Will Your Busines Survive After Covid?
While this is a period of uncertainty and risk, this also makes it a time of opportunity. If you can identify the new normal faster than your competitors, then you can take market share from them. If you wait to see what the future looks like, someone else will define it for you.
There is always a balance between and reward. Given the relative risks of inaction, this is one time when the risk of doing nothing may be far greater than the risk of forging ahead. However, that action must be based on an understanding of the potential risks and rewards, and acceptance of the magnitude of change that may be necessary.
Sitting at our home offices – the ones that double as dining tables and classrooms – it is becoming increasingly difficult to remember what normal office life was like. While many of us would like to go back to the reality we had known for decades, the truth is that we will probably never return to the ways of working that existed before the pandemic. Technologies and social trends that were gathering pace prior to the pandemic are likely to drive profound changes in the workplace that exists afterwards. As business leaders, we need to decide if we are going to lead these changes and help define what exists afterwards, or if we are going to wait for it to impact us and then hope that we can respond, recognizing that our own lack of relevance may be one of the outcomes.
Shocks to the System
There have been many shocks to the socio-economic system in the past century, from the oil crisis of the 1970s to the attacks of September 11, 2001. However, none of these impacted so many people’s lives so directly for such a long period as the pandemic, and none occurred at a period when technology had the means to offer so many options for transforming the way that we do business. In terms of its potential for change, this period is akin to World War 2, when the urgency and necessity precipitated by the need to win drove technological breakthroughs and social change at an incredible pace.
At the beginning of the war, some air forces still flew biplanes and some infantry divisions still rode on horses. By the end of the war, just six years later, jet fighters, radar, code-breaking computers, and atomic weapons were being used. The basic technologies supporting these inventions had been developed prior to the 1940’s but it took a crisis to accelerate their development and deployment. A similar pattern is taking place in the workplace today. Technologies that have been bubbling for years are suddenly viewed as both important and urgent, forcing their rapid improvement and deployment during a period when people don’t know what ‘normal’ is going to look like or when it is going to come about.
In parallel with the advances in technology, World War 2 led to massive numbers of women entering the workforce, often in manual and technical jobs that had traditionally been undertaken by men. From a US perspective, it also led to the military deployment of large numbers of African American men. In both cases – women and African American men – their experience during wartime led them to demand social changes in the years following. The epidemic is not likely to lead to profound changes in social structures, but it is likely to lead to a transfer of power to those who are comfortable operating in a technology-centric world from those who are not. It is the time when the millennials take power from the baby boom generation.
Examples of the changes that we can expect to experience include the following:
- Low level artificial intelligence solutions, such as robotic process automation, will become far more common, displacing large numbers of white-collar employees.
- Improvements in additive manufacturing, weaknesses in long distance supply chains highlighted by the pandemic, and fear of flying will all combine to reduce international trade and lead to more local manufacturing.
- Everything that can go online or become virtual will go online or become virtual. This ranges from showing houses for sale to watching sporting events.
- The transition from internal combustion engines to battery electric vehicles will accelerate as people make fewer and shorter trips.
- Shared mobility solutions will continue to grow at the expense of the automobile industry due to a decreased need for daily commuting. This will have a knock-on impact on the automobile ecosystem, with closures, consolidations, and cost-cutting.
- The oil industry and countries whose economy is built around oil will lose influence as short-term prices fall and demand projections become less optimistic.
- People will be more selective in how and when they interact face-to-face with others. This will have a large impact on how things are sold, with the permanent closure of many stores and the loss of large numbers of direct sales jobs.
- Teleconferencing may be unnatural, stilted, and sometimes embarrassing, but it is here to stay, along with the remote working that it enables. The technology behind teleconferencing will become more sophisticated, providing a more realistic meeting experience
- Expect offices to continue to exist but they will not be used in the same way. What is likely is that large companies retain only core offices and obtain local spaces for employees to gather when necessary.
- Outsourcing will become more common as the use of teleconferencing increases the emotional distance between co-workers but decrease that between employees and vendors.
- The four-year college model will change. The pandemic has highlighted the absurdity of paying more than $300K for an education that could be obtained online for a few thousand. What the solution looks like remains to be seen and may involve a hybrid of in-person and online.
- Changes to the use of offices, the education system, and the capabilities required will all impact how businesses recruit and the type of candidates they look for.
