“To-does” in the “new normal”

#7 of 7 articles about impacts of Covid-19 on supply chain innovation

The urgent to-do for leaders is to leverage the current crisis as a catalyst for innovation, digitization, and change – in business, government, and global governance.

The most important to-do for operators is to learn from the crisis to adjust the way we work and accelerate digitization.

Different stakeholders have different to-does.

The new normal has arrived. It is now. It has three vectors: virus, volatility, and uncertainty. The three may stay with us for some time. We are well advised to factor these three vectors into everything we do and decide today. Overall, Covid-19 has fast-forwarded the digital transformation of the economy and society. The pandemic has changed conditions. The shocks that came with it brought an unfreeze of paradigms, principles, and practices. The perfect ground for change. “Now is the time for a ‘great reset’,” says Klaus Schwab, founder and executive chairman of the World Economic Forum. This great reset, this necessary ambition to generate positive change needs innovation. It needs talent, startups and scaleups, innovative large businesses and local and global frameworks that facilitate and foster the right innovation. Innovation that brings benefits to us and future generations without harming the nature we need to live.

One outcome of the major global experiment forced on us by Covid-19 is the proof-of-value for the digital transformation and innovation. This frees up management capacity. Leaders do not need to make the case for digitization anymore. 

In April 2020, one in three shoppers in the United Kingdom (UK) aged 56 and above ordered the last groceries online for the first time. Marketing consultancy Rare: Group surveyed  over-55s in the UK: 38% say they prefer to buy their clothes and 43% their exercise equipment online in future. People are working from home, experiencing the value of digital tools and services firsthand. Teams, Zoom and previously implemented collaboration platforms allow them to distribute, manage, and perform tasks across organizations and supply chains. Factories are experiencing an uptake of computer vision technology to adjust labor-intensive processes and robots to replace labor altogether. 

Innovation is needed to bring the digitization of traditional businesses, products, and services as well as the creation of alternative business models to the next level. This requires stakeholders to act. Different stakeholders have different to-does. Three of the most important stakeholders are business, government, and international organizations. What are their major to-does in the new normal?

The business to-does

While the best operators focus on the core businesses, leaders and innovators are watching the periphery. The core needs to produce profits to keep things going but also to finance the future. At the periphery emerges the future, with or without us. At the periphery inventors and startups encroach our spheres. It is the place where tech giants are coming after us. It is there, where the next core is created. It is at the periphery where the brightest brains bring to life our “next normal’ through intrapreneurship, research and development, inventing, corporate venturing, and mergers and acquisitions (M&A). It is this vital activity at the periphery that leaders are required to initiate, support, and protect against the internal conservative forces and hunters for funds.

The core businesses itself can benefit from a thorough analysis. Now is the time to have a close look at the “within”. What worked and what did not? This is the basis from which improvement and advantage can be derived. How do we compare to our peers, or to the best players in other industries? What can we learn from the worst decisions taken? It is during the times of crisis, when we can learn the most about ourselves and what is around us. Through in-depth self-analysis supplemented by benchmarking against the best.

Leaders will innovate and invest. Venture capitalists and private equity funds know that the best deals can be made in a downturn. “I am bullish on M&A activity in both the medium and long term once the market adjusts to the ‘new normal’. There is a tremendous amount of dry powder that needs to be deployed, record high valuations will likely decrease,” states Paul Aversano, Managing Director at Alvarez & Marsal Global Transaction Advisory Group. “During and post this crisis, PE firms will be presented with unique opportunities to invest—important to be ready to act,” reads a Bain & Company presentation that was sent around to their clients. Companies that act now can find valuable assets, talent, businesses, and ventures.

Particularly in today’s time of turmoil one can lose significant ground. Covid-19 separates the winners from losers. Watching the periphery is searching for the “new”. For technologies and solutions that can either help to improve the core business or build a digital competitor to disrupt ourselves before others will do it.

Government to-does

Henry Farrell and Abraham Newman write in Foreign Affairs “As they did during the Cold War, policymakers will have to start talking to people with deep technological knowledge”. Covid-19 has shown that supply chains are the lifeline of modern civilization. Cutting off the wrong piece along the chain may cause major challenges. “The problem we’ve got at the moment is not a business problem. It’s a virus problem. Contrary to popular opinion, I don’t think this is a good time to start thinking about redesigning supply chain networks, but instead working out how businesses can work at maximum efficiency and capacity with what they’ve got. This is because some supply chains are up to 20 years old. Trying to change things with the level of uncertainty we have today would be a big mistake,” saysKen Allen, CEO at DHL eCommerce. Supply chain professionals may not only be asked to join the management boards but also to help structuring foreign policies and relations.

