The rules for business in a post-Covid 19 coronavirus world
With Kevin Jenkins / 2 June 2020
This article was first published in The New Zealand Herald on 17 May 2020.
There’s a huge debate just getting started on what our post-Covid-19 world will — or should — look like. Some are arguing it’s our last opportunity to redesign our economy for a sustainable future, with talk about ideas like “portal economics”.
Others point out that the way different countries are responding is reinforcing their national traits, and in many cases this may lead to a drive for growth no matter the cost. Former UK Foreign Secretary William Hague has called Covid-19 “the Great Accelerator”.
In the meantime, how are businesses in New Zealand reshaping themselves?
In my last article I talked about how different New Zealand businesses, including some members of The Colin Meads Club — a video beer group of business owners and leaders — were responding to disruptions in their supply chains. There are lots of problems with deliveries and rising costs, but all these businesses are also seeing opportunities.
Sir Colin reinvented rugby — he was central to a Golden Age of post-war All Black dominance that lasted until 1970. Post-Covid-19, lots of things will stay the same, but lots more will change. We need to reinvent the way we do business.
There is a tsunami of advice about how to adapt to a post-Covid-19 world. Executives in business and the public sector are sharing economic analyses, lists of lessons from past crises, theories about disruption, practical business planning tools and the like. It can be challenging to discern the gems among all the rest.
A recent Economist article, “Why coronavirus will accelerate the fourth industrial revolution”, pointed to the theory of “punctuated equilibrium” for analogies. In 1972, biologists Niles Eldredge and Stephen Jay Gould proposed that evolutionary history should be understood as long steady-state periods of ‘stasis’ that are ‘punctuated’ by rare episodes of rapid evolution of new species (when small isolated subpopulations of a parent species face new and different conditions) — in some ways akin to how technology sometimes advances quickly in wartime.
As a result of the pandemic we’re already adopting lots of technologies that we’ve resisted to date, like videoconferencing and remote learning. Everyone is also talking about whether 3D printing will localise manufacturing.
Our own Productivity Commission recently published an issues paper called “New Zealand firms: reaching for the frontier”. They’re looking at how the economic contribution of our most productive firms — our “frontier” firms — can be maximised through policies and interventions aimed at improving the performance of the frontier firms themselves. This then helps new technologies, efficient business practices and other productivity-enhancing innovations diffuse more effectively across other New Zealand firms.
As the paper notes: “Improvements in productivity allow a given quantity of output to be produced using fewer resources, or more and better outputs to be produced from the same resource base. This is often done using new technologies or innovative practices. Changing how a firm is organised, governed and managed can also improve its productivity.”
Chair of the Commission Murray Sherwin drew a link between the history of low productivity in New Zealand and how the shock of Covid-19 has made the need for local firms to lift productivity even more important: “New Zealand is facing the prospect of a very significant economic shock from the impacts of Covid-19. Helping Kiwi firms to become significantly more productive will play an important role in restoring the economy to full health and supporting long-term gains in social and economic wellbeing.”
One global consultancy has offered advice about process. For example, they recommend launching a planning team that looks beyond the immediate and develops scenarios of what your trading environment might be using a series of horizons (a week, a month, a quarter, and so on). Inputs include being clinical about your current position, identifying what won’t change and what probably will change, and assessing whether you’re facing a long, slow recovery or some immediate growth opportunities that you need to be bold enough to seize quickly.
Meanwhile, the Harvard Business Review advises us to reconsider our business model through four lenses. First, what will our customers want post-Covid-19, and do we need to look at new channels? Second, will what we offer still be valued, or do we need to redefine our value proposition? Third, will our marketing and sales approach still work, or do we need to reinvent them? Finally, do our capabilities match what we need for this new world, including more video support and less facilities management, and of course will our supply chain still be fit for purpose?
Digitise, digitise, digitise
McKinsey cites a recent survey that revealed that 70 per cent of executives in Austria, Germany and Switzerland believe Covid-19 is likely to accelerate the pace of digital transformation. It cites how Asian banks have moved their operations online, and healthcare providers have moved to telehealth, as well as the move to contactless retail. We’ve seen this acceleration in the move to online in Aotearoa of course — one recent example is an Employee Assistance Programme provider introducing secure video-conferencing.
McKinsey goes on to suggest now is the time to try bold new digital initiatives. Customers are likely to be more open-minded, and organisational cultures are not yet settled into the usual silos.
In an earlier article I talked about how digital platforms are already flowering in Aotearoa, and how the advantages they offer to both customers and suppliers will only become more pronounced. One frequent feature is a mash-up of different technologies across different industries, allowing the disruption and exponential growth promoted by people like Peter Daimandis and others at the Singularity University.
McKinsey agree with the Harvard Business Review about the need to “reinvent your business model at its core”. They cite how we all had to quickly adapt to Zoom and the like, as just a taste of what we need to do. Themes it talks about are greater transparency in supply chains, data security, scalability, the user experience, remote working, and automation.
I guess they are really just capturing what most business people are thinking.
“Value for money” might sound old-fashioned, but using AI, experiential technologies like AR/VR, enabling technologies like IoTs, and automating systems and processes will bring better service and more efficient operations at less cost. For example, just look at these eight technologies transforming agriculture.
