By Goh Puay Guan
SINGAPORE — For many people, it was a relief to “check out” of 2020 and “check in” to a new start in 2021. Whilst uncertainty still remains, here are five business norms that could await us.
Technology becomes mainstream
Within the tech space, we also saw similar effects of COVID-19 disparities. While companies like Grab and Airbnb had to take restructuring measures initially, others like Amazon, Netflix and Zoom shot up in their share prices partly due to the work-from-home phenomenon.
At the same time, the success of Airbnb’s IPO, and Tesla’s profitability as an EV manufacturer, are also indications that the upstarts of yesterday are fast becoming the mainstream Fortune 500 companies of the future.
Corporates jump onto the bandwagon
The long-standing large companies are realising the urgency and fighting back with their diversification and innovation. Hollywood studios are releasing their blockbuster movies via video streaming services to make up for declining cinema sales. DBS has set up a digital exchange which allows investors to trade in cryptocurrencies and digital assets. Two years ago, Walmart started using sharing economy concepts to let its employees make e-commerce deliveries on their way home, thereby leveraging on its own retail network strength.
These efforts potentially reduce the amount of space for startup companies without economies of scale, as companies bundle new innovation offerings into their traditional businesses.
The new norm is maybe less so for consumers
While companies are realising the benefits of digitalisation, what about consumers?
The surge of “revenge” spending, eating and partying seem to indicate that when health protocols allow for physical gatherings, we will revert to doing so. If large crowds worldwide are any indication, even with the growth of e-commerce, the need for social contact and experiences will still drive physical consumption. For example, when Singapore entered Phase 3 in December, crowds thronged the malls. These are good signs for the beleaguered retail, F&B and leisure industries.
Consolidation of companies
With smaller companies impacted more by business slowdowns, they may become targets for acquisitions. Struggling owners themselves may look for a way out. There can be opportunities for companies to consolidate the industry and acquire competitors or adjacent capabilities.
SMEs seeking to survive could work together to gain economies of scale. The use of shared spaces and cloud-based apps, are already ways in which shared services are helping companies make their cost structure more flexible. This also creates opportunities for companies which use subscription-based business models.
Supply and demand yet to reach equilibrium
The pandemic has overturned the usual business planning assumptions. Businesses have no clear visibility of what is temporary and what are permanent changes. For example, 2020 saw freight rates shoot up as shipping lines and airlines cut capacity, and the rebound in shipments in the second half of 2020 led to capacity shortages and long waiting times. The need for vaccines to be distributed globally as fast as possible also adds a temporary surge on sourcing, manufacturing, and logistics.
We should expect to see supply chain bullwhip effects in fluctuating prices and supply, as companies continue to balance between reduction of costs, and addition of resources to capture sales.
No one doubts that the global economy will rebound in 2021. We are just not sure of the shape of the rebound. The key issue would of course be how quickly the vaccines can be distributed, and how effective they are in stopping the spread of Covid-19. As the saying goes, health is wealth and that’s even more true today.
Goh Puay Guan is an associate professor in the Analytics & Operations Department at the National University of Singapore Business School. He is also the Academic Director of the NUS MSc in Industry 4.0 programme. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.