Ready for a Post-Covid-19 World?
Then Start Thinking About Change
Understanding the impacts of environmental change is crucial for businesses to survive—and to thrive.
The Covid-19 crisis is a stark reminder of the profound impact environmental change can have on business. The havoc the pandemic is wreaking on societies, economies, and businesses around the globe will take years to repair. However, all environmental changes, including those as devastating as the Covid-19 pandemic, also create new business opportunities.
In fact, one study found that more than half of the companies on the Fortune 500 list were founded during an economic downturn. Many of today’s unicorns including Airbnb, Slack, and Uber, are children of the Global Financial Crisis of 2008.
Environmental changes throw the economy out of balance. This imbalance creates new demand and releases resources from their previous use.
This is true not just for pandemics but also for technological advances as well as regulatory, demographic, socio-cultural, macroeconomic, political, and natural-environmental changes. And often these changes are interlinked. The policy response to the Covid-19 crisis creates as much new opportunity as the pandemic itself.
Understanding which changes are happening, how they affect businesses, and what to do about them is crucial for businesses not only to survive changes but also to turn them into benefits. Most businesses implement workarounds in the current crisis, aiming to return their normal operations afterward. Some, however, recognize and act on the opportunities the change brings.
Benefitting from change
Examples of firms that emerged or benefitted from change are abundant throughout history. The temperance movement of the early 1900s led not only to the demise of breweries and distilleries but also to a soft drink boom.
Coca Cola, Dr. Pepper, Pepsi-Cola, and Moxie realized the opportunity presented and emerged as clear beneficiaries of social pressure and eventually legal dictum against alcohol. They realized that people needed alternative drinks for socializing, as meal supplements, or items of relaxation and reward. They realized demand patterns would change. They also anticipated that premises, machinery, and human-relevant knowledge and skills would become available at bargain rates as breweries and distilleries shut down.
History repeats itself. When the Covid-19 made facemasks a hot commodity, businesses including Vogmask, Airpop, and Respro offering premium facemasks for everyday use saw a huge spike in demand without much need for strategic action.
However, passively cashing in on the windfall does not reap the full potential of change. Many facemask companies quickly sold out and could not benefit further from the increased demand when their supply chains shut down. By contrast, Respilon, another provider of premium facemasks, found ways to continue manufacturing and put new face masks in its online shop on a daily basis. And it continued to sell out in a matter of seconds every single day.
How to prepare your business
1. Anticipating change
To leverage change and not get run over by it, you first need to anticipate it. While the Covid-19 pandemic has already led to some obvious changes in terms of how societies and economies work, its full effect has not yet unfolded. Additional technological, regulatory, socio-cultural, macroeconomic, or political, changes are likely to follow that create opportunities, too.
For example, after Russia annexed the Crimea in 2014, western countries-imposed sanctions and Russia retaliated by imposing import bans on products from western countries. These political changes prevented Russians from consuming many western products including cheese, which created a vacuum that savvy Russian entrepreneurs were keen to fill. Today, Russia has a flourishing cheese industry where none existed before. Similar developments can likely be observed as a result of the Covid-19 crisis in sectors such as tourism and education that depend on open borders.
Not all change is created equal and offers the same opportunities. When having identified change, it is thus important to understand its characteristics.
First, the scope of environmental change determines its business potential. Scope affects temporal, sectoral, geographic, or socio-demographic reach.
For example, local natural disasters such as the Australian bushfires, or industry- or country-specific regulations such as the Sarbanes–Oxley Act, affect only a limited number of regions and industry sectors. By contrast, technological advances like artificial intelligence and pandemics like the one currently caused by the Covid-19 affect most industry sectors globally. Figure 1 illustrates scope differences of some well-known changes.
Second, environmental changes can have different onsets. To benefit from a change, you need to understand how fast you need to act and for how long your window of opportunity stays open.
For example, population aging is predictable whereas the recent US-China trade war unfolded in a rather sudden and unpredictable manner. Moreover, megatrends like the move toward sustainability develop gradually whereas natural disasters and virus outbreaks happen suddenly. What type of change can you handle and potentially benefit from?
Think of the Covid-19 crisis, which first simmered slowly to then rather suddenly spread across the globe. Some businesses saw the early indicators and accordingly adjusted inventories and prepared for remote work. Others ignored the warning signs and ultimately got surprised by it. Even when change is predictable, its development may still be sudden and require swift actions.
With few exceptions, governments and businesses were ill-prepared for the Covid-19 pandemic, even if experts had warned years ago that a lethal pandemic was likely to happen. Figure 2 illustrates the onset differences of some well-known changes.
Third, the potential of environmental change differs in detectability and actionability. Some effects of changes are obvious and can be exploited by almost anyone, whereas others require specialized knowledge or extraordinary creativity. For example, many can easily provide support services such as food deliveries during the Covid-19 crisis, but very few can exploit the potential of new gene sequencing technologies that might help to predict who is at risk to get infected.
Changes that require scarce skills and resources for their detection and/or exploitation usually provide more potential to the few who can act on them. The rise and fall of the vast number of bike-sharing start-ups illustrates a case where the only barrier for exploitation seemed to be access to sufficient amounts of funding.
Where is your business’ change-exploiting edge?
2. Understanding how change can work for you
Each change provides opportunities through specific mechanisms. To benefit from change, you need to understand what these mechanisms are. Table 1 lists mechanisms pertaining to demand, supply, and value capture. Importantly, some mechanisms require lateral thinking and thought experiments. That scuba diving masks can be used as substitutes during a shortage of medical ventilators is obvious to most only after others have pointed it out.
3. Acting on change
Lastly, once you have identified what changes are already happening or
going to happen and how they unfold, it is important to understand how exactly you can act on them. This requires you to evaluate whether change will allow you to shape your market offering, your organization, or the processes you engage in.
First, change might allow you to adapt your existing products or services or to introduce entirely new ones. SenseTime, a provider of building access control technology, realized that the Covid-19 crisis expanded the demand for spotting people with elevated body temperature. Accordingly, they combined thermal imaging sensors with their existing face recognition cameras to cater to these demands. When considering opportunities of change for your products/services, consider how your existing customers’ needs change, which new needs you could serve for new customers, and how.
Second, change might allow you to adjust your organization. For example, the Covid-19 crisis has triggered an unprecedented shift of businesses toward remote work literally overnight. While some businesses will get back to business as usual once the crisis is over, others will see it as an opportunity to strategically reshape their legacy cultures, institutions, and asset bases.
For example, Ctrip, an online travel booking portal, already experimented with remote work before the crisis. They realized that their call center employees were 13% more productive when working from home. When considering the opportunities of change for your organization, think about which behavioral and structural changes are possible and desirable; which of your current assets, resources, and competencies can be changed and how; and which new assets, resources, and competencies become available.
Third, change might allow you to modify existing processes or introduce
new ones. For example, HTC Sweden, a flooring systems company, cut the number of physical prototypes from five to one with digital prototyping. Considering that you and your team might have spare time due to the current lack of economic activity, it might be a good time to leverage technological advances and to make your processes more efficient. Digital prototyping enables you to continue prototyping despite the current constraints, and the same may apply to other technologies enhancing other processes.
Think about which of your processes can be modified, replaced, or eliminated, and which new processes you could introduce to benefit from change.
This article was co-authored by Frederik von Briel (UQ Business School), Per Davidsson (QUT Business School / Australian Centre for Entrepreneurship Research), and Jan Recker (University of Cologne). It is based on our academic work on external enablers of entrepreneurship https://doi.org/10.5465/amp.2017.0163