Speciale COVID19

The world after the COVID pandemic: 6 things to reflect on


Like everybody else, I’m looking at the situation generated by the pandemic trying to guess how the world after COVID-19 could be. Living in Italy, in one of the areas that were severely hit by the virus, and talking every day with professionals in my network all over the world, I observe the evolution of this situation from many angles. One month ago, when my country was already locked-down and many others were still minimising on the extent of the problem, I put down some of my thoughts about our future. Here there are some more.

In Italy, people try to work up the courage by writing everywhere that “everything will be OK”. I think that it depends on what do we mean with OK. I’m sure on one thing only: we will not go back to where we started. Let me talk about a few of the many foreseeable changes I can spot in the industries, and our lives.

1 – The new globalization

Supply chains were among the first strategic activities that failed. The COVID-19 virus was still confined in China, and industries as automotive and high tech were already suffering a shortage of components. It should be not a surprise: more than 200 of the Fortune Global 500 firms have a presence in Wuhan. Weeks later, in the heart of the emergency, we run off gloves and masks as most of them were produced… in China. It’s time to think more about de-risking than immediate savings. It could mean to diversify the supply chain from a geographic perspective, but also to be less strict on “just in time” production, working on a rationalisation of inventories instead of cutting them to the bone. Resilience will be the new buzzword. Investors will look at it from now on too, to evaluate the risks linked to a business. A different suppliers’ selection strategy will also require a re-thinking of logistics, with an interesting impact on what the whole transportation industry could face as a future scenario.

2 – Consolidation

The big companies will survive the pandemic, at least most of them. I see two main reasons because it will happen. Some of them sit on cash and assets that can become a lifesaver, keeping them afloat for months. Others will be saved just because they are considered as strategic assets by governments. In general, the social impact of their failure is a cost that governments cannot pay so that they will receive help and support. The dropped value of some of them, as in the automotive and transportation industry, could bring to attractive acquisitions or participation through stock purchasing. The picture is different when you look at smaller businesses. Pushed into troubled water, they can struggle to survive and become prey for more prominent companies that are looking into adding technologies to their portfolio, or to re-gain power on the supply chain to build more resilience. Another scenario could be to see smaller companies forced to merge or to create clusters to support each other. It’s a strategic move that was already suggested time ago, to become more influential in the market, but that requires a change of mindset of many entrepreneurs. Now the situation is forcing them to take actions, and it could become one of the fastest options to pursue.

3 – Flexibility and collaboration

During this pandemic, on social media, it was possible to read that “Italy is that country where disposable gowns are made by Armani, ventilators by Ferrari, masks by Gucci and sanitising gel by Bulgari”. There are a few phenomena to be spotted here. The first one is about real social responsibility. Nobody asked Armani to produce gowns. They had the productive capacity and the know-how to do it, and they just did it. Consumers will remember how brands acted during the emergency, differentiating those who were just selling from the ones helping the community.

The second point is about flexibility and adaptation. I’ve quoted some globally well-known brand, but hundreds of companies turned their products into something useful for a market that literally changed overnight. Your people and their know-how are the real assets, together with a mindset that facilitates quick changes.

The third one is fascinating to me. Ventilators are not among the most requested medical device, at least not till a few weeks ago. And they were massively produced in… oppss… China. Companies like Ferrari, Lamborghini and many other engineering excellences are helping local healthcare firms with their know-how, supply chain and production capacity. I wonder if the synergies, the knowledge transfer mechanisms, the shared networks that have been created will also stay after the emergency. Of course, everyone has a core business that requires a focus. But in an interdependent world, where we are looking at resilience, devoting energies to your ecosystem could be an excellent investment to mitigate risks and thrive together. Many of the sudden problems we had to face because of the rapid pandemic spread were solved through collaborative efforts. Companies and universities came together to create open working groups around problems as lack of ventilators, and to generate creative design solutions. In western countries, there are four big pharmaceutical companies that develop vaccines: Gsk, Johnson & Johnson, Pfizer and Sanofi. All four are contributing to COVID-19 vaccine efforts and, in an unusual collaboration, Gsk is providing support to Sanofi’s protein subunit programme.

Emerging technologies as additive manufacturing were widely adopted, and the products were quickly validated and accepted by regulatory bodies (even if just in a temporary way of derogation from the standard certification rules). Is this showing us what is possible if we work on it together, and with more flexible approaches?

4 – Trends acceleration

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Some of the significant trends we already spotted in the pre-COVID-19 era are still there and could be accelerated.

Automation and remote working will rise, together with social distancing. The idea of the “death of distance” is around for more than 20 years now. Initially, companies were exploring the concept that the new web-based and telecom technologies had made it possible to communicate and work in new ways that were cutting the value of physical proximity. It was a slower than expected journey, mostly because of the significant change of mindset required. Now that we are forced to do it… it’s just happening. Remote working has a vast series of implications, from a decrease in travels to the possibility for a company to find talents everywhere and not only where their offices are. So, people could work for a top company without spending all their income on rents. The downsize? More competition for each job position. And maybe fewer jobs available for not highly specialised workers. With the automation and optimisation of tasks that digital tools facilitate, according to McKinsey Global Institute, 60 per cent of all jobs could see more than 30 per cent of their critical tasks automated, affecting 400 million to 800 million jobs around the world by 2030.

