As the world turns its sights to vaccine administration to get the global pandemic under control, corporate boards and CEOs are looking ahead to their post-Covid challenges. Nowhere is this challenge more daunting than figuring out if the global pandemic and its far-reaching impacts have created a temporary shock to their markets or a permanent shift in them.
COVID’s devastation not only infected global healthcare systems, but its infection continues to spread around the world and create chaos throughout economic, business, political and social systems. This level of systemic disruption is unprecedented since the last World War.
Understanding whether markets are temporarily impacted or permanently altered requires a deep understanding of the many small and large forces that cause markets to shrink or new markets to emerge. From shifts in consumer behavior to new regulations, these forcing factors are beginning to influence every market, some positively and some negatively.
Airbnb’s markets have experienced a significant negative impact during COVID, while Zoom experienced a positive material shift. Zoom was famously the beneficiary of a market demand explosion for online video engagement.
Airbnb’s markets cratered on both the supply and demand side. Their guests not only reduced their travel significantly, but new hygiene concerns made the proposition of renting a house or room to or from a stranger considerably less appealing for many. Fresh worries over guest cleanliness and disease transmission and changes in travel patterns disrupted both sides of their ability to make a market for temporary accommodations.
“Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb.”
They also call out potential favorable changes in behavior such as traveling closer to home and increased desire to travel outside the top 20 cities as potentially expanding their markets. Also, they call out an economic driver to the supply side of their market-making business model.
“… just as when Airbnb started during the Great Recession of 2008, we believe that people will continue to turn to hosting to earn extra income.”
Subtle factors can influence profound market shifts for every company. The forces of social, technological, economic, environmental, political, legal, ethical, and demographic change regularly converge to shape market needs and wants. Shake up all of those factors simultaneously as COVID has, and business leaders are faced with the most monumental collection of systemic risks, changes, and opportunities that they’ve ever encountered.
Moving from a laissez-faire attitude towards situational hygiene to a need for validated cleanliness shifts the consumer value proposition for many companies and what and how they offer it.
Online ordering and delivery was a secondary channel; it’s now the primary one for many businesses. Moving from a meet and greet culture to a strong aversion to in-person meetings has far-reaching impacts from events, to travel, facilities and the infrastructure designed to enable human movement and interaction.
Supply-chain design and resiliency will shift and impact foreign direct investment flows and patterns.
Corporate greenwashing will recede and give rise to a legitimate effort to understand risk in our complex natural world and our position within it.
Political polarization is giving way to thoughtful leadership in America, and new regulatory priorities will alter markets.
A renewed recognition of the fragility and threats to the digital business system that powers America, along with every business, has created a long-overdue digital and IT renaissance.
Digital as a business afterthought has now moved to digital as a core business value driver. The digital business system was not only one of the few complex systems that didn’t fail during the pandemic, but it saved the day for many companies as it kept employees and customers connected.
In a recently released EY survey, their research indicates that 63% of the global business executives surveyed say that the pandemic has increased their strategic focus and investment in digital transformation. Bill Casey, EY’s Americas Vice Chair, Strategy and Transactions, says this is a “10x leap forward in the appreciation around the role that digital/IT delivers to the organization. An explosion of digitizing the business and making it dimensionally more efficient is occurring. Executives have seen first-hand how these technologies completely enable the business.”
While the EY 2021 Global Capital Confidence Barometer indicates that 69% of the surveyed executives do not count on profitability returning to pre-pandemic levels until 2022 or later, this isn’t slowing down their new found appreciation for how digital business systems create and drive value.
Casey also thinks consumer behavior will drive large-scale and lasting change, “On the customer side, it’s likely to be a shift, and it’s not coming back. Customer buying behavior has changed and is not going back to where it was.”
Airbnb admits the pandemic’s long-term threat to their business model in their IPO prospectus, where they mention COVID over 200 times. They acknowledge:
“Moreover, even after shelter-in-place orders and travel advisories are lifted, demand for our offerings, particularly those related to cross-border travel, may remain depressed for a significant length of time, and we cannot predict if and when demand will return to pre-COVID-19 levels.”
The core strategic questions facing every board and CEO heading into 2021 relate to whether Covid has permanently shrunk or destroyed their company’s market, expanded it, or created new market opportunities.
There will be winners and losers as these many forces converge to reshape markets. The hard work for corporate directors and business executives is far from over and it’s becoming more strategic and more focused on shaping and securing our digital futures.