Nigeria plans to phase out fossil-fuel subsidies and to install solar-power systems for an estimated 25 million people. Business will also have a role. While interim measures, such as improving government operations, monetizing assets, and reducing fiscal leakages, can be helpful, the long-term answer is growth and productivity. In China, the $500 billion fiscal stimulus will raise the countrys fiscal deficit to a record 3.6 percent of GDP. 12. New research reveals why some companies are doing better than others. Taking action is critical. The authors wish to thank Dan Febrer and Jeffrey Lorch for their contributions to this article. If such a comprehensive environment does not exist, it can be built in parallel with AI models. In leading companies, we find that machine centers have dedicated programmable logic controllers with extra inputs and memory capacity. Anniek Bao, Travel rebounds over Chinas national day holiday, Caixin Global, October 9, 2020, caixinglobal.com; Monica Buchanan Pitrelli, More than 600 million people traveled in China during Golden Week, CNBC, October 9, 2020, cnbc.com; Guang Chen, Will Enger, Steve Saxon, and Jackey Yu, . The COVID-19 crisis provoked divergent, even dramatic, reactions, with some industries taking off and others suffering badly; the effect was to shake up historic norms. Metallurgical staff provided derivations of Plitts equation The result was consensus between data-science and operations colleagues and a production increase of more than 20 percent. Vivian Hunt, Bruce Simpson, and Yuito Yamada, The case for stakeholder capitalism, November 12, 2020. 30. Although interest rates are generally low, that could mean raising taxes or cutting spending or both. That isnt an enviable precedent. Germany, Romania, and Switzerland, for example, had the three lowest online-penetration rates prior to the COVID-19 crisis; since then, usage increased 28, 25, and 18 percentage points, respectivelymore than in any other markets. The key is to go beyond the temptation simply to assign blame (or credit). A survey published in November 2020 of 1,500 self-employed people found that 20 percent say they are likely to leave self-employment when they can. Direct-to-consumer selling requires the development of new skills, capabilities, and business and pricing models. xbbd```b``"@$CdujN>`,2# H.=DrEH RD RDzd$30]Uv #L_ )X %PDF-1.7 % The first country to be hit by the COVID-19 pandemic, it was also the first to emerge from it. Seth Borko, Wouter Geerts, and Haixia Wang, The travel industry turned upside down: Insights, analysis, and actions for travel executives, September 2020. Instead, pieces of each stage should be completed concurrently to quickly develop a fully working model with the intention of maturing individual components in future iterations. In the United Kingdom, debt rose to more than 2 trillion, a record and more than 100 percent of GDP. and 20 percent more than in the same month in 2019. The gap narrows further when the cost of rigidity is factored in: end-to-end optimization is more important than the sum of individual transaction costs. Thats why we expect to see substantial portfolio adjustment as companies with healthy balance sheets seek opportunities in a context of discounted assets and lower valuations. Its about building the trustcall it the social capitalthat businesses need to keep doing business. With good leadership, from both business and governments, the changes we describedin productivity, green growth, medical innovation, and resiliencycould provide an enduring foundation for the long term. 10. World Travel & Tourism Council, wttc.org. Andy Bounds and Chris Tighe, Starting a business in the midst of a pandemic, Financial Times, November 26, 2020, ft.com. Experts indicated that a flow meter was critical to the process, but the data-science team It will be a true inflection point, says Rajnish Kumar, chairman of the State Bank of India. Instead, teams should start with the critical sensors identified by process experts and carefully address data gaps using virtual sensors and physically correct imputations. Teams should be aggressive in removing nonsteady-state information, such as the ramping up and down of equipment, along with data from unrelated plant configurations or operating regimes. For example, major retailers are increasingly automating checkout. But the trend is clear: many consumers are moving online. The resulting model showed excellent performance, with the deterministic feature exhibiting an importance of more than 80 percent. the practices and capabilities of leading companies. 227 0 obj <> endobj 31 In practice, this usually means starting with a subset of sensor data, creating a limited list of features, and working with simpler algorithms. Only around a third had resumed out-of-home activities, compared with 81 percent of consumers in China, 49 percent in Franceand just 18 percent in Mexico. How all that feeds into long-term productivity will not be known until the data for several more quarters are evaluated. And in all 13, 65 percent or more say they intend to continue to do so. And for semiconductors, its about identifying and investing in next-generation products. The great acceleration in the use of technology, digitization, and new forms of working is going to be sustained. 21. The result was a unified team with plant experts who understood what to look for in the field that may affect the resulting models and data scientists who recognized operational pitfalls and where to improve data quality. Many companies in heavy industry have spent years building and storing big data but have yet to unlock its full value. Then, the team Put it all together, and we dont think the PE industry is going to keep its powder dry for much longer; there are simply going to be too many new investment opportunities. In Japan, fewer than 1,000 institutions offered remote care in 2018; by July 2020, more than 16,000 did. China, some of the Gulf States, and India are investing in green energy on a scale that would have been considered improbable even a decade ago. We do not believe there is a conflict between the two. Large-scale testing, as well as tracing and quarantine measures, began almost immediately. Japan has pledged to be carbon neutral by 2050. Just as digital-economy companies have powered stock-market returns in the past couple of decades, so green-technology companies could play that role in the coming decades. The CEO of one major travel company told us that, beginning in the third quarter of 2020, business was pretty much back to normal when referring to growth. 