- Working hours will lose the rigidity of the last 200 years. Output driven models, which were the norm prior to the industrial revolution, will once again become common.
- STEM will be incredibly important over the next few years, but only those at the top of the ladder will have an advantage over competing AI solutions as those solutions improve. Jobs in lower level technology areas such as IT helpdesk support will disappear.
- Education in the Arts will increase in popularity as students realize that innovation and emotional intelligence are their competitive advantages relative to AI.
Viewed in isolation, changes like these may not appear profound or even applicable to our business, but they represent only the elements that we can view today. They do not tell us how our industry is going to be upended any more than hearing about the internet in 1994 would have told us how the travel agency was about to become marginalized by web-based booking tools. To have any chance of predicting the future of our industry and of our business, we need to ask some very basic questions.
Where do we go from here?
The first question should be whether we are up to the challenge. If we want to wait and see what happens, then this is admission that we are not going to lead the business, if it still exists, after the pandemic. During a period of such drastic change, those leaders who cling to the old will be replaced or go down with their ship.
Next, we need to ask what business we are in. This question is surprisingly difficult to answer for many businesses, where the marketers like to talk about providing solutions rather than selling widgets or services. It can become confused by the fact that some services and products have to be provided to customers in order to encourage them to purchase the core service or products. For example, a car dealership may appear to be in the business of selling new cars, but it is really in the business of financing cars and performing warranty repairs. The operation of selling cars produces profits in the form of manufacturer rebates, but it is primarily just a way of feeding the pipeline.
Once we are clear on what business we are in, imagine that we are in a start-up situation but with unlimited resources to build whatever is needed. However, we do not have unlimited resources to operate the business. The restrictions that we impose may be external, such as the need to operate without physical interaction with our customer, or self-imposed, such as the desire to operate with costs that are 30% lower than today. Take these conditions and design a business model that meets our customers’ needs. An alternative way to think about it is to ask: “if Apple entered this market, what would their solution look like?”. If Apple is not the best comparison then substitute in whichever rich, technology-savvy company would scare you the most if they entered your market.
When faced with a threat, people will fight, flee, or freeze. In this context, fleeing means pretending that nothing is happening and continuing as before, while freezing means stopping all initiatives until the pandemic has passed. Fighting represents restructuring, acquiring capabilities, changing supply chains, developing new customer journeys, and expanding into new markets, all within the context of the changes that are happening in the market. Some of your competitors will fight, as will companies in adjacent markets.
If we understand what a rich, technology-savvy entrant would do and we understand the changes that our direct competitors would need to implement to achieve that ideal solution, then we have an idea of what our competitors are going to look like soon, whether they come from inside or outside the existing market.
We need to respond with a revised operating model of our own. That may include an updated product portfolio, new delivery methods, revised supply chain, new organization structure, new manufacturing or retail locations, revised employee skill set, and a host of other changes. As we develop this solution, there are many things to consider, some of which will be specific to our industry. However, there are considerations that should be common across industries.
- What does the market value and how is this changing?
- What part of the market do we want to serve going forward?
- What products or services are no longer relevant?
- How does technology impact me?
- What percentage of sales can I move online?
- Do I still need or want a direct sales force?
- What happens to my value chain?
- Is my sourcing strategy still appropriate?
- Which services are better provided by someone else?
- Which internal activities are generic and can be outsourced?
- How do I maintain flexibility?
- How do social changes impact me?
- How do I avoid geopolitical and human rights concerns in my sourcing?
- How does climate change and society’s increasing recognition of it impact the market I serve?
- What does this mean for employees?
- How do I hire the right people, and what does that mean?
- What capabilities do I need in my workforce and how is this changing?
- Do I still need offices and, if so, how should they be used?
These and similar questions should lead you to take a clearer view of the future compared to the past, and not just extrapolate the past into the future. They should lead you to develop a series of initiatives to implement the changes that are necessary for your business to survive and prosper.
My colleagues and I collectively have more than a century of experience in business effectiveness, market trend analysis, and reliable demand projections. Our view is that it is always better to define the future rather than have it defined for you and this period provides an unusual opportunity for our clients to make significant changes to their operating models in preparation for a future that will be very different from the past.
-- John Trousdale, North American Practice Lead, Future Smart Strategies