Coronavirus: 9 Mega Trends Shaping The Post Corona Economy
Business leaders, Entrepreneurs: What should you do to prepare for business success in a post corona economy?
With all the uncertainty around the Coronavirus, it is difficult to assess what a viable medium to long term strategy for a business should look like these days. But as many businesses have implemented their immediate measures, the question “What’s next” forces itself into focus.
Reports were initially fluctuating between “it won’t be so bad” and “this will change the world forever”. They are lately normalizing towards a consensus that after a short couple of months of lock downs there will be a period of up to 12–18 months with many restrictions until a sufficient percentage of the population is immune or effective medication is found.[1]
This extended period of hardship will have a definite impact on what our world will look like in the new normal thereafter.
“A shock of this scale will create a discontinuous shift in the preferences and expectations of individuals as citizens, as employees, and as consumers.” — Kevin Sneader & Shubham Singhal, McKinsey [2]
In this article I am going to summarize what I have heard and learned communicating with dozens of business decision makers and reading numerous articles in recent days. After reading you will see:
- What new mega trends will likely be shaping the post corona economy?
- What specific behavioral patterns can a business build on now to come out ahead in the new normal?
- What should you do? When?
What I assume you know already:
- Corona is real and here to stay with all the counter measures for months, not weeks. First they will be harsh and then they will be more flexible depending on the virus contagions. [1][3]
- We are seeing health shocks, supply shocks, demand shocks, and monetary shocks right now staggered around the globe and more shocks could hit the economy, think deflation/inflation.
- Business leaders have to take the severest measures to ensure their businesses will survive. The cuts have to be as sudden and deep as possible, the moves as bold and stark. Formerly proven truths might no longer be true. A lot of companies will not realize this or will not be able to adapt fast enough. They will vanish — despite government help.
This article is an optimistic view on trends that could develop if we strive to make the best out of the current situation. It does not ignore the problems we are facing today, it merely accepts them and aims to build on them. With this article, I hope to make an ever-so-little contribution to our rebuilding effort. Rather than claiming to know the future, it is meant to inspire.
The Mega Trends
The new normal will likely be dominated by the following 6 mega trends. They will lead to new behavioral patterns. In turn, a number of 3 further mega trends will emerge.
- Personal Protectionism
- My Home Is My Castle
- New Work To Provide Income
- Building Social Ties In A Disconnected Environment
- New Art and Self Expression
- Demographic Reality Shift
- Digital Acceleration
- New Global Trade
- Government Power
We learn and build habits by repetition. So the worse we will be hit by the coronavirus in the next weeks, the stronger and deeper the longterm effects will be.
Mega Trend 1: Personal Protection
The hit humankind has taken on so many levels, health, financial and basic supplies was equally devastating and unexpected. A generation will be marked by a deep mistrust or even fear in a similar fashion we could see with the post-world-war-generation in many countries. We will seek the means to protect ourselves.
The coronavirus pandemic is commonly seen as “black swan” [4], an event that is considered highly unlikely and an existential threat. (To be precise it is classified as “white swan”, because it could have been expected with certainty to happen at some point.) Due to the perceived unlikeliness, we were not sufficiently prepared. Protecting against all sorts of events seems too costly.
Now — in light of the current pandemic — the perceived (not the actual) risk of a pandemic is much higher than before. Therefore, people will seek protection (“never again”).
Striving for protection often does not yield the expected benefit. Insurance is usually designed based on past occurances. If the next event is even bigger, we fail again, Nassim Nicholas Taleb writes in his book Antifragile [5]. Antifragility on the other hand will be less costly and yet more effective. It prepares us to be ready to accept disaster and be nimble enough to find our way out. However, this philosophy is not widely accepted and therefore, expect strong investments into protection.
Personal Health Protection
To prevent further outbreaks people will learn to change behaviors (e.g., fewer hand-shakes), use and stock up certain materials (e.g., disinfectants, gloves, masks), accept and employ services (e.g., digital vaccination/immunization card — maybe on blockchain).
We will see predictive health solutions. Based on where you are going and with whom you are interacting, apps will be able to make risk estimates. This will largely depend on data protection laws, which differ widely between China, Europe and the US for instance. We will see innovative ways of working around it and laxer legislation as many will consider health more important than personal data. In China apps to track infection chains are already active. In Germany a similar app is to be launched mid-April on voluntary basis. [6]
Regional, nationwide and supranational reporting structures will be established, maintained and models developed to act upon the data. This will be the beginning of new big data disaster prevention initiatives.
On a broader scale, people will demand, we build an infrastructure to be able to test huge populations for corona and future viruses. This will not only include lab tests (e.g., polymerase chain reaction — PCR, antigen) but also temperature measurement equipment to be installed at neural points, like airports, businesses, restaurants etc.. Today we see “Thermometer Guns”. In the future, imagine infrared cameras than can spot hot people in a crowd.
And when another outbreak hits, people will demand our health care systems be ready, with sufficient intensive care unit (ICU) capacities [7], material, labs etc.. So we will have to find solutions how we can ramp up facilities in days instead of months.
