As companies slowly transition from shock to survival during what is arguably history’s biggest peacetime crisis, it is becoming increasingly clear that the coronavirus pandemic has the potential to completely transform how the world does business.
During an initial ‘Shock Phase’, which started around the middle of March and ended towards the middle of April, we have seen a flurry of initiatives from businesses across many sectors, under the banner of “we are in this together”.
Initiatives ranged from employee job reassurance, CEO salary sacrifices, donations, and support for healthcare professionals and vulnerable customers, to the manufacturing of PPE and mortgage holidays.
alva, which provides business reputation intelligence, found that actions focused on the production of medical equipment and employee health protection were the most likely to impact positively on a business’ reputation. The impact of executive pay reduction schemes and vulnerable customer support was also high.
Emotional touchpoints of solidarity, fairness, responsibility and compassion have resonated. As has the belief in ideas such as human ingenuity and pulling together in times of crisis.
Indeed, electric car giant Tesla’s announcement of ventilator production had a huge impact; while specific store opening hours for vulnerable customers increasingly resonated, and several companies gained huge support by offering a range of free goods and services to NHS staff.
All of these activities were designed to avoid the immediate damage to those most at risk such as front-line workers, the elderly and the unemployed – almost at any cost.
But as communities began to feel safer, our research shows there has been a shift in corporate attention away from philanthropic announcements and support for communities. Businesses are seeking to gain a better understanding of the impact of the pandemic and are making more pragmatic decisions. We are calling this the ‘Existential Phase’.
Businesses are beginning to juggle different competing demands on resources and financing, as they seek business survival while preparing for future dynamics. This is forcing companies to ask themselves some fundamental questions.
In this Existential Phase, we may see businesses moving away from the belief that companies must maximise shareholder returns at all costs. There are already loud voices acknowledging the flaws in our current model of capitalism.
When 93 percent of profits at the typical listed company are devoted to either dividends or stock buybacks to enrich shareholders and executives, questions of fairness will proliferate against a backdrop of government bail outs to minimise unemployment.
Another dominant theme we expect to see more discussion of is the threat of ‘Big Government’ to society. Many voices have already warned that the combination of the emergency Coronavirus Act and existing far-reaching powers to gather data creates the risk that new contact-tracking technologies could be used as a means of social control.
Earlier this week, for the first time in history, the price of West Texas Intermediate – the benchmark standard for US oil – became negative. The outbreak has come at a time when globalisation was already under serious threat from trade wars and protectionism.
COVID-19 is being seen by many as an accelerant to many of the paradigm shifts already under way, such as deglobalisation, the rise of populism, and the demise of shareholder capitalism in favour of a stakeholder model.
These are big themes that will not be answered overnight. In the coming weeks and months, we are likely to see that as businesses are forced to do more with less, many will find better, simpler, less expensive, and more inclusive ways to operate.
We will see new models to tackle what are likely to be the next big themes: global healthcare, global equality and global climate change.
Firms unwilling to adapt are unlikely to make it.