THE CAPCO INSTITUTE

JOURNAL
OF FINANCIAL TRANSFORMATION

ORGANIZATION
Can businesses recover from the crisis?
Assessing scenarios, riding trends
LESLIE WILLCOCKS

N EW WO R KI NG
PAR AD I G M S
#52 JANUARY 20 2 1
THE CAPCO INSTITUTE
JOURNAL OF FINANCIAL TRANSFORMATION
RECIPIENT OF THE APEX AWARD FOR PUBLICATION EXCELLENCE

Editor
Shahin Shojai, Global Head, Capco Institute

Advisory Board
Michael Ethelston, Partner, Capco
Michael Pugliese, Partner, Capco
Bodo Schaefer, Partner, Capco

Editorial Board
Franklin Allen, Professor of Finance and Economics and Executive Director of the Brevan Howard Centre, Imperial College
London and Professor Emeritus of Finance and Economics, the Wharton School, University of Pennsylvania
Philippe d’Arvisenet, Advisor and former Group Chief Economist, BNP Paribas
Rudi Bogni, former Chief Executive Officer, UBS Private Banking
Bruno Bonati, Former Chairman of the Non-Executive Board, Zuger Kantonalbank, and President,
Landis & Gyr Foundation
Dan Breznitz, Munk Chair of Innovation Studies, University of Toronto
Urs Birchler, Professor Emeritus of Banking, University of Zurich
Géry Daeninck, former CEO, Robeco
Jean Dermine, Professor of Banking and Finance, INSEAD
Douglas W. Diamond, Merton H. Miller Distinguished Service Professor of Finance, University of Chicago
Elroy Dimson, Emeritus Professor of Finance, London Business School
Nicholas Economides, Professor of Economics, New York University
Michael Enthoven, Chairman, NL Financial Investments
José Luis Escrivá, President, The Independent Authority for Fiscal Responsibility (AIReF), Spain
George Feiger, Pro-Vice-Chancellor and Executive Dean, Aston Business School
Gregorio de Felice, Head of Research and Chief Economist, Intesa Sanpaolo
Allen Ferrell, Greenfield Professor of Securities Law, Harvard Law School
Peter Gomber, Full Professor, Chair of e-Finance, Goethe University Frankfurt
Wilfried Hauck, Managing Director, Statera Financial Management GmbH
Pierre Hillion, The de Picciotto Professor of Alternative Investments, INSEAD
Andrei A. Kirilenko, Reader in Finance, Cambridge Judge Business School, University of Cambridge
Mitchel Lenson, Former Group Chief Information Officer, Deutsche Bank
David T. Llewellyn, Professor Emeritus of Money and Banking, Loughborough University
Donald A. Marchand, Professor Emeritus of Strategy and Information Management, IMD
Colin Mayer, Peter Moores Professor of Management Studies, Oxford University
Pierpaolo Montana, Group Chief Risk Officer, Mediobanca
John Taysom, Visiting Professor of Computer Science, UCL
D. Sykes Wilford, W. Frank Hipp Distinguished Chair in Business, The Citadel
CONTENTS

LEADER SH I P
08 Digital leadership: Meeting the challenge of leading in a digitally transformed world
Nelson Phillips, Professor of Innovation and Strategy and Co-Director, Centre for Responsible Leadership,
Imperial College Business School, Imperial College

16 Innovating for growth in an era of change

Alex Sion, Head of New Venture Incubation, Global Consumer Bank, Citi Ventures

24 Five key steps to adopt modern delivery in your financial institution

Poorna Bhimavarapu, Executive Director, Capco
David K. Williams, Managing Principal, Capco

34 Leading in the digital age

Claudia Peus, SVP, Talentmanagement and Diversity, and Professor of Research and
Science Management, Technical University of Munich
Alexandra Hauser, Senior Expert Leadership and Organizational Development, Technical University of Munich

42 Designing a digital workplace: Introducing complementary smart work elements

Tina Blegind Jensen, Professor, Department of Digitalization, Copenhagen Business School
Mari-Klara Stein, Associate Professor, Department of Digitalization, Copenhagen Business School
WORK FO R C E
56 Team to market: An emerging approach for creating dream teams for the post-pandemic world
Feng Li, Chair of Information Management and Head of Technology and Innovation Management, Business School
(formerly Cass), City, University of London
Clare Avery, Business Development Manager, Business School (formerly Cass) and Head of Cass Consulting, City,
University of London

68 Engaging employees with organizational change

Julie Hodges, Professor in Organizational Change and Associate Dean for MBA and DBA Programmes,
Business School, Durham University

