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Business World in the Post COVID-19 Era: Charting the Journey

, April 14, 2020, 0 Comments

coronavirus-covid-marketexpress-inThe world, as we have seen and known, has lived through in the Pre COVID-19 era, is currently coping with the COVID-19 pandemic, and will have to take the journey in the Post COVID-19 era. The present situation, which the world is going through, is akin to the asteroid impact on earth 66 million years ago that wiped out the Dinosaurs from the face of this planet; with the only difference that this time this impact is on the businesses and economy worldwide. This impact of COVID-19 has totally deformed the businesses, which would now need to be formatted (like in computer hardware terminology) and starting afresh.

This situation will totally change the way businesses were conducted worldwide, and doing business henceforth in the Post COVID-19 era will never be the same before as it was in the Pre COVID-19 era. This is because the challenges in the Post COVID-19 era will be totally different and the tools, skillsets, innovations and thought process that has been the “mantras” up until now will become totally obsolete and redundant. With the advent of unprecedented challenges, which has never been thought of before, the call for new skill sets, tools and strategies is gaining huge importance and momentum, something which the world is getting increasingly cognizant.

The economic recovery in the Post COVID-19 era will be extremely long drawn, and many businesses are likely to succumb. So, what’s going to be like in the Post COVID-19 era, what will be the priorities…

…well our take suggests that in the Post COVID-19 era, it will be SURVIVAL over REVIVAL and it will be the most important trend that will be universally acceptable.

Business and Economic Trends in the Post COVID-19 Era

Since the businesses have been deformed and thrown into ICU, with quite a few in ventilators, the first and topmost priority will be to get out of the ICU and continue to breathe i.e., survival. The continued existence of the businesses has become the biggest challenge, followed by revival, sustainable growth, profits and scalability. With this theme now being imprinted / transcripted in our DNA, we see the following to happen (or adapted by businesses) as trends in the Post COVID-19 era:

  • Seeking Bootstrap / Incubation Fund: It’s given that businesses, especially the small-scale players, are out of cash and the liquidity is totally dried up due to the enormous business loss that has happened in the preceding few months. This will exponentially push up the demand for fundraising. While they may have innovative ideas to tread in this difficult water, what they would be lacking is the emergency fund that needs to be deployed to make these ideas work and put the plan into action for effective results. Funds of up to US$ 1 million can be tapped and raised without having to dilute Equity and pledging any assets as collateral. Therefore, it’s necessary to have an actionable plan in place with an effective storyboarding for tapping the funds.
  • Probable Easing of Rigidity in the Investor Fraternity – A Blessing in Disguise: As the businesses are going to need funds in the Post COVID-19 era to ensure their existence as mentioned above, likewise the funds i.e., financial institutions and other investor fraternity, too, would be under pressure to deploy the fund corpus that they have been sitting on for a while. Our take, because of this situation is that – “we see the rigidity in evaluating investment proposals by the financial institutions and other investor fraternity to be relaxed a bit”. Because of this pressure to deploy funds, we are likely to see them to be a bit more accommodative and flexible on investment criteria, which otherwise they have been very rigid up until now. Therefore, the brutal rejection of an investment proposal may give way for more flexible considerations keeping the risk control intact. While businesses may see light at the end of the tunnel for accessing funds / liquidity, it may still not be an easy task. While we foresee relaxation/flexibility in investment considerations, that does not mean every business will be entertained and funded. Having said that, the businesses approaching the investors to seek funds must be professional enough to build a proper actionable and implementable business plan for the first two to three years along with a robust cash flow model explaining the assumptions used in the model. Therefore, businesses should take help of professional advisors who knows how to get the job done.
  • Virtual Office Phenomenon to be the Trigger for a Paradigm Change in Cost Rationalization: COVID-19 does carry a hidden boon that was, up until now, not explored. This situation, which is an inflection point in a business lifecycle, has opened the eyes of entrepreneurs and business leaders that an office space may not really be necessary for work deliverables to be managed and businesses to continue – a virtual office. This thought has been further corroborated by the sudden exponential increase in video conferencing for official meetings and webinars over the last one month, and there has been a general acceptance among business leaders that businesses can be conducted effectively without having to dig pockets for maintaining a large office infrastructure. The world now have realized that except for businesses that needs heavy infrastructure and large office space, most of the businesses can operate from virtual locations thereby reducing the office space only to host server/data room and a small conference/meeting room for situations where a physical meeting is absolutely necessary for a business transaction to be consummated. This will significantly reduce the fixed recurring cost (with inbuild escalation) of keeping a large office space, and will greatly contribute to the profitability of a business. However, this will likely lead to a crash in commercial real estate due to demand vaporization.
  • Cost Optimization will Rationalize Payroll Spectrum but will also likely Increase Happiness Index among Workforce: While I agree that this statement from us is a bit provocative and can be seen as “extremes”, let me take a moment to explain as to what we foresee in the paradigm change of cost rationalization. If the virtual office phenomenon picks up momentum, the need for employees to daily commute to and from office will become redundant. This will not only drastically reduce conveyance/fuel costs of employees commuting to work but will also ensure they have more quality time in hand to spend with family and friends – significant increase in work-life balance, thereby rise in happiness index, which, in turn, will increase productivity. This reduced cost footprint may lead businesses to relook at the payroll structures and rationalize it in line with the paradigm changes.
  • Cost Rationalization will also Impact Business Travel: Businesses, henceforth, are unlikely to authorize/approve business travels unless absolutely necessary. With the spike in video conferencing and speaking to stakeholders – colleagues, clients, etc – face-to-face in real time, gone will be the days for a blanket business travel at the drop of a hat. Virtual office phenomenon coupled with cost rationalization will be the factors for cutting down business travel.
  • Technology and Innovation will be the Way Forward: As virtual office and virtual meetings picks up momentum, technology and innovation will be the key for not only ensuring business continuity, but also sustainable growth while remaining asset-light. Scalability will be faster and easier if the spread of technology and innovativeness is stretched to the maximum.
  • Market Consolidation may Shift the Equation from a Buyer’s Market to a Seller’s Market: Instead of competing with each other, businesses with cross capabilities and synergies may join hands and become a stronger player in the market. Therefore, the incidences of mergers, acquisitions or hive off may likely go up. If this happens, the market will be concentrated with few players that will put them back on the driver’s seat in terms of product/service pricing – seller’s market.

