• Commodities remain largely
geographically concentrated
– Hard commodities (e.g., ores) will be the
anchor of global trade
– Soft commodities (e.g., grains/feedstock)
will partly localize
– Energy will become a more distributed
commodity but with key hard commodities
that tie it to geographically concentrated
sources (e.g., rare earth metals)
• Changes in geopolitics will
challenge the free movement of
goods across borders
– May require changes in strategy for access
• Labor costs lose their importance for
defining competitiveness
• Automation shifts the balance away
from variable costs and towards fixed
costs
• Production moves closer to
end markets
– Move made possible by technology, and
made desirable due to geopolitics (e.g., rising
trade barriers)
• Customer targeting changes as
income polarization increases
• Rising inequality increases the role
of governments in markets, as a
customer or an arbiter of
distribution
• Technological changes create
innovations in logistics
– Drones and other forms of automation
enables more atomized delivery as
demanded by online purchasing
– Changing spatial economics enables
population dispersion in advanced
economies. Localized production will also
shift distribution needs
Where could we land?

Topics for today
01 03 0402
Q&A
What are your top
of mind questions?
What are CEOs in
the region thinking/
doing?
How should you
lead through the
crisis?
How might the
Covid crisis play
out?
What macro trends
might emerge or be
accelerated?
How can you retool
your company for
the future?

54% CXOs believe restrictions likely to last till end of year
When do you think Covid-19 restrictions
will last until in your market(s)?
Source: SEA CEO Survey, N = 13; Survey date: 15 – 23 Apr
Strict restrictions likely to last through Q2
2020. Diluted restrictions may continue
through Q3 2020 to tackle pockets of
Covid-19 spikes.
ASEAN ConsumerProductsCo
The next few months could see alternate
phases of lockdowns being relaxed and
re-imposed… until a vaccine is found…
Indonesian NaturalResourcesCo
Lockdowns last for around 2 months in
each country and have started across
most countries…
APAC ConsumerProductsCo
“
“
“
31%
Q2 2020
54%
15%
Q1 2021
End-of-year

70% CXOs expect recovery to happen by mid-2021
When do you expect economic recovery
to happen in your market(s)?
Recovery will not happen all at once –
travel and tourism may take longer
while services, manufacturing and
natural resources will be faster.
Indonesian NaturalResourcesCo
Many APAC markets are reliant on
exports and it will take time for
borders to open and recovery to
happen.
The level of disruption is huge and
consumers will move back to their
old consumption habits cautiously…
“
“
“
15%
Q1 2021Q4 2020
15%
Q3 2021
40%
Q2 2021
15%
Q4 2021
15%

To what extent has Covid-
19 caused a reduction in
revenue in your business?
What are the top 3 key
challenges your business
is currently facing?
Note: Challenges that were not selected as top 3 by any respondent are not displayed;
85% expect revenue decline in FY20; key challenges are
route-to-market bottlenecks and supply constraints
expect a reduction in
revenues85%
ranked demand
volatility and supply
constraints as #1
challenge each
30%
Other challenges include regulatory
constraints.
ASEAN ConsumerProductsCo
Other challenges include capital
constraints and a review of product
guarantees.
ASEAN FinancialServicesCo
Some markets are trading down due
to lower levels of disposable income
and consumer confidence.
“
“
“

85% CXOs are prioritising digital; 75-80% are prioritising
cash management and commercial strategy
What levers are you prioritising in response to Covid-19?
Note: “n/a” responses are not displayed; Source: SEA CEO Survey, N = 13; Survey date: 15 – 23 Apr
Evaluating supply chain
and logistical set-ups
Managing cash
conservation and driving
cost transformation
Accelerating digital
Flexing commercial
strategy

85% CXOs will invest more in digital post-Covid
What actions will you over-index on after Covid-19?
Note: “n/a” responses are not displayed; Source: SEA CEO Survey, N = 13; Survey date: 15 – 23 Apr
Evaluating supply chain
and logistical set-ups
Managing cash
conservation and driving
cost transformation
Accelerating digital
Flexing commercial
strategy

