Published

24

Mar

2020

Commentary

A Glimpse of the Post-Corona World; Industry Disruption Gets Real

Once the hottest of business topics, fears of digital disruption now seem almost quaint.  Will Amazon deliver your groceries?  Will Google perfect the driverless car?  Will wearables transform healthcare? Will Netflix humble Hollywood?  If only we could worry about such benign intrigues once again.

But to repurpose some Shakespeare, lately, our disruptions have come not as ‘single spies, but in battalions.’  These days, the most powerful market shocks no longer germinate within the IT community; they arrive uninvited from all around the world.  While the coronavirus is now overwhelming all other issues, it’s just the latest and most dangerous exogenous disruption we have faced.  Below are ten other shocks that also outweigh the business impact of anything going on within today’s digital world:

  1. A Rising China. Can your company succeed in the world’s largest market without transferring your proprietary IP?  Should you integrate or decouple your supply chains?  Use Huawei or not?  Play by local rules, or stick to your own values?  Growing criticisms that China was too slow in reporting its initial virus outbreak could further widen the rift.
  2. A Half-Done Brexit. Although the UK has officially left the European Union, complex terms of trade questions remain largely unanswered and are no longer a top priority.  How will multinationals ultimately organize and do business in this newly divided Europe?  In theory, the clock is ticking, but implementation delays would not be surprising.
  3. Supply chain fragilities. The days of efficient, low inventory, but highly reliable global supply chains are over, at least for now. Countries and companies are scrambling to secure the goods and capabilities they need, preferably from within their home nation’s borders.  For many, the lack of self-sufficiency has been a much-needed wake-up call.
  4. Trade wars. President Trump has used tariffs more readily than other any recent US administration, but will this strategy be sustained, or even expanded?  For how long?  Of course, Europe and China put up their own barriers.  Where is all this headed?
  5. Climate change. Although this may well be the biggest disruption of all, its long-term nature still undermines our sense of urgency, and thus the actual pace of decarbonization is nowhere close to matching what the experts say needs to be done.  Meanwhile, the costs of natural disasters are rising, and we can only hope that major new disasters don’t coincide with the pandemic.
  6. Energy volatility. The $28/barrel oil price at the time of this writing is attributed to Saudi Arabia asserting its market power and corona-driven reduced demand.  But if low prices are sustained, the implications for carbon emissions, electric cars, alternative energy, countries that rely on oil revenues, and the once-booming shale/fracking industry will be profound.
  7. Mass migrations. Wars, political instability, gangs, crime, persecution and lack of economic opportunity on multiple continents have put millions of people in border and refugee camps on what seems an almost permanent basis.  Tensions and risks are rising, and will become unbearable if the coronavirus takes hold within these camps.  Long-standing international immigration and asylum commitments are being increasingly exposed as empty words. 
  8. Serial epidemics. Even before covid-19, we lived through HIV, BSE, SARS, MERS, H1N1, ebola and zika which suggests that, unfortunately, this virus is unlikely to be the last. 
  9. Rising nationalism. Countries are increasingly willing to protect their most important companies, make their own internet laws, govern their own data, print their own money, close their own borders, and generally bypass global norms and institutions.
  10. Diminished leadership and trust. The US, Europe, China and Russia are all on very different, often rivalrous paths, making international cooperation even more challenging than it always has been.  Additionally, sharp political and cultural disagreements within – and between -- so many modern nations have significantly diminished societal trust, making it even harder for leaders to calm fears and credibly cope with all of the above challenges.

The need for strategic resiliency

For many years, we have stressed how the digital world often exaggerates the societal impact of information technology, given that earlier technologies such as electricity, telephones, cars, planes, heating and cooling had much more profound effects.  More recently, in our business transformation research, we noted the growing importance of external shocks, as the ten items above were rising steadily in importance.  While nobody saw the specifics of the coronavirus, as noted above, the risk of a major pandemic has been evident for quite some time. 

