The Inevitable Spring…
“No winter lasts forever, no spring skips its turn.” Hal Borland.
My previous blog “Winter’s Coming…” a month ago discussed some key actions for startups over the next few months and projected how long the pandemic would be with us. In this article, I’d like to share some of the thoughts about the very different world we’ll find as we slowly emerge from COVID19. By no means do these thoughts represent a comprehensive view of everything. Rather they are a small subset of what may be.
The new WFH (work from home) / life balance.
We’re finding that most of us can, in fact, work from home for prolonged periods. Taking a step back from the current lockdown situation, one can see how these impacts may be overcome.
There are plenty of tools such as monday.com, Zoom, Microsoft Teams and others that work equally as well when we’re at home, or in the office. So, inevitably, office culture and ergo, office space utilization will change. Companies will lease smaller space, and optimize their space differently than they did before. Personally, I believe corporate air travel will never return to more than two thirds of where it was pre-pandemic. With less travel, staff will have to overcome some challenges — like learning new languages to better interact with staff and vendors, manage morale across a diverse organization, and achieve ‘sign-off’ on things they can’t ‘touch’.
Big opportunities : teamwork, remote work tools, authorization and SaaS management tools, digital signatures, proptech optimization and language translation/education, augmented reality.
Big challenges : Commercial real estate, WeWork/Knotel etc., office furniture (and stationery), older on-premise software, Airlines, Hotels (Business).
e-commerce and Logistics
Old fashioned retail chains have been dealt a death blow. e-commerce rules, and with it last mile logistics (e.g. PostMates, Glovo, Coupang, Deliveroo). Consumer behavior has changed during this period and the traditional retailers’ back has been broken. My guess is that online commerce in the next three years will more than double year-on-year taking with it market share from traditional retailers. This will, of course, necessitate a structural change in the gig economy — a delivery person will need to become better paid and have access to benefits. This will play well for FedEx and UPS as it will force gig economy logistics startups to compete on a more level playing field. However, as in any depression, consumers will buy less (no more latest fancy iPhone upgrade, less Gucci and nice to haves).
Big opportunities: last mile logistics (incumbents and PostMates, automation etc.) as well as autonomous delivery (drones etc.), Benefits companies, e-commerce of basic necessities (Amazon, WalMart).
Big challenges: Retailers, Wholesalers, Retail real estate.
Humanity craves contact, especially in close proximity. The next 18 months or so will be difficult for sports, entertainment and other venues. We may find the NBA playing to empty stadiums, and the franchise will need to find a new way to capture the lost revenues.
Post the 2008 global financial crisis, consumers pared back the most on eating out, alcohol, and entertainment. Restaurants will suffer most, either never opening again or having to deal with small amounts of diners due to psychological after effects (not just financial ones). So too will restaurant supply chains be affected. A restaurant that operates at half capacity won’t order quantities it did before. This volume is not entirely taken up by consumers eating at home. Less alcohol and fewer meals out, translates to less procurement from distributors and ultimately less manufacturing, farming, etc. Will this be overcome by growth in population?
Social games and networks will help bridge contact. Mental, physiological and psychological tools will be a key part to treat a global population that requires support. Watch as D2C startups emerge, armed with apps and products that bridge psychology, physiology and nutrition.
Finally post school education will change — universities will trend towards research, where labs etc. are required. MBA’s, humanities, commerce and law degrees will trend to online.
Big opportunities : Dark kitchens, Pay per view / Live-streaming/networking, Social Games/e-sports, last mile logistics, online under- and post- graduate education, solutions that drive health, wellness, nutrition and mental stability (apps, subscription direct to consumer etc.)
Big challenges : Food distributors, ticketing companies, restaurant, fast food (and coffee) chains.
There are many other fields that are subject to disruption in our ‘new world’. Poorer countries failing are a clear challenge (and a whole separate subject). Closer to home, structural changes in the economy to build robustness at the expense of efficiency will also play an important part. This will be particularly advantageous to healthcare, hygiene (FMCG) manufacturers and the like. Laws will be enacted to deal with more stringent travel, hygiene and other basic structures of our world (like the TSA post 9/11).
A move to greater social responsibility will also occur. As there are social taxes that cover unemployment and forced savings/pensions, and healthcare in Israel, Norway, and other countries, similar ‘social contracts’ will need to be adopted in the countries like the United States. Ultimately, wages that keep folks struggling will end up hurting those that earn well.
Leonard Cohen’s song ‘Everybody knows’ summed it up well :
“Everybody knows the fight was fixed, The poor stay poor, the rich get rich, That’s how it goes… everybody knows…Everybody knows it’s coming apart…Before it blows…Everybody knows.”
Big opportunities : Fintech, consumer brands, digital first healthcare, and the new ‘social contract’.
Big Challenges: Asset managers, pharmaceutical companies, elected parties.
Innovation Trumps All
The small segment of challenges described above and others represent huge opportunities. Ultimately, I believe innovation will win. Those companies that increased R&D spending in 2008/9, are the ones that performed well ahead of their competitors in the last decade. So double down on R&D (or cut elsewhere, not in R&D).
Figure out how you can outsmart your competitors by moving fast with new products and services that possibly take advantage of the opportunities that are presenting themselves in your industry. Have your M&A/funding plan ready to go at a moments notice. Act fast, act with purpose, and be first!