If it takes 30 days to change a habit, 6 weeks of lockdown will change society, work and our economy forever — so what will it be like in The New Normal?
If you take just one thing, then choose this — the world of work (and the property structures that depend on it) will never be the same again.
Accelerating, not changing!
Prof Galloway argues that economic impact of the coronavirus is materially different from the 2008/9 credit crunch in that it accelerates the things already happening rather than materially changing them.
All of which are illustrations of accelerations, rather sudden shifts or changes.
Even among new tech disrupters, such as Hopin — a live events digital platform — this was in pre-launch prior to lockdown and has since reached 100K+ customers on its waiting list
Everyone knew that streaming, digitisation of events / meetings and remote working was coming — but even so, we don’t yet really know how digital communities form differently to physical communities. And what this is going to look like in The New Normal!
It is worth noting how quickly large non-digital companies have reacted to the coronavirus crisis — which suggests that they always had the capacity to respond, but were too worried or tied by previous commercial agreements to make the leap.
For instance, Cadbury and Heinz have launched a direct to consumer box — and, at the time of writing (10th of April), Cadbury’s website was holding visitors in a digital queue even though they can’t deliver until after Easter (at least 6 days later):
Similar fast moving consumer groups got threatened by supermarkets that if they built a direct to consumer box — that they would be taken off or placed on a less prominent supermarket shelf. But now the supermarkets have lost their power and FMCG companies are developing home delivery fast.
Bringing experiences home
Bringing experiences home — and not just products — is an area of new and surprising innovations. For instance, London restaurants are supplying “cook at home burger kits” and cocktails to your door.
These are novel attempts to bring a restaurant experience to your door — and actually, its quite good fun cooking a burger when you are stuck at home with nothing much to do.
So we are seeing the development of home delivery of services and experiences — not just products! Who knows where this might take us next…
Last mile delivery
All of which brings the focus onto the last mile delivery question — the who and how of getting products and services to our front door?
To understand how The New Normal looks, we have to ask what is Amazon’s position in this ?
For instance, it currently takes Amazon UK, in the lockdown, a week to deliver non essential goods. Do we complain, has there been a backlash on social media? No! Is that because we don’t care or because we understand the challenges or does it show the absolute control that Amazon has over home delivery (ie. we have no choice!)?
So, will we see an Amazon rise in different sectors? Restaurant ‘experience’ delivery and will there be new Amazons….? Perhaps so, outside the core delivery of boxable products.
However, the boom in supermarket shopping might only be a temporary phenomena. Once we’re stocked up, do we shift more (or all) of our shopping to home delivery rather than risk queues and infection? If so, is this the final hurrah for supermarkets — especially if infection risk lasts months and year(s)?
The forced change in shopping habits could just be the tipping point for changing established western economies — where there is (or was?) still a strong habit of going to a shop, touching the product, feeling the product and then taking it home.
Deliveroo reported that home delivery in Dubai, prior to lockdown, was x10 high than the UK. So is the UK and other developed economies suddenly going to accelerate to catch up with Dubai —(see this crowded delivery market story) and hurt traditional supermarkets?
However. getting back to the parts of the economy that are immediately and directly impacted by the current crisis, it is helpful to prepare for waves of economic and business breakdown.
Airlines are in trouble, we know — but so are the businesses that rely on them; cleaning contractors, shops in airports, food suppliers for airlines, fuel companies and taxi firms that bring passengers to airports and so on and forth.
Open table saw a 100% drop off in restaurant bookings running up to the lockdown — which affects not just the restaurants but also those who supply the restaurants — clean and supply the cotton for the table cloths and napkins, providers of food, plate and cutlery designers, candle makers, vineyards and so on and so forth.
These will create waves of bankruptcy and jobs losses from which it will be hard to recover and therefore, will have wider knock-on-effects on the rest of the economy, dampened or destroying demand. Okay, government support will soften the blow, but for how long and how effectively?
It won’t all happen at once, but economic damage will come in a series of waves — over the next 18 months…
Remote working is The New Normal
There has, for a while, been a remote working capacity developing in startup tech companies —which has been increasingly seamless thanks to cloud based systems and sharing of data. For startups this was partly out of financial necessity.
