The path to the next normal
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The measures to stop the spread of the virus are well-known by now: staying home in lockdown, working from home as a default option, schools switching from physical classrooms to e-learning models.
Not every country has been able to make these choices fast, due to a combination of hesitation, inaction, and paralysis. Before any decision is made, the first thing to do is determine what needs to be done and at what pace and scale.
As the current health crisis steamrolls into an economic crisis unparalleled for the last 100 years, the decline in economic activity is already at par with the great depression.
This crisis of global proportions requires resilience, both for near-term issues like liquidity and cash flow, as well as long-term issues like uncertainty, personal financial stress and recovering from multiple challenges that were already present and are now further complicated due to the pandemic.
Returning to operative environments is extremely challenging, with reactivation of disrupted supply chains at multiple points and widespread disruption overall.
Leaders should reassess their entire business logistics and supply chain, planning for contingent actions. There is also an added threat of the resurfacing of the virus during winter, even if it subsides in the coming months, which can lead to a renewed crisis if we do not have a vaccine or any effective treatment in place by then.
As we can see most of our interactions, learnings and commercial transactions moving into online and virtual models, many other aspects of our daily lives will have to be reimagined and the leaders who have better insight and foresight will succeed. Many industries will have their existing business models completely disrupted, revealing vulnerabilities and new opportunities.
Luxurious but unessential items may have to change their business models or shut shop.
This ongoing global challenge will help identify existing faultlines and widespread practices that are toxic and are degenerating the environment but were neglected in the past due to the absence of a ‘black-swan’ event like the pandemic.
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The current pandemic has led to an economic free fall which is unparalleled in history. In the US alone, the unemployment rate plummeted at such a speed that more than 10 million have claimed unemp...
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Consider unexpected risks associated with the response to the outbreak, for example, poor mental health that is related to social isolation. Steps to take into account:
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“Save the economy or save lives” is a false choice.
A group of economists published a paper on the 1918 flu outbreak. Their findings revealed:
The hope is for a deep, short recession, to show that people have shut the economy down to limit the spread of disease.
Asking millions of able-bodied workers to stop working creates a crisis of unemployment.
During this time, the U.S. is expanding unemployment benefits and are also delaying tax filing. In northern-European countries, the government is directly paying businesses to maintain their payrolls to avoid mass layoffs and furloughs.
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The economy shut down almost overnight. But reopening it will not happen the same way. It may take months and possibly years to fully open, even under the most optimistic estimates.
The proposed three-phase plan will allow many businesses to open in the first phase.
Schools and daycare centers can open in the next phase. But that means millions of working parents could be asked to return to their jobs before they have someone to take care of their children.
In the early phases of reopening, businesses could be required to operate at a reduced capacity.
Offices might operate in rotating shifts, but other businesses could have a harder time. Restaurants may have tight profit margins even in better times. Operating at half capacity may mean working at a loss.
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A few months ago, the world seemed reliable, but now it is changing so fast and has so many unknown dimensions, it can be hard to try and keep up.
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Compounding is exponential growth. We tend to see the immediate linear relationships in the situation, e.g., how one test diagnoses one person.
The compounding effect of that relationship means that increased testing can lead to an exponential decrease in disease transmission because one infected person can infect more than just one person.
In the absence of enough testing, we need to use probabilistic thinking to make decisions on what actions to take. Reasonable probability will impact your approach to physical distancing if you estimate the likelihood of transmission as being three people out of ten instead of one person out of one thousand.
When you have to make decisions with incomplete information, use inversion: Look at the problem backward. Ask yourself what you could do to make things worse, then avoid doing those things.
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If and when you return to your office after the pandemic, you'll probably notice some changes.
Before the pandemic, only 4 percent of the US workforce worked from home at least half the time. However, the trend of working from home had been gaining momentum for years.
It is estimated that within a couple of years, 30% of people will work from home multiple days per week.
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Throughout history, the most significant and world-changing events emerge in a low-key manner, without warning. 2020 has one such event.
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At the time of the 2009 financial crisis, Time Magazine declared that conspicuous consumption is now over. In reality, the economy made record gains after the 2009 dip.
Many others also predicted a long-term reluctance to spend. In reality, global sales of luxury items show an upward trend in the last 20 years.
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Predictions are inherently inaccurate because in the time horizon of 10 to 12 years many other things happen which cannot be foreseen, and which cause all kinds of good and bad effects. Speculation is useful and starts interesting discussions (like death rate predictions and economic consequences), helping us make the right steps.
The Prediction that can’t go wrong: The future is always unpredictable.
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We learn we are not alone and may learn how others cope with their frustration and fear, which can help us adopt those methods.
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It is the most dangerous phase for teams, but it cannot be skipped.
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Uncertainty is always there. The degree of uncertainty can rise and fall.
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During periods of heightened uncertainty, leaders reflexively reduce investment, stop hiring, slash marketing, refrain from entering new markets, or stop making decisions.
Although understandable, acting in a pro-cyclical manner can be counterproductive. It can leave companies poorly positioned to benefit from the next stage of the cycle.
Organizations should be inclined toward action. As a baseline, companies must strive to be fit for growth. This can be done by aligning costs with priorities and strategy, investing in varied capabilities, and using traditional and digital levers to execute.
They must regularly engage in scenario planning with an array of options. They must build the capacity to be agile. They must learn to become more resilient to withstand strong external forces and quickly recover from setbacks.
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