To manage through the Covid-19 crisis and thrive in the
future, CEOs need to balance multiple priorities
• How do I lead and manage an unprecedented amount of change?
• How do I leverage the learning from planned and unplanned “experiments”
How does the industry evolve
and how do I adapt value
propositions, capabilities and
ways of working?
How do I quickly mobilize
people, re-establish
customer relevance, and
reactivate supply chains?
How do I ensure the safety
of my people and protect
the business?
How do I manage a cascade
of operating challenges for
an uncertain duration?
• How are we relevant to our customers, employees, shareholders, and community?
• How should our purpose, values, and brand guide the decisions we make?
What
How
Business
cycle
Accelerate
through recovery
Retool
for new world
Protect and ensure continuity

Shocks from this crisis will come in many different forms
01 • Social distancing and containment cycles impact workforce availability and productivity
• Potential for recurring infection outbreaks until a Covid-19 treatment or vaccine is created and
distributed
• Employees may also experience delayed onset burn out and/or other mental health challenges
Workforce
shocks
• Supply chains impacted as disease spreads globally
• Supply chain disruptions will pressure businesses to adapt rapidly03
• Liquidity issues may arise
• Customers’ ability to pay could decline and affect financial stability04
• Demand for products and services will continue to face varying challenges (e.g., stockpiling
reduces future demand, layoffs reduce consumption)
• Demand will recover differently across geographies
02 Demand
shocks
Supply
shocks
Financial
challenges

Example - Sustained shocks have already been playing out
for companies affected early in the crisis (China Factory Co)
01
03
04
02
Workforce
shocks
Demand
shocks
Supply
shocks
Financial
challenges
• China Factory Co
experienced
workforce
absenteeism,
straining ability to carry
out essential tasks
• Potential for a second
Covid outbreak;
preparations for
another containment
cycle commence
• Government
mandated
shutdown with no
visibility into when
operations would
resume
• Factory begins to
ramp up operations
after initial crisis
passed, and account
for neglected
operations and
maintenance
• Key suppliers
across the globe are
disrupted by the
disease spread
January February March April May
faces demand
shocks as global
customers delay or
cancel orders
begins to prepare for
eventual demand
surge as some global
regions recover
• Further cash flow
challenges require
another urgent cash-
hunt
• Compounding supply
chain issues mean
suppliers struggle to
come back on online
• Lack of revenue
creates significant
liquidity issues
• Competitors race to
respond to customers,
creating pressure to
keep up and innovate
• Ramp-up challenges
and difficulty
returning to business
as usual negatively
impacts workforce
productivity

• Maintain clear visibility of
the liquidity situation
• Determine tiers of levers -
‘handbrakes’ to ‘break
glass’; monitor situation
and pull as necessary
• Stand-up line-led team for
bottom-up idea generation
and implementation
• Leverage a central war
room for real-time
decision-making
• Communicate with
internal/ external
stakeholders
• Pursue financing options
Model exposure; Stress test
P&L & liquidity
Plan urgent cost take-out,
preserve cash
• Outline macro scenarios
by market, translate to
revenue decline, and
stress test the P&L and
balance sheet
– Units, revenue, costs
– Cap Ex, working capital,
cash/liquidity
– 13 week, 4Q outlook
• Build extreme downside
scenarios
• Outline major
operational actions that
impact liquidity
– Do now ‘handbrake’
actions vs. do-later ‘break
glass’ initiatives
• Manage Investor
Relations
Cash and Cost
• Ensure individual and
location safety
• Ensure availability of
mission critical jobs
• Closely monitor each
cluster of population
(onsite and remote)
• Focus managers on
critical activities
• Adapt workforce by using
full reversibility levers and
govt incentives
• Put in place visible
commitments in line with
company’s purpose
• Reinforce one-team
mindset
Protect employees
and refocus work
People and Org
• Daily calls with impacted
teams (sourcing, planning,
mfg, engineering,
commercial) to track latest
risks
• Work with suppliers to
maintain joint assessment
of supply risks (tiers 1, 2,
3)
• Secure supply for at-risk
components
• Navigate logistics capacity
constraints
• Increase manufacturing
efficiency
• Build contingency plans
Stabilize operations to
“new normal”
OperationsScenario Modeling
• Get close to customers;
communicate and act
empathically
• Take signature actions
and adjust value
proposition
• Invest selectively to build
new capabilities
• Build promoters for life
among customers and
employees – respond to
feedback
• Optimize ROI on GTM
costs
• Embrace tech-enabled
selling
Adapt GTM to protect
revenue
Customers
Ensure continuity
Key levers to successfully ‘ride out the storm’