Digitising will improve productivity, and the good news is that digitising is exactly what most members of the Colin Meads Club are working on.
Treating customers even better
Ben is the director of an executive search and recruitment firm. They already use software to underpin their search and other processes. Their clients still recognise the value the firm brings, but are currently reluctant to commit to the full offering given each dollar counts until some sense of normality returns. Its not a long-term solution, but to help customers through this period Ben’s firm is offering key parts of its service separately.
Len’s Auckland factory spent the lockdown locked down.
He also suspended their capex programme, but did use the downtime to turbocharge the solving of one pain-point his customers have grumbled about. His is a make-to-order business with very short lead times.
Their customers don’t want “fancy websites to enter orders into” — they want to be able to place their orders in whatever format suits them and for Len’s team to work it out at their end, and quickly.
Len’s IT people worked with external vendors to accelerate an existing programme to deploy character and pattern recognition and AI generally to allow the firm to receive orders in lots of formats and convert them for ingestion into their ERP, including the financial system. They are going live with this in two months. This, along with an improved order tracking system, means a more user-friendly customer experience, giving the factory another competitive advantage.
Garry Green, not a member of the Club, is the MD of Quanton, the digital automation firm. They worked remotely through the lockdown helping their clients continue with their existing automation programmes, as well as supporting automation to support new demands created by the Covid-19 crisis. “In the financial sector we have seen that the crisis has resulted in a massive increase in the need to digitally execute contracts,” Garry says. “Many customers don’t have access to printers, and nor can they go into bank branches or lawyers’ offices to sign application documents.”
The only way the business could continue was through the rapid adoption of digital signature technology in combination with back-office robot workers. “This has resulted in a better outcome for customers and banks, with a more secure and robust application process,” Garry says. “The other bonuses are that it is now quicker to process applications and contracts than the original paper-based way, and robots can be scaled to match peaks or troughs in demand.”
The outcome is a much better customer experience, quicker response time, and rapid adoption and acceptance of a new way of working. Bank staff can meet the demand and focus on handling more complex customer applications and exceptions.
Looking for new customers
Roger, CEO of a provincial airport, sees a need to pivot to new customers. “We will need a consumer-first mindset. We talk about existing customers, ignoring people who could be customers.” What he means is that his business, like many, had fallen into the trap of assuming next year and beyond will be pretty much like this year but a bit more. This is classic bias towards the status quo, with a dash of risk aversion: steady growth is a good way to keep most shareholders happy.
Roger reckons Covid-19 gives us all an opportunity to throw out the “how do we beat last year?” mentality. Instead he says we need to “home in on what new customers will look like and whether what we offer will satisfy their needs”. This means research, and maybe even working with potential customers to develop a new offering. Covid-19 will only increase the interest in staying safe and healthy — but what else is going to be different?
Seniors have made up a disproportionate share of passengers but may now travel a lot less. So what do Gens Y (Millennials) and Z want? And what about Gen Alpha, born after 2009 and becoming screenagers very soon? The marketers tell us Y and Z look for choice, but what does that mean?
Roger and his airport are looking at two new steps. First, he is going to seek to collaborate more closely with tourism operators and other airports to create much richer information about consumers and hence identify opportunities. He’s found that the deepest consumer insights come from outside his core stakeholders.
Second, the lockdown has convinced him it’s time to accelerate digitisation. We’ve all become more familiar with living online and there will be little patience for businesses that have clunky interfaces or poor customer experiences in any form.
Managing down costs
Ben’s search and recruitment firm got lucky because their lease expired when the lockdown began. They have no immediate plans for an office, intending to work from home or out of cafes. This is similar to a trend in the real estate industry in the US that’s driven by augmented and virtual reality (AR/VR), which I wrote about 18 months ago. The biggest impact of AR/VR on that industry isn’t doing away with estate agents — it’s removing the need for offices.
The lockdown has brought to the fore some frustrations that Rakesh has about the actual uptake of the digital systems he has invested in. He runs a national distribution company, and has introduced lots of innovations. They use Eroad, deploying GPS, electronic RUCs, speed alerts, recording of routes and deliveries in real time, asset management of all mobile devices, service records, driver breaks and so on. The problem is managers, drivers and other staff don’t always use them properly.
With tablets, drivers can enter the sometimes dozens of deliveries each day, enabling delivery dockets to be sent in real time, but they often just enter everything at the end of the day. The tablets also enable the firm to optimise routes and to get detailed information about their customers’ purchasing behaviour. Rakesh’s frustration is that his salespeople sometimes seem to ignore this capability, default instead to the telephone or driving miles out of the way to visit a customer. It’s always good to talk to or visit a customer, but it’s also expensive at scale.
About the author
Kevin Jenkins a Co-Founder of the professional services firm MartinJenkins together with Doug Martin in 1993. Kevin used to be a director and shareholder of Quanton.
Kevin has undertaken a wide range of assignments in the science and innovation, economic development, and tertiary education sectors — for example, work on the establishment of Callaghan Innovation (New Zealand’s advanced technology institute). He has worked a lot in the justice sector, including leading a major programme targeted at leveling off the increase in the prison muster, and another at ensuring that the cost of the sector is stabilised.
Kevin is a regular contributor to the New Zealand Herald.
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