26 Employers should take the opportunity to learn from the pandemic how to redesign workplaces, build healthier work environments, and invest effectively in employee health. An empirical equation used to approximate pressure loss in a fluid due to friction in a pipe that was proposed by H. Darcy and J. Weisbach. |djE d:h8"u,5du'/fFA2O$RAgxf~)tQ6MQ)$]@uFW0BB~'qpF\p0[_rPMM]0460d('BwD^Mu?bv^PpN7E07+;zdQM_j:04a @b&n1UH$SSs_ jDTrJ*q`zGm For consumer industries, and particularly for retail, that could mean improving digital and omnichannel business models. 21 It will not mean going back to the conditions that prevailed in 2019. Canada is linking recovery to climate goals. 14 At the same time, however, the number of new businesses registered in the United Kingdom in the third quarter of 2020 rose 30 percent compared with 2019, showing the largest increase seen since 2012. The travel industry turned upside down: Insights, analysis, and actions for travel executives, How COVID-19 has pushed companies over the technology tipping pointand transformed business forever: McKinsey Global Survey results, How COVID-19 has pushed companies over the technology tipping pointand transformed business forever, Accelerating digital capabilities to recover from the COVID-19 crisis, DTC e-commerce: How consumer brands can get it right, Making a daily to be list: How a hospital system CEO is navigating the coronavirus crisis, Beyond hiring: How companies are reskilling to address talent gaps, The Bio Revolution: Innovations transforming economies, societies, and our lives, Risk, resilience, and rebalancing in global value chains, The emerging resilients: Achieving escape velocity, Earning the premium: A recipe for long-term SPAC success, How the State Bank of India is learning from crisis, Beyond coronavirus: The path to the next normal, The future is not what it used to be: Thoughts on the shape of the next normal, The European Union plans to dedicate around 30 percent of its $880 billion plan for COVID-19-crisis plan to climate-change-related measures, including the issuance of at least $240 billion in green bonds.. The COVID-19 crisis has highlighted the interconnectedness of business and society. Venture-capital activity dipped only slightly in the first half of 2020. Something went wrong. The COVID-19 crisis has created an imperative for companies to reconfigure their operationsand an opportunity to transform them. Seth Borko, Wouter Geerts, and Haixia Wang. 6 In March 2020, some of our McKinsey colleagues argued that the COVID-19 crisis could be the imperative of our time. Fashions are in closets rather than on display. As an example, a North American mining company endeavored to improve the throughput of its grinding operations, which included seven grinding mills and three cyclone classifiers, which separate particles based on size. The latter step should be accompanied by a literature search to expand the realm of thinking beyond the knowledge of the organization. 27 Too often, investments in prevention and public-health capabilities are undervalued; the experience of COVID-19 demonstrates how costly, in both lives and livelihoods, such thinking can be. Such shocks, then, are far from shocking: they are predictable features of doing business that need to be managed like any other. The defining difference was resiliencethe ability not only to absorb shocks but to use them to build competitive advantage. Finally, note the deterministic equations that govern the process (such as thermodynamic relationships or reaction stoichiometry), as well as the variables involved. But for economic stabilityand in fairness to future generationsit needs to be taken seriously, not kicked down the road. The answer is almost certain to be not as much as before. 4 Consequently, these models rarely endure in production or achieve meaningful impact before operators and engineers lose confidence in them. Disruption creates space for entrepreneursand thats what is happening in the United States, in particular, but also in other major economies. Never miss an insight. Debt, inequality and the coronavirus: A conversation with former Fed Chair Janet Yellen and the World Banks David Malpass, Marketplace, February 4, 2020, marketplace.org. The bounce back will therefore likely emphasize those businesses, particularly the ones that have a communal element, such as restaurants and entertainment venues. So its intriguing that the volume of high-propensity-business applications (those that are likeliest to turn into businesses with payrolls) has also risen stronglymore than 50 percent compared with 2019. In the United States, for example, there were 25.3 percent fewer of them open in December 2020 than at the beginning of the year (the bottom was in mid-April, when the figure was almost half). In 2018, the World Economic Forum estimated that more than half of employees would need significant reskilling or upskilling by 2022. For more on the latest innovations in process controls, see Stephan Grner, Andy Luse, Naman Maheshwari, Ravi Malladi, Lapo Mori, and Robert Samek, . Please try again later. 