The four biggest post-COVID macro issues

The four biggest post-COVID macro issues

TLDR: there are four big questions post-COVID. Now is the time to think about the decisions they will force on you, so you’re ready when they come.

 

 

What we’re talking about: This is the most uncertain moment in our lifetimes. It's also a moment when a lot of businesses are having to rapidly respond to ensure their survival, blocking and tackling across the entire organization. But it's important to remember that beyond survival, the post-COVID world is going to look very different. And if you don’t make today’s actions more deliberate, all the decisions you’re currently making might take you somewhere you didn’t intend. 

 

So while we can’t know exactly where things are headed, let’s look at the key uncertainties that will determine the post-COVID landscape. The below are our top four:

 

 

All of these trends were happening already - but they're now arriving much faster. So if you developed your strategy on the basis of these trends already, you're ahead now - but regardless, there are some big decisions coming:

 

Economic outcomes: How deep and long lasting will the downturn be? In most scenarios, we think elements of a zombie economy are likely, making finding the remaining pockets of growth a key post-COVID issue.

 

De-globalization: How will US-China relations evolve from this already sour spot? And where will Europe head? What about American global leadership? Most directions don’t seem positive for businesses. For many, the China supply chain paradigm will be the most acute issue for reconsideration.

 

Lasting new behaviors: While some new behaviors like hoarding toilet paper won’t last, others might – preferences for online services, migration out of cities, a desire to buy locally-made goods (a recent survey suggested 21% of US consumers would avoid buying products made in China). How will behaviors rebound after quarantine? And what does this mean for serving your customers?

 

Post-crisis politics: While everyone worries about the immediate response, what will the corrective response be after? The current discussion around the $2T stimulus is basically like talking about TARP in 2008, but as eye watering as that is, the real question for business is what the Dodd-Frank equivalent will look like? It could well be orders of magnitude more revolutionary. Will the eventual response lead to more government or less government? Prioritizing growth or redistribution? Will there be incremental fixes or structural change?

 

Beyond these four, there also remains the question of the next grey swan event - what will the next major disruption be? The world certainly hasn’t gotten any less risky, and there’s no shortages of candidates. Italexit? A genuine clampdown on emissions? End of the oil era?

 

 

Lessons to learn: Its too early to know exactly where this is all going. But we know that the risk is threefold: 1) you’re not preparing for the eventual decisions that are likely, 2) you miss the opportunity to act when the value is highest (i.e. first!) and 3) you make short term decisions now that don’t accord with where you’re going to end up later.

 

Even in the midst of firefighting, we recommend a four step exercise:

 

1. Define the key decisions you’ll face post-COVID (e.g. supply chain footprint, find new growth markets)?

2. Structure your options and criteria (e.g. do we stick it out in China, re-shore and automate, or move to a third country. What are the decision criteria?)

3. Setup a system to monitor (e.g. act now, or at a certain tipping point?)

4. Find ways to act (e.g. don’t sign that long-term contract now, or prepare for taking the type of action that you might have to later)

 

Opportunities are largest when everyone else is mired in uncertainty. Now is the time to take advantage. 

20.04.2020

Strategic planning

Analysis