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6th May 2020
The COVID-19 crisis has forced people to future-gaze more than usual. There has been a lot of analysis. Dozens of predictions have been made. Reams of advice is on offer. It is hard to know which predictions to believe or what advice to follow. It is hard to know what to do for the best under normal circumstances but these are not normal circumstances and we have rarely experienced such high levels of uncertainty. We still do not know precisely how many people have been infected, what the full range of symptoms is, why some people are more susceptible than others and when an effective treatment or vaccine will be available for the majority of the population. Businesses are having to make decisions without all the information: it feels like flying blind without a compass.
Different countries have responded differently. The USA and Brazil want to get people back to work as soon as possible whereas the UK and France want to avoid a second wave of the disease. Some sectors, such as household goods, pharmaceuticals, and logistics are doing comparatively well while others such as travel, hospitality, and retail are faring badly. This time won’t last forever – there will be an ‘after’. We’re starting to see some meta-themes emerge.
At Innovia we have been considering a range of scenarios for how different societies might navigate this crisis. Some will try to be more self-reliant (‘my country first’) and others will seek collaboration (‘this is a global challenge needing a global solution’). Some will want to get back as much as possible to the old world with the aim of returning to an oil-based economy, re-emphasising liberal democracy, and minimising state intervention (or retaining state power where it suits them). Some will see this as an opportunity to create a new deal, with more emphasis on society and use it to build a new and different future.
A global recession is almost inevitable. A recent Reuters poll of 50 economists in April 2020 revealed little consensus: the expected contraction of the economy ranged from +0.7% to -6.0%. None could agree whether there would be a V, U, W or L-shaped recovery. Whichever prediction turns out to be true, there seems little doubt that the global economy will take a severe hit. It is within this context that businesses need to make their decisions.
Our analysis has revealed three major themes that businesses will have to address.
1. The virtual vs. physical world
2. Survival of the fittest… and most flexible
3. A new quality of life
1. The virtual vs physical world
The necessary move to working and living remotely, forced on us due to social-distancing strategies, is causing people to spend more of their time online. Some of this behaviour will stick and some will not (this will be the subject of a future blog though we touched on it in an earlier piece ‘Will COVID-19 lead to lasting change?’
However, this change to our daily lives has highlighted the urgent need for reliable digital tools in multiple areas. We need effective digital tools for working remotely, communicating remotely with customers, for researching remotely and for managing many other parts of the business such as design, R&D, and the supply chain. Some online services, such as telemedicine and edutech, have seen dramatically accelerated uptake and this may continue into the future. Being in lockdown has increased the demand for more diverse and better-quality streamed entertainment and consumers are likely to expect this to continue.
The crisis has accelerated trends that we were already observing. Purchases made online will have a major impact on an already declining high street. Concerns about data privacy and personal safety online will be more critical as we use online services more. People are already expressing concerns about apps for collecting data for tracing and tracking. Regulation will need to keep up. This suggests that any company that is not using this period to re-think and refine its digital strategy will miss out.
2. Survival of the fittest…and most flexible
As we have already commented, some companies may do well out of this situation, but not everyone will be a winner. Some well-known but marginal firms may disappear and some small but hitherto unknowns will emerge. Some firms will emerge in even better shape.
Those that survive will not only be fit but also flexible in their response to changing consumer demand. We have already seen that consumers are currently focusing on food, shelter, and belonging – the bottom tier of Maslow’s hierarchy of needs. This may explain the current increase in baking, comfort foods, and improving our homes and gardens. It is not just that people are bored and have nothing to do; it is also the case that in anxious times people turn to the familiar and reassuring. Companies that can tap into this zeitgeist will do well for the foreseeable future.
The opposite side of this need for the familiar is the lack of interest in luxury items. This includes jewellery, cosmetics, and high-end fashion. At present consumers feel insecure about their jobs and are worried about their finances. They are avoiding expenditure on non-essential items or items that signal identity or status. To do so would be considered ‘tone deaf’. In any case you can’t impress anyone with new clothes, make-up, or accessories in lockdown!
We are also seeing a renewed emphasis on shopping locally. Consumers are more prepared to use small local businesses and buy local products because they worry about the health implications of visiting crowded places. Businesses are seeing disruption to lengthy supply chains and may be considering how to shorten them.
The crisis may encourage new ways of thinking about collaboration: we see the use of decentralised technologies and a greater need for connection and cohesion to overcome the difficulties of ongoing remote working. All this suggests that innovation has never been more important. We expect to see an increase in lean innovation and creative improvisation.
3. A new quality of life
The quote ‘never let a good crisis go to waste’ has been attributed to several politicians including Winston Churchill. Although the COVID-19 crisis has caused a lot of suffering to a lot of people, there is the potential for long-term positive outcomes. Here are some of the big questions.
This increased focus on sustainability, collaboration, and quality of life could benefit brands that have a purpose and a reputation for trust and integrity. They may emerge from the crisis with a renewed focus that is good for consumers, the planet, and their shareholders. These three meta-themes are likely to be of relevance to many businesses because they offer many opportunities for growth. It would be a pity to let a good crisis go to waste.