We are within a global crisis, and this is the best time to think how the world is going to be after the crisis is over. It is obvious to deal also with how to survive the crisis, but it’d be a grave mistake to focus only on the obvious.
There are a lot of debate on how long the Coronavirus is going to last, and how long it’d take the economy to overcome the crisis.
But, here is a critical question:
Are the future demand characteristics going to be the same, or even just similar, to the demand we had in 2019?
I have doubts, and if I’m right then all organizations need to exploit the time to re-think their strategy.
We are in the beginning of two different crises and each of them will have an impact on the future demand patterns, in a way we haven’t felt before.
The ‘market demand’ is created by the tastes, habits and preferences of consumers on the use of their free cash. This core of the world consumer consumption is exactly what is disrupted by the Coronavirus causing a significant trauma that is still going on. Too many people all over the world are losing their jobs and experience anxiety to their very basic survival. Add to this the feeling of loneliness and the concern for the elderly parents and other relatives. All these effects influence our buying decisions. The vast of what we’re used to buy in ‘normal times’ is not in order to survive, but in order to enjoy. Having more money than absolutely necessary raises the realization that “we have the means, so why not use it?” The hard times we go through, especially those of us who are stuck at home, have an impact on our preferences and would probably change our habits. The ongoing pressure on cash, without knowing when we’ll be back to steady income, change the perception of what we need in order to have “good life”.
So, the realization of the danger to life, plus the lack of enough secure cash to provide our needs, make a stamp on how we are going to consume even when economy will recover from the current crisis.
The combination of personal trauma and economic uncertainty would cause various long-term changes in consumption of goods. The obvious change for many is becoming more conservative by spending only on things that seem practical and necessary. It also means spending overall less money than the available cash, which raises the issue of the means of saving money. The actual behavior of the stock market will determine whether the stock market is going to be the common way to savings in the future. New ways to save money could become attractive if their stability, rather than their interest rate, can be shown in a convincing way.
However, this ‘conservatism’ is only one possible aspect of the change in behavior. The general “status” culture of amazing others with what we have might go down as well. When the threat of early death becomes widespread, the meaning of life and what does it mean to enjoy is going through a change. A different set of priorities will emerge. Being stuck at home pushes many people to find rewarding ways to fill up the time, reading books, watching more variety of shows in the TV and listening to music, all of these would have a more subtle kind of impact.
A very different reaction to the current hard times is to put more emphasis on having fun now, because who knows whether we’ll live tomorrow. Every human being faces the chronic conflict between enjoying life now and preparing for a better future. The common way people treat conflicts is by looking for an acceptable compromise. Very few people succeed is making their goal for living the center, so everything they do is to achieve more and more of that goal. Most people have to sacrifice something in the present, like money, time devoted to studies or preparations for providing the necessary conditions for good future. That concept might be hit by the thought that life could end at any given time, and the even more general realization that you cannot rely on any prediction of what’s going to happen even in the very short time frame. So, this kind of behavior might lead to preferring the near future over the far away future.
Would these contrasting reactions cancel each other regarding their impact on the global market behavior?
I don’t think so, because the two opposing ways of reacting to the current trauma would impact different sets of products and services. Both ways combine together to reduce the demand for products and services that represent the compromise. Currently every category of products offers a wide variety of prices, from the cheapest to the most expensive. It seems that the role of the middle-level price products would go down. The demand for the lower price products would grow while some of the high pricing products would still find customers willing to pay. The pricing is only one parameter to watch, certain products types that have no practical value, but have a certain aesthetic value, without being truly great art, might not find demand at all.
The crisis would have a significant influence on the use of technology. On one hand it will accelerate the use of newer ways to communicate and work from a distance. On the other hand I expect the use of the newer technologies will be much more focused on the real practical value, rather than being enthusiastic from the new features and the attraction of gadgets that are not truly needed.
What should the organizations do now?
These are the most appropriate times to re-think the strategy and tactics. All organizations face the following three period of times, with their different external impacts on the business.
- Within the Coronavirus crisis: how to survive without losing the future
- After the Coronavirus: experiencing economic recession
- Coming out of both crises into a changed economy and demand patterns
The current period of the Coronavirus crisis gives top management the opportunity to dedicate time to consider the possible changes in the market after the economy would be stabilized.
TOC teaches us to make the best guess, based on cause-and-effect analysis, and then put the signals to tell us whether we are wrong. This means that while we know that we don’t really know, assuming “we know nothing” is also wrong, and more damaging. So, it is the duty of every high-level manager to make plausible assumptions, build a direction for taking the lead in several relevant market sectors, and monitor the warning signals.
There is another aspect of building a plan to win the competition by coming with new products and services that would be highly valuable to big enough market sectors and by this gain high demand. There is an absolutely required need for the buildup of capabilities and capacity buffers to provide the flexibility to quickly adjust to the new trends in the market. This means, among other necessary conditions, to have multi-skilled and highly motivated employees to support any quick changes in the product mix and/or delivery to customers. To achieve it top management might need to come up with a new scheme for maintaining win-win relationships with the employees.
How such re-thinking should be carried on? Certainty time has to be dedicated for mutual re-thinking, most probably using communication packages like Zoom or Skype with all the key players. I strongly believe that TOC consultants should be used as well. First of all because external (but clever) people are less attached to any current paradigms, so they can reveal and challenge hidden assumptions. Secondly because the thinking tools of TOC (including Goldratt Six Questions) can be effectively used to analyze the perception of value of the customers. And a good prediction of the perception value of customers is the key for any good strategy.