The Future of Business: Trends Accelerate

COVID-19 is not an epochal crisis for the business world. It reflects trends that were already well underway.
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CRISES COME in two kinds: those that change the paradigm, and those that intensify current situations. Epoch-making crises create a “before” and an “after.” The Black Death of the 1300s came as a shock to European medieval society, undermining long-standing social hierarchies. It also triggered a flurry of innovations to economize on scarce labor, and these innovations eventually paved the way for the Industrial Revolution.

Similarly, the Great Depression of the 1930s ushered in a new era in terms of economic policymaking, as well as large-scale government programs and institutions such as Social Security and the New Deal in the U.S. It even brought about new artistic expression in the form of social realism.

COVID-19 is not an epochal crisis for the business world. Rather, it represents an acceleration of existing trends that were well underway before the novel coronavirus made its fateful jump from animals to human beings. Online shopping and distance learning have become increasingly popular for two decades. Automation and robotics have been in the works since the 1950s. The pandemic will surely create stronger incentives to replace labor with machines, given that the robots don’t need to observe social distancing. Remote work was also on the increase prior to the outbreak, especially in Scandinavia, where one in five employees who could work from home was already doing so.

Thus, the question is not whether this crisis will create an entirely new economy or business landscape. Rather, the question is what might be the ultimate consequences of the dramatic acceleration of multiple preexisting trends, colliding with one another in ways that could result in chaos unless they are channeled in productive ways?

A SAMPLING OF SECTORS

The pandemic will not upend entire industries, but it almost certainly will render some business models obsolete. Take the airline industry. In the immediate aftermath of the crisis, the low-cost business model based on high volumes and quick turnover may be hard to sustain. Traditional retail is not finished, but online retail was already wreaking havoc before the virus. Consider the department store, where large numbers of people try on everything from face creams to sweaters with relatively little supervision, leaving behind a trail of discarded items. In the future, what we are we are likely to see instead are many smaller outlets that rely on a click-and-collect business model.

THE PANDEMIC WILL NOT UPEND ENTIRE INDUSTRIES, BUT IT WILL RENDER SOME BUSINESS MODELS OBSOLETE.

A similar shift toward hybrid business models will occur in education and in healthcare, which combined account for about a quarter of economic activity in Europe and the United States. Let’s look at education first.

Some pundits are predicting the demise of on-campus education and residential college life. I find that such unwarranted forecasts make two types of mistakes. The first is to assume that distance learning is a new phenomenon that dates back to the availability of broadband a mere two decades ago. Well, mail-based distance learning became a cottage industry about a century ago in both Europe and the United States as providers used printed textbooks and vinyl recordings. The audio cassette tape made it even more popular after World War II, when tens of millions of people worldwide learned a foreign language or a trade without ever stepping into a classroom. Thus, distance learning is by no means a new trend.

Those who predict the end of the education model as we know it also make the critical mistake of confusing complements and substitutes. Online education is not a substitute for traditional classroom teaching. They are two different, and largely complementary, ways of capturing the imagination of learners, disseminating knowledge, and educating citizens. While I offer three online classes myself, I continue to see synergies between online and face-to-face educational models.

I believe that universities, including business schools, will pioneer hybrid models of learning that will prove to be more successful among students than either of the two pure types of instruction. COVID-19 will definitely accelerate that trend, much to the benefit of both students and teachers.

We might see a similar evolution in the healthcare sector. While some types of healthcare services, such as surgery, require doctor’s physical presence, many others can be provided online. Telemedicine has saved many lives in Africa over the last decade by connecting physicians remotely with patients. And since the pandemic began, healthcare organizations in the United States have reported vast increases in the number and scope of telemedicine sessions.

As healthcare providers discover more ways to use the best of what telemedicine and face-to-face treatment have to offer, we might anticipate the industry moving to a hybrid business model. Perhaps this crisis will trigger a wave of innovation in healthcare that will help us address cost inflation.

