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How Will Things Be Different When It’s All Over?

How Will Things Be Different When It’s All Over?

Navigating the Covid-19 Crisis and Beyond

 

SARS is credited with being one of the accelerators for the adoption of e-commerce in China and the rise of Alibaba. We should not expect that the resolution of the Covid-19 epidemic will be a return to a 2019 reality. Many organizations are understandably focused on reacting to and coping with the short term challenges presented by the unfolding epidemic. But in addition to Reaction, they need to focus attention on 3 more important R’s: Rebound, Recession and Reimagination. Beyond individual companies, there is also an opportunity for society as a whole to reimagine norms, behaviors and platforms for coordination and collaboration.

A rebound of demand is inevitable, and using high-frequency data proxies for the movement of goods and people, production and confidence, we can see that it is already beginning to happen in China. Given the complexity of rebooting companies and supply chains at different speeds in different places, the time to begin preparing a rebound strategy is now.

Over the past 100 years, epidemics have only temporarily deflected the economic cycle with short, sharp shocks. Of course, this time could be different. A bear market (technically a 20% decline) does not guarantee a recession but indicates a high probability of one. The most recent expansionary cycle has been one of the longest in recent economic history and signs of vulnerability were already showing in trade relations, political instability, corporate debt and other areas. The shock to demand and confidence could easily tip the global economy into a recession.

Prudent companies will prepare for this possibility. Our analysis shows that 14% of companies across all sectors actually grow top and bottom lines during recessions and downturns. Those who flourish share the common traits of preparation, preemption, growth orientation and long term transformation. They take a long term view and place growth bets when competitors are retrenching.

And even after the epidemic recedes, and even in the case of recession, there will be opportunities and needs to reimagine business and operating models and also the portfolio of offerings. For the average company, the first causality of a crisis is imagination. But those shape and benefit from the future will be those who can imagine it.

We can already see hints of the post-crisis future in shifts in consumer behaviors, which are driving diverging patterns of consumption and stock price recovery across different sectors.

In China, the stock indices of all sectors dipped sharply in parallel, but after this initial shock, different sectors recovered at different speeds. Some, such as transportation and consumer durables, continue to be depressed; most are already recovering to pre-crisis levels; and others, like software and healthcare equipment and services, have already exceeded their pre-crisis levels.

In anticipating this new post-crisis world and seizing opportunity in adversity, we need to think consider several shaping forces: new learnings, new attitudes, new habits and new needs.

(bcghendersoninstitute)

 

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