76 Making collaboration tools work at work: Navigating four major implementation dilemmas
Nick Oostervink, Former Researcher, KIN Center for Digital Innovation, School of Business and Economics,
Vrije Universiteit Amsterdam
Bart van den Hooff, Professor of Organizational Communication and Information Systems, KIN Center for Digital Innovation,
School of Business and Economics, Vrije Universiteit Amsterdam

86 How to successfully work in the redefined world of work: Time-spatial job crafting as a means
to be productive, engaged and innovative
Christina Wessels, Formerly, Rotterdam School of Management, Erasmus University
Michaéla C. Schippers, Professor of Behaviour and Performance Management, Rotterdam School of Management,
Erasmus University

ORGANIZATI O N
94 Can businesses recover from the crisis? Assessing scenarios, riding trends
Leslie Willcocks, Professor of Work, Technology and Globalisation, London School of Economics and Political Science

102 Value streams – a future-proof way to organize your firm

Robert Ord, Managing Principal, Capco
Alla Gancz, Partner, Capco
Daniella Chrysochou, Senior Consultant, Capco
Ana Nikolova, Senior Consultant, Capco
Raymond Tagoe, Senior Consultant, Capco

112 Managing strategic and cultural change in organizations

Jaap Boonstra, Professor of Organization Dynamics, Esade Business School

122 The Innovation Stack: How to make innovation programs deliver more than coffee cups
Steve Blank, Adjunct Professor of Entrepreneurship, Stanford University

128 The risks of artificial intelligence used for decision making in financial services
Udo Milkau, Digital Counsellor, European Association of Co-operative Banks (EACB)

142 Security token offering – new way of financing in the digital era
Seen-Meng Chew, Associate Professor of Practice in Finance, and Assistant Dean for External Engagement, CUHK Business School
Florian Spiegl, Co-founder and COO, FinFabrik

152 Eternal coins? Control and regulation of alternative digital currencies

Matthew Leitch, Associate, Z/Yen Group
Michael Mainelli, Executive Chairman, Z/Yen Group
D EAR R EAD E R ,
Welcome to edition 52 of the Capco Institute Journal of The topics reviewed in this Journal offer flexibility for
Financial Transformation. employees, increased agility for teams, and a combination of
both for organizations. When supported by the right technology,
Transformation has been a constant theme in our industry for these can create collaborative, outcome-driven environments.
several decades, but the events of 2020 have accelerated Through the resulting remote or hybrid models, organizations
change in employee working patterns, and in the very nature of can transform their workforce and operations to boost
the workplace itself. This Journal examines three key elements productivity, cost effectiveness and employee engagement,
of these new working paradigms – leadership, workforce, and while enhancing resilience and customer experiences.
organization.
As always, our contributors to this Capco Journal are
As we explore in this edition, a key part of any firm’s distinguished, world-class thinkers. I am confident that you will
transformation agenda centers around digital leadership find the quality of thinking in this latest edition to be a valuable
and how to tackle the novel challenges created by changes source of information and strategic insight.
within organizations and society. Leaders need advanced
Thank you to all our contributors and thank you for reading.
organizational skills to build teams that use digital technologies,
as well as to inspire millennial workers who have grown up in a
digitally transformed world. They also need deeper technology
skills to lead, and a broader understanding of the ethical
paradigms introduced by the challenges created through new
technologies such as AI. These enhanced skillsets will help
today’s leaders and their teams fully realize the benefits of new
working models. Lance Levy, Capco CEO
 CAN BUSINESSES RECOVER FROM THE CRISIS?
ASSESSING SCENARIOS, RIDING TRENDS
LESLIE WILLCOCKS | Professor of Work, Technology and Globalisation, London School of Economics and Political Science

ABSTRACT
By 2020, five major long-term trends had been impacting international business. This article examines how the pandemic
and related economic crises seriously disrupt these trends and will produce emergent, complex patterns. It then seeks
ways forward. Establishing the point of departure, we look at public health and economic policy interventions and future
scenarios. We assess the more likely global developments that businesses will need to prepare for. We suggest that the
business challenge is to take into account six discernable emerging trends, and plan for and ride these as opportunities,
rather than be overwhelmed by them.

