Forest Trees

Rising to the Challenge

With so many immediate and obvious impacts, the challenge is clear: we need to mitigate the impact of the crisis, control the adjustment costs of reaching a new normal equilibrium and shorten the recovery time.  The challenge is immense but the opportunity is equally significant.  Let’s consider what the recovery might look like in three macro scenarios.  You may also find our detailed scenarios thought-provoking.

 

Recovery Scenario 1:  It’ll Pass

 

First, it is worthwhile to say that, after a sustained impact, recovery may come eventually on the principle of “this too shall pass”.  We could, therefore, view Covid as a temporary interregnum between two periods which look very similar.  This is the view which many of us probably felt to be plausible before lockdown, before the various job retention, business interruption and other social welfare schemes.  At the very least, we may have thought it is only a mild condition for many and its impact will be transient and equally mild.  If doubts remain, they will not remain for long.  Moving into lockdown proved to be the easy part, compared to the seeming challenge of working out how to lift lockdown without creating a second peak of infections.  This laissez-faire route to recovery seems implausible, although it might be achievable for those who can effectively hibernate during the interregnum itself.  On balance, it does not represent a sustainable New Normal for planning purposes.

Recovery Scenario 2: Permanent Damage

 

Second, is the prospect of permanent damage.  This view is all too real for many organisations at the moment and there will be (and indeed already have been) some tragic circumstances in which organisations ultimately fail to weather the storm.  In our respective ways, we will be called upon in some manner to help those folks to find a New Normal, but it will be a materially different outcome from their original hopes.  Behind those organisations will be others that never seriously recover to anything like their previous normal.  The permanent damage is akin to those firms after 2008 who fell into a zombie state supported only by abnormally cheap money.  These organisations may have the toughest time of all as they grapple with the challenges of seeking to sustain marginal operations over a turbulent and protracted recovery period.  The three immediate costs are likely to emerge as a series of increasingly tough hurdles that need to be crossed over a relatively long period.

Recovery Scenario 3: Better than Before

 

Third, is the prospect of rising to the challenge.  In this view of the future, organisations (some of which do not yet exist) recognise the opportunities implicit in a crisis that has broken previous norms and provides an unparalleled opportunity for a reset.  The eclectic choices in designing a New Normal which effectively flow from recognising that the vast majority of people have survived and still have a range of vital needs [3].  These are the organisations that either already know or will find very soon their place again in our society and in our economy (probably both because the social and economic impacts of our actions have probably never before been so immediately obvious to so many people).  We have all just had an object lesson in what is important in life and in many ways it does not correlate to what we previously valued in pay, esteem and privileges.  In rising to the challenge, this scenario opens the prospect of achieving an outcome that both shortens the recovery period and aspires to achieve something better than before.

 
 

These are not the only outcomes, but they are the three archetypes we have chosen to illustrate a range of outcomes and to underline the importance of scenario planning.  For an entertaining and thought-provoking read on scenario planning as a tool for strategic thinking, we recommend the classic article by Paul Schoemaker [4].

 

So we conclude that the temporary interregnum between largely identical ‘normals’ is implausible and the prospect of permanent damage must be avoided, which leaves us with an imperative to work actively on shortening the recovery period and aspiring to achieve something better than before.

 

[3] We might realistically expect shortages to become more acute not only in health and caring professions which seem to be anticipated readily in every scenario we have heard for some weeks but also in: computing (lock-down and social-distancing may be a catalyst for developments in virtual and augmented reality), engineering (rapid manufacture and the potential to re-establish cottage industries for some products) and, indeed, across the sciences.  However, we should not overlook opportunities in education (moving provision on-line at pace may be readily followed by recognising that scale economies are possible and that the ability to widen access especially to those newly displaced by the economic shocks is a significant opportunity), nor in design (more biosecure products and products we still don’t know we need), nor in arts and culture where the impact of social distancing calls out for innovation in creation and performance.  Entrepreneurship and innovation will continue to be huge driving forces but perhaps with a greater sense of social purpose than has ever been needed before.

[4] Schoemaker, Paul J. H., Scenario Planning: A Tool For Strategic Thinking, Sloan Management Review, 36:2 (1995:Winter) p.25: https://sloanreview.mit.edu/wp-content/uploads/1995/01/bb0aeaa3ab.pdf

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