Navigating the Post-Covid World
By: Somshubhro (Som) Pal Choudhury
Locked down at home, with the incessant news of exponentially rising Coronavirus cases and deaths, we start pondering on how the world has changed within weeks. Every country is affected, economically unsettled, getting into deep recession and experts are debating how the revival will look like when it all ends. The only silver lining is that some countries have peaked and have started to see the daily cases and deaths stabilise with stringent lockdowns; and more than 40+ vaccine efforts are ongoing. But then again questions come regarding a second wave of the virus, mutation of the virus in fall, resurgence of cases followed by periodic lockdowns till the viable vaccine emerges. Trillions of dollars in Bailout packages will cushion the initial blow, but entrepreneurs and small businesses are staring at a deep abyss on how to keep the lights on.
Covid-19 has shaken up everybody, but then we see several experts and talks in the last decade warning us on a global mass epidemic and how unprepared we are. We had all quashed these ‘Doom’s Day’ scenarios, but today the ‘Contagion’ fiction movie is a reality. In fact the truth is — that it has been happening at regular frequency in the last 20 years, but on a much smaller scale with Nipah, SARS, H1N1, MERS etc. Mega viruses and mutant strains linked to climate change, cross over from animals and nature because of rapid urbanisation which will probably be more prevalent and deadly in the years to come.
It is a wake-up call, and we believe the post-Covid world will be different and will likely follow a new world order. With such a shock to the global society, economy and individuals, we believe that some distinct patterns will emerge and behavioral changes will likely be more deep rooted. Crises like these have lasting effects and people will not be able to just bounce back up and continue life as normal.
We at Bharat Innovation Fund and Bharat Inclusive Seed Fund along with our entrepreneurship arm — CIIE.CO have been delving and deep diving into each area of geo-politics, macro-economy, industry verticals, consumer behaviour etc. to see the patterns that are likely to emerge and most importantly stick in the post-covid world. The key question we are trying to answer is ‘How would Corporates, Startups and Investors navigate the post-Covid world?’ While detailed research, interviews and deep dives are ongoing, we wanted to share our initial thoughts at a 10,000 ft level.
Macroeconomy and Geo-Politics
While several countries and organisations have criticised China on the lack of transparency and communication on the enormity of the epidemic, we could potentially see tensions simmer up as things get worse. At the bare minimum, over reliance on China in today’s supply chain will get diversified and alternatives established. There could be potential reactions and pushbacks if Chinese companies start buying battered assets globally. Worldwide Government power has increased substantially to keep the lockdowns in effect and some amount of surveillance for the common good will likely be conducive even to a privacy-focused democratic western world.
Large bailouts are a necessity today but this will likely not just be one-time as industries will not hire back workers immediately even when their revenues and demand goes back up. They will rely on more automation and increased productivity. ‘Job-less Growth’ will be the norm for this economic revival and ‘universal income’ under social welfare programs might see accelerated adoption. The anti-globalisation nationalistic agenda which had become mainstream after decades of globalisation will continue on an accelerated note, more and more people concerned about migrant population, much more scrutiny at airports and borders; but at the same time communities will come together digitally to share data, co-learn, co-work etc.
The stock market will likely bounce back sooner than the overall economy; and opportunists will return with the current covid wave passing. But the economy will have a staggered growth — will likely not bounce, but limp back up mimicking the Nike Swoosh curve. The consumption pattern will likely change as people might adjust to the ‘new normal’.
Consumer Behaviour
We have been researching, holding interviews, learning about consumption patterns post previous disruptions and debating on how big of an impact will the sustained lockdown have on the consumer behaviour and most importantly will it persist. While we were already going digital in all facets of life and work, the Covid has simply super-accelerated this and forced this on us. E-Commerce, media and gaming, online education (for our portfolio company Playshifu.com online sales went up 5x as kids stayed at home while parents want them to stay engaged and learn), household and personal hygiene products, health/life insurance and online delivery/pick-up services have gone up substantially in every country for obvious reasons. ‘Work from Home’ with a mixed work-life balance is here to stay as people discover the benefits of new ways of living, working and balancing, challenging traditional ways of doing things and following pre-Covid lifestyle norms. Some of these behaviours are likely to be ingrained and sustained, their growth and adoption taking a big step jump. To draw an analogy, the e-commerce sector started and boomed during the SARS epidemic in China. While most outdoor activities have been severely restricted, consumers worldwide will likely avoid crowded places for the short term, till a vaccine becomes available. Movie halls, malls and restaurants will likely see a footfall drop compared to pre-Covid era in the foreseeable future which in turn will impact the outerwear, clothing and fashion industry negatively. High Covid exposed industries including the sharing economy, travel and hospitality are likely to stay muted for a while, except for more local nature getaways as the quarantine wears down.
