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Beyond COVID-19: Will you define the new normal or watch it unfold?

7 minute read 14 Apr 2020

While addressing the now and planning the next, organizations must also consider the lasting shifts that could be the legacy of COVID-19.

This article forms part of a wider range of insights on the COVID-19 crisis

The COVID-19 pandemic is forcing an unprecedented social, economic, and business response. But once a sense of normality inevitably returns, what will “normal” look like?

COVID-19’s lasting impact is still to be determined, but we see four primary areas in which it’s likely to spur sweeping changes:

  • Globalization and trade
  • Technology and innovation
  • Societal impacts
  • Behavioral shifts
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Chapter 1

Globalization and trade

Automation and additive manufacturing offer promise as global supply chains lose some of their luster

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The COVID-19 pandemic has revealed just how vulnerable globally integrated supply chains can be. Specifically, a model in which businesses rely on a single supplier or a handful of suppliers concentrated in one country now appears particularly fragile.

 

In the medium term, the pandemic will drive risk-mitigating procedures designed to track employee health, reduce human-to-human interactions, and upgrade ventilation and physical barriers. Companies could gain a competitive advantage by adopting emerging automation technologies such as robotics and AI vision systems.

 

In the world beyond the crisis, the response to COVID-19 could accelerate the transition to approaches such as additive manufacturing (3D printing), which has the potential to deliver significant advantages in speed, cost, precision and materials. This, in turn, might enable new or reshaped business models not just in manufacturing but associated sectors such as logistics. It may also cause businesses to move from offshoring to near-shoring and even reshoring of production. This could boost the anti-globalization trend that has been visible for the past few years. 

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Chapter 2

Technology and innovation

The pandemic may lead to a fundamental rethink of where, and how, we work

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COVID-19 will spur rapid technology adoption. Fear of contagion is leading many to abandon cash in favor of digital payments. Social distancing is prompting organizations to embrace videoconferencing, virtual classrooms and telemedicine at an unprecedented scale. As the crisis continues, it could accelerate development of next-gen remote working technologies, such as augmented and virtual reality.

Since these technologies will generate efficiency gains, organizations may retain them. This process will reshape entire industries and reframe the nature of work and learning. Companies may rethink their real estate strategy and footprint, new collaboration and teamwork models could emerge, and remote learning could redefine education.

Technologies that enable remote work and teaming also raise the risk of isolation and loneliness. Organizations will need to balance technology adoption with creative approaches to maintain a sense of community and shared culture. Technologies such as virtual and augmented reality could play a key role.

 

Emerging technologies fighting COVID-19

The minimization of human-to-human interactions to prevent exposure to COVID-19 is paving the way for automation.

Robots are disinfecting rooms, communicating with the quarantined and delivering medications. Drones are patrolling public areas to conduct thermal imaging, spray disinfectant and ensure compliance with social distancing directives. Governments are deploying surveillance technologies to track those infected and identify those who came into contact with them. Researchers are employing AI and synthetic biology in drug and vaccine R&D. 3D printers are printing parts for ventilators, hands-free door openers and more.

Some of these technologies have been under scrutiny due to ethical implications around privacy, data rights and human autonomy. During the crisis, consumers and regulators will likely place less emphasis on these concerns. It’s possible this permissive ethical mindset will become entrenched. On the other hand, the ethical risks may gain visibility and urgency because these technologies are now widely deployed. These trends could also play out differently in regions that have traditionally had different approaches toward privacy.

 

Innovating for the new normal

Short-changing innovation during this time of economic dislocation could imperil long-term survival and value creation.

The Great Recession of 2007-09 saw transformational companies emerge in segments such as the sharing/gig economies and alternative currencies. This crisis will likely spur innovation that is every bit as transformative. As some big players retrench and focus on their most valuable customers, nimble innovators will find space to offer cheaper, “good enough” solutions that gain market traction. Look for disruption from below.

Downturns also create opportunities for entrepreneurs – and corporate intrapreneurs – to build great business ideas in capital-efficient ways. Top talent becomes more accessible. Support services become cheaper. A variety of assets, from real estate to equipment, becomes available for repurposing. If you don’t build it, a disrupter will.

At the same time, venture capitalists will apply more stringent criteria to investing, focusing on the most compelling teams. Funded companies will be of higher quality and face less competition from venture-backed peers. Maintaining and building your ecosystem to tap into this innovation will be essential.

Entrepreneurs are already beginning to innovate for the new normal. To participate and seize the upsides, large corporations must both address the short term and innovate for long-term value.

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Chapter 3

Societal impacts

As the pandemic exposes gaps in the safety net, society’s expectations of who should provide what may be changing

The COVID-19 pandemic is highlighting the economic vulnerability of some segments of society – and demonstrating that the vulnerability of some increases the vulnerability of all.

