The world is starting to move through the transitional gears of change that inevitably come with a shock as large as the Coronavirus pandemic. The post pandemic recovery will need to go from decline to recovery to a new prosperity. This 3 step recovery process should be applied at the national and local level, from government to households and businesses.
The first painful step, we have, by now, all experienced. The vast majority of business leaders and households have experienced decline during the last 18 months. The difference with such a shock global event is the speed at which we went into it - and the all encompassing nature of it. We were caught out. Everyone was affected. Most sectors were hit and many are still a long way from recovery.
The key to the ‘decline’ phase is to acknowledge it, move urgently and manage through it. Decline is like addiction - the first step to recovery is to admit it. Most business leaders are taught to manage for growth or status quo. Few business schools focus on managing in decline - that's for the ‘turnaround’ experts. And this was way more than a cyclical downturn - this was managing while falling off a cliff!
The challenge for certain sectors has been to ascertain whether the decline in business that they experienced was pandemic related or more systemic. For example, the decline of high street department stores and shopping malls has been brewing for a while. The pandemic killed many of them off - the recovery will not see them return. Their longer term demise was merely accelerated by a few years.
The decline phase requires fast, bold action, even more than for high growth mode. The key is to predict the revenue and earnings trough early and cut costs to align to this. If in doubt - go low. A subsequent priority is to rapidly develop a new 3 year plan which covers both of the first 2 steps - ‘decline and recovery’.
Some products need to be dropped - some developed. Certain new innovations should be accelerated, some put on hold. Some services should be trimmed. Some departments beefed up - some restructured. Profitable customers need to be hugged harder than ever before. Systemically loss-making customers might require the opposite. Planning and decision cycles have to be shortened. Flexibility is the new key word.
Businesses went into the pandemic somewhere on a digital spectrum. At one end of the spectrum were the ‘digitally lite’, i.e. businesses that were predominantly analogue with most customer interactions done in-person. At the other end of the spectrum existed the ‘digitally advanced’ businesses that operate predominantly online, with most of their customer interactions being virtual. Today being ‘digitally advanced’ also requires you to be able to offer employee home working for at least part of the week. ‘Digitally advanced’ businesses often thrived during the pandemic.
Businesses and households that were ‘digitally lite’ have suffered the most. Indeed, you could argue that such a classification system could have been utilised by governments to target pandemic payments. They could perhaps have better focused financial and other support to those that needed it the most. We know that households that were ‘digitally lite’ felt more isolated, often could not work from home and struggled with online schooling.
‘Digitally lite’ businesses could have been targeted with information, training and financial support geared towards getting them online or at least helping them understand how to serve their customers and employees in a more virtual fashion. And, of course, the two are linked. Operating a ‘digitally lite’ household and working for a ‘digitally lite’ organisation might be a tough place to be.
The hardest part is moving from ‘decline to recovery’. Decline is all about cost and cash management. Recovery is about realigning to the new realities - the post pandemic world, as it were. The starting point, as always, is to read the new macro tea leaves. Great shocks accelerate change and create the circumstances for new desires and habits to emerge. The current environment is no different.
With the benefit of hindsight it seems clear that there are 7 macro trends that progressive businesses and households will need to realign to. They include equality, diversity, wellbeing, sustainability, digital, virtual and green. The most successful organisations will be the ones that adapt their business strategy, values and model to optimise for each of the 7 macro trends. Being great at just one or two will not suffice.
And it is around these new trends that tomorrow's businesses are being formed. It is where the consumers needs and desires are heading. Incumbents will have to adapt or they will get pushed to one side. Like the footballer, Ronaldo, pushing aside Coke bottles in a press conference because they clash with his values around health and sustainability.
Tomorrow's restaurant groups are figuring out how to design kitchens that are efficient at supporting the online delivery model, while also supporting a more unique in-restaurant experience. New entrants, such as Six by Nico, are embracing the new world and growing fast.
Bars and cafes have had to figure out how to optimize outdoor experiences. Planning regulations need to enable and extend this shift. Delivery organisations are trying to better support their gig economy workers - improving employee wellbeing and income equality.
The entire arts sector is acknowledging that it needs to appeal to a wider audience, while attempting to nurture talent from all sectors of society and any denomination. The only way that this can be achieved is by adapting the curatorial process and switching to digital. Arts organisation can no longer count on thriving as physical outlets alone. The concept of the all-digital museum will soon be with us.
The music sector is trying to develop equal opportunity for new acts and to support the long-tail, independent end of the music industry. The TV and movie streaming services have been more successful - providing a welcome boost for independent film and TV production companies. Perhaps the music streaming services should take note and attempt to develop classification systems and algorithms that are better at ‘discovery’ and ‘genre’ rather than so heavily focused on the ‘artist’.
Outdoor venues are facing the twin pressures of going green while embracing a digital front office. New organisations such as Devon Sculpture Park are pointing the way. The world's first rewilding sculpture park is a refreshing new take on such a traditional sector, combining a heavily green and digital agenda with a refreshing contemporary art programme that is strong on nurturing the long-tail of talent.
Corporates in general will have to develop advanced green programmes and adopt innovative approaches to carbon offsetting. At the same time they will need to develop systems that deliver greater opportunity and access for a wider subset of the population and employee base. The model of fast-tracking white, often male, MBA graduates for management opportunities is getting challenged.
Technology companies will need to raise their game when it comes to employee wellbeing, sustainability and going green. Their Achilles heel could prove to be how energy intensive data centres and computers are by design. At the same time they will need to address the life of consumer electronics devices as they increasingly atone for much of the damaging waste dumped on land and in our seas. They also need to continue to tackle employee wellbeing, given the long hours that come with the sector and time stuck inside, behind screens.
The fast growing crypto-currency sector will have to go green or face a future spurned by increasingly climate aware investors, households and businesses. Minting new crypto-coins just burns too much fossil fuel.
There is no doubt that the hardest part for many companies will be making the transition from decline to recovery to a new prosperity. But, the prosperity part requires a different kind of business for society. One that looks to the 7 new pillars of growth - equality, diversity, wellbeing, sustainability, digital, virtual and green.
For those who achieve this somewhat more enlightened path to growth, there might be a better future around the corner. One with lower levels of inequality, opportunity for more, less imbalance of life and more hope for our planet and future generations. We may have to accept a digital pathway to discover this future hope. But, that might prove a small price compared to the alternatives.
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