Mother Earth will be the Biggest Beneficiary in the Post COVID-19 Era

There is a saying that if you do not give adequate rest to your body that it deserves, your body will somehow find a way to get it. This may come in the form of a fever or any other illness that will force you to take time out from work and take rest. That’s precisely the situation that we all are in today. Over the past century or so, human beings have been constantly abusing the nature and its ecosystem, leading to ecological imbalances. This has invoked nature’s fury time and again in the form of earthquakes, tsunami, cyclones, cloud burst, wild fire, etc. with each having devastating effect on human lives and properties.

With the world under lockdown due to COVID-19, nature is now claiming back what was rightfully hers. While some of it may again be intruded once the world comes out of this crisis, we foresee that the nature may still be greatly respected if the trends of virtual office and virtual meetings reaches the peak momentum. That’s because it will significantly cut travels across the spectrum leading to significant reduction in carbon emissions. This will be a gift from all of us to our children and the future generations.

How can the Investor Fraternity Support the Recovery in Business Ecosystem in the Post COVID-19 Era?

While we have, all this while in this article, advocated for virtual office and asset-light business models, we are also equally cognizant of the fact that this will work best in new-age industries, and corporate and sales offices of heavy / basic industries. The basic industries – manufacturing, capital goods, consumer goods, oil & gas, automobiles, etc – will continue to co-exist and cannot be ignored. The new-age industries are the peripheral industries and, more often than not, are dependent on the basic industries. In other words, the basic industries are like the nucleus in an animal cell, whereas the peripheral industries are towards the edges and are like the cell membrane containing cytoplasm.

The investors fraternity, up until now, have been divided on asset-heavy and asset-light models, where quite a few have been away from funding a basic industry for being asset-heavy. The expectations from the fraternity, therefore, would be more flexibility and expanding investment horizon that will include the entire business ecosystem based on the revival plan.

To Conclude…

While there will be a new learning as we all attempt to learn the new walk of life in this era, the going will be very tough. As social distancing becomes the new norm, economy and businesses will also witness a 180⁰ change in the dynamics. On one hand, businesses are trying to learn the art of a business continuity plan in a catastrophic situation, and on the other hand we are staring at a darkness with a long-drawn recovery. While all businesses/sectors are very badly impacted, there are some that has been hit the hardest. Though the world will never be the same, the sliver-lining from the COVID-19 impact is that it may see a huge shift in the manufacturing base from China to India in the Post COVID-19 era. This will significantly contribute in job creation not just at the bottom of the pyramid level, but also across spectrum due to the positive cascading effect.

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