Healthcare is on the rise, of course. Governments cut healthcare funds for years, in an attempt to rationalise their expenditures. Now they are all scrambling to add beds in IC units, investing millions. It would be interesting to see if, in countries like the USA that has by far the most significant global spending on defense, part of that money will be reinvested on people health. I’m not even saying they have to cut defense expenditure: Interestingly, during the emergency, many countries took advantages of the army, air force and navy services to quickly build hospitals, emergency centres, move patients and vital supplies. Coming from that world to me is not a surprise: Military professionals are trained to respond to emergencies, be resilient and flexible, be disciplined. Maybe investing in healthcare also through our defense organisation can be the right way to be much better prepared for a possible next pandemic. We need fast reactions, and this is exposing another weakness of the industry. It is widely accepted that the process of creating new medicines is not efficient and that the time taken to launch a new drug can be as long as 12 years. So, we will not have a cure for the COVID-19 soon. The average cost of drug development is between USD 800 million and 1 Billion, and most of them are sunk into failures. In silico trials bring the promises of faster and less expensive drug development, and now companies are ready to move into it.

The aerospace industry is severely hit by the storm. The ICAO, in the scenario presented on April 16th, shows an overall reduction of 58% of seats offered by airlines with a potential loss for the industry of USD 135 Billion in gross operating revenue just in the first half of this year. If the recovery is slow as predicted, there will be a monthly loss between 35 and 40 Billion USD. Because of that, airlines are reducing their fleets, getting rid of older aircraft. We will probably see the giant of the sky disappearing faster than expected. People will travel less, but a re-design of supply chains could mean a surge of freight transportation. Are cargos on the rise? What is growing for sure is the drone market, linked to needs as disinfection, control and inspections, delivery. Research by ABI highlights how the US market will go from a predicted $414 million by 2021, to $10.4 billion by 2030. What about UAM? There could be many emerging opportunities linked with the accelerated retirement of older aircraft, rising in tickets’ fares, people working remotely but with still the need of going from time to time to main cities from smaller ones, with local airports that could be better served by electric aircraft.

5 – The digitalisation of our lives

Companies had to scramble to be able to continue their operations, and now many have at least a basic infrastructure in place for remote working and have seen the benefits of it. This put a lot of pressure on IT departments, that were not dimensioned to sustain such an effort. Digitalisation brings the promise of more data to make decisions, increased flexibility to meet customer demand, faster speed to market, and better integration within the supply chain. All things that companies are looking for now. Mckinsey says that the companies who have already embraced the Industry 4.0 transformation have recorded improvements that include 30 to 50 per cent reductions of machine downtime, 15 to 30 per cent growth in labour productivity, 10 to 30 per cent increases in throughput, and 10 to 20 per cent decrease in the cost of quality. My experience in engineering simulation suggests that the impact on R&D could be even more substantial. In an attempt to make these tools affordable and available to companies of any size, and build digital threads across companies and ecosystems, it’s likely to see a rise in cloud – web-based solutions.

We will be more digital also in our private lives as well. It’s even more accessible, as we all own a smartphone, a tablet, a computer. We need better infrastructure. The UK government was discussing spending billions of pounds to improve the rail network. If remote working keeps this traction, they could see a shift from the needs for better mobility to a stable, high capacity and faster internet service. What we have not done yet is to exploit the full potential of the internet. Habits are tough to change and create, but we are now forced to make things differently, and for a period long enough to turn this new way into a new habit. In Europe, 13 per cent of consumers said in early April that they were planning to browse online shops for the first time. In Italy alone, a quite traditional country that was slow in adopting digital, e-commerce transactions have risen 81 per cent since the end of February. More than half of these people had never shopped online before. Learning apps and online workout training are among the best hits of the moment. Videoconferencing is skyrocketing. Also going to your doctor is changing, as telemedicine rises: Teladoc Health, the largest US stand-alone telemedicine service, is adding thousands of doctors to its network this month only. Be ready for a virtual consultation.

6 – A new focus on people

A quite interesting book is “Thanks for being late”. Among the many points it makes, there is one about how everything that is digitalised start accelerating, and change at an exponential speed. This is too fast for human beings to adapt. So, maybe the biggest challenge of this vast social transformation we are witnessing will be not on the technology side, but the human hand. We need to find ways to help people to keep the pace, to learn how to cope with a changed reality quickly. In companies, HR will need to retake a leading role. I’ve seen many of my friends forced to work from home, with all the right tools to do it but without any process in place or training provided to do that properly. I’m not talking about how to use videoconferencing software. It’s more how to organise yourself, collaborate with your team, balance work and life when you sit all day in your living room. Outside of our work environments, maybe the challenge is even bigger, but if we can make it, we could say “everything will be OK”.