The increasing widespread of COVID-19 has transformed the world’s hustle into varying degrees of uncertainty. One of the few things that seems fairly certain is that the current downturn is fundamentally different from recessions we have seen in the past. This is not just another turn of the business cycle, but a shakeup of the world economic order. While countries and companies continue to comprehend the scale of this pandemic, it is certainly undeniable that we are staring at more permanent, structural changes to the way we live, work and play. The collective experience of going through this common crisis will lead to questioning of fundamental assumptions and priorities which will be both a challenge and an opportunity. We have summarized seven ways in which the business landscape will shift, not only in India, but the world around. Leveraging these will certainly help navigate the economically and socially viable path to the next. The supply chain disruption has brought to light the impact of black swan events. That, along with the ongoing geopolitical environment and a globally recessionary climate is likely to lead to greater protectionism and risk aversion. This is expected to lead to more localization of supply chains, especially of essentials and for sectors that are seen as strategically important.
Most companies have opted to work remotely and their employees are now ‘online’ and working from home. While these trends were already ‘in-motion’, they have now hit the fast-forward button. Even the most brick and mortar organizations have been forced to experiment with digital channels. This presents a real and immediate opportunity to drive efficiencies through digital. At the same time, this crisis has highlighted the importance of investment in enabling technologies like cloud, data and cyber security.
This will change the way we ‘work’ with far reaching implications on services, commercial real estate, e-commerce, e-governance, cyber security, process automation, data analytics, self-service, capabilities etc.
This situation has proven, once again, that cash is king - companies that are over leveraged and ‘living on the edge’ are the most vulnerable. The crisis has reiterated that it is important to be financially prudent and conserve cash.
Move towards variable cost models
One of the biggest lessons, amongst others, is the importance of reducing overall business costs. One significant way to accomplish this is to convert fixed costs to variable costs wherever feasible. For instance, businesses will now determine what they must keep in-house, and explore outsourcing the rest so that fixed costs can be lowered. As with other trends, this will further impact the labour force and ‘how they work’, contract manufacturing, supply chain considerations, Alternative data can offer insights into an activity, with a shorter time lag, that traditional measures may not. This is especially pertinent for areas where information is scarce or erratic. The downside to this are also challenges such as short histories, collection systems that are pron to change etc. Nevertheless, governments and companies have realized the importance of sensing capabilities, building transparency through ‘digital control towers’, ‘digital twins’ and the ability to process both structured and unstructured data. For instance, analytics companies are now mining alternative data such as traffic jams, food orders etc. to track COVID-19 shock. This trend is only expected to pick-up.While localization is a trend we covered earlier, individual companies will want to ensure their supply chains are resilient to remain competitive. Risks to supply chains are numerous and continuously evolving. Hence, it is imperative that resilience capabilities are developed in order to respond to repercussions of unexpected events and either quickly return to original state of business or move to a new and better state after being affected by the risk and continue business operations as efficiently as possible. Achieving this will require initiatives from both internal businesses as well as from the wider networks. The ongoing pandemic is forcing countries and companies to take quick actions in the absence of perfect data, while remaining customer-centric, addressing employee needs and reinforcing stable team dynamics. It has also made them ponder upon the enabling mechanisms that need to be put in place to respond to any unexpected events in the future. Going forward, policies will need to evolve faster than the market and policymakers will need to be more responsive, inclusive and agile.