When I was a kid, my school was an emergency hospital for a potential cold war nuclear strike. This shows we have asked ourselves similar questions some decades ago. We need disaster plans for hospitals and critical production facilities.
Maybe the taxpayer will pay companies that manufacture personal use sleeping masks with ventilators to be ready to switch over to ICU-grade ventilators.
Personal Financial Protection
The next thing we worry about is our finances. The stock market has taken a hit of anywhere between 25% and 33% as of this writing. Real estate values will likely decline [8], and every asset class except cash is plummeting. At the same time prices for durable basic supplies are surging. This is driving perceived inflation. Major economies, like Germany, are predicted to possibly shrink by 5% or more this year. [9]
“A one-year epidemic […] consistent with recent projections based on scenarios from the Centers for Disease Control and Prevention, would reduce the nation’s [U.S.] G.D.P. in 2020 by $1.8 trillion — 8.4 percent.” — New York Times, March 21, 2020 [10]
McKinsey is predicting the U.S. GDP to drop by 8% to 13% — in their optimistic scenarios. That’s almost World War II levels. [11]
As a result, consumers will not see any salary increases or bonuses. With companies ailing or going bankrupt, jobs will be lost despite recovery programs already in place.
Many consumer brands have seen sales plunge. To be expected, as brick-and-mortar stores had to lock down globally. But e-commerce sales in general have declined, too.
People are only spending on necessities (see next section). Once we are in a new normal, expect consumers to resume spending especially for smaller items in categories related to the mega trends.
Other spending categories, like travel, concert tickets, clothes, will remain on a low level before they slowly pick up again. Many will probably not reach pre-crisis levels any time soon. People will be afraid to travel, concerts might still be banned, clothes and make-up are less needed without the proper events to attend.
At the same time consumers will try to recover their savings. Here is an interesting opportunity for financial service providers to win some new clients. And this time a lot of new players, e.g., fintechs (technology companies that transform the financial services industry) with their robo advisors, will also be there to fight for market share.
In this new world it will take creative marketers and convincing products and services to get people to swipe their card.
As time passes people will start rewarding themselves again. This will drive major purchases — largely in the categories matching the mega trends described in this article. The mega trend “Demographic Reality Shift” might considerably add to this and inject a significant amount of windfall capital into the consumers hands. (Windfall money is you receive unexpectedly without any need reciprocity, e.g., an inheritance or lottery win. This is typically used for major purchases that would otherwise not have happened. [12])
Personal Basic Supply Protection
There are still products we need every day. Mostly FMCG (fast moving consumer goods) / CPG (consumer packaged goods). Despite being the laggards in e-commerce before, these products are seeing stellar growth rates online right now.
“We are reporting directly to the CEO now.” — VP eCommerce of a major FMCG company
Well known from the news is the toilet paper shortage in some industrialized countries. [13] Panic buying is symptomatic for the fear that supply chains might be disrupted and basic needs could no longer be fulfilled. While many suppliers and traders are making a decent earning on those panic buys, a lot of consumers are left short of what they need, further increasing panic buying.
“I have been to six supermarkets in London and there was no food, no toilet paper, no soap and certainly no disinfectants.” — London citizen
This is further intensified by people stocking up on guns and ammunition until stores are empty. [14] Societies will want to ensure that the need for basic supply does not give rise to riots.
What business models can be cooked up to ensure supplies and reliable distribution? Will “subscribe and save” see its new summer? Will we trust Amazon or another entity? (“subscribe and save” is a service by Amazon.)
Preppers, a group of people preparing for the break-down of our civilization, have long been frowned upon. Now stocking supplies for a few weeks will become mainstream with great business opportunities for prep kit suppliers. Governments in many countries have already advised citizens to do that in the past but hardly anyone seemed to care.
Mega Trend 2: My Home Is My Castle
Protected sites. Safe havens. The center of our lives. Most activities and consumption will circle around our homes.
Our homes are the focus of our attention. Consequently, we will want to make them as nice as possible, driving a surge in home decor, furniture, kitchen, smart home installations and everything that contributes to well-being at home. It will start with small purchases first, slowly building growth for the expensive, more investive goods.
Apart from improving the home environment, all the activities we relocate to our home, will drive further consumption.
For months we will have learned how pleasant delivery is. Be it groceries or pizza. Be it toilet paper or a power drill. Stationary retail will permanently lose to delivery. Restaurants have started delivery. Yes, we will certainly eat out again, but combined with the new work mega trend food demand at home will remain a major topic.
What will we do with our time? Every pastime offering that can be consumed at home will thrive: For some it will be video streaming, books or gaming. Remember SecondLife, where we could play out our real/fantasy lives in a virtual reality 3D world? It has been declining for years. Now it is already trying to capitalize on the current developments and rolling out major ads. Numerous other online games that allow for social interaction and fun are out there and will likely grow. As we spend even more time in our virtual home, additional hardware for VR games will be purchased making the game experience even more immersive and thus attractive. A lot of money will be spent to prevent boredom.
