As of 20th June 2020, reported and recognised COVID19 figures by the GOI, are 4,11,773 infections, 13,281 fatalities. To put things in perspective, we're adding on an average over 13K cases, every day, for past few days, we're 3rd largest in daily caseload increase, 4th largest in the overall volume of cases in the world and hold the dubious 8th rank on overall mortality. All of this when India's ranking on testing is 147th among 192 countries, to give you some perspective, the tiny nation of Nepal is testing 2.7 times more than us on a per million population basis, as per John Hopkins university study. Many experts (Professor Jha, Harvard Medical school) believe that the actual number of cases in India must be anywhere between 4 to 6 crores.
The entire planet is reeling under this unprecedented crisis.
We as a country, however, are not so much in the same boat with the rest of the world as in the same storm, as far as the COVID19 risk is concerned, because our public health infrastructure is not among the best in the world! Two people hardly agree on the same thing in the current dangerously polarised times let alone nations, but a unicellular pathogen has effortlessly brought about consensus among people divided by nationalities, ethnicities, race, political affiliation and religious views, by and large. The world has dedicated its entire collective cognitive bandwidth towards observing and studying ways to get better of the virus or to learn ways to survive with it. I am gravitating towards conceding to the possibilities of a shared future with the virus. Finest minds in the world have been examining the pathogen closely and yet, a comprehensive study exhaustively covering ways in which the transmission happens has not come out. Between WHO announcement that ‘human to human’ transmission is not a thing to declaring humans as the sole vector, from 'mask is not necessary' to 'mask saves lives' from surfaces do not spread to they do to again they do not. Debate on whether the virus is aerosol or not has also not been settled, thus far. In conclusion, the human race still does not know much about the virus. Those of us who have avoided the outside world completely thus far are safe. We are hedging all of our future hopes on just this flimsy fact.
At this point, you must wonder, what is the point of it all?
The world has been dealing with this menace for nearly 7 months now and it does not even know if we are in the beginning, middle or the end of the destruction cycle. Does that not say a lot about, how certain our world view has been? Lockdown made a great case for itself, political leadership across the world sold it on premium and ordinary citizens who do not have a way of knowing better lauded it. By the beginning of May 2020, the shine started wearing off the panacea of administrative isolation- lockdown, as the number of cases did not show any sign of slowing down, both at a global and the national level. Administrative restrictions may not have hurt the virus as much as it promised to but it surely nearly decimated economies around the world. I borrow from Mr Bajaj, who said in an interview to Rahul Kanwal (Right-wing journalist who works hard to appear neutral), "that we flattened the wrong curve". He was referring to the flatlining of the GDP. The sharp decline in revenue collection of the Government and the fear of resulting fiscal deficit shook it back into senses and it quietly introduced ‘unlock 1.0’. Revenue starved businesses in a heartbeat reopened, ignoring the fact that the risk of infection had gone substantially up, in the hope to see things resume, volumes return. Recovery, predictively, has been mixed, mainly on account of high unemployment causing severe lack of demand - but some business is better than no business. Hospitality, F&B, tourism and travel etc, still haven’t seen any respite and the outlook at least for next 8 to 10 months does not look promising for them, either.
Geopolitics and societal structures are undergoing massive transformation, we do not know yet, for good or for the worse. But the change is visible. We can’t, however, say the same for the businesses around us. Do not get me wrong, yes ‘work from home’ has become the new excel macro. Big and small alike have lapped it with ease now, even the ones who were not in favour of it before, because it promises business continuity and cost-saving, among other things. Distributed and digitalised work in sectors that do not require congregation or special equipment, like let’s say in manufacturing - is gaining steam. Knowledge workers, who I also call ‘keyboard warriors’ have all acclimatised themselves to working in shorts from the corner of their homes. It is all good, if not for the health and mental well being of the workers then at least for the environment. Vehicular traffic and related carbon emissions have gone down and as a result, all of us are breathing better quality air- that is a clear win!
But apart from the superficialities, has the core business model shifted to anything different?
