In 2008/2009 we lived through the Great Recession.
One way to frame the impact of the Covid-19 tragedy is to think about it as the start of the Great Re-invention.
Of Business, Of Government, Of Society.
And of our ourselves.
The Impact of this crisis will be greater than the ones we have lived through including the dot.com bust, 9/11. SARS/MERS and the Great Recession, because it is a health, economic and social crisis happening to everybody in the world, at the same time, for an extended period ( 8 to 12 weeks or more).
Peoples habits change if they repeat or stop a behavior for 60 or more days.
People’s mindsets change when they go through a severe shock.
Peoples relationships change when they get the opportunity to see, feel and think in new ways.
All this is happening to all of us.
Predicting has always been a risky business and all futurists need to be humble since tomorrow will prove them often wrong. This is particularly true today given the unprecedented circumstances. In order to ground my observations I am beginning with what I believe is a key to understand and frame the way forward.
We need to 1) address fragility, 2) sculpt resilience and 3) resurrect now
The first thing we all need to do is to address the reality of Fragility.
Human Fragility: If there was ever a doubt about the frailty of our bodies and minds and the reality that we all are carbon-based feeling filled creatures with limited life spans and parts that go wrong, Covid-19 has brought us clarity. Never have so many people been so anxious, fearful and uncertain for their futures. Even the well to do who are working from home with financial reserves are stressed. As I remind people we are not working from home. We are working under duress in homes filled with children who should be at school, worried about parents and loved ones and our jobs, while being scared out of our wits via our television and social feeds and dealing with toilet paper shortages and the grocery trip as a hazardous life risking endeavor!
Economic Fragility: Tens of millions of businesses and hundreds of millions of people all over the world have less than two or three weeks of reserves after a decade of a booming economy. Huge corporations including airlines spent all their reserves buying back their stock and would go out of business without government help. The CEO’s who believed in free enterprise and told government to back off are going hat in hand and pleading for help.
Social Fragility: In the US about 16% of the population are immigrants but over 25% of the people who are working on the front lines whether it be delivery, warehouses, drivers or nurses are immigrants. Across the US African Americans are dying at over 2X rate to the general population. The harsh downturn is impacting labor particularly gig workers, poor people and young people. The walls we put up thinking that we could live compartmentalized lives are eroding as it is becoming clear that we are all connected.
Focus on Society, Safety and Security.
As businesses and a society, we need to think, see and feel differently to ensure that we work to re-invent our world in the light of the learnings of our fragility. This is likely to mean that successful businesses and leaders will acknowledge the following in all their behaviors, product development and messaging: Society, Safety and Security:
Society: We live in a society where we are all connected as people. We have to ensure we are optimizing for society and not just for consumers or businesses.
America is different from Europe with a rugged individualistic streak that is part of the national character but today when we see CEO’s who were capitalistic in boom times turn socialist when they run into trouble ( or as Professor Scott Galloway says they want to individualize the gains in good times for themselves but socialize the losses for everybody when things go wrong) or politicians who claimed had no money to address infrastructure or social issues but now have unlimited money will give people pause on nonsensical ideologies.
The shock of Covid-19 has revealed the fault lines of inequality (African American compared to general population, rich versus poor, urban versus suburban, baby boomer versus millennial) . These must be bridged through new legislation, better listening and enhanced leadership (one more empathetic, diverse and trustworthy) rather than rants and rages inflamed across polarized and algorithmic media which often colonize minds and rot the soul.
The days of making fun of government or causes that focus on common good are likely to pass. I anticipate a newfound appreciation of blue-collar workers and people on the front lines and would not be surprised to see increased unionization particularly among gig and warehouse workers.
Safety: This crisis has shown the most important asset is our health. It has placed a new spotlight on the importance of safety and the people who keep us safe.
Funding for some form of Universal Healthcare will become essential and new found appreciation for medical staff, first responders will remain long lasting. Too many people are too vulnerable and there will be a hunger to keep oneself and one’s family safe.
And Climate Change will be taken seriously for the first time by many deniers.
For a few months and maybe longer messaging will need to emphasize safety. Why is this conference safe? Why is this theater safe? How does our company keep you safe?