2021 will be the year of transition. BlackRock, a global investment company with around $7 trillion in assets under management, noted in its 2021 Global Outlook that, contrary to past consensus, it expects that the shift to sustainability will help enhance returns and that the tectonic shift towards sustainable investing is accelerating. Successful reskilling starts with knowing what skills are needed, both right now and in the near future; offering tailored learning opportunities to meet them; and evaluating what does and doesnt work. Its happening not just because of the COVID-19 crisis but also because advances in automation and digitization made it possible; the use of those technologies has accelerated during the pandemic. Urgency has created momentum, but the larger story is how a wide and diverse range of capabilitiesamong them, bioengineering, genetic sequencing, computing, data analytics, automation, machine learning, and AIhave come together. History shows that, after a recession, business travel takes longer than leisure travel to bounce back. One is to decide the role of the office itself, which is the traditional center for creating culture and a sense of belonging. Consumers in continental Europe have bought more online but arent as enthusiastic as those in Britain and the United States to continue doing so. Kevin Sneader and Shubham Singhal, Beyond coronavirus: The path to the next normal, March 23, 2020; Kevin Sneader and Shubham Singhal, The future is not what it used to be: Thoughts on the shape of the next normal, April 14, 2020. Perhaps most important, it requires commitment from the top that inculcates a culture of lifelong learning. A month later, we noted that it could bring a dramatic restructuring of the economic and social order. 9 And whatever we learn through this processit must not go to waste.. Most of all, it will require individuals, businesses, and governments to be willing to embrace change. Arun Arora, Hamza Khan, Sajal Kohli, and Caroline Tufft, DTC e-commerce: How consumer brands can get it right, November 2020. Impact can be achieved only if models (or their findings) are implemented. Adopting a smart data mindset in a world of big data. In practice, first principlebased features should provide the deterministic portion, with machine-learning models capturing the statistical portion from ancillary sensors and data. Overall, the focus should be on creating models that drive plant improvement, as opposed to tuning a model to achieve the highest predictive accuracy. Indeed, one of the first things people do as they grow more prosperous is to travelfirst close to home and then further afield. In the G-20 alone, fiscal packages are estimated at more than $10 trillion. For everyone, there will be new opportunities in M&A and an urgent need to invest in capability building. US small-business revenue fell more than 30 percent between January and December 2020. The United States is transitioning away from coal and is innovating in a wide array of green technologies, such as batteries, carbon-capture methods, and electric vehicles. We often find that companies have (or are hiring to fill) roles for data science, but they face three main challenges regarding process experts: there is a dearth of process expertise either at a specific facility or across the company; there are sufficient process experts, but they are not comfortable with modern digital or analytical tools; or process experts dont know how to work effectively on digital teams (Exhibit 2). Once these elements are combined with an agile way of working that advocates iterative improvement and a bias to implement findings, a true transformation can be achieved. The European Union has not seen anything like this response, perhaps because its recovery strategy tended to emphasize protecting jobs (not income, as in the United States). In manufacturing, companies that adopt Industry 4.0 principles (meaning the application of data, analytics, humanmachine interaction, advanced robotics, and 3-D printing) can offset half of the labor-cost differential between China and the United States. If the Muse du Louvre were open, the lack of tourists might even create the opportunity for an unobstructed view of the Mona Lisa. Chinas consumers are relievedand spending accordingly. It is not uncommon for data scientists to strive for higher model accuracy only to find that it is limited by sensor accuracy. What is less obvious is how the dynamics within sectors are likely to change. 28 Promoting growth will require supportive regulation, well-trained workforces, and the continued diffusion of technologies. An equation to calculate particle-size distributions for hydrocyclone overflow and underflow that was proposed by L. Plitt. In these and other ways, consumers have pulled back. Please email us at: The first two revolutions introduced programmable logic controllers and distributed control systems, which enabled plant-wide data collection and automation. Then we discuss how they will affect the direction of the global economy, how business will adjust, and how society could be changed forever as a result of the COVID-19 crisis. And its about recognizing that creating long-term shareholder value requires more than just focusing on shareholders. Taking action is critical. Few question the humanitarian and economic cases for strong action. To put it another way, the first half of 2020 saw an increase in e-commerce equivalent to that of the previous ten years. The McKinsey Global Institute (MGI) estimates that more than 20 percent of the global workforce (most of them in high-skilled jobs in sectors such as finance, insurance, and IT) could work the majority of its time away from the officeand be just as effective. Generally, the number of observables must greatly exceed the number of features to yield a generalized model. Creating reusable data products and patterns for piecing together data technologies enables companies to derive value from data today and tomorrow. Teams should evaluate features by inspecting their importance and therefore their explanatory power. The potential of advanced process controls in energy and materials, McKinsey_Website_Accessibility@mckinsey.com. Over the course of a decade, companies can expect losses of 42 percent of a years profits from disruptions. Instead, its an argument to infuse profit, a readily measured metric, with a sense of purposesomething that humans naturally seek. We strive to provide individuals with disabilities equal access to our website. Millions of Americans dont think so, Wall Street Journal, September 26, 2020, wsj.com.