On the personal Finance side, we should see higher savings rate. Global citizens will realise the need for building up a safety net with sudden disruptions. The hardest hit are the poor daily wage earners especially in developing nations like in India. We are conducting primary research to understand better if the migrant population would return to their workplaces or find less lucrative jobs closer to home.
Industry Impact
The lines between home and work have blurred. ‘Work from Home’ which was a luxury and perk for the IT sector has now become a necessity. The technology focused new age industry has been quick to adopt and started being productive barring some hitches in video/audio conferencing quality, VPN access and Cybersecurity. Moving forward we will not be surprised to see the work remotely trend in the tech sector increasing significantly, which will be a big boost to the technology infrastructure and cybersecurity industry but headwinds for the commercial real estate market. This is also good news for the Indian IT and captive R&D centres as MNCs globally will be expanding their remote lower cost centres during any economic downturn. Across all market verticals, digital savvy companies will thrive and gain market share tremendously as we have already started witnessing in China post the lockdown. Coronavirus will be the biggest driver to accelerate ‘digital transformations’. ‘Business continuity’, ‘going remote’ and ‘contactless,’ is where a myriad of consultants and CXOs will be focused on to avoid future disruptions in businesses.
In the manufacturing side for a short term, all non-essential expenditure will be eliminated as demand will be lukewarm. Getting the required temporary workforce back will be a big challenge as seen in China post lockdown. But as things stabilise, we would see businesses preparing more for ‘Business Continuity’. We should be seeing increased automation, less reliance on human workforce, use of contactless delivery, more flexible/agile manufacturing, flexible and localised supply chain integrated with technology for uncertain and unpredictable demands. Efficient centralised manufacturing may give way to more agile smaller automated factories closer to demand in the long run. But this automation and technology integration will mean much less job creation for the blue/grey collar workforce.
The big concern for the Financial industry will be the non-performing loans in the short term which has already started to swell. Payments industry would see much higher growth of online and mobile transactions. We expect multiple categories of insurance sector to pick up significantly including health, life, as well as business disruption/interruption insurance.
Public investment in healthcare infrastructure, more spent on healthcare as percent of GDP, more innovation and low-cost affordable tests and medical devices, tele-health/remote-health, research and drugs in Immuno-Virology, more opensource and collaborative databases, treatment/therapy of loneliness/depression and revival of universal healthcare efforts are some of the sectors that would see progress. Crisis bears opportunities. Post the market stabilisation, regulations in terms of more stricter pollution norms, urban planning, proper zoning and congestion avoidance etc. would likely see movement.
Looking Forward
All industries will see a ripple effect across the value chain because of the reduced demand, behavioural changes and adjustments to the new normal. In each of the following areas we are diving deep, analysing the history of similar but smaller scale disruptions in the past, learning and comparing across countries, conducting primary and secondary research and putting together insights and plans for our investment thesis, portfolio startups, our investors and as well as engaging with the broader ecosystem.
In the post-Covid VUCA (Volatile, Uncertain, Complex and Ambiguous) World, the first order of task is to stabilise your business. But this is also an opportunity for businesses to adapt, renovate and invigorate. It is during these tough transition times that winners are born. But this requires detailed understanding and insights of the fundamental shift in your business, technology, supply chain, distribution channel, competition along with innovation and leapfrogging potential.
Stay tuned for more insights and recommendations from us. If you want to know about our Funds and our Incubator and how we stay in the forefront of Innovation, Incubation, Research and Investment, please feel free to contact us.
About the Author:
Somsubhro (Som) Pal Choudhury is a Partner at Bharat Innovation Fund. He tweets @sompalchoudhury.