Security: A joint survey by the Financial Times and the Peter G Petersen Foundation released this morning indicated “how widespread the pandemic’s economic impact has become, with almost as many families making more than $100,000 a year reported a hit to their income (71 per cent), as those making less than $50,000 (74 per cent). Similarly, 53 per cent of those making less than $50,000 said they would lose their pay if illness forced them to stop work, while 47 per cent of those making more than $100,000 were in the same boat.”
People all over the world at all income groups will feel far more financially insecure after Covid-19 than before it. The Millennials burdened with student debt and facing a constrained market for employment will feel particularly vulnerable and older retirees are facing lower retirement balances, zero to negative interest rates on savings and the possibility of higher inflation as 6 trillion dollars in the US flows through the system.
As businesses restart, they will have limited to no pricing power since their customers will watch their spending and will be needed to be incentivized to re-start behaviors they may have given up.
A key to driving the Great Re-invention will be to focus on society and how you are serving society while helping peoples (customers, employees, stakeholders) need for the safety of their and their families health and the need for financial security.
2. Sculpt Resilience.
In order to address the fragility that has been revealed and underscored in recent weeks, society, business and each of us will need to sculpt ourselves into more resilient forms.
A health crisis where every single person is at risk, with impoverished people at much greater risk, combined with an economic crisis that will leave over a quarter of the US population unemployed is going to change the mindset of the United States in three ways.
1.Government matters. Governance matters: As he set off what would be four decades of deregulation, former President Ronald Reagan said to great laughter:
“The most terrifying words in the English language are I’m from the government and I’m here to help. “
Who is laughing now?
During this crisis we have seen the need for Government and importantly the difference in good versus bad governance at national, state and local levels.
Government matters. Governance matters.
It is a life and death thing.
2.Expanded Healthcare: Regardless of who gets elected in 2020 we can expect to see significant expansion of health care benefits particularly to blue collar service and gig workers.
We are likely to finally understand that in a world that will require more mobility and flexibility we have to decouple affordable and comprehensive health care from being employed. This is good for business and good for society.
3. Optimizing for society not just consumer and business: Over the past few decades whether it be the government or judicial system there has been a tendency to favor decisions which benefit consumers or business.
Consumer and business will remain key drivers of economic growth, but we will now see the importance of society stakeholders like community, environment and employees.
Make America Well Again may replace Make America Great Again.
Many businesses particularly smaller ones may never recover from the shock of having to shut down for two to three months. Even, large established firms are going hat in hand for bailouts or imposing a combination of pay cuts, furloughs and mass layoff of employees to cut costs and drawing down every credit line they can to buy liquidity and time.
After going through such a near death and chastening experience business will re-invent the way they work in order to build in resilience in the following ways:
1.Re-architect to a smaller and/or different footprint: Bob Iger of Disney believes it will be very different in the future including have many fewer employees.
Companies will not bring back all the full-time employees they have furloughed even if they can afford it because they will want to create a financial buffer for the future. The University of Chicago estimates that up to 42 percent of those furloughed will not return.
Anticipate a greater use of contract versus full time employees to allow one to flex staffing to changing circumstances.
Companies will also radically re-think all their real-estate needs and slash their travel budgets recognizing that not only many meetings can be done remotely but most business travel is not an efficient use of time.
Most importantly, companies will re-think their business models or be forced to do so because this great pause will lead to a great acceleration of change with any nay-sayers either seeing the light or the first to be let go.
2. Re-think supply chains: For the past decade off shoring and just in time supply chains have driven great speed and financial returns. The recent crisis has shown that the most efficient chain is the not the most resilient one and companies will now balance efficiency with resilience. They will carry more inventory and ensure multiple supply chains.
Wendy’s cannot afford to ask “Where is the Beef” or our supply of N-95 masks dependent on a moody China.
3. Hybrid versus Pure breed: There is really “no digital “only or direct to consumer only. Majority of businesses will be a mix of analog and digital, direct to consumer and retail channel firms, full time and contractor businesses. For resilience you need optionality. To thrive one needs diversity of models.
Restaurants will be dining in, drive through, pick up and delivery. Conferences will be real and virtual. Being mono-maniacal will simply be being a maniac.
4.Strong Balance Sheets will be cool again: With major well-run Unicorns like Airbnb forced to borrow money at double digit rates of interest while eliminating nearly a quarter of their work force signal implies that lesser Unicorns dreams will pop.
We will speak of “Pop”corns and not just Unicorns. The Soft Bank Vision fund will be revealed to be the Soft Bank Delusion Fund.
