Ten years from now we will look back at this time as catalyst for change. It will be known as ‘The Great Reset of the 21st Century’. We will look back in retrospect to see the companies and industries that adjusted to the changes in economic climate and reacted to the work revolution which immensely impacted the way people lived their lives. We will look back in awe and with an investigative behavioural lenses at those who pivoted and reinvented revenue streams. New companies would have been born from the ashes and meet new gaps in the market. And yet, like with all hardships, there will be the companies that were unable to transform and ultimately, left behind. A new economy will be born and it will underpinned by new performance indicators that are reflective of the cultural, economic, technological and societal shifts that incurred due to COVID19.
However, if we look at the current economic climate, it is bleak. The Dow and the FTSE witnessed their biggest quarterly drops in the first three months of the year since 1987 (BBC). The World Bank reported that ‘the pandemic is expected to plunge most countries into this year, with per capita income contracting in the largest fraction of countries worldwide since 1870’. On Wednesday 12 August, the UK entered a recession following a contraction of 20.4% at the end of Q2, making it the worst impacted economy in the G-7 in comparison to French GDP that fell by 13.8%, Germany 10.1%, Canada 12%, USA 9.5%, Japan 7.6% and Italy at 12.4% (CNBC). Alongside this, millions of people have lost their jobs and can no longer pay their credit cards. Restaurants and shops are slowly reopening after months of closure. Industrial companies are unable to maintain their payments for equipment hire. Landlords can no longer afford to pay their mortgages due to less income. The world is suddenly away in credit risk (McKinsey).
One of the industry most heavily impacted is the travel and tourism industry. The sudden halt of international travel during lockdowns has in turn impacted many businesses whose work relied on frequent air travel. Companies have moved to virtual meetings and the hotel industry that relied on business travel has also been affected. At the same time, less people are taking personal trips and holidays, so the tourism industry is taking a hit, research company McKinsey confirms. However, the insights company also relayed research that ‘historically, business travel is slower to rebound from crises than leisure travel’.
However, where industries are suffering, there is an opportunity to innovate and see how companies can pivot despite the challenging circumstances. For instance, when it comes to traveling to work, fewer people are taking trains and using public transport. Instead, they are opting to walk or cycle. This in turn is fuelling a cycling boom. In the UK over half of employees living in cities are considering cycling to working due to COVID19, with two-thirds of the population stating it is ‘unsafe’ to use public transport (Cycling Weekly). Between February and July, Google Maps reported an increase of 69% of cycling directions. This in turn opens up new opportunities for urban life and the design of cities to accommodate this boom. In terms of international travel, private travel that ensures insulation from mass-transit environments will prove to be resilient. This is especially true for the luxury market catering to UHNWIs and HNWIs. In the US, private jet service Sentient Air reported a 127% growth of new clients during the June (Barrons 2020).
Whilst new trends and behaviour patterns will arise in response to COVID19, one thing is for sure is that the recovery will be digital (Deloitte). This was evident with the rapid migration into digital technologies during the outbreak of the virus and is set to boom into the global recovery Examples of digital pivots include Banks offering remote sales and services. Food stores increased delivery services. Schools and education pivoted into online classrooms (McKinsey).
Even though the current economic impact of COVID19 feels heavy and bleak, we must remind ourselves that this virus has laid down the foundations for change. We have arrived at an opportunity to reset, revalue, reassess and most importantly adjust. Companies that are able to embrace digital offerings, alongside adjusting to new ways of living, working and travelling will recover. Those that do not change, will not be able to survive in the new normal.