“Our world has changed. Our challenges are greater. Our fragilities have been exposed. Our systems need a reset. Everyone has a role to play“ Tedros Ghebreyesus, Director-General, World Health Organization – WHO
On March 11 the World Health Organization (WHO) announced that COVID-19 was a pandemic – a disease that is spreading in multiple countries around the world at the same time. This is a rare event, one that we have not seen for 100 years, with significant public health, economic and political consequences.
Over the past nine months, the economic impact of COVID-19 on manufacturing, supply chains and service businesses such as tourism and travel has been significant. We have seen a collapse in financial markets, followed by a recovery, but with the biggest one-day drop in the S&P 500 since “Black Monday,” Oct. 19, 1987. There have been significant increases in volatility, ending the long bull-market run that began after the 2008 financial crisis. Market volatility was compounded in March by an oil price war triggered by a collapse in talks between OPEC and partners.
The UK economy shrunk by over 20% with the subsequent economic recession being the deepest in 300 years. It is difficult to make accurate predictions on what the world will look like in what is being described as the new normal. COVID-19 is less than a year old but a phenomenal amount of literature and research already exists, with more coming daily, on the impact of this pandemic. This highlights the challenge for organisations in finding the appropriate path in delivering their visions.
Current predictions are that the post COVID-19 crisis world will be more indebted, less global, and more digital. Organisations are expected to have to deal with higher taxation, financial repression, and moderately higher inflation, along with populism and protectionism, while navigating the transitions from global to local supply chains, and from the physical to the digital.
COVID-19 lockdowns have been an unprecedented experiment in extreme localisation, with many individuals banned from even leaving their own homes. These measures will clearly not persist in the long term. However, senior economists and commentators believe that the world will be left structurally less global by the crisis, spurring on the de-globalisation trend. In a less global world, the expectation is that one would see increasing levels of populism, protectionism and localisation. Evidence of this prior to the COVID-19 had been Donald Trumps’ Make America Great Again, the America First approach and the UK’s exit from the European Union. Although with the recent Joe Biden win in the United States a move back to working collectively and collaboratively across international trading arrangements may be coming back into focus. As organisations tackle these challenges, reported countermeasures include global diversification and investment in automation and roboticsCOVID-19 lockdown measures across the world have forced many consumers and businesses to fundamentally change the way they buy and sell goods and services turned more digital. While there is an expectation that over the coming years individuals and businesses could return to previous ways of working, there will be some lasting changes and the most successful will be those that use change as an opportunity.
It remains unclear how quickly consumers and regulators will regain confidence in the safety of the working environment, but some COVID-19 lockdown consequences look as if they will include greater digital adoption and less sharing.
With an increasing shift and demand for further digital interaction across the buying and selling of goods and services those that accelerate digital transformation with automation are expected to be the winners.
Technology disruption spurred by digital transformation has been accelerated by COVID-19. The pandemic, arriving on the back of the US-China trade tensions, has clearly demonstrated the vulnerability of global supply chains. Following the crisis, companies and governments are forecasted to seek to diversify their supply chains and bring them closer to home, creating several long-term beneficiaries of this trend.
One such trend is warehouse automation, which is expected to experience structural growth alongside the rise of online shopping. Another is factory automation—companies with automated factories have been able to maintain production through the crisis, a clear competitive advantage. These trends are also expected to be replicated in the service sectors as firms look to simplify, automate and cost save on processes with an ultimate outcome being a headcount reduction.
Technology change is happening quickly. The speed at which AI is improving is beyond even the most optimistic people, pretty much anything that requires ten seconds of thinking or less can be done by AI or other algorithms. Software companies are taking up the mantle and charging ahead, pushing the boundaries of automation, search and social media. For example, virtual assistants or chatbots offer expert assistance; smart robots or robot advisors in the fields on finance, insurance, legal, media and journalism provide instantaneous research or findings. Other benefits include significantly improving efficiencies in R&D projects by reducing time to market, optimising transport and supply chain networks, and improving governance by better decision-making processes. Already today, there are expert systems that can scan and share overviews of legal documents from obscure previous court rulings with lawyers within seconds, saving time and money.
Digital lifestyles are no longer a choice, but a necessity. We remain connected to our screens while trying to maintain healthy digital habits. The COVID-19 pandemic and the resulting lockdowns came as a major shock to many companies. To maintain business continuity, firms had to act quickly to ensure employees could work seamlessly from home and the consumer impact was much milder than expected as people took the measures in their stride by enhancing their digital engagement.
The fourth industrial revolution or industry 4.0 is just beginning, and yet it has already reshaped entire industries. Meanwhile, the COVID-19 pandemic is accelerating e-commerce and digital data penetration.
The virus accelerated existing structural changes in the global economy around the fourth industrial revolution and the environmental credit crunch. One of the areas that is most evident is in the digital economy and how we work. In terms of working, those that can are now working from home and this shift is forecasted to continue. COVID-19 changes the demand for office real estate, and it may be that future digital automation investments are paid for by the further rationalisation of the real estate footprint.
As opposed to previous cost and process reduction programmes, COVID-19 is also facilitating a decline in globalisation. COVID-19 doesn’t differentiate between developed or developing countries, onshore, near shore or offshore operating centres. As the effects of the pandemic have taken hold across the developing world, limited research has been done as to the impact on people centric service centres and their local public health operating restrictions. However, it would follow that human centric operating models will have been affected more than those operations and companies that had either more automation within their processes or that operated work from home practices, or a combination of the two.
As companies consider restructuring or transformation programmes to respond to the impact of COVID-19, offshoring is not typically a priority with companies looking to software automation, robotic process automation and machine learning as a preference.
Some 80 years ago, World War II transformed society forever, shaping the development of the next century in thousands, if not millions of different ways. Technology, culture and social norms were all shaped by the event, with the modern world’s foundations firmly entrenched in the conflict.
Now, similarly, we are in the midst of an event that will shape the next century. While the circumstances are radically different, the global nature of COVID-19 and the upheaval to people’s day-to-day lives, is similar. And as with World War II, COVID-19 will impact aspects of technology, society and culture in a myriad of ways, many of which are impossible to predict at this distance.
We are in the midst of the painful birth of a new, more technological age, and nothing is going to be the same again. And amid the chaos, companies are attempting to adapt; to prepare themselves for what is to come. Because this is not about the new normal – it may not always feel like it, but that is changing on a near daily basis. What we must deal with now is the future normal, and the road there is rocky and deeply uncertain.
The COVID-19 virus has accelerated existing structural changes in the global economy around the fourth industrial revolution and the environmental credit crunch. One of the areas that is most evident is in the digital economy and how we work. 73% of UK business leaders expect COVID-19 to spark a new wave of workplace and industry automation and 37% believe that at least 3 in 10 roles will be automated. The largest primary driver for this change was cost reduction as indicated by 34% of the respondents.
Resistance to change and pushback to the introduction of new technologies from the workforce has reduced. Evidence as to the long-term acceptance of these changes is limited as employees are challenged with the wider societal impacts of COVID -19. It remains to be seen how employees will react in a normal public health scenario.
COVID-19 and its knock-on effects have essentially evaporated organisational fears about industry 4.0, taking it from a risky bid with potential gains to a key resource for survival. Technology suppliers are reporting that some of the fears that have stopped progress of industry 4.0 adoption are instantly being lifted because of the new way of work.
Fuelled by a sense of urgency, fewer organisations are likely to choose not to act. The fourth industrial revolution was already beginning to pick-up pace before the COVID-19 pandemic. This pace has been further quickened as traditional rules of business are revised and reformed due to social distancing and lockdown measures. The opportunity is now.