It’s hard to even begin to talk in the abstract about what all this means to our clients, but we think much of it comes down to the pursuit of what we call strategic resiliency. Organizations have long viewed resiliency in terms of disaster recovery, systems back-up, alternative suppliers, working at home, staffing up and down, financial lines of credit, and the maintenance of critical operations – all of which remain essential.  Enterprise IT has long been central to these efforts in terms of making sure that organizations have the capacity, infrastructure, at-home technology, data records and employee skills needed to work securely in a virtual mode.  It’s one of the IT profession’s greatest, but not sufficiently acknowledged, business contributions.  (For more on modern remote workforce management, see Coping with Quarantine: Pandemics and Reconfiguring the Collaborative Workspace.)

Traditional resiliency was once something assigned to operations and IT.  But it now dominates the boardroom agenda.  How well can your organization cope with a sudden drop-off (or explosion) in demand, global supply chain shortages, natural disasters, major government interventions, potentially sharp shifts in Chinese/Western relations, collapsing stock prices, rising debt, sudden M&A pressures (and opportunities), or a no-deal Brexit?  As work goes virtual, new even higher stake security challenges arise from bad actors, denial of service attacks, fake news and other cyber threats. Above all, there are the many human and ethical issues that come with trying to pay people fairly, ensure worker safety, and use private resources to better serve the public good.  As traditional strategic plans are virtually useless in all of these rapidly changing areas, companies are now discovering just how agile and resilient they really are across their entire value chain.  There will be many lessons for the future.

How the tech industry can help

The coronavirus has knocked the techlash off our top ten disruption list and has put fears of AI and automation into much-needed perspective.  Although it goes without saying that without the internet, the impact of covid-19 would be almost unimaginably worse, more can be done.  The dot.com community can regain public support by visibly becoming a bigger part of the pandemic solution.  While enabling people to work effectively at home is the most obvious of these contributions, there are potentially many others.  Who better than Amazon to track the real-time status of retail supply chains?  Amazon, Uber, Lyft, Grubhub, Just Eat et al can deliver vital food and supplies to the self-quarantined, especially if they can assure the hygiene of their trucks, cars, and drivers, and demonstrate that they can take care of workers in the gig economy.  As so many schools stand down, there has never been a better time for Edtech to stand up.  Netflix, Amazon and the cable giants can afford to supply free video services for a few months, or even until the sporting world resumes. Similarly, it would be great to see today’s tech billionaires open their wallets in more meaningful ways. Perhaps most importantly, Google, Facebook and Apple should be active members of the data gathering community.  Although it’s good to see Google becoming more engaged in the US, it’s mostly been a missed opportunity so far.  For example, while it is difficult to assess all the claims now coming out of China, it’s been reported that AI has helped in analyzing location and mobile phone data to better track and limit community spread.

Rethinking disruption

The ten challenges above surely make today’s digital disruption scenarios seem trivial – so much so that maybe we need to rethink how we use the word disruption.  Within the technology industry, the phrase disruptive innovation (made famous by the late Clayton Christensen) is used to describe the process by which a new firm, technology or business model overturns the existing order, eventually supplanting established market and industry incumbents.  That’s still a very important dynamic.  But in its wider English language use, a disruption is really anything that significantly shakes up the status quo.  For many years, the Christensen definition has been utmost in our thinking, but the original meaning is now rightfully dominant once again. 

Happily, this realization is also a source of optimism.  Like the risks, disputes and panics of the past, most of today’s disruptions will likely prove manageable (perhaps with the exception of climate change).  Viruses dissipate; vaccines get developed; trade deals are struck; supply chains stabilize; political and cultural tensions wane; trusted leaders re-emerge; the global research community takes aim at the problems of the day; and perhaps most importantly, governments act. 

Despite a deadly contagion, pervasive quarantines, and shocking employment and financial losses, most of the developed world remains peaceful and prosperous, as well as remarkably skilled and capable.   There is good reason to believe that our pharmaceutical, biotech, medical, university, government and other communities will eventually prove up to the task and that the center will hold.  But that’s scant comfort as the virus spreads, and these less-pressing disruptions loom in the background. As the 2020s unfold, exogenous disruptions seem much more potent than the digital ones. We’ve gone from the Revenge of the Nerds to the Return of the Material World.

 


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