VIEWPOINT

2022

T H E PA N D E M I C
STRESS TEST
Why some companies passed
and others failed
AUTHORSThe COVID-19 pandemic was an unprecedented
stress test for businesses around the world, andultimately a trigger for differentiation for those

Alan Martinovich
Ben van der Schaaf

most willing to embrace change. Looking more

Richard Eagar

closely at how companies have responded to theFlorent Nanse

pandemic’s stress test, some commonalities emerge
from those that succeeded in turning this crisis intoopportunity. The winning recipe: rapid mobilization,a consistent search for growth, and a willingness totake on risks and innovate while acting defensively.

ARTHUR D. LITTLE

VIEWPOINT

There’s an old joke that we may have all heard

What can we learn from those companies thatat one time or another: “My doctor asked me if I

fared well and fared badly? Were there somehad ever had a stress test. Sure … it’s called life!”

particular strategies or approaches especially

Today, and for some time to come, the COVID-19

effective that could be transferable to otherpandemic has become part of our daily lives andcompanies?

is providing the biggest stress test of our lifetime.

To shed some light on these questions, we have

For the business world, the likes of such a stressexamined how some peer companies performed

test most recently came from the Global Financial

in different sectors (e.g., pharmaceuticals andCrisis of 2007–2008, when about US $2 trillion

automotive). Based on the peer comparisons

was wiped out from the global economy, leading

and our experience in working with companies

to widespread adoption of stress testing forin disruptive environments, this Viewpoint seeksfinancial institutions. In that particular type ofto uncover some transferable learnings.

stress test, the robustness of the institution istested against a range of extreme but plausible
scenarios. Consequently, after that debilitating
economic crash, many companies beefed up

PFIZER WINS THE
VACCINE R ACE

their crisis management systems; indeed, aAbout two years ago, if asked the question,

global pandemic was often one of the scenarios“Which pharmaceutical company would be bestused as a test. However, for most companies, theplaced to develop a vaccine quickly in the caseseverity, velocity, and uncertainty of the actualof a pandemic?” most would have suggested thepandemic crisis transcended anything in which

established global vaccine powerhouses — Pfizer,

they had planned. (For more on this, see “LeadingMerck, GlaxoSmithKline (GSK), or Sanofi. With thebusinesses through the COVID-19 crisis” from

benefit of hindsight, we now know that only one

an Arthur D. Little [ADL] Prism Special Report. )of the four could actually deliver on that promise,

Today’s pandemic has impacted everything aby going with an unproven technology in a new

business touches, including supply, operations,partnership.

1and demand.

Of course, that major vaccine player is Pfizer,

As we enter the third year of the crisis — andwhich delivered the first highly effective mRNA

with forecasters such as the Organisation forvaccine to battle the pandemic. The other

Economic Co-operation and Development having

three major vaccine makers decided to stickpredicted GDP growth of more than 5.6% in 2021

with proven methods involving much longer

and 4.5% in 2022 as the economy recovers —timelines — and failed to get the same results.

we can now begin to look more closely at how

Merck abandoned its trials, while GSK and Sanofi

companies have responded to the pandemic’s

only announced their intention to submit datastress test. Overall, the impact has varied

from their booster and Phase 3 trials in February

dramatically across different sectors, causing

2022. Incidentally, GSK rebooted its partnershipnear collapse in some industries like tourism

with CureVac, which in February 2022 dosed itsand hospitality and rapid expansion in others

first patient in a Phase 1 study for the seasonal

like e-commerce and logistics. Companies haveinfluenza vaccine, based on the mRNA backbone

adapted in a plethora of ways, by scaling down,

it developed together.

scaling up, and even changing their businessmodels, operating models, and products/services.

1

THE PANDEMIC STRESS TEST

See https://www.adlittle.com/en/insights/prism/leading-businessesthrough-covid-19-crisis.

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ARTHUR D. LITTLE

VIEWPOINT

So what did Pfizer do differently to leave its

In addition to Pfizer, we should also mentioncompetitors behind and put itself in a prime

Moderna and AstraZeneca as winners. Moderna

position to reap the benefits for years tomanaged to accelerate its strategy by three tocome, not only in the vaccine field but also as

four years — and was close on the heels of Pfizera major player in mRNA technology throughwith a highly effective vaccine. Its share priceits partnership with BioNTech?

multiplied by seven at the time of FDA approval- First, Pfizer acted decisively in mobilizing(incidentally, Merck was a large shareholder in

its resources toward developing an mRNAvaccine. It bet on an unproven technology

AstraZeneca was not an established nameand an untested partnership with BioNTech.

in vaccines before the pandemic. It quickly

As Pfizer CEO Albert Bourla explained inestablished a collaboration with Oxford

Harvard Business Review (HBR) last year, toUniversity, where the other UK giant GSK was aspeed up the process, the partnership beganmuch likelier partner, and delivered an effective

on a handshake and the contracts followed

vaccine within the year. It promised to deliver atlater — highly unusual in drug development.

cost, and while it has had some bad luck with side

Merck, on the other hand, decided to go witheffects and a few unfortunate PR stumbles, it has

its proven methodology, and its CEO declaredestablished itself as a major player in vaccines. On

early on that the timelines of less than a

top of that, it pulled off the largest acquisition inyear were unrealistic. (Note, however, in drug

the industry in 2020 by announcing it would buy

development, the methodology used is only

Alexion Pharmaceuticals (AstraZeneca completed

one of many factors affecting the outcome.)the acquisition in July 2021).

