At the moment we’re all trying to come to terms with the profound short-term personal and business consequences of Covid-19 but we also have to think about how it will impact our lives and business in the longer term as well. Business plans for 2020 are already overtaken, but our assumptions about the next few years may no longer apply either. In some cases, life may return to business-as-usual, but the scale of the challenge the virus poses will likely accelerate many megatrends already underway, and many plausible new disruptions will emerge.
New supply chains
China dominated supply chains, already strained in the U.S due to the trade war, are highly likely to be re-examined. China could well be one of the first major economies to ‘recover,’ but execs around the world will be reconsidering lean supply chains. Carrying larger inventories and having domestic suppliers may no longer look economically wasteful. The risk exposure in supply chains is likely to become a key KPI, in the near to mid-term, and accelerate onshoring and 3D production at home.
The death of the High Street
The long march of the death of the high street has continued for more than a decade. This will likely accelerate in the wake of Covid-19. There’s an old saying that it only takes a month to change a habit, and we may be about to experience the phenomenon that when forced to get used to something, it has residual effects. Those who have hitherto avoided home delivery or on-line retail activity may wade in permanently.
Travel is optional?
Business travel (and education related travel) could also see more than just a significant short-term slump, and level off or even decline long-term as well. There is now a chance to experiment with new ways of doing things – cutting the $1 trillion spent annually on business travel.
Extraordinary monetary policy
Over the past 40 years the big central banks have reduced interest rates by around 4 percentage points in response to recessions. But that option no longer exists. Rates are now near zero or already negative across many of the leading economies and this could spread. This is a very different world, which may be only weeks away. There is also a huge risk Covid-19 could be the straw that breaks the camel’s back in the Italian banking system. Does another euro crisis beckon? Huge changes are underway with fiscal and monetary restraint thrown to the wind.
Work, and school, is no longer just a place
The redesign of offices into more decentralised networks is likely to be one of the major short-term trends as companies look for staff to work from home. More and more people will be forced into self-isolation, who hitherto had not considered home-working as feasible for them. Business resilience plans which previously said no way, could evolve into here’s how we’ve found a way. We will then find out whether company cultures and technology are advanced enough to allow this at scale.
Could Covid-19 lead to a lot more empty retail and office space, then be re-developed as residential accommodation, and financed by zero or negative interest rates? And could this be eagerly bought up in a negative interest rate induced housing boom? That would be some economic virus.
The shift to a cashless society
If banks do pass-on negative rates to savers, the incentive to hold cash will be obvious. This is not to suggest there could be a wholesale shift to cash, that would be absurd, but the hitherto inexorable transition towards a cashless society could hit a bump in the road which slows its arrival.
A closed world?
The political fall-out has barely begun. Will Governments also become casualties of Covid-19? Governments seen as non-transparent and slow to respond could be the most vulnerable. Covid-19 could shift big versus small state ideology as well.
Digital open-sourced collaboration will go from a nice to have capability to a core business driver in tackling the economic, legal and even social impacts of the virus. In some cases it will be used to further power the at-home entertainment market, combining new technologies such as mixed reality to ‘attend’ sports events. We should also expect ‘resiliency’ against scenarios such as Covid-19 to feature prominently in future company valuations.
Perhaps the greatest irony of Covid-19 could be that at a time when we’re fearful of illness and death, and finding refuge at home, it might lead to a baby or a divorce boom by Christmas!
This is a 9/11 moment, after which the world will never be the same again and our thinking must reflect this too. It’s likely that some premonitions of change will prove false but others might not, so it will be time, soon, to think this all over.
Written by David Smith, SAMI Associate and Chief Executive, Global Futures and Foresight
The views expressed are those of the author and not necessarily of SAMI Consulting.
SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.
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