At the time of writing, COVID-19 cases are increasing in parts of the world and decreasing in others, this different progression gives many the opportunity to think about the best strategies and to act accordingly, imitating and learning from peers' experiences.
In the short term, the previous approach is a valid one but looking forward we can imagine that right after the current shock there will be a limited window for all the markets and governments to review the logic behind their assumptions. Business-as-usual has proven to be insufficient for society, investors, employees, clients, and the environment.
Up to now, the public and private sector have created value focusing on the short-term and self-interest, they look for fast monetization and have little consideration for other aspects such as social impact, equality, transparency, cooperation... or something as simple and important as long term thinking. The question remains whether these should be seen as trade-offs or could be considered as options to create value.
Maybe it is time to start thinking differently and to set the basis for a new model, nothing too revolutionary but effective nevertheless. It is clear that governments will spend more on health and hygiene systems, directly linked to water, sanitation, waste, and health services, all the necessary in order to protect their citizens and avoid the huge costs of pandemics. In the same line, what changes can we expect in the private sector?
Business-as-usual has proven to be insufficient for society, investors, employees, clients, and the environment
COVID-19 will definitely accelerate trends and even create transformations in industries. We can expect changes such as customer’s behaviors, fewer supplier’s dependencies, increased employees' value, shifts in technologies, competitors becoming more flexible, and new scenarios where thinking ahead & differently will play a stronger role than before. Even investor's psychology might change after the heavy decline in market capitalization across almost all sectors, and if the investor's approach change, we can definitely expect some changes in the old rules.
Focusing on the challenges that affect only 3 groups -workers, clients, and partners- we can identify key aspects to overcome the crisis, as well as different possibilities for improvement in the short term. It is an exercise of thought, comparison, prioritization, and testing that should result in a scalable and dynamic action plan, bearing in mind that in the medium term the business context will also be uncertain, for example, future regulations, new competitors, deep changes in habits, and others.
Historically productive assets were mainly material. The recent shock will make companies that are more traditional to review their level of flexibility, comparing themselves to the growing number of companies that already base their value on knowledge, skills, or business models; All intangible assets that result in essential competitive advantages. An example of how we should balance between what worked in the past and what will be necessary for the future.
Resource reallocation, smart capital investment, and operational resilience will be key to the transition. Many economic factors are already changing, changes that go beyond the cost of debt, leverage and similar that are already reflected in the capital market. It is becoming essential to have a global vision that considers the effects of agility, vulnerability, and flexible structuring, among others. All factors that can have a relevant financial impact, being also another significant source of competitive advantage.
These examples, among others, show how organizations will be tested in these times, making us reflect, adapt, and take a clear position in the face of the possibilities of our markets.