5. A New Set of Companies and Wealth Creation Opportunities will arise: In the debris of the Great Recession companies like Airbnb and Uber were forged as was Square, and technologies such as Blockchain and much more. One will see new companies being founded that are built using the current technologies and changed expectations of people.
Whenever there is a mindset shift as there is now and new technologies ( 5g, Machine Learning, Cloud and Voice) there are new industries and opportunities.
Over a four-decade career I have seen a lot of changes and adapted to a lot of changes. Some of my distilled advice as 10 Career Lessons remains my most popular blog post and remains even more relevant today.
Like never before I believe every individual must recognize that a part of the Great Re-invention it is imperative to spend time rethinking their own careers. Let’s utilize this down time to begin to up skill in ways that will allow for resilience in times where there will be fewer and different full-time jobs.
1.Upgrade Your Mental Operating System: Spend at least a few hours a day learning new skills when you have the time and there is a world of free resources and training like this. And when the world returns never stop learning. Whatever you are good at will likely erode in market value unless you replenish yourself.
One of the keys is to also ensure that you become “virtual certified” and can work in a world of distributed work forces. We will get back to offices but less than before both in numbers and the time we spend there. Here is how to ensure that you are seen as capable, trustworthy, empathetic, vulnerable and inspiring will be so key to your career.
2. Build a Brand: In a world where full time jobs are going to be fewer at least for a while you need to make sure that you have developed networks and a brand so that you retain optionality.
A recession is not just a time where smart brands who continue to market gain market share, but it is where you can stand out. This is not the time to go into hiding or expect that when you return things will be the same.
3. Face the reality that you are likely to have little pricing power and may need to cut your own costs: When the economy opens up most businesses will find limited demand from customers combined with millions of people looking for work. This will be true at least for a year or two if not more. Those temporary pay cuts may not be temporary and the big bonuses of the past may remain memories as companies husband resources and face cost conscious customers.
You must find ways to cut your cost base wherever you can so that may build your reserves. This will also allow you to afford your next career which may have you start at lower level in growth industry, join one of the new next-generation startups which will pay you a lower base but lots of options or finally follow the career you wanted but did not do because it did not pay big bucks.
No longer should you price yourself out of your dreams because of your cost structure. Could it be that you should be doing something else? Could Plan B or “one day I will” be really Plan A?
4. Change sucks but irrelevance is worse: While today is traumatic in both human and financial and career loss and the path forward will be uncertain and sometimes difficult, we are likely to come out as a better people and society.
Every day you see this with the way people are stepping up and helping their neighbors and finding new ways and approaches to cope.
Humans adapt. Humans invent.
Humans are resilient.
And you are human.
3. Resurrect Now!
As firms re-emerge from the shutdown and begin to return to what Bill Gates calls semi-normal and I believe will be a New Strange world (google images of workplaces, malls and schools in South Korea to get a glimpse of our future) , it will not be business as usual, since people, industry and society will all be different.
In an era of constrained growth, companies and individuals will all be addressing fragility, by looking for safety and security. They will be working to sculpt resilience by re-thinking their size and scale, incorporating optionality into the way they design their work force and supply chains, while also strengthening their balance sheets.
As I work with a range of companies and their senior management, I am helping guide their transition from managing the shock of the shut down to the new landscape they will find themselves operating in.
It is absolutely critical that business use the next four to six weeks as they await the shutdown to end to get ready by asking themselves three questions:
1.What will my Customer/Consumer be like: How will the behavior and expectations of my customer/consumer be different? What will they be doing more and doing less?
For every industry and product category it will different, but I would expect that most firms should begin with an expectation that a)their customers will be more value driven due to reduced purchasing power combined with a need to enhance their future financial security and b) they will be ultra-sensitive about health and safety
For these financial and health reasons people are likely to move to a semi-quarantined state for at least six months to a year, as they travel less, go out less and work more from home.
2. How can I get my company to learn from and accept the new reality?
Leaders face and adapt to reality versus living in a world of magical thinking.
Every business has been shocked, and this has revealed internal fault lines and hopefully also some strengths which exposed a number of new threats and possibly opportunities.