- Second, Pfizer elected not to take direct

Of course, drug development is a long game.

government funding, allowing it to operate at

It will take some years to assess the ultimate

a faster pace. The company did, however, sign

winners and losers, but the stress test of thenumerous sales agreements with the US andpandemic has already demonstrated that evenother governments; in effect, underwriting

pharmaceutical companies can move with greatpart of the development and scaling effort.

speed and agility if pressed to do so.

- Third, Pfizer recognized quickly that the global
need and urgency changed the environment,with risk and short-term return becoming lessimportant. As a result, it went “all in” on the“moon shot challenge” of a six-month vaccine
development timeline, according to Bourla.
It was imperative to him to push for success— playing the new circumstances well andtaking full advantage of regulatory flexibility— while also “doing the right thing” (helping
the efforts of fighting the pandemic).

-Moderna and cashed in that stake).

Fourth, Pfizer leveraged its partnership with
BioNTech optimally. Although, it must be

VOLVO ANTICIPATES TRENDS
The pandemic hit automotive sales hard, withinitial falls of about 15%-30% in many markets
in 2020 (see ADL’s Prism article, “Automotive:Accelerating disruption through creativedestruction”2). Ford was among the major players
exposed to a large decline in the mainly internal
combustion engine car segment, although it
managed to make up its losses with Q1 2021 sales
similar to the Q1 2020 in the US (70% of its globalmarket).

noted that BioNTech is also a big winner inthis story — not just Pfizer.

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THE PANDEMIC STRESS TEST

See https://www.adlittle.com/en/insights/prism/automotiveaccelerating-disruption-through-creative-destruction.

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ARTHUR D. LITTLE

VIEWPOINT

However, not all automotive players suffered

What does all this have to do with theto the same degree; indeed, a few bucked thepandemic? Well, the pandemic caused not justtrend entirely. One of the most striking examples

a fall in automotive sales but also significantly

is Volvo, whose quarterly revenues actually

accelerated the disruption in the industry that

increased by 41% in Q1 2021, relative to the same

was already taking place. This includes theperiod in 2020, which was largely pre-pandemic.

move toward electrification, digitalization ofThis is the best quarter in its history. What did

automotive sales and services through connected

Volvo do differently to achieve such a stunningand smart devices, and the shift in ownershipperformance during the pandemic?

models toward subscription and mobility services.

One of the main factors was certainly Volvo’s

The lesson here is that companies that are faster

early commitment to move toward full electricat recognizing and adapting to long-term trendsvehicles. (In the words of its CEO Håkan— and committing clearly to a long-term vision

Samuelsson, “We are determined to be the firstaligned with those trends — are more likely to bepremium car maker to move our entire portfolio

resilient to shocks like the pandemic. Somethingof vehicles into electrification.”) Volvo is currentlyof a revelation to the world has been how thethe only maker to offer a plug-in hybrid variant

pandemic has accelerated preexisting trends

on every model in its lineup from the smallest

across all sectors, intensifying the difference

to the largest, and it has declared an aim to

between those companies with a greater

accelerate half its sales to fully electric cars bycommitment to change versus those slower

2025 with the rest as hybrids. In Q1 2020, theto adapt.

share of fully electric or plug-in hybrid powertrain
sales in Europe was already 39%. It also more thantripled its numbers of subscriptions sold online
through its “Care by Volvo” offer. Meanwhile Ford’sLES SONS FOR SUCCES SDURING CRISIS

electrified vehicle sales increased nearly 75% to a

So what can we reasonably infer from these casenew record sales start, although starting from aexamples in terms of how to do well in future

lower share.

crises? Figure 1 highlights three complementarystrategies for success.
1. Move fast to accelerate change

Figure 1.Figure
The triangleof success in a crisis
1. The triangle of success in a crisis
1The pandemic stress test showed more clearly
than ever why the ability of companies to move
fast and respond with agility is essential forMove fast toaccelerate change

success. Normal working processes with checks
and balances, often using a sequence of steps
with intermediate approvals, are not fit-for-SPEED

purpose in a crisis. The companies that succeeded
throughout the pandemic were typically those
whose leadership had the courage to deviate fromthe normal way of doing things and take decisive
action with incomplete data, such as Pfizer’s CEO.
These winners recognized that, in crisis mode,

