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The business world after the pandemic

How COVID will shape the business environment

We all are living through challenging times, and we are in this together. For most of us, our personal and professional lives have been already significantly affected by the COVID. I feel lucky that everyone in my family and my friends’ are Corona-free, healthy, and safe. However, one question has been bothering me a lot for past weeks: How will this socio-economic event impact our lives once the pandemic is defeated?

Hence, I decided to dedicate my next article to answering this question, gathering some of my thoughts, and sharing my perspective on how it will shape and impact organizations and the business environment.

The first part of this article will discuss impacts on the global business landscape while the second part will dig deeper into the Financial Services and Insurance industry specifically.

Pandemic induced changes in customer behaviour

According to Phillippa Lally's research, it takes as little as 18 days, to change or form a new habit. Amidst the COVID-19 pandemic, people worldwide are forced to adapt to the new situation, change the way they perform their professional activities, and spend their free time. In some countries, it’s been over six weeks and even longer that people are following a new lifestyle of lockdown, and most likely it will take at least twice a much time for the world to get back to “normal.” As a result, in the new “normal” world, we can expect a massive shift in customer behaviour, which will inadvertently impact several industries.

Just by examining a few examples, such as the extent to which people are being forced to work from home, it seems evident that telecommuting will become a norm even in the most traditional industries. Another example is the online grocery market, which, as a vertical globally, after years of development, had only claimed less than 3% of the global market share. It has grown a few folds in just the past few weeks due to the pandemic-led circumstances that forced people to self-isolate and resort to ordering grocery online. Today finding a delivery slot in countries like UK, Singapore and many others is as tricky as getting tickets to Burning man or Glustanburry.

The unusual circumstances that we are witnessing will undoubtedly encourage new habits and serve as a catalyst that eventually will accelerate the mass adoption of new services. For instance, subscription fitness and wellness, online education, telemedicine, and many other emerging services will jump one step of the customer adoption curve, crossing the chasm what in normal circumstances would take them at 2–5 years.

Doubble blow for the established businesses

People are in self-isolation mode and home-bound nowadays, they have plenty of free time, making them much more open to browsing, discovering, and trial. In the past few weeks, this trend is clearly reflected in performance marketing data, as considerable shifts are being observed between the effectiveness and costs of prospecting, retargeting, and retention campaigns.

Legacy businesses boasting of the large and established customer base are at high risk of losing their customers because of this trend to new players and to more traditional competitors that have fared well at driving digital offerings and customer experience quality. This would be a second big blow to traditional organizations as they have been impacted the most by the virus. They were less prepared to cope with this abrupt business disruption and dramatic drop in sales than their more agile and digital savvy counterparts.

New priorities for Outsourcing Arrangements

Governments worldwide imposed restrictions and control measures to deal with Coronavirus pandemonium, highlighting the complexities surrounding the current modern business context and the global interdependent nature of providers, suppliers, and end customers relationships. Understandably, a large number of organizations have been severely impacted by the steps governments worldwide have taken to contain the spread of the virus, such as travel restrictions, quarantine orders, and even full country lockdown.

The most obvious example would be the manufacturing industry and how the supply chain was disrupted, but it isn’t the industry that suffered the most. That’s because the manufacturing industry is quite well-prepared for dealing with adverse situations given that supplier disruption is not an uncommon occurrence in this sector. However, what we are dealing with right now is definitely beyond anyone’s comprehension as no one has experienced such a scenario. Since world war two, the world didn’t experience such a disruption.

I would argue that the service sector is, at the moment, receiving the biggest blow from the pandemic, as a result of preventive measures imposed on their service providers and outsourcing partners. The service sector was not well prepared for such a scenario and did not have much experience to lean on in dealing with service provider disruption either. After all, how often does it happen that your data entry, payroll, back-office operations or IT support halt operations overnight?

Recent events have exposed weak processes and governance across both sides of the relationship regarding business continuity planning, which involves basic capabilities and scenarios such as partner employees’ ability to work from home effectively, etc.

When the pandemic is over, many organization will trigger a review of their existing outsourcing arrangements separately from evaluating only the financial benefits. It will focus on carrying out in-depth key suppliers and partners assessment regarding preparedness for dealing with crisis events, and its subsequent impacts on the business continuity. I also expect regulators to step in and impose more stringent requirements and tighter controls in this area.

Inadvertently, a majority of the providers will be forced to improve their processes and infrastructure, which will eventually be reflected in the service's costs. This will change the cost-benefit balance, especially when considering the stakeholder’s visceral experience of dealing with a large-scale crisis, and will prompt changes in the organizational strategies and risk appetite regarding what part of the business to outsource and what to insource and automate.

Increased Cyber-Security Risks

When millions of people are suddenly forced to work from home, cybercriminals are bound to take advantage of the situation. Reports suggest that there has been an abrupt surge in cyber-attacks ranging from phishing, attempts to exploit the weak security policies of VPN networks, and attacks on corporate network infrastructure, which is already under much pressure as entire business activities are being carried out remotely.

