Disruption and Resilience – The New Normal

COVID-19 pandemic has taken a toll on the entire world dragging the largest and the most developed economies into a recession. With almost all the countries under lockdown for months, conventional businesses are now facing the wave of disruption like never before.

We were witnessing an increased technological disruption in the pre-COVID period. However, the disruptions we would face post-COVID would be quite different. Adapting to the new norm may not always work but relience has always and will always prove to be beneficial.

This pandemic has posed a lot of conventional business segments a threat of massive disruption. Some of the segments where disruption is quite obvious are as follows:

1. Supply Chain and logistics
2. Education and technology
3. E-commerce
4. Telecom
5. Employee work culture
6. Consumer behaviour and perception
7. Shift in Investment focus to sustainability

Technology plays a key role in the disruption that is about to come. It is obvious that in the shift to e-commerce – online shopping, logistics is going to be an important segment for the e-commerce businesses. They will now have to adopt even more efficient supply chain systems to maintain the retail price while also keeping their costs at bay.

Work-from-home concept that was underutilised and underappreciated for so long is now the life line for many businesses across the world. This raises questions on the conventional idea of acquiring large corporate spaces when the same work by the same number of people can be completed at the employee’s convenience of being at home. This work-from-home concept can prove to be an efficient way forward for a lot more start-ups and small sized businesses across various sectors such as financial services, IT, etc. This may also enable cross-border employment where an employee from India may work for an employer in the UK for example, for the same pay while staying in India. This enables businesses to bring together the finest pool of talent from all across the globe into a unity.

Ed-tech also is witnessing this disruption through the need to conduct online classes and examinations securely.

The local consumers have also shifted their focus to home delivery rather than going out themselves risking their life for essential products. The only way forward for local shop owners without any association with e-commerce websites is to have a presence online.

To ease out the business process in this changing world that is moving online, telecom sector plays a crucial role. Fast internet at reasonable rates is going to be the need for the hour and adapting to quicker R&D for faster services, the telecom sector has to fasten its seatbelt to gain immensely from the upcoming disruption. Reliance Jio seems to be in the game for this disruption. With Facebook in its support, Jio can help technology reach to the rural areas in India through Facebook’s Whatsapp platform and help the local shop owners benefit from the disruption. Financial inclusion, wider reach for e-commerce and local shop owners, etc are some beneficial outcomes from the Facebook-Jio deal, ignoring all the other investments Reliance has raised so far.

From historical times disruptions have been a constant. From monarchy to democracy, conventional paper banking to online banking, paper money to plastic money, physical trading to demat trading, distruptions have always been a constant. The above examples show how disruptions change the entire rule of the world.

Disruptions in the coming time may occur more frequently because of the fundamental shift that the world is witnessing at the moment.

The fundamental shift here refers to the shift in the way investors percieve businesses and change their investment style to meet their ultimate objective. This shift will be more obvious for long-term investors like asset managers or fund managers and institutional investors who have billions of dollars in long-term assets. For example; the oil and gas industry is losing its shine of being a safe heaven and the focus has shifted to renewable energy; climate change is one of the crucial factors being considered for long-term sustainable investment. While in the short run there may not be any visible shifts in investment, from long term point of view, the shift is quite visible. Fund managers and investors across the globe have already started shifting their investments based on the climate change, ESG and other factors that seem more sustainable than the conventional coal and oil and gas industries.

So the conclusion of the discussion is that disruptions prevail and are inevitable. Then what is the way forward?

In this competitive world, waiting for a disruption and then taking adaptive steps may throw out your business altogether. Hence, resilience is the only survival rule of the new world.

We are all aware of the plight of companies like Nokia that did not change when Chinese companies like Samsung came in the Indian market to disrupt the conventional mobile phone business. We are also aware about Jio’s disruption in the telecom sector that has consolidated the entire sector into 3 major players and Jio is now being resilient in its approach by raising investments and adapting to the upcoming change in consumer behaviour.

Though technology has managed to bring the world closer, it has also compelled the world to become faster in innovating and disrupting the market. Some technological disruptions in the past like the shift from pager to mobile phone has thrown an entire pager industry out of business. The same happened to Kodak at a company level in the photography business. Hence, only resilience does not always help because not all the pre-disruption ways of business survive post-disruption. Being innovative and quickly adapting to newer technology is crucial. Hence, more than simple resilience, innovative resilience seems to be even more efficient for a business to not just survive but to become a leader in the new world.

Post the COVID disruption, a few shifts are foreseen from the conventional ways in the pre-COVID period. Those can be summarised as follows:

1. Institutional investors and fund managers may shift their long-term focus to sustainable investing by considering climate-related risks that a company is exposed to and the ESG disclosures of the company.
2. Businesses will have to emphasize more on R&D to survive any disruption like a pro. They will also have to focus on their ESG performance and disclosures in order to attract long-term funds for their business.

Lastly, consumer support is essential and a resilient company can gain that support or retain that support during and post any disruption. Hence, the new world norm is that disruptions are going to prevail while resilience is going to be the only survival rule.