The rollout of COVID-19 vaccines across the world has rekindled a faint light at the end of the tunnel. For more than a year, several economies and businesses have been disrupted by the impact of the pandemic, leaving a lasting effect on them.
Barring any unexpected catastrophes, individuals, businesses and society can start to look forward to shaping their futures rather than grinding through the present as the next normal will be different, McKinsey & Company, a consulting firm, notes.
According to the global consulting firm, 2021 will be the year of transition and will mean there is no going back to the conditions that prevailed in 2019.
“Indeed, just as the terms ‘pre-war’ and ‘post-war’ are commonly used to describe the 20th Century, generations to come will likely discuss the pre-COVID-19 and post-COVID-19 eras,” Kevin Sneader, global managing partner of McKinsey & Company, states.
In a recent report, ‘The next normal arrives: Trends that will define 2021 – and beyond,’ McKinsey identifies five trends business leaders must be aware of to adjust to the next normal – the factors that will shape the direction of the global economy.
Spending will only recover as fast as confidence rate
According to McKinsey, consumer spending will only recover as fast as the rate at which people feel confident about becoming mobile again—and those attitudes differ markedly by country.
“As consumer confidence returns, so will spending, with ‘revenge shopping’ sweeping through sectors as pent-up demand is unleashed,” it says.
While the aforementioned has been the experience of all previous economic downturns, McKinsey, however, sees one difference, which is the fact that “services have been particularly hard hit this time.”
The bounce back will therefore likely emphasise those businesses, particularly the ones that have a communal element, such as restaurants and entertainment venues, it explains.
Business travel will lag
While business-travel spending reached $1.4 trillion in 2018, which was more than 20 percent of the total spending in the hospitality and travel sector, McKinsey does not expect it to be as much as before.
“Video calls and collaboration tools that enable remote working, for example, could replace some onsite meetings and conferences,” Shubham Singhal, senior partner, McKinsey & Company, notes.
People who travel for pleasure, according to McKinsey’s survey, will want to get back to doing so.
“That has been the pattern in China. The CEO of one major travel company told us that, beginning in the third quarter of 2020, business was ‘pretty much back to normal’ when referring to growth,” Singhal says.
But, according to Singhal, it was a different normal: “Domestic travel was surging, but international travel was still depressed given pandemic-related border restrictions and concerns about health and safety.”
Digitisation will be sustained
According to analysts, the impact of the COVID-19 pandemic has shown that, indeed, Plato was right: necessity is indeed the mother of invention.
During the COVID-19 crisis, one area that has seen tremendous growth is digitisation, meaning everything from online customer service to remote working to supply-chain reinvention to the use of artificial intelligence (AI) and machine learning to improve operations.
“Healthcare, too, has changed substantially, with telehealth and biopharma coming into their own,” McKinsey reports.
According to the report, disruption creates space for entrepreneurs—and that is what is happening in the US, in particular, but also in other major economies.
Like in the US, the e-commerce industry in Nigeria reported tremendous growth as COVID-19 lockdown forced transactions to go mostly online. A company like Jumia delayed in delivery due to increase in online orders.
“We admit that we didn’t see this coming. After all, during the 2008–09 financial crisis, small-business formation declined, and it rose only slightly during the recessions of 2001 and 1990–91. This time, though, there is a veritable flood of new small businesses. In the third quarter of 2020 alone, there were more than 1.5 million new-business applications in the United States—almost double the figure for the same period in 2019,” analysts at McKinsey say.
Consumers are moving online
The trend is clear: many consumers are moving online. To reach them, companies have to go there, too, McKinsey advises.
According to the recent McKinsey survey, only 60 percent of consumer-goods companies say they are even moderately prepared to capture e-commerce growth opportunities.
“As one executive told us, ‘when it comes to selling directly to consumers, we don’t really know where to start.’ That concern is certainly valid. Direct-to-consumer selling requires the development of new skills, capabilities, and business and pricing models.”
In nine of 13 major countries surveyed by McKinsey, at least two-thirds of consumers say they have tried new kinds of shopping. And in all 13, 65 percent or more say they intend to continue to do so.
The implication is that brands that have not figured out how to reach consumers in new ways had better catch up, or they will be left behind.
“We expect that in developing markets—Brazil and India, for example—the pandemic will accelerate digital shopping, albeit from a low base,” it states.
The future of work arrives ahead of schedule
According to the New York-based organisation, the idea of remote working before the COVID-19 crisis was in the air but not proceeding very far or fast.
But the pandemic changed that, with tens of millions of people transitioning to working from home, essentially overnight, in a wide range of industries.
For example, according to Michael Fisher, president/CEO of Cincinnati Children’s Hospital Medical Centre, US, there were 2,000 telehealth visits recorded at the organisation in all of 2019—and 5,000 a week in July 2020.
Fisher thinks telehealth could account for 30 percent of all healthcare visits in the future. In Japan, fewer than 1,000 institutions offered remote care in 2018; by July 2020, more than 16,000 did.
The McKinsey Global Institute (MGI) estimates that more than 20 percent of the global workforce (most of them in high-skilled jobs in sectors such as finance, insurance, and IT) could work the majority of its time away from the office—and be just as effective.
“Not everyone who can, will; even so, that is a once-in-several-generations change. It’s happening not just because of the COVID-19 crisis but also because advances in automation and digitisation made it possible; the use of those technologies has accelerated during the pandemic,” McKinsey states.