Public sector to-does include the digitization of public services, but governments also need to ensure that sufficient digital infrastructure is in place. Innovation also needs space. In times of increasing inequality and social frictions, we need frameworks that enable digital transformation while supporting inclusiveness. This is the time to ensure that the next phase of growth benefits every part of society. History has proven, only regulation can ensure fairness in access and distribution.

The digital opportunity is enormous. At the center of the concept of digitization sits the idea of the ecosystem: A world of abundance, now under our fingertips. Digitization allows the distribution of capacity, ledgers, and manufacturing. More importantly it provides access to capacities and capabilities. The “pie of wealth” is there and growing. We are at a pivotal point where we have the chance to place human values and the construction for the long-term above profit and short-term consumption.

Larger companies are traditionally slower innovators. Governments that wish to drive innovation need to support startups and scaleups. Innovation creates jobs, mostly in small and midsize enterprises (SMEs). SMEs struggle the most with the digital transformation. Governments need to aid this particularly important job engine. Examples for such government support are Italy’s Fabbrica Intelligente as well as France’s Advisory Program – Industrie du Futur.

Global to-does

It is easy to criticize our international organizations (IOs). The World Health Organization (WHO) provides valuable advice and information during the current Covid-19 crisis. The organization communicates and acts in line with science. This is exactly what this IO should do. The probably most vital IO is the World Trade Organization (WTO). Established in 1994, the WTO is the largest intergovernmental economic organization. It is the only organization that has a binding dispute resolution mechanism. Covid-19 and the challenges resulting from uncoordinated government decisions across the globe have shown that we need more organizations like the WTO and WHO, not less. 

IOs are the vehicles to approach global challenges like climate change and plastic pollution but they are also the glue that holds the world together. It is not the distance that separates us and puts peace and prosperity in peril but the lack of communication, exchange, and collaboration. Independent silos without or outside global treaties, frameworks and structures drift and may fall apart.

We need to digitize our IOs or transform them into digital constructs to improve their effectiveness and efficiency. As Covid-19 will not be the last pandemic, we better learn our lessons. This requires true global leadership that leads us from where we are to where we need to be. From a largely uncoordinated response that created chaos to an aligned response of our global community. The need for innovation in global governance seems so obivous.

Experts point out the link between the destruction of nature and the rise of new diseases. They therefore call for the protection of nature to protect ourselves. “When a virus that wasn’t part of our evolutionary history leaves its natural host and enters our bodies, it’s chaos. The new coronavirus is rubbing that in our faces,” says Ana Lucia Tourinho, ecologist at the Federal University of Mato Grosso in Brazil. “If the Amazon turns into a great savannah, we can’t even imagine what kind of diseases [could] come out of there.” People start to begin to grasp the magnitude of our doing and the unwanted consequences that come with it. Leaders act. “More than 200 top UK firms and investors are calling on the government to deliver a Covid-19 recovery plan that prioritises the environment,” reports the BBC. 

Greater alignment, protection of the environment, and digitizing existing and building new organizations that help to drive global well-being are big to-does for the global leader community. A holistic and systemic view of the world is a core prerequisite to succeed. This requires that governments work together with academia and other experts to understand linkages and interdependencies and foster the development of more sustainable models and solutions. “It should not have taken a pandemic for Americans, Brits, Brazilians, Indians and other residents of populist democracies to realize that science should lead public health decisions,” writes Parag Khanna, specialist in international relations and managing partner of FutureMap.

Covid-19 is a revealing moment. The pandemic shows our shortcomings and our strengths. When the abyss opens beneath our feet, we more readily accept to change. This is when we reach the end of procrastination. Avoiding pandemics requires public sector leaders to put a halt to the destruction of our planet. It requires consumers to change their behavior and support companies that go far beyond pure compliance. It needs the private sector to plan for the long-term. Innovation is needed to live up to the challenges that humanity is facing. Those countries and companies that thrive on responsible leadership and sustainable investment will be tomorrow’s icons. “Sustainable funds attracted record inflows in the first quarter amid the market turmoil, according to data from Morningstar, and many of these funds are outperforming the broader market for the year,” reports Pippa Stevens, reporter for CNBC.

Digitization is gradually pushing supply closer to demand. The shortening of delivery times for online orders is only one example for this trend. The concept of instant gratification has already been part of the “old normal”. One key driver of digital acceleration and the reduction of response and reaction times from suppliers to assemblers, to distributors, to customers is 5G. 5G is therefore expected to bring the next technology revolution. If this turns out to be true – and there is little room for doubt considering the importance of connectivity in the digital era – companies around the world have about five years to prepare. Being digital is no longer an option. Digital innovation is becoming a necessity.“Many of the most iconic companies were forged and shaped during difficult times,” writes Sequoia. The leaders are the ones that act now. Because they know opportunities disappear quickly and challenges only vanish when we take them by the horns.