By and large, the answer to that question is a NO. Zomato choosing to also deliver grocery in the lockdown or call centres shifting to phone-based dialers hardly qualify, at max, it can be called mild manoeuvring. Has the rate of technology adoption been accelerated? When you look at the larger picture, the answer is no. 'Working from home' or calling one another on zoom all day, is not tech adoption, it is just a change of scenery. The tech backbone and the architecture for 90% of the organisations remain absolutely unchanged: 'same processes, same application and largely the same turnaround times'. In fact, if anything mega tech projects have been put on hold, some indefinitely for operating cash crunch that most businesses are having to face up to, these days. Serious degradation of value in the real estate sector is being noticed and that when coupled with -ve 4% GDP growth outlook, I suspect things will get worse before they get better. Where does that leave us?
The jury is out on the number of organisations that will actually survive to see the other side of the crisis, reports on the closure of 30% of MSMEs which contribute to about 37% of the GDP and 40% of Indian exports have already shut shop. Service organisations have seen anything between 30% to 50% loss of business. Buying capacity of the population has been severely dented with record unemployment about 42% when organised and unorganised sectors are clubbed. Those still employed in a paying job are earning, anything between 10% to 50% less on account of wage cuts. Which means there is lesser money in the market making the rounds.
A wise man once said, "business is not a pond, it is a river". Resources flow from one end of the stream to the other, along the way those who dip in it collect some water for their consumption (both current and future needs), both by means of employment and investment. When upstream funnel size gets reduced, the downstream impact becomes pervasive.
Running a business is hard!
Number 1 priority of any organisation is to keep afloat; so when value evaporates, costs have to be adjusted in proportion. Not all cost cuttings are done equally though, with varying degree of success, industries across the board have managed to get it right. Managing outflow of cash in the know of the quantum of inflow does not require much of anything. But steps that come after it are of critical importance, their complexities are immense. Mostly on account of how little that we know about the future that we should prepare for. Despite the operating cash issues and the slump in the demand investments in the future will have to be made, not pledging will mean forgoing the possibilities of future prosperity.
What to bet on however is unclear. I might be naval-gazing here but, the economy of knowledge is the basket in which I would keep all my eggs, even if I could take just one shot at it.
Physical infrastructure: In the medium term the value of infra and real estate will see degradation but it will eventually pick up again in the long term. The rate of population growth is the reason why I say this. Irrespective of what people do, if we survive as a race, we will need space and physical infrastructure. Therefore, investing in it now for 'cash-surplus' corporations is not a bad option, especially because they stand to reap the benefits of acquiring the properties at price discounted by the recessionary spiral, the economy is unwillingly living through. One should, however, be prepared to remain calm in the prolonged period of hibernation induced by slow demand, the capital might appear to suffocate. But if you can hold on to your nerve, returns are going to be more than handsome, in a few years from now. Let’s say in about 4 to 5 years.
Manufacturing is another segment where we are about to witness a sea change. Industry 4.0 is going to be about connectivity and communication, a barrage of censors providing inputs to smart algorithms to facilitate real-time decision-making, all without any considerable human involvement. Powered by data and automation, digitalization is poised to transform every step of the manufacturing process, from supply chain and enterprise to the shop floor and end-users. Smart manufacturing will vastly improve throughput, uptime, and performance while reducing overhead, operating, and capital costs. Emerging tech like Industrial IoT, FOG computing, edge computing and advanced robotics will form the bedrock of change. Investments made in these technological platforms are bound to grow well.
Logical infra: Solution augmentation happens to process needs of the market and the market is a microcosm of the society, a continued spell of the pandemic is bound to re-write fundamentals of the social contract that have existed for the last 4 centuries. Humans live in flocks too (we are intelligent sheep). We are a social animal, we access what we need in groups. Our needs and desires follow the principle of batches. One man gets wheels, all follow - 'Monkey see... Monkey do'. (We share our DNA with more than one species, let's keep it for another day)
Before, we conclude that the logical infra is a horse that we’d like to put our bet on, it is essential to take a cursory look at the changing landscape around us.
