8 Big Ideas for post-Covid19 Recovery
Singapore is slowly trying to round the bend in our circuit breaker efforts. We are have been seeing a dwindling number of local transmissions of the virus in the community, and while the total number of cases remains high, this looks to be petering out. Last week also saw, for the first time, the number of discharge cases for the virus higher than that of new infection cases. Well done!
Yet, we are not out of the woods, not by a long shot. Many companies are itching to start ramping up business in an attempt to close the shortfall in revenue for the past 4 to 5 months. Some will not be able to make it and will have to shutter for good (especially so for F&B outlets and bars). Some will come back to a new dawn of business, where the rules of engagement have changed significantly – and permanently. Others will thrive, simply because their business model is suited for post-Covid19 existence.
Will you thrive or will you capitulate? What will make one business soar after Covid19, and make another fail? In this post, I will share my ideas on this based on 8 Big Ideas that I picked up at a webinar last week.
So on 13 May 2020, I attended a webinar by Dr Pablo Martin De Holan, Dean of HEC Paris in Qatar. In his talk, he shared 5 big ideas for organisations, and 3 more for individuals. I do believe these are important for all of us to take note of, and, more importantly, understand how these will impact businesses and individuals going forward. The key thing to note is that while Covid19 will be the biggest disruptor of economies, it is also the biggest opportunity-provider for businesses. It all depends of whether we are nimble enough to catch the next wave, or too rooted in the past to move ahead. That is totally up to you.
The five big ideas for businesses are:
1. Nationalisation of the supply chain
It used to be that China was the world’s manufacturing hub and many global companies had uprooted their local production capabilities and planted them in China for “economies of scale”. Contract manufacturers thrived in China, increasing capacity to the point where unit costs were so low, that Apple could even make their newest iPhone for less than $500 (source: Investopedia, 27 Mar 2020). Mind you, they are selling that phone for three times the cost! However, Covid19 has demonstrated the risks of such a dispersed supply chain. The just-in-time (JIT) model of getting all your suppliers on a tight and accurate timeline works only if there is very high efficiency in your transportation – right from raw material to finished product. With global air and sea transportation in disarray, and with no real timeline to when air transport capacity will go back up, manufacturing and supplies will return home. This will translate to higher costs; and that will also mean higher price of the product, but that will also mean that there is greater supply chain resilience. Indeed, Covid19 will accelerate the advent of deglobalization, something which had begun before the start of the pandemic. “Made in Your Country” will now become hip again. So, time to start building capacity once more! Oh, and you know what? There might even be a nationalization of MNCs! Just last week, France cried foul, saying it was “unacceptable” when French pharma company, Sanofi, decided to give the US its virus vaccine first before its own home country! Nationalisation has already begun! Covid19 speeds up deglobalization!
2. Business Model Reinvention
It is not just your supply chain that will be impacted, but your whole value chain. What customers used to want, when they wanted it and how they wanted it, would have changed. As it stands now, most of us have gotten used to juggling work and home duties, getting online to attend a meeting as well as to learn new knowledge. All of our business processes have been impacted by the lockdowns, and new behaviours and habits are being formed as we speak. This will create new ways of doing things, and the “old” normal may no longer work. Business owners are already finding out that many functions don’t need to be conducted from a central location. This means that we won’t need to travel to the office, spend time to “get into the groove”, start the day’s discussions, submit reports, go for client meetings, and then at the end of the day, commute back. We would have saved all that time and yet produced the same output. Hence, commercial rentals may see declining renewals as businesses opt to make “work from home” (WFH) a permanent feature of their business model. This will certainly impact the way business is being done, the way products are being developed, the way services are being consumed. Hence, there will be a need for constant business model pivots as businesses adopt agile methodologies to reinvent their models. And, think about it, if your business models are being disrupted, aren’t your customers’ too? Hence there will be a systemic global business model reinvention where one pivot will lead to other pivots and so on. Fortunately, the time between pivots will lengthen, and the need for re-pivoting will peter out. Until the NEXT pandemic!
If it is not abundantly clear by now, everything that can go digital will go digital. There will be a recalibration of human activities to go online, perhaps even more than what we are seeing now during the lockdown. Machine learning, artificial intelligence and big data will be the currency in the “new normal”. Marketplaces have already become more digital, and they will be even more so going forward. Blockchain, which until now seems to be a concept that needs more validation, will become the key enabler for secure information validation. Services that once were thought to be in the domain of physical human touch can now go online, with some variation to the fulfillment. Take massage, for example. We may think that this cannot go online because we need a professional masseuse to rub all the kinks away from our back. But combined with a massage ball and an exercise mat, we can enjoy a back rub with an online connection to the sport therapist without having to meet with him/her. Experiences are now being recreated or replicated online with virtual and augmented realities. Since we now cannot fly to Everest, we can bring Everest to our living room! Of course, some human experiences may never be able to be digitalized; for example, childcare. And we still cannot build a car online, or can we?
Of course, if we nationalize the supply chain, recognizing that we don’t have all the raw materials, then we must expect that there will be slack. The JIT model works in a truly efficient market with zero leadtime. But the minute you have leadtime, there has to be some slack. And with leadtime, you need inventory. Such inventory will be housed in strategic stockpiling centres around the land. That increases costs, but it also increases resilience and flexibility. Obviously, the cost of this slack will become more and more expensive, and will weigh on the political will of leaders. The further we move away from Covid19 in the future, the less and less willing leaders will be to pay for slack. Yet, that is precisely the time we need to pay attention to the slack, and maintain that slack. Because, as we move away from Covid19, we are getting closer to Covid27, or whatever other number it would be. We must never forget that the next pandemic is around the corner; and while we will one day do a phoenix on Covid19, we will also be moving closer to the next one. Covid19 is NOT our first pandemic, and it certainly will not be our last. Hence, we need to ensure that the slack remains; and we must absorb that cost in the products and services that we consume.