Workouts will not be conducted in a gym anymore but at home in front of a screen, or outdoors in a garden or park, cycling or running. Think about all the equipment that will be necessary, the workout plans, the app-based personal trainers, the new type of sportswear. I have even heard talk of anti-germ face masks for sports — think fashionable hospital surgical masks. Protein drinks will be consumed at home, not in the gym.
And all this will be even more important to the health-conscious people. They will know they need more workouts to compensate for the lack of other physical activities.
Sports today is more than working out. Team sports like football, soccer, dancing and many more have come to a halt. In the near future we will see innovative virtual sports that can be played from home or in the park without touching or coming close to each other. This will not be e-sports from a desk but actual physical experiences.
Part of the home is also the garden. Not only is it less populated and more protected than public parks, it also serves as potential agricultural estate. Based on my conversations it seems urban farming will not become a major trend as long as it is so tedious. But having a garden that can be used if necessary would be an attractive proposition. Maintaining a garden will also mean more purchases of gardening equipment.
Consequently, the country side will become more attractive, changing real estate valuations in the long term.
Vacation types will change. Taking the family on a trip with a camper to secluded places will be the new luxury vacation for those who can afford it. Innovative vehicles like Hymer’s VisionVenutre concept car are showing us the direction. [15] Virtual reality hikes with Oculus Rift goggles [16] and apps like World Traveler VR [17] and Nature Trek VR [18] are already around today and will be mainstream in the near future.
What does this mean for travel? We will travel less, for pleasure and for business. If we travel we will tend to prefer individual transportation or smaller aircraft, vessels and trains. Some Airlines will die, transportation in general will suffer. Cars, bicycles, e-scooters will relatively thrive. Yet due to the reduced level of overall travel, the need for cars will still be lower than today — especially if we consider the advent of self-driving cars.
Mega Trend 3: New Work To Provide Income
During the crisis, we have confined ourselves to our homes beyond what we previously thought possible. Therefore, it has been proven pretty much every job that does not inherently need people to work at a specific location can be done from home — at least partially. For manufacturing businesses, restaurants, arts, education and others, this has been more challenging. For knowledge workers this has been relatively easy. Yet in total, expect a lot of jobs to remain remote.
Google, Microsoft and others have all made their videoconferencing systems available for free or at a reduced cost. WhatsApp indicated data traffic has increased sixfold. Europe’s central internet hub DE-CIX in Frankfurt has seen growth of 100% last week. [38] Netflix had to downgrade the bandwidth to ensure service for itself and other more crucial services. We are right now conducting the largest field experiment of remote work in history.
Ultimately, coronavirus will unleash a host of new solutions to tackle complex remote work situations leading to a permanently different work environment.
New business ideas will be created. Oblong Mezzanine — a virtual reality conferencing system made famous by the movie Minority Report — has given us a taste of what is possible. Holographic conferencing has been in research and development for years and is kind of ready for prime time.
A lot of meetings in the past have happened because we felt more comfortable doing them in person. Right now we are getting used to them happening remotely. And it works. The new normal way of doing things will even be more efficient as we will save the commutes.
In the more long term, robots will support in, then take over, more chores in manufacturing, agriculture, care etc.. Thereby we will see another shift to working from home. However, those hardware type technological developments will take a little longer.
Enough questions are still open: How will we seamlessly integrate processes despite poorly reliable communication? Imagine the equipment operators for a manufacturing facility sitting at home, while the factory is cranking out pans and pots or vehicles. Communication would need to be without significant latency. And it would be need to be free from manipulation and transmission errors. Quantum computing can solve this, but what do we do until then?
How will we ensure employees work? Our current models of monitoring and time-tracking will not work. Different incentive structures might be part of the answer.
“The opportunity to attend a virtual pub in the evening is crucial for our team members, especially the single ones and the ones that don’t interact with a lot with colleagues due to their type of work. In the long run, this will also help us keep our global teams better connected.” — Managing Director of a global agency group
How can we build a team culture and understand how our teams are feeling? Some companies are hosting working lunches on a video conference and virtual pubs in the evening centered around various topics. Will this be enough?
None of these questions are new, but now they will be answered — because they have to. And once they are answered, those answers are there to stay. In the course of this, many formerly skeptical bosses will see it works. Many employees will be tasting the benefits. They will not want to give them up.
In the new normal, expect everything that can be done on a computer will largely happen from home.
This will further fuel the demand for at-home office equipment and infrastructure, particularly high-speed internet — also in rural areas. It will also shift the market to different apartment configurations. It might even spawn neighborhood co-working cells, where people can come together in a calm working environment without commuting a lot. This will then also make location a lot less relevant in job search and further intensify competition for the top jobs.
The above notwithstanding, many workers will still work in factories, visit clients or work on construction sites. For them adequate ways of protection will also have to be found and will change their work routines. Everyone, who has ever visited a plant of one of the major oil companies can get a taste of safety policies.