Until recently, big and traditional companies/ organisations have resisted remote working — but now they have no choice but to engaged. Hence, we are seeing the development of policy and protections that you find in the large scale physical work space developed for the new multi-user online / and video conferencing work space.
And research supports the productivity benefits of a shift to home working: people who work from home are likely to be 1.4 days more productive per week (Source). The reasons for this are that some people go into the office to be visual and then over-communicate and over-present; rather than focus on an appropriate level of team building and delivering productive work.
Equally, online meetings are more effective because they get into the nuts and bolts of an issue faster. They are more productive and speedy.
And, the stigma of remote working has disappeared. People won’t question home worker’s commitment or dedication in the way that it used to happen in the background.
A lot of tech companies have a culture dedicated person — which are critical to high growth tech companies — and they help focus onto the team, which is needed to make building home based teams successful.
It is likely that for big companies to successful in the online working world that they too will adopt and develop the culture and team building roles found in today’s successful startups.
The end of the 9–5 work day
Working from home is allowing people to flip their schedule … fit in a walk or exercise before or during the work day. And the work day is no longer linear — it can be calls in the morning — followed by time out for a personal or career development course in the afternoon — and then jump on emails and calls again in the evening. The 9–5 working day is finished, forever.
Parents with young children working from home need to yo-yo around child care — one parent works while the other attends to the children, and then they swap.
Hence, for home working to work, companies need to allow flexible schedules and this change then needs to become the standard for everyone.
Once the investment in transitioning is made and these policies are established and stabilise, there is no reason to go back to the old way of working. This is The New Normal.
Breaking down barriers
Moreover, these moves to digital teams breakdown the barriers to entry to sectors and meetings.
In tech sectors — you often have to be physically present — the removal of the ‘rule of present’ will breakdown barriers for those who cannot be in central London / NYC / Madrid in the evening! These not only include people who may have disabilities, but also those who either cannot afford to attend (students or low income) or have caring duties (of children and / or older parents).
By moving events and meet ups online, we are opening everything up to the talents and skills of many more people (there are some useful stats to support this here).
The challenge of working from home is to ensure that home life doesn’t swap productivity and that work doesn’t dominate time with family and friends.
Everyone needs to be able to draw boundaries around their work and in urban environment team members may only have a few rooms to live and work in. This requires more deliberate planning to ensure work and home remain to separate locations.
Equally, being constantly switched on can be damaging from a wellness perspective too.
Teams that up skill their people in terms of mental stress and resilience will achieve more and have happier teams.
In the current crisis, anxiety reaches everyone — everyone is having to think about their own or someone else’s health, mindset and wellness.
One minute we’re thinking about survival — food, milk, farm shops for vegetables- and the next, we are thinking about how to deliver a piece of work or pitch for business!
Our brains aren’t really designed for this…
In the future, expect budget to switch from training and development to more resilience based training and support.
Lastly, managing our digital notifications is key. Muting certain things will be important and different team members in different time zones will need to handle things in their own way — there is no one rule for all here!
The great migration
Migration out of London — to get to parents with gardens or less urban location is already happening. Will they return?
People still in the city are asking, why am paying sky high rent when I am working remotely? Will they remain?
In Spain, a number of the infections in the more rural regions to the south of of Madrid and on the coast of Spain came from the Madrileños escaping Madrid to get to their parents’ rural family home or their place on the coast.
Once away from the costs of a big city, and with the acceptance of home working, will people really go back?
Or, as office space is the second biggest cost for most companies, will companies want their staff to come back or stay remote?
Different groups of people will respond differently, yet, it is almost certain that how we interact with physical space has changed! And that change is permanent.
Bye bye property
Something that companies haven’t yet done is figure out the total property cost on their firm.
Yes, companies know how much it costs to rent and manage an office space, but how much poorer are staff who have to pay exorbitant property costs to live near work or ensure the huge travel costs and discomfort to commute long distances?
Once a company adds the cost of their office location decision to their employees additional living costs, will they really want to re-impose that burden on their teams?
