Innovating our way out of a crisis.
As the roots of America were being established, Lisbon was one of the richest cities in the world. In 1755, an earthquake that caused a fire brought the Portuguese economy to a grinding halt. In that local crisis, Amsterdam and London displaced Lisbon’s trading empire. A crisis that closed down one city displaced a global empire. The COVID-19 pandemic has shaken the world economy to its core — bringing cities and national economies to a grinding halt. But like any large machine, the U.S. and global economies will need an orderly restart to get humming again. We will recover from this, but economic patterns have changed. Localities that identify these changes and innovate to address emergent challenges will be the ones that prosper. As we reopen the economy, what lessons will we learn, and how will we retool to make the Pacific Northwest economic region even more vibrant than it was?
Framework
While we are still in the midst of this crisis, we propose that when envisioning the creation of a “New Normal,” we consider four distinct but overlapping phases of the response: (1) health security, (2) economic restoration, (3) economic retooling, and finally (4) the new normal.
Phase One: Health Security
First, we need to stop the spread of COVID-19 while keeping the health care system functioning. It appears that social distancing, while resulting in a halting of the economy, is working to do this. However, as a nation, we cannot go on too much longer. We need to develop a plan that reopens the economy in a safe way and in a way that minimized downstream health and economic problems.
Phase Two: Economic Restoration
Once economies open for business, we will not be able to go back to work as normal. Assuming that economies open up again in early July, businesses need to start planning now for the contingency of a second wave causing us to need to take similar measures in December. In that time, companies need to create and train for a new normal, repair equipment and get factories humming again, and plan for a second wave. While travel will start up again, there will likely continue to be travel restrictions, more shift work, and more regular health checks and compliance guidelines. Further, international supply chains will continue to be a challenge.
Key to economic restoration is that we must make sure that producers and industry to keep functioning. This will make the task of supporting adjacent businesses (e.g. suppliers, shops, restaurants, and small businesses that cater to anchor industry workers) to get back on their feet and thrive easier. Further, we need to think about how to get the region exporting again.
Phase Three: Economic Retooling
The crisis has uncovered gaps, vulnerabilities, and strengths. It is also likely to change consumer and industry behavior. With all these changes, we need to:
- Learn lessons from this pandemic that provide greater business and economic resilience to the Northwest economy;
- Identify gaps and vulnerabilities that require coordinated investments to address;
- Attract external investment (federal, international, private) to support rebuilding the regional economy; and
- Judiciously manage government spending to maximize value and return on investment.
Phase Four: Creating the New Normal
The first three phases are traditional recovery. But then traditional recovery activities end, we will be living in a new reality. We need to harness innovation to challenge industry to address the gaps globally, and export capabilities that:
- Leverage policy and technology to build fault-tolerant industries;
- Address existing inequities in the economy that are vulnerabilities during a crisis;
- Build redundancy into essential industries; and
- Position the Pacific Northwest to be a global economic leader in the emerging next economy.
Lessons Learned
As this crisis continues, our lessons are mounting. The pressure on the health system and the shelter-in-place orders uncovered conditions in society that leave us all vulnerable. There were also some notable successes — where technologies and innovations, though developed for other reasons, made the economy a bit more resilient. And COVID-19 made us think of other issues and risks that, while perhaps not causing problems in this crisis, could fail in a different crisis.
What Went Wrong — Vulnerabilities and Gaps
Health capacity is limited — For years, there has been an effort on efficiency in health care which has limited the number of unused hospital rooms and constrained deployment of technology. As such, the U.S. health care system operates far too close to its capacity on a typical day that it is ill-equipped to surge for a crisis.
Technology access — With shelter-in-place orders, knowledge workers and schools were forced to telework. Internet access has proven vital to the functioning of the economy and should be viewed as a utility. The technology sector was able to migrate to remote work quickly. More risk-averse industries suffered and companies whose employees had limited internet access suffered.
Education — We failed our children by not having a mechanism to ensure their education continued through shelter-in-place orders. While many private schools transitioned to on-line learning, public schools did not fare as well — not due to a lack of trying, but due to equity issues such as availability of computers and the difficulty of essential workers to supplement learning.
Unexpected Successes
Industry 4.0 — There has been a trend toward increasing automation in manufacturing. While this has resulted in job losses for years in the manufacturing sector, in an age of social distancing, this has proven to be vital for production.
