Going “Back to Normal”?

For some industries, there may not be a normal to go back to.

Like so many, I have been trying to make sense of what the “new normal”, brought about by the COVID-19 pandemic, will look like. Not just today’s version of normal, but the one we may find when stay-at-home orders are amended or lifted, in one month, six months, a year from now and beyond. With half of my family isolated at home in Italy and half in the Bay Area where I live, I am thinking not just about what comes next, but also how it may be different in different cultures and economic systems.

It’s not easy to parse information through all of the uncertainty. We are constantly inundated with data, facts, news, opinions and a good dose of hot takes. COVID-19 will upend the world order. Nothing will fundamentally change. We will finally come together as a society. It will turn us all into tribal savages.

So I set a modest goal for myself: To focus through the noise, look for changes emerging from the disruption, and pull, from this, likely trends and ideas that might blossom in a post-pandemic world.

Humans are immensely creative and adaptable and, if anything, this global emergency is giving us ample proof of that. The often-overlooked truth about innovation is that it thrives within hard and urgent constraints. We should not be surprised if profoundly novel technology applications and business models emerge first in those industries that are hit the hardest.

Space & Time

The dynamics of the pandemic are essentially “physical”. They are tightly related to the parameters of space and time. At its most basic level, the illness spreads among individuals that are in the same physical location at the same time.

Through this lens, businesses or industries should be thought of in terms of places, of where economic activity takes place or value is created and exchanged. Office buildings, factories and retail stores of course, but also more broadly other loci where consumption, social and business transactions take place, like museums, sports venues or airplanes.

There are two dimensions that especially matter in the context of the pandemic’s impact on business and the places where this activity takes place, proximity and simultaneousness (or synchronicity):

• Proximity refers to the need for people i.e. employees, customers, citizens to be near each other for the activity to take place.
• Simultaneousness refers to the need for people to perform the activity at the same time for its value to be created or exchanged.

To visually capture these two dimensions, consider the following:

The Pretty Normal

Businesses operating in this quadrant will be able to handle the direct impact of the pandemic better than most. That is because minor adjustments to operations can realistically be introduced, without fundamentally changing the way business is done.

These are industries where, in large part, value-creating activities do not require customers and employees to be in close vicinity (low proximity), nor they require that they occupy the same physical space at the same time (low simultaneousness).

For example, truck drivers spend most of their working hours alone. Logistical planning is designed to minimize overlapping arrivals, loading and departures from distribution centers. On balance, a trucking company should be able to continue to operate by adapting its procedures, and should not need to fundamentally change its basic tenets.

The Spaced Normal

In this quadrant, space is less important than timing. In other words, people need to mostly work or operate concurrently to get things done, while proximity is less imperative or can be relaxed without degrading the value of transactions.

Take the typical corporate office setting. Most companies operate on a 9-to-5 schedule, with the vast majority of employees overlapping in their work for large chunks of the day. However, it is not impossible to imagine office spaces being more sparsely inhabited so as to maintain safe distancing among employees. That can be achieved with flexible and staggered schedules or more remote work, for example.

Organizations in this quadrant can more easily find ways to operate even if strict distancing requirements are in place. In the midterm, they can undertake a non-trivial, but workable path to going back to a “spaced normal”.

The Throttled Normal

In some instances, organizations have strict spacial constrains. Museums can offer access to their collections only in the confined halls of their locations. Physical retail activity takes place in specific commercial spaces. To fully enjoy parks or monuments, visitors must be on site.

However, contemporaneity constraints are weaker. It is entirely conceivable to spread visitors to a gallery or a monument over time — i.e. throttle access — to reduce the number of people visiting, shopping or exploring at the same time.

The (Possibly) Never Normal

For industries and companies in this quadrant there is almost no scenario under which they can go back to normal until either herd-immunity is achieved, or a vaccine is widely available.

By their very nature, their core business activity takes place in locales where distancing is either impossible or incompatible with the activity’s purpose itself. Think about passengers in an airplane, fans in an arena, patrons in a bar, attendees to an industry conference.

Taking Measures

Of course, much can be done to establish a viable path to a “new normal”. Office workers can largely be productive remotely from their homes. Stores and gyms can limit access to customers. A variety of throttling and distancing measures can be implemented to create a path towards a return to normalcy.

Aside from testing and tracing, measures are being taken to reduce the density of people in a space — i.e. lowering proximity — , limit the opportunity for simultaneous presence in a space — i.e. lowering simultaneousness — or both.

It seems obvious that for some businesses and some industries undertaking such measures will be easier, or more effective, then for others. It also seems reasonable to imagine that such measures should have an effect on fundamental economics. The unit profitability of a passenger flight quickly decreases with each additional empty seat and, below a certain load factor (in industry parlance, the percentage of available seating capacity that is filled with passengers) an airline simply cannot operate profitably.

Besides the operational impact, will culture and norms be transformed too? And to what extent? Masks in the office, different ways of communicating, virtualization of physical spaces, recasting of socialization in the professional and personal spheres… Will these measures change permanently our expectations of work, our consumption patterns, even our behavioral responses?

Time for New Habits?

Time is of course of the essence. If the “reopening” of the economy moves along swiftly and without major setbacks, we may see a return to normal operations in many sectors in months rather than years. The fallout from the economic impact of the pandemic will be severe, without a doubt, but customer habits will have only marginally changed and the economic structure of many industries will return to being viable, at least in the medium term.

If, on the other hand, the disruption turns into a protracted, multi-year departure from norm, then things might look quite different. Companies in the “Never Normal” quadrant will have to come up with creative ways to survive, potentially developing structurally altered business models. Conversely, customers and employees will become accustomed to those new offerings and develop new habits. By the time the pandemic is over, and its fallout absorbed, these businesses may live in a very different kind of “normal” and some of the changes will be irreversible.

Radical Innovation

Much has been said about the explosion in remote work, videoconferencing, online retail and streaming. My hunch is that it is not the real consequential story, at least as far as innovation is concerned. The pandemic is fundamentally an accelerant for trends already in play.

Radical innovation is born out of radical constraints. The more interesting areas to watch, the ones where we may see novel, disruptive, and persistent innovation are likely to be also the ones that, right now, are the most hopeless.

-Will we see a rearrangement of the tourism and leisure industry in tiers, with luxury offerings that guarantee a superior level of medical safety?

Will airlines offer an “epidemic concierge” as a premium add-on alongside checked-in luggage and special meal menus?

Will sports take the leap towards VR-enabled experiences for fans or simulated audiences that provide live feedback to players during spectator-less games?

Will collaboration tools evolve to offer more immersive, always-on modalities to simulate the office experience?

Will we have electronic masks that reflect our faces underneath?

Will large, live trade events cease to be the primary platform for business deal-making and be replaced by pop-up, on-demand AR meetups?

And what about fundamentals like trust, human interactions, social dynamics? Differences in culture and business ethos inform how we collaborate and progress. Will these pressures and changes further disjoint already fractious societies, damaging their ability to innovate, or will they bring communities together in new, unpredictable ways?

Let’s see.