Business

Yes, COVID-19 will drive the next great wave of innovation

This global coronavirus pandemic will shape businesses for decades to come.

10 min read

The opinions expressed by collaborators are personal.

Yes, COVID-19 will drive the next great wave of innovation
Yes, COVID-19 will drive the next great wave of innovation

Crises , like economic recessions and pandemics , change the trajectory of governments, economies, and businesses, altering the course of history. The Black Death in the 1300s broke the feudal system ingrained in Europe and replaced it with the more modern employment contract. Just three centuries later, a deep economic recession, thanks to the Hundred Years War between England and France, started a major drive for innovation that radically improved agricultural productivity.

Fast forward to more recent times: The 2002-2004 SARS pandemic catalyzed the meteoric growth of a then-small e-commerce company called Alibaba and helped establish it at the forefront of retail in Asia. This growth was fueled by underlying anxiety around travel and human contact, similar to what we see today with Covid-19 . The 2008 financial crises also produced their own disruptive side effects. Airbnb and Uber soared in popularity across the West as high-risk crises meant lower savings and income for the masses, forcing people to share assets in the form of free rooms and car trips to cover the deficit. .

By doubling this trend, video game business models also changed rapidly, with 2011 seeing the emergence of the free-to-play business model, thanks to Nexon in Asia and King in the west.

With the Covid-19 we are already seeing early signs of a change in consumer and business behavior. Tech and non-tech companies are encouraging remote work, airline profitability is affected by low seat occupancy, supply chains are disrupted worldwide, and retail stores are running out of ibuprofen and paper. hygienic en masse. Some of these changes are direct short-term responses to crises and will return to normal levels once Covid-19 is contained. However, some of these changes will continue, creating a long-term digital disruption that will shape companies for decades to come.

The three dimensions of impact

Pandemics have a direct impact on the biological, psychological, and economic dimensions of the world. Its intensity varies according to the mortality and morbidity rate of the pathogen in question, as well as the time it takes to spread.

For Covid-19 the biological impact has intensified rapidly and has been harder on the elderly. The psychological impact can be seen in stock markets around the world: Investors are wary of the future as information on the spread of Covid-19 and its impact on global productivity is incomplete at best and at worst, incorrect. The world population also faces a psychological impact, with low morale and greater isolation, as human contact and freedom of travel are greatly reduced. Last but not least, the economic impact has been significant. In the short term, the supply of various essential products has been interrupted and the demand for various products and services has been reduced. If this continues, Covid-19 could negatively affect world GDP.

Long-term innovation and changes in trends will occur as consumers and businesses seriously attempt to normalize the impact on the psychological and economic dimensions, provided that containment is achieved and the biological impact is resolved.

Studying more than 50 startups that expanded around the times of world crises through the lens of this framework clears the fog. To start, a recession generally causes an acceleration in the change of the business model, reducing service costs and prices. On the other hand, pandemics tend to allow entirely new business categories. It is also quite clear that both pandemics and recessions are accelerators of innovation rather than direct causes of it. In other words, these new companies and business ideas already existed, but they gained popularity at a faster rate thanks to a certain crisis event. With these learnings and frameworks in mind, below are three macro-innovations that we can expect to continue after Covid-19.

1. Supply chains will merge into resilient ecosystems

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Global supply chains have long been geared to keep quality relatively consistent while reducing costs at every step. This has resulted in significant concentration and geography and supplier risk for most companies. For example, the decline in China due to Covid-19 and the creation of an impact on supply that we are seeing today has highlighted the lack of resistance in this approach. There is a great need for a more distributed, coordinated and traceable supply of components across multiple geographies and suppliers, while maintaining economies of scale. This would require the creation of global platforms using sophisticated technologies such as 5G, robotics, IoT, and blockchain to help link multiple buyers with multiple suppliers reliably through a “mesh” of supply chains. This will also have a negative impact on the adoption of autonomous cars and delivery drones, as the demand for e-commerce logistics will far exceed the number of drivers required to fulfill them. Regular B2B platform suspects like Amazon and Alibaba are likely to step up and compete for ownership of this more sophisticated supply chain ecosystem in the next decade.

2. Digital bureaucracies will become the mainstream

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The emergence of Covid-19 has caused government bureaucracies to spring into action faster than ever. China broke records by building a hospital in just 10 days in Wuhan. South Korea conducted rapid tests of more than 200,000 of its citizens and used smartphones to tag the movement of the infected, alerting the uninfected of those movements through real-time updates. All these efforts, as well as the transparency of the biological impact, could have been improved if there were more smart cities in the world. According to the latest study from the University of Glasgow, only 27 of the 5,500 large cities are considered leaders in this area. As governments learn from the Covid-19 experience, investment in smart cities will shift, as it would be critical to have them to better manage the upcoming black swan event. Key players who would benefit from this gear shift would be smart governments, focused companies like Cisco, Microsoft and Siemens, as well as digital city startups.

3. Mental health support will be provided at scale (digitally)

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It is easy to predict that the Covid-19 will be an accelerator for remote work and online education. What is more difficult to understand is what will happen once the majority of the knowledge workforce needs to work together remotely and indefinitely. This change is likely to affect the morale, productivity and mental health of workers around the world, and companies must prepare for it. For companies looking to add the human touch digitally to their workplace, options are limited today: Humu, a startup by former Google head of human resources Laszlo Bock, is in a prime position to capitalize on this. A handful of other tech companies, like Github and Automattic, which run primarily on a remote collaboration model, may also choose to productivize their knowledge and capabilities to help other companies cope. For people who work remotely, things look much better. Several mental health startups, like Braive and Moment Pebble, can double the resolution of the isolation problem, while enterprise networking apps like Ripple can help solve the mentoring and development challenges of being a remote worker.

A post-coronavirus world

Covid-19 is a terrible shock to the global economy, as well as to the thousands of individuals and families it has affected. Short-term companies must ensure that the health and safety of their workers, partners and suppliers come first. In the long term, Covid-19 has irrevocably changed the way companies will compete in the next decade. Companies that choose to capitalize on these underlying changes will succeed and those that will not be affected.

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