The different options of protection and thus the feeling of being disadvantaged might widen the chasm between white and blue collar workers. A danger for our society.
Mega Trend 4: Building Social Ties In A Disconnected Environment
We are said to be social animals. How to be social in a disconnected world, where everybody stays in his or her own home? During the next months, we will learn to socialize remotely. Once learned, we will stick to the new behaviors to a large degree — even when the need is no longer imminent.
Social distancing is what we are experiencing right now: No meetings, no coffees with friends, nothing involving people beyond our co-habitants.
But we will want more and we are already finding solutions for it. Maybe soon there will be baby-phones for grown-ups. I would call that “co-presence”. Imagine leaving your phone line open with your best friends on the other end. I have already been invited to a video-conference with a bottle of wine. The host has even shipped wine to all participants. It feels eerie for now, but we will get used to it.
How will we maintain friendships and family bonds? A friend’s kid is spending an hour each Sunday on FaceTime with their grandparents instead of the “usual” visit. With all this video conferencing going on, expect to have teleconferencing equipment in your house at some point. Why not use the TV as screen and have a central camera in the living room that tracks speakers? I have something similar in my office. Now the need is at home. And once it will be installed, it will be there to stay.
How will we make new friends and meet new people? Tinder is said to be dead. Or will we need to find a way on how to get to know each other virtually? First date via videoconference? Had you asked me a few months ago, I would have laughed. But our grandparents would have laughed at WhatsApp and sexting, too.
Helping is also a form of socializing. Right now a stronger sense of community is developing. Volunteers in Berlin have developed a platform (Helfen.Berlin) where small businesses can sell vouchers to be cashed when they re-open. [19] One of our neighbors is offering free work-out sessions from his balcony. Some ideas will persist and be commercialized. Let’s see which.
Large events and gatherings will remain banned until a vaccine is invented or Corona has died out some other way. Numerous venues will face bankruptcy and will take time to re-boot. This will keep the push for innovative socializing solutions.
Mega Trend 5: New Art and Self Expression
Corona kills art. Policy decision are made roughly in the order of “health”, “economy”, “art”. Yet creativity is one of the inherent traits of humankind and therefore expected to prevail. However, the form how it is created, delivered and received will change.
You might remember the videos of people singing from balconies in Italy. The first night clubs, like the Atomino, are offering live stream acts, so people can party at home for free. While this is more or less a promotion to make sure the venue is not forgotten, this is also an experiment on finding ways to transport the spirit of a performance to a home theater.
In addition to the performing act, an event experience is crucially defined by the spirit of the crowd. But how can we transport that to a home theater? Remember virtual clapping from 90s sitcoms? Innovative feedback technologies could easily be deployed. They will stream live sound from your home to other people watching the same show. To me this sounds crazy, but let’s give it a try, see what works and move on from there. People want to be entertained and we will find ways to do it.
Without museums or galleries, how will artists exhibit? What ways to bridge the gap between the desire to express and the demand to consume or own art will we find? Museums and galleries will re-open at some point but maybe some other ideas have already reached maturity until then.
It appears this is one of the weaker trends, as art will take a backseat for the bigger part of society in the months to come. Many artists will feel the consequences and possibly engage in different fields of work. A lot of art will never see the light of day. It will be gone forever. What happens next might then be a fresh start.
Mega Trend 6: Demographic Reality Shift
The human tragedy, the likely death of millions of senior citizens is unprecedented. Viewed with some distance the change in our age pyramid will impact election results, pension systems and transfer huge amounts of wealth. Our new world will be younger and a lot of inherited money will be spent.
This is the hardest section to write. We are seeing incredible death tolls in many European countries. Equally unbelievable death counts are expected for the United States, Iran and other countries at this point. [40] The number grows exponentially. If the implemented measures do not yield results quickly, we will see millions of dead people. Even if they work a little, we are still talking about hundreds of thousands dead. Most of the fatalities will be above 70 years old, the generation of my parents and grand parents. The human tragedy is indescribable.
It takes a moment to let this sink in. Statistically speaking, the result will be demographic change. Based on what we have been seeing so far: [20, 21]
- 5.3 - 12.5% of infected people aged 70–79 will die.
- 9.3% - 20.2% of infected people above 80 years old will die.
That is based on the numbers provided by the respective disease control centers for South Korea, China and Italy. There is no reason to believe the fatalities (= rate of deaths within a 100 people) will be on different percentage levels moving forward. They will rather be within the same bounds: Higher if the health systems are overwhelmed, lower if we manage to treat all patients equally well.
If truly 60–70% of the population will get infected over time, as chancellor Angela Merkel suggested [22], we will see between approximately 700,000 and 1,800,000 people die in Germany (of a total population of 83 million). Most of them will be above 70. 4.2% - 11.1% of the population in this group will be gone.
See the maths for yourself. The conservative scenario assumes low fatalities on South Korean level. (Deaths in the group below 49 years old are considerably lower and not shown.)
