Covid-19: Lessons from recovery of Chinese businesses

WHEN China's economy effectively ground to a halt in late January 2020, its businesses were the first in the world to face the significant impact of Covid-19 disruption. Six months later, with the cautious reopening of China's domestic economy, some of these businesses have begun to experience the green shoots of recovery. Indeed, China reported a strong rebound in its GDP, up by 3.2 per cent in the second quarter of 2020, compared to a year ago - beating analysts' expectations and rebounding from the first quarter's contraction of 6.8 per cent.

There are lessons to be learnt from businesses in China which were able to successfully adapt to travel and supply chain restrictions, responding quickly and decisively to changing customer needs and behaviours.

A close examination of the Chinese businesses that were successful in navigating the pandemic reveals a few common characteristics: not only are they decisive, agile, and forward-thinking even when confronted with short-term challenges, they are also collaborative and demonstrate high levels of empathy towards their own employees and relevant stakeholders. Most importantly, in the face of uncertainty, many of these China-based companies did not let fear prevent them from rethinking and optimising their business operations and how they reach their customers.

Embrace the accelerated digital transformation journey

From education and health to omnichannel shopping or restaurant delivery, the crisis has accelerated digital adoption - and there is no going back. It is not surprising that Chinese organisations that were able to survive and thrive beyond the pandemic are those that effectively incorporated technology into their operations and leveraged their digital talents.

For businesses in the retail segment, this starts with building up a robust database of their customers' purchasing behaviours and preferences that enabled them to quickly implement effective new strategies when lockdown restrictions were in place. In addition, they were also able to quickly utilise new digital platforms and channels as additional sources of revenue when physical stores were closed. Figures from China's Commerce Ministry indicate that 4 million livestreaming e-commerce broadcasts took place in the first quarter of 2020 - promoting everything from the nutritional value of fresh fruit to cosmetic makeover demonstrations. According to JD.com, livestreaming now generates about a tenth of all eCommerce sales.

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With wide deployment of 5G technology in the near future, these shifts in consumer behaviour and demands are likely to stay. Chinese organisations have an advantage when it comes to technology adoption, having invested in digital capabilities and quality talent even before the crisis hit, and this is something that businesses around the world would do well to focus on.

An opportunity to rethink business strategies and workflows

There is no doubt this has been a time of experimentation for many businesses. Organisations must respond quickly and decisively to new challenges that emerge as a result of a global slowdown in economic activity and lockdowns in many countries. When the impact of the crisis started to weigh on the economy, Chinese companies needed to quickly reshape their structures and systems, further break down outdated models, and re-build them.

For example, when all its retail outlets were forced to close, a major household electrical supplier in China identified manufacturing as their priority, enabling them to meet a new surge of demand for its products through online channels. Shifting its business from B2B to B2C, and from offline to online, required a complete rethink of the supply chain and logistics model. Within the first few months, they managed to re-work the entire logistics workflow to allow for a 40 per cent increase in online sales by rearranging the warehouse layout, decentralising stock holdings, as well as deploying a highly efficient, digital-driven integrated supply chain management system, which now ensured that they were able to maintain stock levels to meet both offline and online demand for years to come.

Build a resilient culture and business for the future

More than ever, businesses need to ensure that their culture can accommodate change. The response to the pandemic has compressed years of future technological change into a matter of months - and shone a spotlight on the need for digital talent across every area of an organisation.

The solution is not simply to focus on recruiting new tech-savvy talent, but to complement this with investing in the current workforce by identifying the right behaviours and skillsets and aligning these with reward and management structures. For example, a large K-12 education provider in China was challenged by the closure of classrooms following strict lockdown regulations. They quickly developed online capabilities and trained teachers (who were already familiar with the curriculum) to run online courses and helped them develop programmes for online platforms. These investments have continued to pay off even after restrictions were lifted, as parents found that they added value to the children's learning abilities and familiarity with digital tools.

Likewise, Chinese businesses in the eCommerce and delivery sectors, which are already one of the most mature and innovative in the world, continue to push on with their plans to embark on a longer-term organisational redesign that will enable them to adapt to the likely permanent shift in consumer behaviour and demands. People continue to be at the core of driving successful digital transformation and this means a significant amount of time and resources should be dedicated to upskilling them.

In the last few months, we have seen positive signs of recovery from certain markets and businesses around the world, as economies gradually ease restrictions and transition into a new normal. Nonetheless, as the business landscape remains volatile, organisations must learn to operate in ambiguity and constant disruption. The way that Chinese businesses have responded can provide some valuable lessons for what lies ahead for the rest of the world.