Major new realities will include:
a) Accelerated digitization of business and expansion of remote everything: Covid-19 has transformed more businesses than any strategist, chief digital or chief transformation officer. Every old school resistor has been zoomed into the future.
b) Growth Reversal: Many growth industries (hospitality and travel) will experience depression economics as tens of thousands of restaurants close, airlines grow smaller, hotel room become dorm rooms.
c) Schizophrenia of Size: We will find “smaller is beautiful” as industries like puffed up and bloated universities get reality punched in their theoretical faces. Many will be forced to stop being pseudo sport franchises, building developers and luxury brands with unlimited pricing power to get back to focus on teaching and research.
There will be widespread amputation of company appendages as a combination of strategic focus and financial flexibility result in harsh surgical action and sale/burial of body parts.
On the other hand “Bigger is wonderful” will also emerge, as the large well capitalized businesses such as Amazon, Walmart and Costco in retail, Google, Facebook, Microsoft and Adobe will grow even bigger buying the sawed off parts up for sale or entering new arenas as they smell blood in the water. They will use their scale and reputation to deliver the value pricing and safety signaling people are looking for.
Very few businesses will be spared in the eddies and crashing waves ahead and over the next month you and your team in order to stay afloat and navigate the seas need to do a two-part audit:
a. Shock/Resilience: This is a look inside the business.
What broke or almost failed and what can we do about it. As importantly what worked and why?
b Threat/Opportunity: This is a look outside the business.
Given that consumers and customers are going to be different what parts of our business is threatened and could there are new opportunities and unmet needs we can work on?
When doing these exercises please be real. Call out the turd on the table.
3. How can we leverage fresh sheet thinking: How would we re-start if we had a fresh sheet of paper?
So now that your team has envisioned the future consumer/customer and looked inside and outside of the business to do an audit of shock, resilience, opportunity and threats, what are you going to do?
The biggest mistake individuals or businesses can make is continuing with the status quo.
Every time there is a significant economic shock like the Great Recession, new business is born in the bonfire of the old structures. Remember that Dollar Shave Club, Uber, Airbnb and many more were born in midst of and right after 2007-2009 period.
The reason I call this era The Great Re-invention is that we have a health, financial and society crisis occurring at the same time all over the world. People are being forced to start or stop doing things for 60 to 90 days. As a result, new behaviors will start, and old behaviors may no longer return.
Imagine and invent without limitations except these three reality checks. 1. Whatever you do has to be legal. 2. Whatever you do has to be scientifically and technically possible today and 3. Whatever you do has to break even within three years.
I would then imagine your re-invention keeping in mind:
a. You are not behind your competitor but your customer. Too many companies focus on benchmarking against their competitors but beating other pathetic people does not leave you any less pathetic. When customer/consumer behavior changes this focus on what competitors do is all wrong.
b. Your competitors have changed: Either because new categories have been created or a new type of competitor has arrived. Just as when the auto companies were ogling each other Tesla, Uber and AI re-wrote the rules of the category or as Gillette and Schick were out blading and out price increasing each other, new competitors such as Dollar Shave Club and Harrys emerged.
c. Your talent needs to be incentivized, trained and aligned differently: There are only two ways to transform your company. Upgrade the people or get better/new people.
If you want your people to behave differently in this new world you will have to incentivize them differently. While people like to be informed via your press release, videos or mantras on transformation, they are most eager to understand what it means to them. Go check out Fishbowl and Glassdoor to get a look at what is on their mind and sometimes get a kick in the gut.
Put your best people against tomorrows opportunities versus todays biggest businesses.
Incentivize behavior and not just outcomes.
Invest in training. Skills are learned and not immaculately born.
Look in the mirror dear leader. We might be part of the problem.
d. The Future Does Not Fit in the Containers of the past:
Why are you organized the way you are if you are re-thinking your category, your competitors and your talent?
If you started today would you have all the people and parts that make your company. Competitors who are starting today do not have these legacy structures weighing them down.
There is a dawning of a new era.
Many opportunities and positive changes will occur after the period of shock. Use this time to get revitalized and re-invent.
Rishad Tobaccowala ( @rishad ) is the author of the bestselling “Restoring the Soul of Business: Staying Human in the Age of Data” published by HarperCollins globally in January 2020. It has been described as an “operating manual” for managing people, teams and careers in the age we live in. Rishad is a sought-after speaker and advisor who helps people think, feels and see differently about how to grow their companies, their teams and themselves. More at https://rishadtobaccowala.com/