1. INTRODUCTION: GLOBALIZATION TO 2020 by 25 percent between 2014 and 2019. Meanwhile, return
on equity (RoE) fell from 18 percent in 2009 to 11 percent
By 2020 five major trends could be discerned in the global
by 2019. RoE on foreign operations investments declined to
economy. The first long-term trend was the vast expansion
between 4 and 8 percent across the OECD. Emerging country
in world output and cross-border trading. In 2018, world
MNEs fared no better – worldwide RoE was 8 percent. The
merchandise trade was U.S.$19.67 trillion, and commercial
bright spot into 2021 was technology companies. One should
services U.S.$5.63 trillion, while world trade and gross
also note that companies were reporting lower RoE in foreign
domestic product (GDP) grew by 26 percent between 2008
markets than domestic ones. Even before the major disruption
and 2018. By the beginning of 2020, the value of world trade
arising from the coronavirus pandemic, multinationals
was 160 times larger than it was in 1960. Throughout most
were needing to review strategies on the degree of
of the 2008 to 2020 period, so-called “developing” countries
globalization of markets and production, and the sources of
equalled or outperformed developed economies in trade
competitive advantage.
and results.
Meanwhile, a fourth trend has been the continuously shifting
The second major long-term trend was increasing foreign
political world order. Many former communist nations in
direct investment (FDI). The average yearly FDI outflow
Europe and Asia had become more committed to forms of
increased from U.S.$14 billion in 1970 to U.S.$1.45 trillion
democratic politics and market economies, hence creating
in 2016, when the global stock of FDI was about U.S.$27
new opportunities for international businesses. But there have
trillion. Developing nations were increasingly important as
been more recent signs of growing unrest and authoritarian
destinations for, but also as exporters of, FDI. These trends
tendencies in some countries, for example, Russia, Turkey,
reflect the internationalization of company operations.
and Poland. China and Latin America had also been moving
The third trend in the years following the 2008/9 financial toward greater market reforms. Over the years, several Latin
crisis was that multinationals were doing less well. In American countries have increased their attractiveness as
retrospect, multinationals had been overestimating the value markets for exports and as targets for FDI – for example Brazil,
of economies of scale, and, more recently, of arbitrage. Profits Chile, and Mexico. Will this continue? China, for example, has
of the 700 largest multinational enterprises (MNEs) dropped moved to greater state control since 2012.

94 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

A fifth recent trend has been towards deglobalization. During By May 2020, The World Health Organization (WHO) had
the 2010-20 period, there were indications of the long-term recorded globally over two million cases of coronavirus,
trend towards vertical and horizontal globalization being and 150,000 related deaths. New cases were coming in at
reversed. The global firm has most recently been in retreat. around 85,000, and deaths 6,500 per day. This was likely a
Some signs: by 2016, multinational cross-border investment substantial underestimate due, for various reasons, to under-
had fallen by 10-15 percent, Western firms’ percentage of reporting. The impacts were unevenly distributed across 212
sales outside their home regions has shrunk, multinational countries, but major economies, and so the global economy,
profits have been falling, as has new investment relative were largely on semi-pause, and this was likely to continue
to GDP. The pace of economic integration has also slowed for some time. Some suggested at this time that it could
between 2015 and 2020. take most economies more than two years, i.e., until 2023,
to recover. In numbers, the most disproportionately affected
The summary from an international business perspective is (in size order) were U.S., Spain, Italy, Germany, U.K., France,
that trade stopped getting cheaper, and straddling the world China, Iran, and Turkey, but no country was left untouched due
became less profitable. While services were growing in many to the integratedness of the global economy. By 12 August
economies, companies found them harder to export than 2020, the WHO reported over 20 million cases and over
products (only 7 percent of world GDP is service exports). 737,000 deaths worldwide, with North and South America,
Meanwhile, “emerging” economies were becoming more (particularly the U.S. and Brazil) experiencing half of these.
self reliant, economic activity became more regional, while The virus was seriously impacting many more countries, while
protectionism, tariffs and counterattacks against global second spikes, often more localized, were occurring in the
intruders became more frequent. At the big picture level, the countries first affected by the virus.
center of gravity for international business has been shifting
east and south, with 18 countries there recording 5 percent
3. THE GLOBAL ECONOMY TAKES A BIG HIT
plus annual growth over the last 20 years. The role for high
growth “developing” economies has been expanding, as has According to the World Trade Organization (WTO; trade forecast
the amount of South-South and China-South trade. press conference, April 9, 2020), world merchandise trade
was set to plummet by between 13 percent and 32 percent in
Following on from this, the 2020 pandemic has been highly 2020 due to the COVID-19 pandemic. On a relatively optimistic
disruptive, and will create new winners and losers, and new scenario, a sharp drop in trade would be followed by a recovery
globalization and deglobalization trends. Let us, then, look at starting in the second half of 2020. A more pessimistic
the pressing questions: how have these trends been disrupted scenario would see a steeper initial decline and a more
by the pandemic and economic crises, how far will the trends prolonged and incomplete recovery. A 2021 recovery in trade
change again, what will emerge, and what actions can was expected, but depended on the duration of the outbreak
businesses take in the new environment? and the effectiveness of the policy responses (see below).
Nearly all regions would suffer double-digit declines in trade
2. COMING TO TERMS WITH THE CRISIS volumes in 2020, with exports from North America and Asia
The five major trends were indeed highly disrupted by events hit hardest. Trade would fall steeper in sectors with complex
during 2020. Expansion in world output and trade came to a value chains, particularly electronics and automotive products.
grinding halt. FDI was put on pause, though many businesses Merchandise trade volume had already fallen by 0.1 percent in
anticipated opportunities in the event of an economic recovery. 2019, weighed down by trade tensions and slowing economic
Multinationals continued to do less well, but some were more growth. The dollar value of world merchandise exports in
likely inheritors of the future than others. The political order 2019 had fallen by 3 percent to U.S.$18.89 trillion. The
continued to be dynamic and shifting, with the economic slump value of commercial services exports actually rose 2 percent
and health crisis creating both political tensions and increased to U.S.$6.03 trillion in 2019. But services trade may be the
need to cooperate internationally. Deglobalization and component of world trade most directly affected by COVID-19,
protectionism played powerfully into these shifts as potential through the imposition of transport, social distancing, and
salves and ways forward in a dynamic, interconnected, travel restrictions, and the closure of many retail, recreational,
and uncertain world. Let us look at such developments in travel, tourist, and hospitality establishments. Unlike goods,
more detail. there are no inventories of services to be drawn down now and

