The Covid-19 pandemic is destroying many human lives, and the social and economic consequences of the lockdown and social distancing policies are wreaking havoc on many more. The livelihood of countless families and entire communities the world over jeopardized by the potential aftermath of the virus, with unemployment on the rise, and uncertainty on whether companies can stay afloat because of delayed investments, cancelled contracts, and disruptions in national and international supply chains.
All across the globe, all eyes are on the evolving situation in China, as we wait to see what tools will be effective in facing the second phase of the emergency. Likewise, we also look to the countries that were first struck by the Covid-19 pandemic, in an attempt to predict what will happen here in Italy to our companies and our organizations in the coming months.
In South Korea, after many companies encouraged their employees to work from home during the height of the crisis, the flows of public transportation and the level of air pollution are slowly climbing back to pre-crisis levels. Most pedestrians wear masks, which are now available in pharmacies and stores. Cafes and restaurants are open again, although with fewer customers.
China too is slowing entering its own post-Covid-19 world, and the experience there is shining a light on five critical questions we need to focus on: uncertainty of demand, lack of liquidity, interruption of supply chains, digitalization, and last but not least the very real (not simply professed) importance of the human side of companies, more critical than ever before.
As for the first question, China’s example shows that measures to contain the pandemic also encompass restaurants and other communal areas, in addition to limitations on air travel. What’s more, domestic demand will be limited due to unemployment, financial difficulties, and risk-averse behavior among consumers in general. Right now many people are still frightened by what has happened, and it will take time before the situation goes back to normal. On the other hand, with companies resorting to smartworking, there is greater need for digital communications and solutions for storing sensitive data, meaning that demand for connectivity and cloud storage solutions is constantly climbing. Putting millions of Chinese residents on lockdown has also triggered an upsurge in demand in the gaming sector for mobile phones; with people spending hours at home, more users are spending more time gaming online.
As for dealing with liquidity, interesting data have come to light in a survey run in February 2020 by several Chinese universities. The Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) analyzed the impact of the pandemic on over 2500 Chinese small and medium sized enterprises (SMEs). The main challenge for most of these companies is a lack of liquidity. In fact, 20% of interviewees said they couldn’t survive for more than a month. The survey also confirmed weak domestic demand, with ripple effects on company revenues. The drop in profits hit exporters hardest, with more limited damage to SMEs that operate in B2B sectors.
The ESIEC study also reveals that companies positioned in the middle of the supply chain of a given sector need to contend with a lack of raw materials and components. The global economy depends largely on Chinese manufacturing of finished products and components for the automobile and electronics industries, for medical equipment and supplies, and for consumer goods in general. According to projections, it looks like the return to normal for production will be slow. What’s more, a labor shortage in February and March 2020, along with stricter safety standards in the workplace (including PPE for employees), and the sluggish recovery in the logistics sector may cause severe disruptions of the global supply chain.
Moving on to the question of digitalization and innovative solutions, we find that China is currently experiencing an added acceleration in digital transformation. In 2003, after the SARS epidemic ended, the Alibaba Group created Taobao, an online sales platform. In recent weeks this and other platforms are offering an immediate remedy to the lack of liquidity: with the help of blockchain technology developed by Ant Duo-Chain, SMEs can apply for loans by tapping into the credit of bigger players. At the same time, e-commerce is also growing thanks to an upswing in online purchases, often integrated with popular chat platforms.
In the corporate context, upheavals trigger innovation. The need to limit social contacts during the epidemic fact-tracked the introduction of delivery systems via self-driving vehicles. What’s more, social distancing policies for citizens and pressures on doctors and nurses spotlighted the need to expand telemedicine, focusing greater attention on mental health at the same time. Unmind and Headspace, UK-based startups for psychological support, have begun offering free access to their platforms for healthcare workers. In China, the startup Guahao created a platform with more than 8,000 volunteer doctors who offer online consulting, even in English.
Will these changes become permanent? According to a consumer survey conducted in Hong Kong at the end of last March, before the second wave of the pandemic, only 6% of interviewees said they hadn’t changed their daily habits.
Like most of my colleagues, recently I’ve been receiving messages of encouragement and support from former students and other teachers all over the world. I also had the chance to discuss the impact of Covid-19 with Mengjia Ma, an entrepreneur from Shanghai and former participant in one of our Executive Training Programs at SDA Bocconi School of Management. She pointed out another incredible revolution that is underway right now on the front of digitalization of the consumer goods and services sectors - from “online hospitals” to livestreams for retail sales.
She also mentioned another sign of the changes that are taking place in post-Covid-19 society. On April 7, a television newsreader named Zhu Guangquan took part in a livestream show on Taobao Live, along with the influencer Li Jiaqi, to promote products from Hubei Province. The event generated over 3 million dollars in sales. A mainstream television presenter joined a famous influencer of beauty products to help local companies sell Wuhan’s famous hot and dry spaghetti, tea, snacks and other products from the region. And this isn’t the only example of celebrities or leading companies dedicating time, energy and resources to help their communities contend with the economic fallout from the pandemic. Pinduoduo, an e-commerce platform, has created a channel called “Help the Farmer” to reopen sales channels between farmers and customers which were interrupted by the crisis. JD.com and Alibaba, top e-commerce groups, have announced huge recruitment campaigns, hiring people who were fired from their jobs in restaurants, hotels, cinemas, and traditional stores. In Italy too companies reacted quickly with generous donations to hospitals, reconverting their production to personal protection equipment and valves for ventilators.
These events are signs of the shifting economic and social paradigms in the new world order, post Covid-19. In light of the long-term impact of the pandemic on the economic and social aspects of our lives, these changes are here to stay. So it seems that in the post-Covid world, success and progress will be measured not only in economic terms, but in human terms as well.