COVID-19 and the great reset: Briefing note #24, September 23, 2020
A potential end to the pandemic, a bright outlook for electric vehicles, and more.
In our latest public-health research, we assess the prospects for an end to the pandemic. Two standards must be met. In the United States and most other developed economies, herd immunity is most likely to be achieved in the third or fourth quarter of 2021. Key variables are the arrival, efficacy, and coverage of vaccines; we anticipate four scenarios (Exhibit 1). A return to normalcy might come sooner, possibly in the first or second quarter of 2021. Every day matters, for lives and livelihoods.
On the economic front, the COVID-19 crisis presents the greatest challenge in a decade for the auto sector. Global sales of light vehicles in 2020 might decline 20 to 25 percent from prepandemic forecasts. In the hardest-hit countries, sales could fall by 45 percent. Electric vehicles (EVs) have not been spared. But our new research finds that EV sales may come back quickly in the next couple of years, especially in Asia and Europe, for a few reasons (Exhibit 2).
Exhibit 2
The crisis has also set in motion a number of trends in mobility that will affect EVs, internal-combustion engines, and all the other ways that people get around. A second report considers five of these trends. One critical finding: as lives become hyperlocal, modes of transport will change. We expect a drastic decrease in private-car usage in some major European cities but only a slight decline in North America. Greater China will become even more reliant on public transit and rail as some drivers are coaxed out of their cars.
Our private-equity research teams chipped in a comprehensive look at the effects of the crisis on sectors, and what those mean for portfolio companies and firm strategy. Several analyses offer insights; one on debt-service coverage ratios finds that companies in industrial equipment and logistics are among the most vulnerable, along with real estate, travel, and retail. Telecom companies are better situated, as their business has been only mildly disrupted.
COVID-19 and the great reset: Briefing note #23, September 16, 2020
Companies return to work after an unusual summer—and grapple with an uncertain future.
What now? Over the past six months, business leaders have reorganized supply chains, set up remote operations, and made tough financial decisions. The world anxiously awaits an effective COVID-19 vaccine that can be readily distributed. Until then, the priority is to reenergize organizations—to act rather than react. Even as the uncertainties of the COVID-19 crisis multiply, the goal must be to rebuild for the longer term. There are many ways to lead, but regardless of the type of business or geography, ten actions can form a path to emerge stronger from the crisis.
We start with an idea—that returning is a muscle that needs to be exercised, not a plan to be executed once or a date to be achieved. We go on to more specific considerations, such as the need to make big moves fast and to be willing to rethink entire portfolios, including where work gets done.
Those are four of the ten actions, and they make for a good starting point. But companies must adjust for the particulars of their industry. Healthcare companies might want to pay strict heed to six trends that are affecting their business. Most were under way before the crisis. But a crisis has a way of bringing things to a head: the coming months might be the best opportunity in memory for healthcare companies to pursue exponential innovation, which could create an additional $400 billion in value by 2025. And now is the time to claim the hundreds of billions of dollars that could be saved through productivity gains.
McKinsey’s healthcare researchers also took a close look at the US blood supply, which was fragile before the pandemic and is now critical. Businesses have a big role to play in the solution. Blood donors frequently cite convenience and social pressure as prompts. Virtual campaigns for blood drives can help blood centers quickly reach large audiences and steer them to the locations most convenient for them.
CFOs have a critical task too: for many, it’s budgeting season. Our new research finds that the financial-planning process for 2021 presents an opportunity to turn hard-earned lessons from the COVID-19 pandemic into an enduring exercise in linking strategy to value. And leaders across organizations need to consider the problems of unresolved grief—another issue that the pandemic has dragged into the spotlight.
Our industry research this week looked at fintech, where the news is not altogether bad, though fintech companies may have to find a detour on the road to profitability. We also considered M&A in pharma, a long-running trend that should continue. Companies are advised to make sure that three capabilities—competitive advantage, capacity, and conviction—are up to snuff before pursuing COVID-19-era mergers.
Finally, the pandemic has forced a reckoning for many between the profit motive and a company’s social purpose. A team of McKinsey editors recaps how we got from there to here, and suggests where we might go next.