95 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

restocked at a later stage. Consequently, decline in services lead to longer durations of containment, worsening financial
trade during the pandemic may be lost forever. Services are conditions, and further breakdowns of global supply chains. In
also interconnected, with air transport enabling an ecosystem such cases, global GDP would fall even further. This would be
of cultural, sporting, and recreational activities. However, some more of a U-shaped recovery. The IMF suggested an additional
services were benefiting from the crisis; for example, home 3 percent fall in 2020, while, if the pandemic continued into
delivery services, and, most noticeably, information technology 2021, an additional 8 percent decline from the +5.5 percent
services, as companies enabled their employees to work from growth projection. Most research groups at this time were
home, and people socialized remotely. not contemplating the most pessimistic scenario of an
L-shaped depression, i.e., a dramatic fall, with no recovery for
In its April  2020 World Economic Outlook,1  the International several years.
Monetary Fund (IMF) projected global growth in 2020 to
fall to -3 percent. This represented a downgrade of 6.3 By August 2020, projections were becoming less optimistic,
percentage points from January 2020, a major revision over and suggesting long-term disruption before recovering to
a very short period. Advanced economies would be hardest 2019 trade levels. For example, the U.K. Treasury forecast a
hit, with negative growth at -6.1 percent. Emerging market central scenario fall of 12.4 percent in GDP in 2020, with the
and developing economies would have negative growth rates U.K. only reaching the pre-virus GDP peak by the end of 2022.
of -1.1 percent (-2.2 percent if China is excluded). But a note According to the Organization for Economic Cooperation and
here. Emerging market and developing economies faced Development (OECD), Germany’s decline in national income
additional challenges with unprecedented reversals in capital (GDP) would be 6.6 percent in 2020, while Spain’s GDP would
flows if global risk appetite declined, currency pressures, fall by 11.1 percent, Italy’s by 11.3 percent, and France’s by
weaker health systems, and more limited fiscal space to 11.4 percent. By this time, the OECD was seeing little evidence
provide support. Moreover, several economies entered the for a V-shaped recovery for the global economy, citing the
crisis in a vulnerable state already, with sluggish growth and long-lasting effects of the pandemic. Meanwhile, as early as
high debt levels. May 2020, The Economist was projecting the rise of the “90
percent economy”, possibly lasting several years, with some
All this would make the 2020 pandemic crisis the worst countries and sectors more adversely affected than others.
recession since the Great Depression from 1929 to the late
1930s, and far worse than the global financial crisis, which
4. BUSINESS CONTEXT: DISRUPTION
experienced a -1 percent reduction in economic growth
AND NEW SCENARIOS
in 2009, though its impact stretched for a long period. For
example, following the 2009 crisis merchandise exports never The above is a compelling endorsement of using
returned to their previous levels. environmental analysis on a frequent basis in contemporary
business environments. But it also suggests changes of
However, assuming the pandemic faded in the second half of emphasis are needed. A common, useful analytical device is
2020 and that policy actions around the world were effective the PESTEL framework (political, economic, social/cultural,
in preventing widespread firm bankruptcies, extended job technological, environmental, legal). Clearly, “social factors”
losses, and system-wide financial strains, the IMF projected included accelerated moves to home and remote working,
global growth in 2021 to rebound to 5.8 percent. This recovery and potentially long-term shifting attitudes and preferences
in 2021 would be only partial as the level of economic activity amongst consumers and workforces. On the “political,
would remain below the level the IMF had projected for 2021, economic, and legal” fronts, we were seeing, during 2020,
before the virus hit. The cumulative loss to global GDP over massive government intervention in the conduct of business.
2020 and 2021 from the pandemic crisis could be around This was contrary to globalization’s main direction of travel.
U.S.$9 trillion. Politically and legally, governments took on more command
and control functions. Economically, governments moved to
The WTO and IMF projections were, of course, possible
support faltering economies and businesses. Among the
scenarios, the main assumption being a V shaped economic
enormous relief programs to sustain companies and citizens
recovery from late 2020 through 2021, at different rates for
during the lockdowns, the largest was the U.S. stimulus,
different economies. But given the high uncertainty around the
valued at more than U.S.$2 trillion. Meanwhile, the European
duration and intensity of the health crisis, the pandemic could

