COVID-19 A Massive Global Reset? Part 1

Capturing the Opportunities after the 2020 Pandemic

“Luck favors the prepared mind….” Louis Pasteur

The purpose of this blogpost is to look beyond the headlights of this ongoing global crisis and the global recession that is certain to follow and to uncover great opportunities awaiting ahead. As all prior crises, this will pass. However, the world will return to a new normal, which will be significantly different than the one prior.

“For some organizations, near-term survival is the only agenda item. Others are peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal. The question is, ‘What will normal look like?’ While no one can say how long the crisis will last and how deep will it be, what we find on the other side will not look like the normal of recent years.”

Ian Davis, Managing Partner, McKinsey & Co, Addressing the impact of the global financial crisis in 2008.

This is a three-part blogpost. This one (Part 1), sets the argument why the new normal radically departs from the old normal from the world as we knew it last December 2019. Part 2 discuss the characteristics of the new normal, and the business impact, and Part 3 will be a collection of thought about societal pressure points which have been gathering momentum across the world over the last few decades, and COVID-19 has provided the “excuse” to release the built-up pressure.

Runway, runway and more runway. These days, this is the most over-used word by us at our Alaya partner’s meetings and by our portfolio companies, as well as by other colleagues’ investors and VC’s. This advice, to prepare for the inevitable recession, requires Startups to go into survival mode and freeze all variable expenses, which include team cuts, salary reductions, hiring freezes, curtailing marketing, traveling, office rent, and every possible expense. No sacred cows!

Part 1-1However, the goal is not survival for survival’s sake, nor is it an exercise of unimaginable actions just a few weeks ago, to disavow or renegotiate all prior commitments and contracts just because the crisis enables us to, or the clause of force majeure provides the legal framework to rescind any contract. The purpose of survival for as long as the global pandemic and the ensuing recession (or depression?) last, is to navigate today’s uncertainty in order to thrive in what will be the new, post-COVID-19 world.

Normality is when society behaves according to collectively accepted norms and operating protocols. The coronavirus pandemic will have long-lasting human and economic effects and will cause a massive global reset, during which most societal behaviors will be forced to change by replacing old habits and routines with new ones.

Habits are highly effective in helping us work, look after our families and pursue our life goals. As the lockdown (or “shelter-in-place” as it is called here in California) is applied everywhere around the world for multiple weeks, the world will sustain a shock never seen on this global scale. A shock of this magnitude will create a discontinuous shift in the preferences and expectations of individuals as citizens, as employees, and as consumers. These shifts will impact our routines; the very rhythm of our lives will change significantly, particularly in how we communicate, how we live, how we work, and how we use technology. All these elements will emerge more clearly over the coming weeks and months to form a new and complex equation. Success will favor those firms able to lead in solving this equation.

As consumer habits and preferences evolve, enterprises able to solve this equation and position themselves to exploit it effectively will disproportionately succeed and thrive. Clearly, the online world of contactless economy could be bolstered in ways that adapt to and reshape consumer behavior forever. But other effects could prove even more significant as the pursuit of efficiency gives way to the requirement of resilience—the end of supply-chain globalization, for example, if production and sourcing move closer to the end user. Opportunities to push the envelope of technology adoption will be accelerated by rapid learning about what it takes to drive productivity when labor is unavailable. The result: a stronger sense of what makes business more resilient to shocks, more productive, and better able to perceive and deliver what customers wants.

The physical analog business world is being decimated in the current crisis, particularly traditional analog businesses including hotels, restaurants and airlines during this crisis. The digital world, however, is thriving. We are surviving through this pandemic because of technology. All of us sitting in our home-offices have a potent window to the world through the internet connection to our smartphones, tablets, laptops and of course our TVs (and our favorite shows in Netflix).

The aftermath of the pandemic will also provide an opportunity to learn from myriad social innovations and experiments, ranging from working from home to large-scale surveillance. With this will come an understanding of which innovations, if adopted permanently, might provide substantial uplift to economic and social welfare—and which would ultimately inhibit the broader betterment of society, even if helpful in halting or limiting the spread of the virus. Some of these virtual or low-touch services include:

          • Autonomous/virtual education
          • Virtual celebrating with friends and family members
          • Digital corporate culture
          • Home aesthetics
          • Health safety protection gadgets
          • Telemedicine, home tests, wellness devices/Apps, etc.
          • Speaker bot companions
          • Tech communities
          • Accessing virtual caregivers
          • Market driven kindness and branded relief
          • Delivery-only services and parcel protection,

Practice makes us proficient! Many of new habits save us time, are more cost effective, enable us to reduce generational divides, or simply make our personal and professional lives better. Clearly not every new habit is a net gain nor are they necessarily more satisfying, but clearly in the post COVID-19 world we will have a richer set of options, which will include blending the new with the old.

Looking back 18 months from now, trying to explain the market mood in the days prior to the pandemic, it is likely to appear that global markets were looking for an excuse to have a massive correction. In addition, multiple change vectors, which have been building-up pressure across the world (see Part 3), were looking for the appropriate gathering storm to release their accumulated energy over the last few decades. Together, the COVID-19 pandemic presents a breakpoint, a non-linear disruption from the world as we knew it before this crisis started few months ago.Part 1-2part 1 - quote

The corona virus offered the opportunity for a Great Global Reset. Difficult as it certainly is, to rise above the current global storm, it is a must. But survival for survival sake is not an option, survival only makes sense if we can emerge from the crisis re-invented, vibrant and dynamic, as protagonist in a future we have actively participated to re-imagine.

Until our paths cross again amigo – Carlos B.

About Carlos S. Baradello

Investor, thought leader, university professor, and advisor in areas of corporate innovation, born global entrepreneurship and venture capital investing.
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