GROWTH

2

Turn the crisis
into opportunity

Source: Arthur D. Little

a rapid but risky decision is much more valuableINNOVATION
Go for the“moon shot”

3than a slower but more measured one due tothe speed with which the “problem statement”
changes and deteriorates.

urce: Arthur D. Little

THE PANDEMIC STRESS TEST

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ARTHUR D. LITTLE

VIEWPOINT

In such situations, personal relationships withtrend accelerations, as we have seen during

the broader network are especially important.

the current pandemic. Volvo, with its strong

If there’s no time to conduct any checks or gocommitment to electric vehicles, is a good

through a formal procurement process, the next

illustration.

best thing is to engage with people whom you
personally know and trust. One of the reasons
why the UK was able to vaccinate its population
so quickly is that an empowered Vaccine
Taskforce was set up, comprising leading figuresfrom industry, academia, and government who
were well-known to the UK political leadership.
Although there were strong media allegations ofcronyism at the time, this strategy proved to bea huge success with the benefit of hindsight.
2. Turn the crisis into opportunity
Companies that have prospered during the crisis
have had the courage to go against the crowd,
be aggressive rather than defensive, and takeadvantage of low valuations — AstraZeneca’s
takeover of Alexion in December 2020 is a good
example. Although there was a dip in M&A activity
in 2020 as the crisis hit, Q1 2021 saw an increaseof 93% on the previous quarter, the second
biggest quarter on record, according to data
provider Refinitiv.

3. Go for the “moon shot”
Finally, successful companies under the pandemic
stress test have taken the opportunity to set
moon shot challenges that, like Pfizer, Moderna,and AstraZeneca, have led to stunning successes.
A crisis such as the pandemic can be a unique
opportunity for breakthrough innovation. If thedownside of “business as usual” is very severe,
then suddenly it makes sense to accept muchhigher levels of risk and uncertainty. For example,
when Pfizer CEO Bourla first postulated a sixmonth vaccine development timeline, he claims
his “scientists were incredulous.” (Source: HBR.)
However, ultimately, they found a way to makeit happen.

THE NE W NORMAL
There are huge learnings from the way companies
have been able to respond to challenges that,prior to the pandemic, might have been previously
thought to be impossible. A key question is whichaspects of the modus operandi adopted during

B E F E A R F U L W H E N 		OT HER S A R E G R EEDYA N D G R E E D Y W H E N 		OTHERS ARE FEARFUL
Warren Buffett

this crisis will become normal practice goingforward.
Like any stress test, the pandemic has shone
a spotlight on how well — and how badly —businesses are set up to respond to disruption.
While various sectors have been affected in very
different ways, there are still useful lessons tobe learned from how peers in the same sector

However, there’s more to this than justhave performed. The most successful companies

opportunism. If we believe, as many do, thatduring the pandemic are those that have been

the coming decades are going to be increasingly

able to move and adapt with speed, leverage

subject to serial disruptions, whether health,the opportunities for growth, and use the crisis

climate change, or geopolitical, then it follows

as a unique opportunity to drive breakthroughthat future-oriented companies will be muchinnovation.

better positioned to take advantage of sudden

THE PANDEMIC STRESS TEST

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VIEWPOINT

THE PANDEMIC STRESS TESTARTHUR D. LITTLE

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ARTHUR D. LITTLE

VIEWPOINT

CONCLUSIONHOW BEST TO RESPOND
TO DISRUPTIONB E W A R Y O F W R I T I N G O F F T H E PA N D E M I C A S A
ONE-OFF AND INSTEAD USE IT TO BRING ABOUT
VA L U A B L E C H A N G E

The pandemic has accentuated and highlighted companies’ strengths
and weaknesses in ways that cannot be ignored. Be wary of writing off thepandemic as a one-off and instead use it to bring about valuable change.
Executives should ask themselves:1	What did the pandemic reveal about our agility, and what changes
should we make?
2

Which new approaches can we integrate into our business processes
to speed them up?

3

Does our culture encourage risk taking; if not, how can we change this?

4	Do we place enough emphasis on understanding future trends
and aligning with them?
5

Do we have a clear and inspiring vision and sense of purpose?

6

Do we have the right organization and culture to be “ambidextrous” —blending scale/productivity with speed/creativity in a balanced way?

7	Do we have the right innovation approach for moon shots alignedwith our vision and sense of purpose?
As Winston Churchill is reputed to have said in relation to the conditions
after World War II that allowed for the formation of the United Nations,“Never let a good crisis go to waste.” Executives should make the mostof the valuable learnings that the pandemic stress test has revealed.

THE PANDEMIC STRESS TEST

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