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As the Covid-19 crisis has stretched on, we’re grappling with the tremendous changes it’s wrought on our lives.
A year and a half on, though, the shape of the post-pandemic world is becoming clearer. New economic and social patterns are deepening and combining. The scale of this disruption, much of which is irreversible, spells both big risks and opportunities for businesses in the coming years.
Pause for a moment and consider the range of disruptions we’ve either already seen or are emerging. Some are specific to demographics — where and how people work, live and collaborate; how they prioritize their time and disposable income; even how they buy and furnish their homes.
Then add macro and societal disruptions, including looming changes in tax policy, rising inflation and potentially higher interest rates, together with massive white- and blue-collar attrition, labor shortages, re-shoring supply chains and even the need for supply chain redundancies.
Any one of these factors, in isolation, is a challenge. Collectively, they can be crippling. But we can’t wait and seek shelter from this storm of disruption — despite our education in quarantining.
The business winners in this new world are those who jettison conventional thinking, allowing them to defend their companies from the inevitable threats and take advantage of tectonic shifts.
Here’s how to position your thinking and your teams for changes now and in the future.
Identify relevant changes; ignore (but watch) the rest
Executive teams need to think deeply and broadly about which trend — or combination of trends — will affect their businesses now and in the near term.
As an example, consider the Covid trend of people buying upscale homes — either primary or secondary — in remote and rural areas.
The ripple effects have been tremendous for a variety of businesses that serve these consumers. Affluent homeowners often rely on an ecosystem of service providers to care for their residences, including designers and decorators. Manufacturers, who once sold through urban-based interior designers, now must reach new geographies and find suitable channel partners and meet customer experience expectations. They must also rethink their urban-based sales relationships now that demand has declined — some dealers may not survive. At the same time, online sales are booming.
To add even more complexity, millennials are finally becoming homeowners for the first time, altering demographic patterns. It’s daunting.
The result? Dealer dislocation risk and new market access opportunities.
To find both risks and new opportunities, it’s important to recognize that not all new pandemic-caused trends will affect businesses equally. Don’t waste your teams’ time on researching, analyzing and scenario-planning for trends that likely won’t affect your business. Questions to ask include: What are the biggest disruptions in my industry? Which will affect my company most? What are the real implications of the trends I’m seeing?
Look for unexpected wins
Consider the recent willingness of restaurant-goers to eat outside on city sidewalks during the pandemic. Does this signal that al fresco has become seasonal? Perhaps. But it also signals incredible price inelasticity. Customers were willing to pay full price as they literally suffered the elements to eat outside in yurts, tents and huts in December in cold-weather cities. Does the restaurateur use this observed — and unprecedented — behavior to raise prices, configure new spaces and/or change dining /service options? All of the above? The trend can’t be ignored and it’s a perfect example of both disruption and opportunity.
Look for long-term implications of short-term trends
For another example, think about widespread implications of workplace attrition and war for talent that most companies are facing these days. Obviously, they’re incurring higher training, recruiting and salary costs. But the bigger question is, how does this change the shape of the talent supply curve?
Imagine two competitors in any industry — tech, for example. One competitor might be located in a hotbed metro location for recent college graduate talent, such as Boston. The second competitor is in South Dakota, where access to recent grads isn’t as plentiful. Historically, the Boston company has an advantage. The company pays for this advantage, however, in the form of higher rents and higher salaries, among other costs.
Until now, the South Dakota company has been constrained in accessing those talented grads. To convince someone to move, they’d need to offer higher wages than their competitor. While that could be a good decision for a few key employees, it’s hard to implement across the entire employee base. Our Great Plains company is at a competitive disadvantage
But now in a post-Covid world, the South Dakota company could take advantage of its relatively lower fixed costs by making offers to its competitor’s employees. Even better, the company won’t have to ask new staff to relocate since they can use technology to work remotely. Over time, the company’s relative competitive advantage in the war for talent could improve. The firm probably won’t have to pay as much since they’ve reduced the relocation barrier. Essentially, they’re turning their geographic location into a competitive advantage. Likewise, the Boston employer will have to raise its employees’ salaries to keep them.
As you can see, the disruptions can be far-reaching and significant. Executives need to think beyond the obvious trends and consider new opportunities to capture advantage.
Short term vs. long term
At the outset of the pandemic, even the casual observer could see disruptive implications in supply chains. Now disruptions are occurring across regions and markets: Note long waits for everything from automobiles to computer chips to construction supplies. Combine these supply chain disruptions with the potential risk of exchange-rate volatility and continued trade/tariff strife.
What’s the implication?
In a world where container ships are backed up at ports, market access and nimbleness should be prized. Companies should be investigating greater supply chain redundancy, revisiting their just-in-time policies and revisiting safety stock levels.
And not just upstream — you need to consider downstream as well. These challenges can also impact your ability to get your products to customers. Do your channel partners have enough employees to be open during the hours your brand requires? Are your channel partners shopping in new ways? Where and how are they getting products?
The smartest C-suite leaders are always looking ahead, assessing the trajectory of their industries. But the scale and complexity of recent disruptions will make it more difficult than ever to identify which changes most impact long-term strategic directions. It’s critically important to have a systematic approach to assessing how each disruption could affect a business. It’s just as important — perhaps even more so — to be asking the right questions and understanding what issues are being missed as it is to identify solutions.