1
https://bit.ly/2PRH0nR

96 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

Figure 1: International business context: scenarios

BETTER
SECTOR DAMAGE; LOWER SLOW RECOVERY STRONG GROWTH REBOUND
LONG-TERM GROWTH TREND

Rapid and
effective GDP GDP GDP
control

TIME TIME TIME

VIRUS SPREAD
AND PUBLIC HEALTH SLOW LONG-TERM GROWTH SLOW LONG-TERM GROWTH; STAGGERED RETURN TO
RESPONSE MUTED WORLD RECOVERY STRONG WORLD GROWTH
Effective
response but
GDP GDP GDP
virus recurs

TIME TIME TIME

Ineffective Partially ineffective Effective

WORSE
KNOCK-ON EFFECTS AND
WORSE ECONOMIC POLICY BETTER
RESPONSE

Adapted from Hirt et al. (2020)

Central Bank (ECB) announced €870 billion in quantitative very supportive in business terms during the crisis, but
easing, and, to forestall a credit crunch, also forbade eurozone technology and hi-tech companies were probably going to be
banks from paying dividends to investors or buying back among the inheritors of the future, following the pandemic.
shares until late 2020. The European Parliament released Many businesses were likely to accelerate their digital
€37 billion to support small- and medium-size enterprises transformation and adoption of emerging technologies (e.g.,
(SMEs) and the healthcare sector. By May 2020, the People’s internet of things, augmented reality, AI, blockchain), in order
Bank of China had pumped the Chinese banks with more than to build resilience against future unpredictable risk, and also
550 billion renminbi (around U.S.$78 billion) in liquidity. The to recover economic performance by becoming more cost
U.S. Federal Reserve Board brought its policy rate near zero efficient, while driving revenues and competitiveness.
(0.00 to 0.25 percent) and announced U.S.$700 billion in
quantitative easing. Even more surprising to many has been the new centrality of
“environmental” factors. In particular, how one environmental
But for international business, a pressing question arises for factor – an epidemic – shaped the other PESTEL factors
future environmental analyses: for how long, and how deeply so dramatically and pervasively. Of course, there had been
will government command, control, and intervention persist? warnings. Climate change correlates with a number of natural
During 2020, all governments were building debt they would disasters in the last 15 years. In 2019 alone there were 15
seek to repay, not least through taxation. Financial innovations climate change related natural disasters, including wildfires,
that give power to the state may well be kept if they appear floods, rainstorms, cyclones, and typhoons, costing over
to reduce systemic risk. Interventions to preserve firms, U.S.$250 billion. The prognosis: such events will become more
industries, jobs, and worker incomes may well endure and frequent. There have been pandemics, notably the 1997 ‘bird
become policy, not least to build national resilience in the face flu’, the 2002/3 SARS, and the H1N1 ‘swine flu’ in 2009, to the
of any future crisis. State spending may become permanently point that Goldin and Mariathasan (2016) suggested that the
higher. If everyone is a Keynesian in a crisis, what if world had become so interdependent that another pandemic
crises are expected to be more frequent, and impactful? was long overdue. The interconnectedness can explain why
a natural disaster such as the 2010 volcanic eruptions of
If government interventions made previous PESTEL analyses Eyjafjallajökull in Iceland caused enormous disruption to air
outdated, then global businesses now needed to factor travel across western and northern Europe during April and
in much more seriously than ever before “technological” May, affecting some 10 million travelers. Likewise, for human-
factors [Willcocks (2021)]. Technology has proved not only made disasters, such as the 2011 Fukushima Daiichi nuclear