In many cases, businesses had very little time to react and prepare their employees and systems for shifting to telecommuting at such a massive level. To ensure rapid scaling of employees’ access to organizational networks, tools, and resources, companies had to make often painful compromises such as loosening the security policy, launching new tools without detailed risk assessment, and not scaling necessary control measures. Unfortunately, this made it much easier for cybercriminals to conduct their malicious activities.

I am afraid that in the aftermath of the COVID pandemic, many companies will report about getting compromised during the time of crisis. Based on past examples of large-scale britches, service providers have remained the weakest link in organizational cyber-security defence matters. Unfortunately, this particular attack vector can be exploited during this challenging time even further as smaller businesses will be forced to take tough decisions while facing challenges to maintain service delivery under adverse economic conditions.

Hopefully, many organizations will take this experience as a learning opportunity and realize the significance of cyber-security. Increased awareness resulting from being forced to make difficult decisions, will result in dedicating more efforts and resources to developing more robust cyber resilience capabilities in the future to better respond to crises.

Accelerated Process Automation and Digitalisation

The operational interruption that businesses worldwide are currently facing due to the pandemic has one thing in common- organizations realize how much work is still done manually and to which extent they rely upon the workforce. It is a sobering moment, especially for those organizations that attempted in the past to assess the benefits of investing in automation, but didn’t implement it. In most such projects from the perspective of the business case, financial benefits were not attractive enough and as a result, favoured the easier solution of maintaining the status quo of manual work or relying on outsourcing.

The pandemic's novel experience will most likely give many organizations at least one more good reason to pursue process automation projects. In the past, CFO’s or budget committees brushed off the benefits of risk reduction and organizational resilience improvement related to automation investments as they deemed that they were merely qualitative in nature. Today, the situation has changed completely. Many organizations are rapidly implementing automation initiatives focusing on quick wins in the form of RPA or other codeless solutions to address their crisis-induced interruption and short-term needs.

The operational disruption that businesses face even in low-wage countries will compel them to scale up and accelerate efforts and investments in automating their operations. In effect, their operational resilience will improve along with service quality and customer experience, but there is a catch. As companies automate more processes, they will want quickly realize benefits in expense reduction by workforce downsizing. It will be especially pronounced within service industry white collar, low to middle-skilled, and middle-aged population of employees, putting them in a disadvantageous position, especially in the face of the potential post-pandemic downturn.

Improved protection for Gig Workers

Today, most gig workers, primarily in the food delivery and logistics sector, are at the frontline fighting the COVID pandemic. They help millions of people that are forced to stay at home due to quarantine or self-isolation in enduring this time of crisis. They are more vulnerable and exposed to the virus and the impact of the pandemic on the real economy once it contracts.

The successful proliferation of the platforms and shared economy services has its negative aspects; it transformed gig workers into essentially variable cost and shifted the responsibility for their protection and wellbeing from companies to the government and individual workers themselves. Now that the demand for services in many verticals, e.g. ride-sharing, has dropped. As the downward trend continues given the overall economic activity contraction, gig workers are among the most impacted population as many are losing their source of income and jobs.

One of the pandemic's positive outcomes will be the strong urge for revising gig workers’ protection and benefits and making it sustainable for the future. I am not referring to increment in overtime pay or minimum wage as we have recently witnessed in the case of Amazon and Wal-Mart. I am talking about devising a systematic solution both in terms of government policy as well as business initiatives to address the needs of gig workers, as many of them after going through the challenging experience will not want to come back to work and sustain the precarious conditions.

High COVID mortality rate of early-stage Start-up’s

The downward spiral for the early-stage start-ups just started with initial reports of more than 20% drop in early-stage funding for Q1 that will most probably accelerate in Q2 and not recover until Q4'20/Q1’21. A large number of new ventures will not survive the next 12 months despite having the perfect combo for success- a good team, early traction, interesting product, and targeting a large market. Regrettably, they will become victims of Bad Timing.

Unfortunately, history likes to repeat itself, as we have already seen it at least twice in the past. Firstly, during the Dot Com bubble and secondly, when a global financial crisis hit the world. These incidents led to changing the investors’ attitude drastically. It moved from suffering severe FOMO and worrying how fast hey can spend the raised capital so they can launch an even bigger fund, to become highly risk-averse, and choose to invest only into later-stage ventures, of series B, and beyond.

On The Other Hand, this graveyard of start-ups will provide many entrepreneurs with a great source of lessons learned and ideas to ponder on when the world recovers from the impacts of the pandemic and economy gets back on track for another long period of bull markets.

For companies that just raised their rounds and have enough runways for the next 12+ months, the future seems bright. During this turbulent time, they will be able to recruit great talent, which previously they couldn’t afford or attract, increase customer acquisition at a considerably lower cost, improve their product and market fit, reduce the burn rate and improve unit economics.

By the next round of fundraising, they will become much more robust companies. They will be in the position to command better conditions, including lower dilution rates keeping more equity for founders and employees to reward them for enduring the crisis.

This article was originally published in March 2020 on my LinkedIn pulse blog:



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Tomasz Kurczyk

Tomasz Kurczyk

Waking up to create, build and grow. Sharing my 100% organic passion for #Digital & #Customer | #Innovation #FinTech #DigitalTransformation #InsurTech| #CDO@AXA