As summer turns to fall in the Northern Hemisphere, executives are thinking through the contours of the next normal. Consider our special collection, “The next normal: The recovery will be digital,” featuring a 172-page curated volume that you can download—the first of five edited collections that accompany “Our New Future,” a multimedia series we created with CNBC.
You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and how our editors choose images that help readers visualize the impact of an invisible threat.
This briefing note was edited by Mark Staples, an executive editor in the New York office.
COVID-19 and the great reset: Briefing note #22, September 10, 2020
McKinsey research focuses on the postpandemic future of developing Asia.
No nation has escaped widespread disruption from the COVID-19 pandemic, but some have fared better than others. This week, McKinsey researchers examined the state of the recovery in some of the emerging Association of Southeast Asian Nations (ASEAN) countries—Indonesia, Malaysia, Philippines, Thailand, and Vietnam—that began the crisis at a disadvantage and have suffered disproportionate effects. Our new report explores a series of trends that the pandemic has caused or accelerated. Within each is a seed of recovery, but stakeholders must be prepared to reimagine their country’s economy in five areas: manufacturing hubs, green infrastructure, investments in digital, talent reskilling, and high-value food industries.
We also looked in detail at developments in two ASEAN countries. In Indonesia, the pandemic is still raging; case counts and fatalities are rising sharply. The first priority is to mitigate and contain the outbreak. But even amid the current hardship and profound uncertainty, Indonesia can reimagine and reform itself by increasing national resilience, accelerating economic transition, rebuilding the tourist sector, and enabling genuine change.
Vietnam, too, is contending with short-term challenges as it emerges from the pandemic, especially in tourism and manufacturing, two of the country’s strengths. For the long haul, our new report argues that one essential element of growth is renewable energy. As a country likely to be heavily affected by climate change, Vietnam could accelerate its journey toward a less carbon-intensive future. A new national energy plan is a good sign; now, the challenge is to execute it. (For Vietnam and many other countries, education is another important cog in the engine of growth. This week, we published a comprehensive report on a more equitable and resilient education system.)
Elsewhere in the region, our latest CEO interview, with Peter Harmer of Insurance Australia Group, reveals new insights into “the CEO moment” afforded by the crisis. Asked about crisis resilience, Harmer says, “You have to tether resilience to real beliefs. We have a deep commitment to our purpose, which is to make your world a safer place. Our purpose is the framework through which all our decisions are made.”
Also this week, a new McKinsey survey tapped the wisdom of hundreds of executives across a swath of industries on the need for speed (exhibit). Most expect significant change across ten of 12 dimensions; surprisingly, only a few expect change in their corporate purpose. (Perhaps they have already embraced Peter Harmer’s view.) And our industry researchers looked at the promise of digital services at B2B service companies and contemplated the troubled present—and potential future—for downstream oil and gas in North America.
Summer may be over in the Northern Hemisphere, but great reading knows no season. It’s not too late to catch our annual summer reading list and our special collection, “The next normal: The recovery will be digital,” featuring a 172-page curated volume that you can download—the first of five edited collections that accompany “Our New Future,” a multimedia series we created with CNBC.
You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and how our editors choose images that help readers visualize the impact of an invisible threat.
This briefing note was edited by Mark Staples, an executive editor in the New York office.
Preventing future waves of COVID-19: Briefing note #21, August 31, 2020
After seven months of responding to the pandemic, we have learned some things. Here are some of the key lessons and how to apply them.
By Sarun Charumilind, Matt Craven, Jessica Lamb, and Matt Wilson
When history books one day recount the COVID-19 pandemic of 2020, it may well be a tale of human ingenuity and adaptiveness. Although the novel coronavirus (SARS-CoV-2), the virus that causes COVID-19, has infected more than 24 million people and left more than 800,000 dead as of this writing, the early projections of mortality were much worse.
Fears of millions of deaths by June 2020 have proven wrong—not because the disease is less lethal than anticipated, but because those fears ignored the ability of people to learn and change behaviors. Pockets of resistance against wearing masks and complying with other measures notwithstanding, the global public-health response has saved millions of lives. Increasingly, countries are restarting more aspects of normal life while keeping case numbers tenuously in check.