By contrast, the banking and financial sector is likely to see massive change as a result of COVID-19. Money is an intangible commodity. It can flow seamlessly from one part of the world to another in an instant. Digital platforms and new business models have been undermining the traditional banking sector for decades. This crisis will only accelerate that trend.

Fully digitizing payments will be the first and easiest innovation for financial institutions to implement. Next in line will be conducting due diligence, providing advice, allowing customers to sign documents, marketing new products, and managing customer relationships virtually. Banks and many other “utility” businesses—such as telecommunications, electricity, and water companies—have reported a huge increase in the use of bots and roboadvising. Customers are seeing that machine-based interactions save them time and keep them from waiting on the phone for a customer service representative, the newest endangered species. And thanks to artificial intelligence, the more people shift away from traditional forms of service delivery, the more accurate and useful machine-based services will become as ever greater amounts of big data fuel the voracious appetite of algorithms.

COMPLEX CONSEQUENCES

While some accelerating trends may benefit industries and consumers, other trends will be highly disruptive, particularly in areas such as economic inequality. The public health emergency itself has already led to a widening of economic disparities by gender, race, ethnicity, and income. The virus does not respect any boundaries, but it does flourish among people who do not have the luxury of social distancing or staying at home. Therefore, the likelihood of infection and its health consequences vary enormously in ways that exacerbate current inequalities.

Consider the case of employees who must show up for work if they want to earn their minimum wages. As they travel on public transportation and work on-site, they are exposed to the virus to a much greater extent than those who are lucky enough to be able to work from home. Moreover, the less advantaged people in society have a higher prevalence of preexisting medical conditions that lead to more severe symptoms and potentially to death.

This pandemic also will accelerate the trend toward economic inequality because it will lead to increased incentives for automation. Unemployment has soared, and many of the jobs now vacant will simply disappear as companies redesign their work processes in an attempt to make their operations more resilient.

In other instances, it is harder to anticipate the effects of trends that will be accelerated by this crisis. For instance, millennials are going through the second large-scale disruption of their lives. Will that change their values, making them more or less materialistic, other-regarding, or self-expressive?

It is also difficult to predict how the coronavirus will impact global demographics, especially in countries that have aging populations. On the one hand, all crises reduce fertility as couples postpone having children; as a result, populations skew older. On the other hand, mortality rates from the coronavirus are higher for those in the older age group, rebalancing the demographics toward the young.

MANY OF THESE ACCELERATING TRENDS WILL COLLIDE, CAUSING EVEN GREATER FALLOUT.

Gender dynamics also are affected. For example, women experience lower mortality rates than men at every age, due to their better anti-viral biology and their aversion to taking risks. But when they work from home, they take on a greater share of household tasks than their male counterparts and have greater exposure to domestic violence. We do not yet know what the ultimate effects from COVID-19 will be where gender is concerned.

Many of these accelerating trends will collide with each other, causing even greater fallout from the pandemic. To further complicate matters, governments are implementing different kinds of policies—not only to arrest the spread of the virus, but also to mitigate its economic consequences. Such diverging paths perhaps will create new tensions in global geopolitics, even as we continue to see the proliferation of populism, protectionism, racism, and xenophobia.

CALL TO LEADERSHIP

Many people are under the impression that this crisis catches the world at a time when we were already lacking in effective, inspirational, and transformational leadership. Big disruptions test all leaders and leadership styles alike. Perhaps the main historical lesson from previous episodes of acute social and economic stress is that leaders who deny or minimize the reality of massive transformations are at best merely postponing the reckoning and at worst making the crisis worse than it needs to be.

Given that the only possible response to change is change itself, leadership must be oriented to the etymological meaning that we always teach in business school: leading as opposed to trailing, and leading as opposed to resisting the flow of change.

 


Mauro Guillen bio

Mauro Guillén is the Dr. Felix Sandman Professor of International Management at the Wharton School at the University of Pennsylvania in Philadelphia. He is the author of the forthcoming book 2030: How Today’s Biggest Trends Will Collide and Change the Future of Everything.

 


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