In the US and most emerging markets, many people do not have health coverage – which has raised questions about whether they could afford to get tested for the virus. Gig workers in the services sector are at high risk of exposure, but in some markets, they lack benefits such as paid sick leave – raising concerns that workers would continue to come to work even if they were feeling unwell. In the megacities of the developing world, large populations live in cramped conditions with little access to good sanitation – calling into question the ability to effectively implement measures such as social distancing.

As societies have moved from prevention to mitigation, more fault lines have become visible. Social distancing mandates have led to large numbers of workers losing their jobs practically overnight, straining safety net programs such as unemployment insurance. Once again, gig workers are particularly vulnerable.

Policymakers from across the political spectrum are moving rapidly to shore up safety nets. These changes could have staying power. Companies may find themselves operating in a world in which the safety net expectations of workers and societies have permanently shifted – along with their role in helping provide the safety net.

Re-examining companies’ role in society

Trust in businesses has declined in recent years even as consumers and investors call on companies to proactively address societal challenges, from income inequality to climate change. Today’s crisis will increase scrutiny of this issue in at least a couple of ways.

First, companies across multiple sectors are playing an active role in addressing the challenges created by the pandemic. Internet and wireless providers are delivering free wi-fi access to assist individuals working from home. News and media companies are taking down paywalls to expand access to life-saving information. Retailers are repurposing parking lots for drive-through testing clinics. Tech giants are donating millions of N95 masks to support frontline health care workers. Such visible moves could help burnish companies’ reputations and restore dwindling trust.

Second, business leaders should tread carefully with respect to bailouts, a contentious issue in the Great Recession. While companies will start from a more sympathetic place this time, they will need to pay careful attention to the political debate over bailouts – and their own subsequent actions with respect to layoffs, executive bonuses and the like.

The increased cooperation between companies and governments could lead to a larger role for public-private partnerships. The active part that companies are playing in addressing societal issues might also raise consumer expectations. Beyond the crisis, expect to be held to a higher standard about your societal responsibilities.

Preparing for the post-pandemic generation

For the generation coming up behind Gen Z, the post-pandemic “new normal” will just be “normal.” The impact of this generational shift will likely be profound.

Generational cohorts are defined by societal changes during their formative years. The children who never knew the world as it existed before the global pandemic will take for granted the transformations following in its wake.

By 2030, there will be 1.8 billion people aged 19 or younger. These individuals will have little or no experience of a world before COVID-19. Compared with their predecessors, this generation will likely bring very different assumptions and expectations related to society, technology and ethics, and the role of private companies in providing public goods.

Think of the business transformations sparked by the emergence of Millennials and Gen Z, from corporate purpose to sustainability, ways of working, use of digital and new business models. The next such transformation is on the horizon. Companies that respond fastest will enjoy a competitive advantage in areas such as recruiting, productivity, innovation and customer.

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Chapter 4

Behavioral shifts

The lasting impacts on society are as inevitable as they are hard to predict; behavioral economics might prove useful in responding

Fear and uncertainty are already triggering irrational acts, including herd behaviors such as stockpiling toilet paper. Hoarding is likely to dissipate. But what lasting effects will COVID-19 have on consumer psychology?

Will the profound isolation created by social distancing create a wave of consumers who prioritize in-person connection over social media? Will large numbers of casualties and a heightened awareness of mortality draw consumers to experiences rather than material possessions? Will the pervasive sense of risk and uncertainty create a spike in demand for products and experiences that provide comfort?

Business leaders should track these changes to truly understand the needs of customers in the new normal. Behavioral economics could be invaluable here. Companies in many sectors have already been bringing behavioral expertise into boardrooms and executive offices; in the post-COVID-19 world, such capabilities should be even more valuable.

Trust, polarization and information

The novel coronavirus arrives when our social fabric is already badly frayed. Trust is low, polarization high, and xenophobia surging. Historically, pandemics have lowered social cohesion and spawned conflict. Will the pandemic bring us closer together or drive us further apart?

How might the pandemic affect our highly polarized environment and the perception of social media? So far, social media has disseminated both valuable facts as well as misinformation. Platforms are taking serious and visible steps to combat COVID-19 misinformation – which could buy them some goodwill.

Early on, there were sharp divisions between liberals and conservatives with respect to how seriously they took information about the pandemic. But as the crisis deepens, both are increasingly focusing on a common set of facts – at least in the scientific realm. Will the pandemic help restore a shared reality?

Summary

Like all crises, the pandemic will bring out the best and the worst in us. At a time when companies are being called on to assume a broader societal role, business leaders can lead by tackling misinformation, combating scapegoating and addressing the urgent challenges ahead. At the same time, they should keep an eye on the many changes underway in the global economy, technology adoption, societal norms and consumer behaviour — which will together shape the new normal beyond the crisis.

Platis – Anastassiadis & Associates Law Partnership is registered with the Athens Bar, registration number 80240 Partners: Eirinikos Platis and Tassos Anastassiadis