97 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

plant disaster in Japan. Hopefully, these and the coronavirus China, there was (as yet) no broad failure simply because
experience will lead to a new business mindset about how governments had no choice. However, by August 2020, with
interdependent the global economy is, and how, from now on, no vaccine yet forthcoming, it was clear that some countries
environmental risk needs high profile attention. were not handling the pandemic at all well (e.g., U.S., Brazil,
and the U.K.) and this would be having even more adverse
The 2020 pandemic and economic crises have also highlighted impacts on economic activity. This point is important because
for international businesses the criticality of scenario planning. COVID-19 has some distinctive features that make scenario
This involves creating a series of more, or less, likely futures development particularly difficult. First, the virus is highly
from which to derive actions points and business strategy. The contagious. Second, symptoms take many days to be noticed.
secret here is to select the most powerful parameters, and Third, it would take time to develop a vaccine or cure. This
map them against one another. Governments play a central creates considerable uncertainty over both length and depth of
role during and after pandemics, and public policy becomes a the contagion, but also in how public health and government
key environmental factor for businesses to consider. For 2020, agencies can respond.
it was useful to map out scenarios that took into account the
spread of the virus, public health responses, the knock-on A further factor not accounted for in Figure 1 was if the
effects, and economic policy interventions. pandemic spread into countries/cities with crowded, often
poor neighborhoods ill-served by healthcare organizations.
Figure 1, adapted from Hirt et al. (2020), shows six scenarios This subsequently happened in many countries not at
generated from this mapping. Within the more likely scenarios, first seriously hit by the virus (e.g., India, Iran, Mexico, and
we would choose four to focus on that, in our analysis, contain Russia). Given that some informed commentators positioned
varying degrees of optimism: the pandemic as a likely disaster for developing nations
• Most optimistic: there is rapid and effective control of
[for example, Goldin and Muggah (2020)], this is a serious
virus spread, and no recurrence of the virus. Meanwhile, limitation in our illustrative example. However, the model does
there is a strong policy response that prevents structural develop scenarios assuming that the virus could recur. The
damage and allows return to pre-crisis fundamentals and key to scenario planning is not to discount all possibilities, but
momentum. This is a V-shaped recovery. primarily focus on those adjudged the most likely scenarios,
useful to develop action plans for. What is interesting is how
• Moderately optimistic: there is an effective public health
the Figure 1 likely scenarios developed in April 2020, look very
response but the virus recurs. Despite this, the economic
different by the time one gets to August 2020.
policy intervention is effective and there is a strong global
economy rebound. This would be somewhere between The scenario mapping exercise should not ignore the further
a V- and U-shaped recovery. possibility that in some countries government “economic”
• Less optimistic: the virus is effectively contained, policies might actually be ineffective. By August 2020, it
but economic policy interventions are only partially was difficult to make the call as to which countries, if any,
offset economic damage. A banking crisis is avoided, were handling economic interventions badly. However, this
but recovery levels are slower. This would be a judgement call may well become easier to make by the end of
U-shaped recovery. 2020. The point: like McKinsey, one can generate several more
• Least optimistic: the virus is effectively contained,
worse case scenarios than Figure 1 accommodates. Welcome
then recurs. Meanwhile, economic policy interventions to the challenges of scenario planning. An international
are only partially ineffective. This leads to a muted world business would be wise to proceed by taking the four likeliest
recovery and slow long-term growth – a staggered scenarios and building flexibility and resilience into future
U-shaped recovery. strategy and capabilities, sufficient to mitigate the risks if any
scenario becomes real. Two other action pointers. One cannot
Note that one factor we have not taken into account is if there rule out “black swans”, that is, seemingly unlikely events
was a broad failure in public health interventions. The original that can have massive impact. Some describe the pandemic
McKinsey study did indeed include the possibility of failed crisis as one such event, though there were many warnings.
public health interventions, but discounted this as unlikely. Secondly, as evidenced here, a business needs to revisit the
By April 2020, there was evidence that while some public scenarios frequently. We live in an accelerating world, not
health interventions were being more effective than others, just of fast presents, but of faster futures.
for example in Taiwan, Germany, South Korea, Japan, and