The pessimistic scenario assumes high fatalities on Italian level.
In the U.S. worst case — assuming the national medical system gets crushed — up to around 11,000,000 deaths can be predicted, that is 25 times the number of people who died in World War Two. [24] The moderate estimate of U.S. Center for Disease Control and Prevention currently states 200,000 to 1.7 million lives will be lost during this pandemic. They are expecting a 50% - 65% infection rate for the U.S.. However, they are assuming a lower fatality. [25] At the same time the white house projects only 100,000 to 240,000 deaths in the U.S.. [26]
Looked upon with some distance, this will also mean a huge transfer of wealth to the next generation. For Germany it would be 90 – 230 billion EUR based on net wealth figures provided by the German Central Bank [27] and German Economic Institute [28]. Between 2.6% and 6.8% of the pre-corona GDP. Figures will likely be on a similar order of magnitude for other industrial countries.
Factually, this will also take some strain off of the pension systems.
After this collective shock people will want to compensate. Expect they will shop and spend a lot of the money they have inherited. [12] It is hard to estimate what the overall effect of fearful frugality and spending inheritances will be. It is likely at least the categories that are favored by the mega trends will see even stronger growth.
Finally, the demographic change will also impact election results. Senior citizens typically vote differently than youngsters. With less seniors at the polls, results will swing towards the younger votes. We might see a shift towards the left. [29]
There is a persistent myth long blackouts lead to more children. Potentially, this could be said for the corona lock-down as well, leading to a significant surge in birthrates and baby-related spending starting in 9 months. However, there is no evidence to the myth. It was disproven. [30] The contrary seems to be true. We are seing an increase in domestic violence. [31]
“Downloads for content around divorces, like webinars and papers, are at an all time high.” — IT manager at a leading legal publishing house
Lately, in China divorce rates have spiked after the corona lock-down has ended. [32] After all, it seems likely we will rather have fewer babies in the near future and thus consumers will have more money to spend on their own interests.
Hopefully, it won’t come as badly, but it is clear we have not been able to prevent this trend from starting. And we will have to do a lot better, not just a little better, to see significantly different results. (While this is not the subject of this article, I can only ask all readers to socially isolate and to take this SERIOUSLY.)
Mega Trend 7: Digital Acceleration
Digitalization will be the great facilitator to the challenges society is facing around Corona. This will lift the state of technology and digitalization to a new level. Once there, a host of new applications and businesses will enter the stage.
We can count ourselves lucky Corona strikes us in a digitalized world. When the Spanish pandemic hit 100 years ago, it was faster than the available means of communication. 17–50 million people died. [33] That’s like Berlin, Buenos Aires, London, New York, Paris and Shanghai all wiped of the face of the earth. [34] But because of our digital infrastructure we will be faster.
As many more services will go digital, digitalization — an exponential trend in many ways itself — will be one of the great winners of this crisis.
Virtually all home delivery is ordered online and we will find new ways to further include e-commerce into our daily lives. The Amazon dash button will look like a joke from a distant past, once Alexa can also see us. (Note: Alexa with camera is pure speculation.)
We already see a strong shift in media budgets from out-of-home (e.g., billboards) to digital channels like influencer marketing, Amazon Ads etc.. Brands understand they cannot make any business offline right now, and nobody sees their billboard ads. For many industries, online is the only chance.
Once the crisis is over, a lot of that money will stay there as e-commerce will have grown and become an even more natural part of live.
Numerous opportunities are out there right now. We see those players that invest now (they have started already) are winning solid market share in a growing market. Hesitant business are watching their offline markets shrink. For late followers winning back market share will be almost impossible.
“Right now our clients are in three categories: One third is in trouble, one third is doing okay and one third is growing incredibly. The latter is investing strongly, overcompensating the losses for us.” — Co-Founder and MD of a leading social media agency
As we can expect some pent up demand after the crisis, there will be a temporary increase in brick-and-mortar retail followed by a dip back to the new normal level. Brick-and-mortar will keep its role — especially for inspirational shopping. Will e-commerce business learn to provide an equally fun shopping experience or will they just be the efficiency winners?
I would bet, Corona will be the stepping stone for social commerce in Europe and the US. While WeChat in China has already realized its version of social commerce, we still wait for a true social commerce experience on Instagram, Pinterest and the like. By combining social experiences with shopping, social commerce will be the next big thing in consumer sales.
Everything that can be serviced out of a plug instead of a person coming into your home or office will have an advantage. Additionally, a Software as a Service (SaaS) application can run anywhere, at the office, at home, and — yes — at the beach. No matter if you are thinking, about industrial equipment monitoring, media production, enterprise resource planning (ERP) systems, all SaaS offerings will make a leap in market penetration.
Furthermore, everything that reduces physical touchpoints with other humans or material that was previously handled by others will grow stronger. This will yet be another impulse for the paperless office, paperless factory, paperless everything. We will get used to doors opening without us touching the handle. And we will learn many things we thought we had to touch, work without our physical interaction. Touch will mainly be limited to things we own.