Accelerate through recovery
Planning for recovery should start early and be linked to
triggers
Identify major macro drivers
(Heterogeneous and asymmetrical) Model range of sector-level scenarios
Link choices to scenarios
Same across all scenarios – do it now Scenario dependent – identify and watch for triggers
Epidemiological progression
• Across geographies
• Shape and length of curve
Government interventions
• Stay at home orders
• Stimulus packages
Macroeconomic impact
• GDP trends
• Unemployment and consumer confidence
Customer behavior and demand
• Spikes vs. hits
• Bounce back vs. fundamental shift
Operational impacts
• Tier 1, 2, 3 suppliers; distribution
• Shared service centers
Competitor moves
• Products
• Offers, pricing
1 2

• Manage timing of costs
and revenues
• Maintain cost saving and
cash management
measures through
recovery
• Accelerate automation
agenda
• Pursue asset-light models
• Begin structural resets for
the future
Manage fiscal
sustainability
Cash and Cost
• Take advantage of this
time to make intentional
choices
– Where to revert to pre-crisis
mode
– Changes made in crisis that
should remain
– Things to do now to come
back stronger and win in the
new world
• Manage the portfolio
– Simplify the product suite
– Begin process of executing
inorganic activity
Come back
stronger
Strategy
• Turbocharge logistics
flexibility
• Manage and secure
supply (tier 1, 2, 3)
– Collaborate with suppliers
– Optionality and redundancy
– Inventory strategy
• Improve visibility and
traceability
• Evaluate and adjust
production; learn from
efficiencies in crisis
– Reduce complexity
– Optimize quality standards
Design for resilient
operations
Operations
• Triage customer
experiences for digital /
virtual hot spots to build
competitive advantage
and delight customers
• Continuously ask for
feedback and rapidly
refine offerings and
experiences
• Re-evaluate marketing for
relevance and
effectiveness
• Empower teams to
become adaptive – test
and learn as the
environment changes
Delight customers and build
revenue
Customers
Accelerate through recovery
Successful companies will do five things in recovery
• Coordinate closely with
regulators
• Plan back to work /
location opening and
safety procedures by
group
• Retrain for new
competencies, new ways
of working
• Manage stress and
uncertainty
• Plan for re-containment
• Create flexibility with
ecosystem partners
Protect & bolster your
workforce
People and Org

How do I lead and manage an unprecedented amount of
change?
CEOs face a leadership challenge like
nothing before
To meet this challenge, CEOs must get four
activities right
• This is the largest wave of change your people have
experienced in their career
• They will need to juggle multiple change agendas –
Protect, Recover, and Retool – balance might differ by
business/geography
• The organization has already launched thousands of
“natural experiments”, which leadership needs to learn
from and selectively amplify
• There is a window of opportunity to reconnect with your
mission and culture and address existing pain points
• Your people are going through their own disruption …
they are human too
Lead: Align your senior leaders on a complex and
often conflicting set of priorities; adopt and foster a
“learning” rather than “protection” mindset
Decide: Prioritize the portfolio of change initiatives,
and dynamically adjust as the organization learns
Do: Increase the organization’s metabolism by
mobilizing distributed teams to test and scale
solutions
Orchestrate: Build capabilities, boost accountability,
and define the appropriate balance of “top down” vs.
“bottom up” approach