Pockets of resistance against wearing masks and complying with other measures notwithstanding, the global public health response has saved millions of lives.
Yet the threat to lives and livelihoods persists. A COVID-19 vaccine may yet “save the world.” But even if one proves effective, it will be many months before we will have the capacity to vaccinate everyone—and there are new concerns about reinfection.1 Therapeutics such as dexamethasone and remdesivir appear to provide important benefits for those with severe cases but are not alone sufficient to stop deaths from COVID-19.
New therapies are possible but by no means guaranteed. Countries will very likely need to plan for almost another year during which public-health measures are their primary tools for saving lives. In the meantime, the world cannot be idle. Societies have been upended, causing unprecedented disruption to economies, education systems, and the day-to-day lives of people everywhere. And as we and others have argued, saving lives and opening societies is a false trade-off.
In that area, too, our ability to learn and adapt is proving dispositive. Countries that have successfully reduced their number of COVID-19 cases have generally been more successful at reopening their economies. For them, controlling the virus ultimately has come down to two things: understanding what to do and executing well. Both have been challenging at various points. For example, the evidence base for the population-wide use of masks only became compelling a few months into the pandemic response. In contrast, the importance of testing has been clear from the earliest days, but many countries have faced operational challenges in ramping up their capacity.
While there is much more to learn, this article summarizes what response leaders have discovered so far about what to do and how to do it. Every jurisdiction is doing some of these things; none of them are new for experts in infectious diseases. But we have tried to describe specific considerations for practitioners looking to adopt and adapt best practices to their management of the COVID-19 pandemic. Given the outsize role that businesses are taking in the crisis response in numerous countries, many of the ideas are as relevant to private-sector leaders as to those in the public sector. Interventions are divided into three categories—detecting disease, reducing the number of new cases, and limiting mortality—and can be tailored for specific populations and settings (Exhibit 1).
Exhibit 1
Detecting disease
The ability to detect cases of COVID-19 is a critical prerequisite for effective public-health programs. A comprehensive program might include traditional disease surveillance, cluster analysis to understand local patterns of transmission, and wastewater surveillance for early warning of disease hot spots.
Disease surveillance
An ability to collect, analyze, and interpret data is fundamental to the management of infectious diseases. While many people have grown familiar with epidemiological metrics such as test-positivity rates and case-fatality ratios, many countries and regions still rely on 20th-century surveillance systems. The biggest gaps are in data collection and integration: there is no shortage of data-crunching horsepower in the world, but everyone is forced to work from the same imperfect data sets. Even seven months into the COVID-19-pandemic response, there is a surprising level of disagreement about questions as basic as the true number of people who have been infected with SARS-CoV-2 and the number of deaths attributable to it. Continuing to expand testing, as described later in this article, is a big part of improving surveillance.
The best surveillance systems seamlessly combine data from traditional sources with newer data sets, such as anonymized mobility tracking—and do so in near real time. They provide a high level of detail and transparency around the characteristics and location of those infected while protecting individual privacy. And they improve over time as a design principle, incorporating new sources of data and improving quality to reduce friction in the response.
The best surveillance systems seamlessly combine data from traditional sources with newer data sets, such as anonymized mobility tracking—and do so in near real time.
Cluster analysis
The medical community has learned much about how COVID-19 is passed from person to person and therefore how to prevent transmission. But there is more to learn about the specific nature of transmission in particular geographies. The examination of chains of infectious-disease transmission, or cluster analysis, helps medical professionals understand how, when, where, and between whom transmission occurs.
Locally relevant information can focus public-health measures on steps that will make a difference and deemphasize those that won’t. A study of more than 3,000 cases across 61 clusters in Japan, for example, identified healthcare facilities and retirement centers as among the most important centers of transmission.2 Similarly, clusters in the United Kingdom have been identified around retirement homes, in hospitals, and in meatpacking factories—the latter also being a source of clusters in Germany.
Cluster analysis has revealed the importance and characteristics of so-called superspreaders (infected individuals who pass the disease to many others). A deeper understanding of transmission dynamics may allow some regions to move from broad-based interventions to targeted ones. It can also allow for more nuanced risk assessments, for example, to determine who can safely access senior-care facilities.
Wastewater surveillance
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