98 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

5. NAVIGATING THE FUTURE U.S.$207 billion cash mountain, and Unilever, able to fund
its suppliers during 2020. The Economist (2020) called such
What emerges from the 2020 crisis? The pandemic and
businesses “top dogs”. Their analysis of over 800 European
economic downturn saw trade, financial flows, and travel
and American firms showed technology firms making up 48
contract, but a single trend towards deglobalization was
of the top 100. Microsoft, Apple, Facebook, and Alphabet
unlikely. In the longer term, the globalization trends would
operate with big cash buffers. High demand for their products
continue, while reflecting increasingly the growing role of
surged further during 2020. Cisco Systems, Nvidia, and Adobe
Asia and China with their continued growth in incomes, and
were also in this top dog technology group. Another 24 were
homing two-thirds of the world’s population. Speculating,
pharmaceutical and healthcare firms with spare cash and a
we will see an acceleration of the trend towards reshoring
captive market of people needing drugs. Think Roche, Novo
production and services to move businesses closer to their
Nordisk, and Johnson and Johnson.
final markets. This will be helped by the deployment of
automation and digital technologies. Capitalizing on the
pandemic experience, managers will also become more
digital in order to build resilience in systems, and deal with
cost reduction pressures, while responding to customers If everyone is a Keynesian
expecting fast delivery of more customized products and
services. There will be a shakeout across business sectors
in a crisis, what if crises are
and countries. This will show up weak business models, poor expected to be more frequent,
financial positions, and managements who failed to build
resilience and adaptiveness into their competitive positioning and impactful?
and operations. Also, during 2020 certain sectors were being
hit more severely than others, notably travel, recreation, oil
and gas, commercial aerospace, insurers, and (off-line) retail. There will also be winners and losers within sectors. As
Think American Airlines, event companies, the smaller oil an indication, the technology sector saw Amazon add
companies, and Marks and Spencer. Thus, damage is likely to 100,000 workers to its U.S. workforce, while Softbank
be unevenly distributed. In terms of general damage and the was announcing U.S.$41 billion in divestments to raise
ability of businesses to recover, much depended on the length cash. In the energy sector, BP, ExxonMobil and Royal Dutch
and depth of the downturn. By August 2020, predictions on Shell vastly outperformed smaller firms, and were better
economic recovery had become noticeably gloomier, despite positioned to ride out the 2020 downturn in global oil prices.
the Russian announcement of a possible workable vaccine. It In cosmetics, L’Oreal has done better than its US rival Coty.
was clear how global the pandemic had become, how it could In plane manufacturing, Airbus had U.S.$32 billion in liquid
spike again despite counter-measures, and how inextricably funds in March 2020, just as Boeing thought of seeking a U.S.
linked the pandemic was with the workings of the global government bail-out. These differing performances reflects
economy [Willcocks (2021)]. Just as a rising tide raises all previous good results and management, built-in financial
boats, a receding (economic) tide can ground all too many. and organizational adaptiveness and resilience, prescient
Government support for struggling businesses will be long-term planning mixed in with happening to be in the right
strong everywhere, but cannot be limitless. place, in the right industry, at the right time. As in previous
recoveries, the “winner” firms will be better placed to achieve,
Some firms will emerge from the 2020 general drop in sales
over time, greater market share and enduring advantage
and profits even stronger; many firms, where they survive,
in their sectors. With better cash positions, higher profits,
will be weaker. In the past three recessions, share prices of
and lower cost of capital, they will be in a stronger position
the top ten American firms in ten major sectors rose by an
than rivals to make further investments, pursue mergers
average of 6 percent, while those at the bottom fell by 44
and acquisitions, restructure the business, and change
percent. Some firms had the advantages of large size and
strategic direction.
strong financial position before 2020. Look at Apple with its