March 23, 2020 March 30, 2020 April 6, 2020 April 13, 2020 April 20, 2020
When and How
Should Leaders
Retool for a Post-
Coronavirus World?
Link
Preparing for the
Post-Pandemic
World
Link
The Big
Business Idea
from the
Pandemic
Link
• Urgently initiate retooling
discussions to
o Avoid ‘snap back’ to old
ways
o Experiment and learn around
the unknown
o Agree design principles and
values early
• Approach retooling as an
‘alpine style’ journey:
o Align on simple first steps –
journey, map, travelers
o Break down the journey into
‘day trips’ (for sub-teams)
o Focus on behavior change
early and often
o Engage the frontline
o Reorient CEO agenda to
emphasize business building
• Reintroduce
yourself to your
customers
• Get your new
definition of “risk
management” right?
• Think about
changing strategic
priorities and new
operating systems
• Recognize that
every single action
is communication
The Coronavirus
May Inspire a
Great Retooling
Link
• Rally around a Big
Idea
• Reconsider your
assets and think
beyond traditional
boundaries of the
Firm
• Prepare for two
different types of
customers, and
multiple scenarios
• Need to be a more
adaptable, learning
organization;
compete with Scale
and Speed
• Refocus on the
best of Global and
Local
• Rediscover
business building
• Reorient your talent
model and culture
to those that really
matter
The Great Re-
tooling: Adapting
for the Pandemic
& Beyond
Link
• Move from retreat
to retool
• Put on your own
mask before
assisting others
• Think costs fast,
but owners last
• Prioritize private-
public partnerships
• Evolve with the
world and the job—
everything is
different
March 16, 2020
Coronavirus: A
CEO’s Dress
Rehearsal for the
new world
Link
• We are entering a
new normal..
• ..but it’s only the
dress rehearsal for
what’s to come
• While costs matter,
this is a battle for
customer relevance
• If we act today, we
will be stronger
tomorrow
• We’re all a little
scared
Responding to the Crisis
Protect, Recover and Retool for the new World

Rally around a Big Idea
1940s CEOs fully embraced the ideas of
mass production and a global mindset
Reconsider your assets & think
beyond traditional boundaries
Competitive dynamics and role of the
Government changed, public-private
partnerships became key to survival
Prepare for two different types of
consumers, and multiple
scenarios
Almost every CEO underestimated how much
the American consumer was transformed by
the war
• Re-imagine how you will manage the three great conflicts in
the new world:
– Scale vs. Intimacy
– Routine vs. Disruption
– Short term vs. Long term
• The Firm of the Future will be defined more by its partnerships
(with competitors, suppliers and governments) than by its own
assets
• Global CEOs may need to consider how the boundaries of their
firms can match the new boundaries that the governments of US
and China will create
• Don’t underestimate how profound crisis will change your
consumer – prepare to stay relevant to different cohorts
• The adaptability you are building should be the new norm: As
you move from ‘protect’ to ‘recover’ to ‘re-tool’, you will live in a
world of scenarios…and build a team adaptable to weekly changes
Lessons from the “Great Retooling” of WWII for
CEOs of 2020
Lessons from the Great Retooling Implications for the 2020 Class of CEOs

Scale
Insurgency
Precursors
to modern
firms
Scale
apprenticeships
Early
industrialists
Trusts Professional
Management
Shareholder
Primacy
Trading
Empires
Today1790s 1830s 1870s 1970s1920s 2000s
Dominant ideas about the firm change about every 50
years…

Scale
Intimacy
vs
Routine
Disruption
vs
Deliver
Develop
vs
…what made Professional Management work is only one part
of what companies need now

Thank you for
joining - hope you
carry with you some
useful takeaways
Materials
presented today
will be circulated
shortly
We continue to develop
topical, actionable material
on Covid-19 as we navigate
this crisis
To access our latest on
Covid-19, visit
Covid War Room
Macro Trends Group
For further questions
Jean-Pierre.Felenbok@Bain.com
Praneeth.Yendamuri@Bain.com

Bain Covid 19 situation report & action agenda

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