Digital road to recovery

Written by:
Matthew Tod
"I like to plan. I like planning a lot, and my favoured technique is scenario planning."

Needless to say, I have been thinking a lot about what happens next given so many of my previous assumptions have been ruined by the virus. I'm now working on new scenarios.

As I have read and thought I have come to believe that we are going to see a huge lift in digital adoption that will accelerate existing trends and force us all to confront the impact of these trends with positive and negative consequences. This quote “The future has arrived — it’s just not evenly distributed yet” by William Gibson I find very helpful as it encapsulates where we are today, and I believe the trends unleashed by the pandemic will drive the distribution of digital technologies faster and deeper into every sector of human activity.

I am sharing here my view of the world going forward to get feedback and input, and I am keen to hear how other people are thinking about the next five years. Maybe you believe in the V shaped recession and a rapid return to normal, or maybe you view things more apocalyptically. All are valid scenarios so please send us your thoughts.

I'm going to give you both the background and my thoughts on the impact of the pandemic, skip these first two sections if you just want good news!

Understanding the medical outlook

This article has been fundamental in my understanding of the pandemic and it created for me a very good framework in which to plan. The article describes two stages of the pandemic and the response we must take to regain control. It uses the term Hammer for the initial response, and the Dance for the ongoing battle until there is a cure or we have achieved herd immunity. I have used this article to frame my future looking scenario as follows:

Phase 1 “The Hammer”: The 6 months health crisis to September 2020 that involves locking down populations around the world to gain control but not eradicate the virus. Right now, 25% of the world’s population is being locked down and more people advised to isolate but this is not a cure, it is a means of deferring the pain and a means to buy time for real solutions to be found. However, we are all still saying things like “I will see you when things get back to normal” but the Dance means there will be no return to normal for a few years, back to normal is a hollow mantra we repeat to comfort ourselves. We are almost all in denial about the impact and have yet to start the grieving process for the way the world was.

Phase 2 “The Dance”: This period of 18 months economic crunch and “re-outbreak crises” runs to Easter 2022. In this period the virus keeps reappearing and must be trapped and confined once again. It is very disruptive and tedious; countries and regions move in and out of lockdown, some events happen, some don’t. Travel between countries is complicated due to suspicion of infection. If this happens it will cause anger, unrest and depression as “normal” is not restored as promised and there is no end in sight.

Phase 3 “Economic Recovery”: Once herd immunity is reached in many countries, through medicine and acquired immunity the rebuild process will get under way. I’m thinking it will be a 3 year rebuild/transformation to end in 2025 with tax rises to pay for it all. At this point we will achieve acceptance that the world has changed and start to find meaning in the “new normal”.

So, I am currently looking at a five-year period, two years of which are highly disrupted, but three of which will be full of interesting opportunities for growth and development. How do you see it playing out?

Looking at the economic outlook

I’m no economist, but it seems to me the medical outlook outlined above will drive a huge number of inter-related issues, and this list just touches the tip of the iceberg:

  • Massive reduction in economic activity in the short term, and it is not a V shaped recession because the dance is not V shaped.
  • Household incomes fall due to reduced hours and bonuses, unemployment rises fast for a short period and then sticks due to slow recovery.
  • House prices fall, stock market have low growth / high volatility for a prolonged period leading to a reduction in the financial security of many people.
  • Consumerism takes a hit due to lower incomes and a reduced feel good factor; saving and economising become the new chic.
  • Government will seek to stimulate the economy powered by borrowing beyond belief. Politicians that preach prudence will be dropped by voters at the first opportunity.
  • Resilience for country, governments, organisations, businesses and individuals become something that matters. Everybody will watch Bill Gates to understand the issue. Investment in resilience becomes mandatory once we realise that this will happen again.
  • Government expenditure growth and long-term investment in healthcare, research and social care to create future resilience will be the top spending priority. It will be very popular.
  • 5G and broadband to facilitate home working will be a government priority, airports and roads will get demoted as spending priorities.
  • Kick starting a consumer driven recovery will prove hard due to mental scars of the global population. Interest rates can’t be cut and government spending on resilience related work reduces scope for further tax cuts.
  • Economic/environmental tension grows, civil unrest may happen as people become frustrated by reduced lifestyle, lack of progress and inequality.
  • Businesses that don’t recover quickly limp on and then go bust later in the decade saddled with debt.
  • Country dynamics shift, border control and access become a very political issue, wars could breakout, traditional alliances may collapse.

So yes, I can see some interesting years ahead, and I’m sure you can think of many more or you can correct my assumptions, so please send me your comments! This thinking is what then shapes my view of the future, and why I think there are some fantastic opportunities ahead for all of us if we get into the right place at the right time.

The Digital Escape Map

There is I believe a silver lining to the cloudy sky we see ahead, and it is a silver lining that the most digitally advanced companies and those with the most digital skills will use to prosper greatly. The prolonged lockdown of the Hammer, and the variability of life during the Dance will have a profound impact on digital adoption and will drive a series of trends:

  • Digital tools and services that are forced on many during the crisis acts as a spur to adoption, people who were reluctant to change and use digital services now have no choice but to use them. Practical necessity is the driver of adoption.
  • People discover that the digital experience is overwhelmingly good, and they embrace technology, try it out and adopt it like never before. The stats on streaming, broadband use and new customer sign ups bear this out already.
  • Human behaviour is changed by our experiences and the vast majority of forced digital habits remain in place once people have adopted them. The Dance ensures they keep up and don’t revert to old behaviours. Suddenly trips to shopping centres will seem a bit quaint (and risky), going to supermarkets will be something to be avoided and talking to a doctor via video will be normal.
  • Processes and working practices within organisations will have to change to support this new rapid advance has to change. A wave of reorganisation will follow, and this will spur sales of new digital technology.
  • Unthinkable changes become palatable as a result, for example will GPs go back to having only physical surgeries that patients must attend? I doubt it very much.
  • Resilience become as a new reason to invest more in digital in addition to financial reasons. This drives ever fast digital growth.
  • Supply chains will have to balance low cost sources with agile regional digitally enabled suppliers to create a broader portfolio that has a lower risk profile.
  • Phoenix businesses e.g. airlines, travel companies are reborn digital shorn of legacy systems, pensions and liabilities. They will be strong competitors.
  • New businesses are born digital in ever greater numbers, and because they use new digital technology old technologies dies even faster.
  • Pre-digital Dinosaurs, saddled by debt, non-digital culture and poor leadership limp on and die later in the decade

My view is the digital acceleration will be huge and prolonged driven by these factors. It will transform governments and businesses; it will make many of the forecasts given out by pundits actually come true and it will set us on a path to the end of the digital revolution. Not all industries will be impacted equally, and they will be subject to other trends, and that is what I am currently thinking about and will write up and post in the future.

So that’s my working scenario, but what do you think will happen in your world?

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