99 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

6. RIDING FUTURE TRENDS • Greater focus on south and east Asia: countries here
may well recover earlier, contain two-thirds of the world’s
The problem and reality for all organizations would be
population, and were already rising to globalism. They will
highly challenging: how to build an international business
be in prime position to shape the new (ab)normal. Focus
organization for the new (ab)normal, that was likely to be
here will not just be on prospective markets and sourcing
increasingly in the hands of governments, developments
options. What can be learned from Asia is a key question
in China and Asia, and the relatively few large corporations
for international businesses. This covers not just innovative
who emerged well from the health and economic crisis.
uses of technology, but, for example, how retailing can
There would be opportunities. Government and populations
be restructured, and how to mobilize resources fast and
would need to increasingly address climate change, energy
at scale. Marrying the learning and the opportunity with
and water supply, and healthcare. In business terms, these
what is best for the business will be a key management
all provided the source of not just potential crises, but also
task. Trade-offs will be necessary. For example, over-
were potential growth markets for new products and services.
dependence on Chinese supply may be reduced by
Additionally, management could harness, rather than resist,
building resilience, and some repatriation of production.
six major future trends that accelerated during the pandemic
period. What are these? 7. CONCLUSION
• Digital technologies and automation: global Global business received a severe shock to the system in
businesses has had a crash course in the value of moving 2020, and this will pass into 2021 and beyond. It had received
to digitalization. Technology may bring more opportunities many economic shocks before, but few businesses saw this
to create value, while redefining work. However, coming because they had not trained themselves to sufficiently
technological adoption has been uneven across countries, factor environmental human-made and natural disasters into
sectors, and companies. There is a growing gulf between their long-term scanning and scenario planning. Several
those who have embraced technological change and those commentators, including Ian Goldin and Bill Gates, pointed out
that have not, which may place many companies, and as early as 2015 that a pandemic was long overdue, and that
even countries, at a growing disadvantage as the the world’s economies and their businesses were not ready.
2020s proceed.
We have seen how five major 2015-20 global business trends
• Supply chain restructuring: the crisis highlighted the
have been shifted by the pandemic and subsequent crisis.
need for greater risk mitigation and resilience. This will
Some businesses will come to terms with the disruptions in
speed moving a critical mass of production/service closer
different ways. But many businesses will not. And many who
to home, rethinking processes and suppliers, bigger safety
survive the crisis might not emerge in such good shape to
buffers in inventory, and even greater automation.
compete with others who were building themselves more
• Repatriation and less cross border investment: resilient business models even before the pandemic hit.
this pushes further a pre-existing trend where better The crisis produced six likely future trends that international
financial performance came from shrinking to regional business need to ride and seize opportunities from: technology
or domestic markets. deployment, resilience, restructured supply chains, less
• Flexible labor models: the pandemic experience will foreign investment, greater focus on home markets, but also
push core-periphery models even further, minimizing the a greater focus on events and markets in south and east Asia.
number of, but privileging core workers, while automating
This crisis points to the requirement for better forward
more work, and increasing automated control over the
planning, greater built-in resilience, and the need for a new
part-time, temporary, and contracted workforces.
set of assumptions for managing what I have been
• Resilience in the face of uncertainty over business
calling the new (ab)normal. Interconnectedness has turned
environments and human-made and natural
into a complex interdependence. This has created uncertainty
disasters: while we expect this to be high on the
and systemic risk. The pandemic will provide all too many
agenda over 2021-22, past experience indicates growing
lessons, but the biggest and clearest for businesses, nations,
complacency if no further widespread crisis, of whatever
and supra-national bodies alike is: systemic risk requires
sort, occurs for a few years.
systemic thinking, to shape systemic responses.

100 /
 ORGANIZATION | CAN BUSINESSES RECOVER FROM THE CRISIS? ASSESSING SCENARIOS, RIDING TRENDS

REFERENCES
Economist, 2020, “Best in show,” March 26, Goldin, I., and R. Muggah, 2020, “The world Hirt, M. S. Smit, C. Bradley, R. Uhlaner, M. Mysore,
https://econ.st/2PTR0wN before this coronavirus and after cannot be the Y. Atsmon, and N. Northcote, 2020, “Getting
same,” The Conversation, March 27, ahead of the next stage of the coronavirus crisis,”
Goldin, I., and M. Mariathasan, 2016, The https://bit.ly/3gYIxV7 McKinsey & Co., April 2, https://mck.co/3asws81
butterfly defect: how globalization creates
systemic risk, and what to do about it, Willcocks, L., 2021, Global business: strategy in
Princeton University Press context, SB Publishing

101 /
© 2021 The Capital Markets Company (UK) Limited. All rights reserved. 

This document was produced for information purposes only and is for the exclusive use of
the recipient.

This publication has been prepared for general guidance purposes, and is indicative and subject
to change.  It does not constitute professional advice. You should not act upon the information
contained in this publication without obtaining specific professional advice.  No representation
or warranty (whether express or implied) is given as to the accuracy or completeness of the
information contained in this publication and The Capital Markets Company BVBA and its
affiliated companies globally (collectively “Capco”) does not, to the extent permissible by law,
assume any liability or duty of care for any consequences of the acts or omissions of those
relying on information contained in this publication, or for any decision taken based upon it.
ABOUT CAPCO
Capco is a global technology and management consultancy dedicated to the financial services
industry. Our professionals combine innovative thinking with unrivalled industry knowledge to
offer our clients consulting expertise, complex technology and package integration, transformation
delivery, and managed services, to move their organizations forward.

Through our collaborative and efficient approach, we help our clients successfully innovate,
increase revenue, manage risk and regulatory change, reduce costs, and enhance controls. We
specialize primarily in banking, capital markets, wealth and asset management and insurance.
We also have an energy consulting practice in the US. We serve our clients from offices in leading
financial centers across the Americas, Europe, and Asia Pacific.

WORLDWIDE OFFICES
APAC EUROPE NORTH AMERICA
Bangalore Berlin Charlotte
Bangkok Bratislava Chicago
Gurgaon Brussels Dallas
Hong Kong Dusseldorf Hartford
Kuala Lumpur Edinburgh Houston
Mumbai Frankfurt New York
Pune Geneva Orlando
Singapore London Toronto
Munich Tysons Corner
Paris Washington, DC
Vienna
Warsaw SOUTH AMERICA
Zurich São Paulo

WWW.CAPCO.COM