E-commerce and delivery services — E-commerce platforms like Amazon and delivery services like Uber Eats were developed for consumer convenience. During this crisis, they served as essential services. It has been amazing to see dine-in restaurants transform into delivery and take-out institutions overnight. Grocery delivery services have made it possible for people in vulnerable demographics to get basics without needing to leave their house.
Web Conferencing — One of the stars of the quarantine was web conferencing services like Zoom and Microsoft Teams. Services that were built, to a large extent, to support global outsourcing and remote team collaboration have been redeployed to functions as broad as enabling children to attend school, telemedicine, and even on-line benefit concerts. And novel applications of virtual reality for virtual conferences and remote white-boarding sessions show promise that we can progress even further.
Adjacent Risks
Food security — We are starting to see an impact on slaughterhouses and farm harvests, but the general availability of food was not overly impacted. As the crisis drags on, this might not remain the case.
Infrastructure — Airports, rail corridors, and civic infrastructure have benefited from a scarcity of use since mid-March. Had this happened in more adverse weather conditions, it would have been difficult to repair infrastructure while also keeping workers safe.
Distribution/Logistics — We are seeing farmers throwing away tons of crops in a time when grocery store baking aisles are empty. We have not seen a lack of food, rather that it is not packaged for the new patterns of consumption. Likewise, our logistics systems have stood up well, but we have been acutely aware of their criticality.
Capabilities to Leverage
The Pacific Northwest region fared well following the Cold War and in the post-9/11 world. It was during this time that Microsoft took off, Amazon was born, Vancouver boomed, etc. The region became global leaders in cloud computing, artificial intelligence, immersive technology, cyber-security, enterprise technology, biotech, unmanned systems, agriculture technology, global health, and additive manufacturing. These capabilities form the core of what is needed for the emerging economy. Cloud computing and immersive technology are coming together to allow greater remote work and telemedicine. Robotic process automation and enterprise technology applied to agriculture and logistics are critical to building redundancy and resilience in the global economy.
Innovation is critical to business resilience. Companies that have embraced technological innovation have fared the best during the crisis. This is particularly notable by the resilience in the stock price of technology companies like Amazon and Microsoft. They continue to operate with little to no impact on productivity.
Remote work: A remote workforce is needed for business resilience. Companies that have a culture of flexible work agreement have fared well during this crisis.
AgTech: We need to identify ways to connect the knowledge economies along the coast with agriculture and logistics needs inland and throughout the region. Autonomy technology is vital in agriculture and logistics for food security.
Recommendations
To build the next global economy in the PNW, we need to bring industry and government across the region to work in tandem. In much the way that the moonshot challenged industry to build the core technology that led to the internet cell phones, and a global satellite network that allowed many of us to work from home the past two months, the challenge of pandemic resilience should be viewed as an opportunity to challenge this generation to invent, build, and commercialize technology that will be the basis of tomorrow. Elements of this are already happening. We recommend the several initiatives to ensure that the Pacific Northwest emerges from this crisis stronger than we entered it.
Cross-Sector Industry/Government Collaboration: Public-Private Partnerships that develop common repositories for policies, procedures, and training related to health security, but that also identify gaps vulnerabilities and emergent threats.
Governments should focus on the identification of risks to health, security, and economy and they should challenge industry to address these risks. Some examples of these challenge-based investments in emerging industries could include:
- Labor-safe automation: With AI booming and the need being even higher in an age of social distancing, we need to challenge industry to develop business models that share the benefits of automation across the economy and workforce. Can we make AI a tool to enable worker creativity rather than replace labor?
- Intelligent Edge for Privacy: Google and Apple are working on solutions for contract tracing. i.e. to alert citizens when they may have encountered infected communities and when one should get tested. They are doing this based on anonymized location tracking. Can we challenge industry to work on issues like this that leverage AI and big data to solve problems while also not infringing on citizens’ freedom and privacy?
- Redundancy in supply chains: With the trend towards globalization since the 90s, we have become dependent on capabilities that, in an emergency, might not be available. We need to leverage and invest in local capabilities, infrastructure to support remote work, and a combination of global and local sourcing.
- AI for Resilience: AI has grown dramatically in the last decade. We need to look into ways to harness this technology to grow industrial autonomy to secure agriculture, logistics, food security, and manufacturing.
Together we will build a stronger region, but we need to do this smartly!