Beyond that smart ways of automated disinfection will be implemented in public places and businesses. Also wait for cellphone disinfection to finally address one of the most strongly contaminated personal effects.
Where do you really need to go? Do you need to go to the doctors? Primary care is often non-invasive (no blood samples are being taken). It could easily be handled via videoconference, without you potentially infecting people you encounter en route or the doctor. And even blood and urine sampling and analysis could be done at home. Prototypes are available.
Speech therapy? Teleconference.
Our kids are being home-schooled these days. There is a lot of positive side-effects of going to a school and socializing with other kids. But maybe we will keep partly remote educating our kids. Especially for the older students this might offer access to previously untaught materials.
This trend is not new, it is just accelerating by an order of magnitude. In the past digital natives were already more accepting of technology than wide parts of the population. Numerous people, who had not grown up with digital technologies, could get by refusing and sticking to old habits. Now, coronavirus enforces a shift and pushes all generations to adapt the digital tech. In the future, we will see, whether tech providers have seized the opportunity to make tech acceptable and usable for everyone.
There are great opportunities. Disruption is already a threat to many incumbent companies and an opportunity for startups. Expect to see a lot more.
8. Emergent Mega Trend: New Global Trade
Global supply chains have taken a hit. Our global economy has many strong players and they will not give up, yield to the virus and stop selling across borders. But under the hood some things will work differently, opening up yet new opportunities.
We have seen factories had to shut down for weeks and thus material could not be delivered just-in time. Ports were shut down, or workers did not show up, so ships could not load.
“Our suppliers in Pakistan are in lock-down — as is the entire country. Once we have sold off our current stock, we cannot sell anything.” — COO of a direct to consumer fashion brand
Effects have been clearly visible for businesses and consumers. The above mentioned company also has a backup supply chain in another country. But what good is it if that country is in lock-down as well? These risks will be factored into new supply chains, likely making them shorter, adding more buffer stock and diversifying across even more geographic regions. Ultimately, this will increase the cost of products.
Cross border trade will not grow as strongly as before, as our mindsets are becoming more home focused. Free-trade initiatives will have a harder time yet again. Nonetheless, the overall welfare gains of international trade are too attractive to pass them up.
Some manufacturing will be repatriated, creating blue collar jobs in regions they have previously left. The primary concern here will be industries of critical importance, e.g., pharmaceuticals. Here we will not want other governments to have the possibility to interfere with the produced goods. But make no mistake, this effect will be minuscule.
Global corporations, governments and consultants, will rather work on ensuring supply chain resilience. They will create transparency, implement their emergency security protocols around the globe and track compliance.
9. Emergent Mega Trend: Government Power
We will need to find new forms of public decision making and interaction with the people. In a democracy even more than in an autocracy. Across the world, the crisis offers an opportunity for strong leaders to emerge. They will wield a lot of power and some of it will remain in their grasp, making our democracies a little less democratic.
How do our parliaments work if we cannot meet? Spacing legislators in a parliament building is only possible if limited numbers show up.
How can we build a legislative process, where votes can be cast reliably, even with legislators residing at home? We are painfully aware of the trouble with voting machines during recent US elections. In most parliaments this process is still pretty much analog and thus location-bound.
What if the head of state cannot join relevant meetings? Several of them are currently in quarantine or even sick. We will need to find manipulation proof video conferencing systems trusted by all parties. Otherwise a malicious party could manipulate the video feed of a head of state with an AI-based deepfake. Or they could later claim the video feed was manipulated to construe a vote.
Up to now most democratic bodies have been functioning well, even at a speed many of us would not have anticipated. In face of this unique outside enemy, even bipartisan agreements are suddenly becoming the norm. A lot of populist distractions suddenly don’t get airtime anymore. It will be interesting to see, how persistent this development will be.
The corona time has been calling for strong leaders not just in business but also in government. In many countries the executive branch of the government has already increased its power by passing emergency laws. Some of those have an expiration date. They have to be reviewed or expire altogether after a certain period. Others will remain in place even when the coronavirus is long gone. Governments and public bodies will play a more vital part after the crisis than before.
And the people will not only accept this, they will demand it — at least partially. The future will see an improved setup of government bodies to protect them from pandemics and other threats. This will mean physical emergency infrastructure, redundancies on many levels and clearer rules for emergencies.
The above also applies tonations or supranational bodies, like the EU or UN. There is no certain reason to believe they will fall apart although they are challenged and will emerge differently.
Furthermore, our society will change according to the above mega trends. This will invoke the need for a recalibration of governing and regulatory bodies.
Governments and administrations will soon see a leap in digitalization. While some countries have been slow to adapt in the past, citizens demand services to work even in lock-down times. We will want to be able to register vehicles, incorporate businesses, apply for a new ID or a construction permit. Doing so remotely, we can keep the country going even without going anyhwere ourselves.
What Should You Do? When?