We're a poor country, our per capita income is just about 2.5K USD. From this small pool, most of the expenditure happens on community building and survival, individual needs in most cases remain primitive and not too distant from the bare essentials, for a large part of the population. But when you contrast it with demographic, you’ll also notice that a vast majority of this country is at an age, which is considered a gold mind for impulse buying. When we see it in light of poor financial literacy in the country you’d understand that, if an ordinary Indian youth was left with last 100 dollars he is more likely to spend it on trends, then saving it for the rainy day. From that behaviour emerges 'aspiration' of the economy - From cloths to electronic to travel (Simplifying the behaviour to make this argument readable and concise)
Let me give you an example:
87% of all tablet users own a computer, there is not one thing/operation that the tablet can do but a computer can’t. In fact, there are a variety of things that a tablet can’t handle, not nearly as efficiently as a computer can and yet people who already own a computer buy a tablet too, sometimes more than one. (I'm included in it)
Aspiration for the ‘new’ is a strong economic stimulus among the young people which is why all the young (Avg age of the citizens) countries are of special interest to the large consumer goods corporations. Electronics in India and China rock, for the same reason (Though China is 5 times the size of India's GDP).
Now that we have addressed the aspiration part of the demand. Let’s analyse how the pervasive internet is shaping social behaviours. The world that saw the internet as an alternative for information, before COVID19, is now convinced that the web is the primary mode of exchange, even in the third world societies, like ours. Real-time and reliable Instant messengers, quick and easy digital payment methods, convenience and price benefits of e-commerce retail, had educated people on how the alternative is the new mainstream, subtly, in last few years, but imposed social distancing brought that understanding to the fore. Deep penetration of smartphones in the company of wireless and cheap internet network has liberated consumers from the exclusive relationship that they had with physical retail stores.
Stores are on their way of becoming the new warehouse and retail stores are about to permanently become an application.
Google search for information has long replaced libraries for a lot of people, location tracking, the ability to compare prices from different suppliers gives the buyer the false (everything on the internet is curated, it does not exist organically) impression of being in charge. Consumers like when they think they are making the choices. The Internet has another distinct property: it is open 24*7.
From popularity, usefulness and adoption of the internet as the primary method of exchange and given special COVID19 circumstances below business opportunities emerge.
- Tech Platform: From Advertising to lead generation to, informing the customer about the product and services, to getting on with the actual sign up to purchase to billing to delivery to post-sale query/complaint handling to return and refund; everything can be managed digitally. Not just that all backend processes, like demand estimation, we have touched upon manufacturing earlier in the article, supply chain to human resource management to finance and accounting - all of it can also be digitised. Pick whichever part of the customer journey that you are comfortable with and build a tech platform for it. The next trillion dollars in the Indian economy is going to come from platforms, as per the research conducted by the Boston consulting group.
- Advanced data modelling: Digital wandering leaves data trail, even those expeditions that honour consumer data privacy, do enough for someone to catalogue a replica of your persona: your buying ability, your impulses, your likes and dislikes, your consumption rate, your refill propensity, down to the sec in which you are likely to make a decision. There is data on who you speak with, in what tone and what manner, what is it that you speak about and what is it you are wanting to convey. You may think of yourself as a private person but nothing about you is private anymore in the world of the internet.
Data set is used to create both descriptive and as well as predictive models. Principles of data science, behavioural economics, behavioural psychology, coupled with the capability of AI and machine learning are used in conjunction with market trends, capital and goods movement to exact future demands and way to fulfil those are appropriated too. Even if your model is 50% accurate, you are talking about getting it right once in 2 tries, that is way way better than sitting and hoping for a customer to decide in your favour. So if you have the stomach for data, get on with it and form a data product.
COVID19 induced human tragedy and capital erosion is disastrous and heartbreaking. But the only way to not lose to it completely is by preparing for the next frontier. History tells us that whenever a change disruptive and extensive enough gets forced on humans by nature. Humans adjust by eliminating or automating the items at the bottom of the pyramid, the most basic items are attacked first. Before World War II there use to be a job profile called, “Knocker Upper” job of this person was to knock on the door of the Europeans to wake them up in the morning. Alarm clock drove them out of jobs. Similarly, all the basic and unintelligent things that are today performed by humans will siege to exist, i.e - most over the counter retail interactions, simple bookkeeping, telephone-based reminders to customers to renew and recharge and pay are the kinds of job that will just disappear overnight.
"Are you investing today for your future security", is the question that deserves to have all your attention.
On that note, see you on the other side!
