How business operations might adapt to the post-pandemic reality
Inspirations for your strategic scenarios
The coronavirus crisis is a world-changing event having a growing impact on the global economy. In a series of internal futures thinking exercises we looked at 5 areas: Travel & Leisure, Society, Economics & Consumption, Environment and Politics. Here are our hypotheses of what’s going to change in business operations, part of our Economics area. (You may find the earlier published Travel related inspirations here)
SHIFT IN SUPPLY CHAINS
The pressure to reduce supply chain costs by offshoring and outsourcing has been recalibrated by the COVID-19 pandemic. To secure delivery capabilities, companies might try to diversify their providers and invest in supply chain redundancies. Some might also be pressured to look for local providers, on the same continent or even in the same country. This is a particularly pressing issue, especially for the pharma and medical devices manufacturers, who are the most vulnerable to disruptions in global supply chains caused by the pandemic.
ACCELERATION OF AUTOMATION
The automation trend is not new and was already well visible long before the pandemic and many already projected its further far-reaching impact on the global workforce. COVID-19 is likely to additionally accelerate the use of robots and machines to replace human workers. We can expect more investments in AI and automation. More production lines and supply chains will be operated and, at some point, managed and optimized by machines. This is partly because businesses seek ways to make their operations less dependent on the vulnerable human factor. The other reason behind the transformation is that replacing part of the human workforce with robots might help to meet strict social distancing and hygiene requirements. Last, but not least, intelligent automation might help decrease some of the operating costs, which is welcome especially while recession looms. Not before long, talking to a human customer representative might become a luxury.
RISK AWARENESS AND AVOIDANCE
The crisis and uncertainty will force businesses to take all possible precautions to protect themselves from future outbreaks. This might result in some rigidity in business. Future contracts and insurance policies may include preventive clauses outlining contractual obligations and rules of contract termination or suspension in case of future outbreaks. Investing will be more disciplined. It might integrate resilience into valuation models next to environmental and social factors. Additionally, the reminiscence of the current pain might temporarily sway the investment balance overly towards low acceptance of risk. This might kill valuable non-zero risk projects and opportunities, even without liquidity shortage. Low yield predictability might give comfort to CFOs and family heads.
NEW BUSINESS MODELS
During the lockdown, many customers have realised that one can survive without constant acquisition of so many products. The ownership model is likely to get a hit, at least temporarily, creating an opportunity for more circular and shared models. But the latter might not be compatible with new hygiene and social distancing standards. In the meanwhile, also subscription-based services have been growing faster than traditional models. The Subscription Economy Index created by Zuora consistently showed revenues to grow even 5x faster than S&P 500 Industry benchmarks. Subscriptions are more flexible and resilient than traditional models which are dependent on new, one-time sales. Traditional businesses heavily affected by the pandemics, such as hotel chains and airlines, might seek opportunities in subscription models. The focus might shift from one-off optimization to long-term customer lifetime value maximization.
EMPLOYMENT FLEXIBILITY TENSION
The discrepancy between the priorities of businesses and that of the workforce will widen. Businesses will most probably push for flexible employment contracts, and ‘on-demand’ workers market will grow. In parallel, the value of permanent employment contracts will grow among the workforce due to unstable economic circumstances and to the fear of worsening future living standards.
Coronavirus became a game-changer for what we think of remote work. Forced lockdowns proved that even traditional jobs can be delivered at least in a limited way from home. The current situation might shift future workplace dynamics for longer. The remote work model enables companies to quickly adapt to pandemic-like constraints and decrease operational costs. But remote work comes with a set of new threats. These are among others productivity decrease, team management challenges and data insecurity. Should remote work stay with us partly for longer, business infrastructure and management standards need to be ready for the new reality.
RESPONSIBILITY AND TRANSPARENCY
Coronavirus pandemics might also change customers’ behavioural expectations toward brands and businesses behind them. Responsibility in how companies operate and transparency in how they communicate might become more important in consumer decisions. This opens a new window of opportunity to differentiate via excellence in environmental and social governance. But this does not have to start in remote counties, where you source your supplies. This differentiation can start with your customer who is likely to feel vulnerable right now. Acknowledging customers’ feelings, showing empathy and support will build long term loyalty.
Inspirations described above are not exhaustive and universal. However, you can use those as input for internal strategy discussions, to feel more comfortable with the upcoming risks and opportunities. You can also make a step further and use them to draft impact and response scenarios. Then naturally comes the turn of prototyping and testing your responses before you launch at full scale.
In the meanwhile, stay safe!
By Marta Wawrzyniak-Falkowska; Jagoda Podrucka; Andrzej Nagalski, PhD and Krzysztof Kwiecinski