“3 changes businesses will need to adapt to post-coronavirus”

Temporary hours and contactless-pickup signs are displayed on the entrance of a closed Best Buy store in Mount Juliet, Tenn., on April 16, 2020. LUKE SHARRETT—BLOOMBERG VIA GETTY IMAGES

 

“First, there will be more government intervention—and therefore greater scrutiny of business. Governments around the world have pumped trillions into their economies directly and have also cut interest rates and applied other forms of monetary stimulus. As governments step up to serve, or save, the private sector, the means they choose will differ. Some will outright nationalize, some will take equity stakes, some will provide loans, and others will choose to regulate. How much, how fast, and in what ways governments eventually reduce their economic role will be some of the most important questions of the next decade.

With many businesses likely to be operating to some extent with public money, the public will expect—indeed, demand—that their money be used for the benefit of society at large. Of course, this was already happening: In August, 181 American CEOs vowed to “promote an economy that serves all Americans” in a statement of the Business Roundtable. But with citizens potentially facing higher taxes or fewer services (or both) to pay for the stimulus, this pressure will likely not be eased. This raises complicated questions. What does it mean for businesses to do right by their employees and customers? If a financial institution accepts a bailout, how should it think about calling in loans? And as the coronavirus pandemic reveals or heightens awareness of social fractures, business will be expected to be part of finding long-term solutions.

Second, the world will see the rise of a contact-free economy. In three areas in particular—digital commerce, telemedicine, and automation—the COVID-19 pandemic could prove to be a decisive turning point.

In terms of e-commerce, the pandemic has accelerated a change in shopping habits that was already well established. In Europe, 13% of consumers said that they were considering online retailers for the first time in April, and in just Italy, e-commerce transactions rose 81% in March.

The figures for telemedicine are just as striking. Teladoc Health, the largest independent U.S. telemedicine service, is adding thousands of doctors to its network, according to the Wall Street Journal. Sweden’s KRY International, one of Europe’s biggest telehealth providers, noted a 200% increase in registrations. FranceSouth Korea, and the U.S. have all changed regulations to ease access to telemedicine.

As for automation, the robots were coming well before COVID-19. In late 2017, the McKinsey Global Institute estimated that automation could affect from 400 million to 800 million jobs by 2030. These trends could accelerate: Over the three recessions that have occurred in the past 30 years, the pace of automation increased during each, according to a National Bureau of Economic Research paper cited by the Brookings Institution.

In effect, it is becoming possible to imagine a world of business—from the factory to the shop floor—in which human contact is minimized. But not eliminated: Getting back to normal will include popping into stores again, and many patients will still want to chat with their doctors in person. Still, the trends are unmistakable. Businesses may need to reallocate investment—for example, hospitals might offer both telemedicine and clinic visit options—and rethink their strategic plans to take them into account.

And finally, companies will need to reconsider how they can establish more resilience. The pandemic could end up rivaling, or even exceeding, the 2008 financial crisis in economic damage. The U.S. Congressional Budget Office has projected that in the second quarter, GDP could fall 12%, and that unemployment could stick at double digits into 2021—a level never reached during the financial crisis.

The implication is that companies will have to rethink, not tweak, their business models. For example, supply chains built on just-in-time inventory and distributed component sourcing may well have to be reconsidered, given the way many have been disrupted. Instead, companies will have to build, or strengthen, backup and safety plans, be it deeper layers of succession planning or significantly expanding work-at-home capabilities for more employees. Investors are likely to take note and to devise ways to incorporate new resiliency metrics into their valuation, as they have begun to do with climate-related risks. Many companies will need to rebalance their priorities, making additional resiliency measures as important to their strategic thinking as cost and efficiency.

Because necessity is often the mother of invention, the pandemic could bring some positive outcomes. Individuals, communities, businesses, and governments are all learning new ways to connect. And businesses are finding faster, cheaper ways to operate. In-person conferences have gone virtual. Remote working has soared. These changes could make for better management and more flexible workforces.

Nurturing a next normal that will be better than what it replaced will be a long-term test for all institutions, global and local, public and private. For all of us, instead of looking to the past, it will be critical to reconstruct for the future. ”

By: KEVIN SNEADER and SHUBHAM SINGHAL

More information: fortune.com

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