All trends and statements about the future in this article are based on assumptions and educated estimations of experts in the appropriate fields. There cannot be any certainty looking into the future. Take it as the best, we could come up with today, knowing the future will certainly look different in many respects.
When you evaluate the applicably of the trends, please note, what I am summarizing and deducting in this article is biased toward developed countries, like those of the European Union or the United States of America. This is the society all the people I spoke to live in and have first-hand knowledge about.
McKinsey [2] has recently published a list of five horizons, business leaders need to think about these days:
- Resolving the immediate challenges posed by the coronavirus pandemic
- Being resilient by addressing near-term cash-management challenges and broader issues like shutdowns
- Creating a plan to return business to scale quickly once the fog lifts
- Reimagining the new normal — they call it the next normal — in light of the current discontinuous shift
- Understanding how the regulatory and competitive environment is shifting
This article has looked primarily at the 4th horizon. I want to invite you to start thinking how you can capitalize on the trends identified above. If you are an entrepreneur, you are probably already thinking about how to build the next big thing.
When considering the immediate measures, it is necessary to consider how you can get your company back from hibernation, how to ensure your business will remain in business in the long run, and how your business will be able to grow fast once the economy picks up. This will answer the question, how deep your hibernation will be, or if you will wake up as a different animal altogether.
Consider the simple case of three restaurants I know:
- Full Hibernation: One of them, usually extremely popular, is closed down completely and uses the time to renovate the interior.
- Partial Hibernation: One of them has shuffled tables around the dining room, so only one person can enter. They offer take out with a limited menu and limited staff.
- Transformation: The last one has ceased operating the location and offers chilled meal bundles. They serve home office workers for days with a single shipment. Their current plan is to keep this service going after corona.
So let’s derive a recommendation from the above trends for those business leaders already working on their post pandemic plan. This leads to facing a three-pronged dilemma.
If you are in one of the declining or dead industries: Leave now. Enough will stay. (Writing this is easy, doing it incredibly hard.)
If you are in one of the industries that are hit hard, but will likely resume at some point: Hibernate and innovate to build additional business on the new trends.
If you are aiming for one of the new trends: Be creative, others will be seeing similar opportunities.
So no matter, what you do, there is no guarantee. Your business might fail. Likely it will. But not considering corona and the changing environment is way more dangerous.
If you get government help, if you have cash on hand, don’t use it to extend the period your pre-corona business is faltering. But use it to build for the new normal.
If past crises can be an indicator, five key moves have differentiated companies that added substantial economic value when resetting [11]:
- M&A: They conducted deals of up to 30% of their market cap over 10 years.
- Reallocation: They reallocated 50% of their capital among their business units over 10 years.
- Capex: They were in the top 20% of capex spenders per unit of sales in their industry.
- Productivity: They increased their productivity to be in the top 30% of the industry.
- Differentiation: They managed to build and sustain a gross margin in the top 30% of the industry.
Look at examples of companies like Dyson or Trigema. Dyson, best known for vacuum cleaners, has developed a breathing ventilator and is now getting it into production. The first 10,000 have already been ordered. [36] Trigema, a German manufacturer of t-shirts and underwear, is manufacturing masks for daily use. The first 60,000 have been made and they are now making 100,000 every week. [37]
The nature of this pandemic is exponential. We have seen many exponential trends in the past. An entire university has been founded on the sentiment we need to better understand exponentially (Singularity University [35]). This could be a great starting point for you to learn about dealing with exponentiality in business.
All other technologies and trends, which were said to be exponential, were all but training for what we are experiencing now.
It is time to get started now. The stakes are huge. Watch for leading indicators of further change, e.g., corona case numbers. Develop your plan for adjusting your business to the new normal immediately, once your short term situation is under sufficient control. Build in short feedback loops so you can adjust. In an exponential world results come quickly and their order of magnitude increases within a short time.
Conclusion
In the above post, I have build on the assumption the coronavirus and the subsequent counter-measures around the world will impair our lives significantly for the next 12–18 months. This period will leave its mark and thereafter we will see a shift to a new normal.
This new new normal will be characterized by 9 mega trends:
- Personal protection: After being hit by disaster, we will want this to happen “never again” and therefore invest in protecting our health and our finances. Also we will invest in ensuring a reliable supply of basic goods.
- New Work To Provide Income: Remote work from home will become the norm for a large part of the population. This will spawn numerous new enabling technologies and business models as well as drive sales for home office equipment.
- My Home Is My Castle: With the home being the reinvigorated center of life, demand for all services and products to improve living and staying at home will surge: general delivery — especially food, home decor, furniture, home entertainment, home workout equipment etc.. We will also likely see a trend towards moving to the country side and suburbs.
- Building Social Ties In A Disconnected Environment: Social ties will remain crucial to our well being. They will be built and maintained remotely even more than today. In the last century we have seen the progression from letter writing to WhatsApp and Hangout. This century we will see the progression from WhatsApp and Hangout to something equally unexpected.