Equally, can a company really claim to be environmentally friendly if it requires all its staff to travel daily long distances in order to be in attendance at an office?
And if there is pressure on company profits in the years ahead, will that not translate into pressure on wages, which in turn will lead to a demand that staff not be required to spend £000s / US$000s / €000s on unnecessary travel, work clothes and over-priced city centre lunches and accommodation?
Betting against this pessimistic property forecast, Blackstone raised a US$10bn European property fund. Blackstone believe that they can make money on ‘distressed’ commercial property just as they did after the financial crisis of 2008/9. However, this time, could they get it badly wrong?
Of course, you could have argued that in Samuel Pepy’s London of 1665— just after a quarter of the population had died of the plague, that the city would collapse — and it didn’t, but that doesn’t mean it bounces back quickly either.
Remember Prof Galoway’s advice at the start of this piece — not changing but accelerating! The shift away from super-charged prime city centre pricing was already happening — now, perhaps, it is about to happen much faster and commercial rents and values are going down quickly in the short and possible medium term.
In the travel and property sector, AirBnB’s recent private equity raise significantly reduced its valuation of just a few months ago. AirBnB is both a property company (well, a platform for everyone else’s property) and a travel / experience company. What will happen? Goodness knows, but some of those short let apartments will seek modest long term rents instead or simply sell, bringing down rents and the cost of homes. And, helping to push up the price of the fewer apartments still offered on a short let basis when the recovery does come.
One thing that offices do provide, of course, is both human contact and a sense of belonging. But there again, the local library is also place to work, as is a coffee shop or a co-working space.
If we can connect to our teams and colleagues digitally from these local places, why would we commute? We can be physically alongside our neighbours, we can belong and be part of community, and connect with our diverse and disparate work teams digitally.
Will these locations become The New Normal work hubs? Places where we can walk to work and cut commute costs, whilst building a strong sense of ‘local’ and community?
U shaped recovery
The argument for a U shaped recovery looks at Hong Kong’s experience of recovery after the SARS outbreak — how did it go back then? Pretty good, economically, once the infections declined (source).
Yes, the economy had a tough time for 18 months or so, but at the end, hotel bookings and travel recovered above levels before the outbreak.
But Coronavirus is different. Firstly, Covid-19 is global. So there can be no new inbound unmet demand releasing economic growth — all nations are suffering, spending fortunes on health and our children’s fortunes on keeping our economies on life-support.
We are witnessing a huge crash in global demand and no region will be spared so there is no capacity for one country to pull another out of the economy out of a hole (see China’s struggle to recover).
Secondly, the weightless world is one where so much is free. Across the world, publications and newspapers are folding as readers move further online and stop picking up copies at the newspaper shop. These titles aren’t coming back.
Digital disruption often shrinks costs for consumers rather than enlarge economies — I did some analysis of the effect of digital on music and book industries in this forecast here — in which those industries shrank between 40% and 80% in terms of revenue in the past 20 years.
If we accelerate digital, that revenue shrink will happen to more industries faster — for instance, take university education. Are students going to pay £50k or $100k of debt for a degree that makes little or no difference to their economic prospects? Not if they can get similar education online or part time and at significantly lower costs.
The Human side
Hand shaking is dead! Hugs and kisses in southern Europe are gone! These are major social changes and how will humans cope without physical contact?
Touch is a natural human instinct and we need to redress that — and allow strangers to meet. But how?
We humans — we go out for drinks with colleagues, don’t we? It’s part of what we do? And students and young people want to congregate in pubs, clubs and music venues too.
And what about events?
Going to events and listening to like minded individuals who have achieved something significant, fills us with energy — so how do we replace that?
Yes, digital can help — but what about the random connections we make in the breakout rooms?
How do we ‘bump’ into the right people anymore? There is either more to come here in digital form — or yes, we will revert. But equally, a hybrid of physical and digital events is another likely outcome as we step into our New Normal.
This article was written up from our conversation about The New Normal with Jazz Hanley of TechNation and Sinead Daly of Revolut with additional contributions from Stuart Smith, Maria Noel Reyes and Manoj Ranaweera.