- New Art and Self Expression: Artists will be part of our new normal, but they will have to find new ways to create and deliver their works. Receiving and consuming art will be different. Probably more so for rock starts and clubs then for painters and museums.
- Demographic Reality Shift: Based on the maths and currently available figures, it can be expected up to 4.2% to 11.1% of the population above 70 years will die. This will change our hearts and society forever. Huge amounts of wealth will be transferred fueling consumption and thus future growth. But also election results will likely shift towards the left.
- Digital Acceleration: This trend is not new but it accelerates. A lot of the mitigation measures against corona are only possible thanks to digital technology. It is the back bone for most of the personal activities that are still allowed. This considerably drives adoption of the new technology. Once the entire population is used to it, they will demand it. Digital tech then will grow from a much stronger base.
- New Global Trade: Global trade will be substantially affected by the pandemic as supply chains are rebuilt to be more resilient and key industries (e.g., pharmaceuticals) are repatriated.
- Government Power: Governments are among the winners of the crisis. Strong leaders can prove their worth. They will seek power now and pass the laws to retain it. In some places this might be autocrats. In others this will apply to the executive branch in general.
For business leaders this is an extremely hard time. They not only have to deal with the current crisis but also reimagine their business for a susequently different economy. This new normal will be signficantly different than before.
All this happens under extremely high degrees of uncertainty in the face of exponential developments. Making correct precise predictions will be like winning the lottery. So as you develop your plan, stay flexible and build in short feedback loops.
Get your ship ready for the stormiest seas of your lifetime. I have lived through the dot-com burst with my own startup. In 2009 I was managing a software company that sold primarily to the automotive industry in Detroit. Now, I have just taken a big hit myself. But as always, there will be a time after this crisis. If you have similar experience, you know this. If you are a young entrepreneur, I hope this gives you some courage.
As soon as we can, let’s get ready for it. Let’s not only adapt but also be vigilant for the need to transform even further. The future is here to stay. Let’s shape it. #futureisheretostay #startrebuilding
Thank you for reading!
Thanks to all the people who spoke to me lately and shared their knowledge and insights. A special thanks to the peer reviewers, who have voluntarily put an incredible amount of time and effort into this.
If you are an expert in one of these fields as well, and would like to critique or endorse the article or some of its parts, please get in touch or leave a comment with your thoughts and suggestions. If your want to capitalize on any of the trends, feel free to reach out, I will connect you with others with similar ambitions!
Below are some of the published references that went into writing this post. In addition I have spoken to dozens of business decision makers.
[1] https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-the-dance-be9337092b56
[3] https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca
[4] Nassim Nicholas Taleb, The Black Swan
[5] Nassim Nicholas Taleb, Antifragile
[8] https://www.radiokoeln.de/artikel/corona-krise-koennte-wende-am-immobilienmarkt-bringen-545973.html
[9] https://www.faz.net/aktuell/wirtschaft/konjunktur/corona-krise-auch-eine-kranke-wirtschaft-schadet-der-gesundheit-16694569.html
https://www.faz.net/aktuell/wirtschaft/konjunktur/sondergutachten-corona-auswirkungen-auf-die-deutsche-wirtschaft-16703191.html
[10] https://www.nytimes.com/2020/03/21/business/economy/coronavirus-recession.html
[13] https://www.nytimes.com/2020/03/13/business/toilet-paper-shortage.html
[15] https://www.hymer.com/de/de/modelle/technologie-innovation/vision-venture
[17] https://store.steampowered.com/app/682110/World_Traveler_VR/
[18] https://store.steampowered.com/app/587580/Nature_Treks_VR/
[19] https://helfen-shop.berlin/home/
[20] https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business
[21] https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/
[22] https://www.cnbc.com/2020/03/11/angela-merkel-most-people-will-get-the-coronavirus.html
[23] https://service.destatis.de/bevoelkerungspyramide/#!a=20,70&g
[24] Figure based on the C.D.C maximum projection of 214 million infected [25] and a 5% fatality and https://www.washingtonpost.com/news/politics/wp/2017/08/14/heres-how-many-americans-have-already-died-to-defeat-the-nazis-and-the-confederacy/.
[25] https://www.nytimes.com/2020/03/13/us/coronavirus-deaths-estimate.html
[29] https://metro.co.uk/2019/12/17/election-results-reveal-massive-divide-old-young-voters-11920781/
[30] Udry, J.R. The effect of the Great Blackout of 1965 on births in New York City. Demography 7, 325–327 (1970). https://doi.org/10.2307/2060151
[31] https://www.theguardian.com/society/2020/mar/28/lockdowns-world-rise-domestic-violence
[32] https://www.nytimes.com/2020/03/27/world/coronavirus-lockdown-relationships.html
[33] https://en.wikipedia.org/wiki/Spanish_flu
[35] https://su.org
[36] https://edition.cnn.com/2020/03/26/tech/dyson-ventilators-coronavirus/index.html
Further Reading:
https://www.zukunft.business/foresight/trendstudien/trendstudie/download-trendanalyse-corona/
