When Did Nightmares Become Real?

On January 05, 2020, the World Health Organization reported a “pneumonia of unknown cause” in Wuhan, China, later dubbed COVID-19 by the WHO.

As awareness of the virus and its fast rate of transmission came into focus, it became clear that drastic measures were needed to contain its impact. Many countries in the world, joined by the United States federal and state governments in March, implemented drastic social distancing measures and mandatory lockdowns on businesses to slow down and turn around the rate of spread of the disease. The lockdown meant that businesses had to choose between the well-being of their employees and keeping their doors open. The virus resulted in hundreds of thousands of deaths, loss of job for millions of people globally, and risk of recession for economies that were projecting rosy numbers some months ago. Whole industries like airlines, retailers, and hotels that depended on foot traffic were laid low by the sudden absence of travelers and customers.

The Walt Disney Company reported record profits in 2019 and was King of the Hill. Come the COVID-19 pandemic and things turned ugly for them in a heartbeat. Most of their properties are shut down, they have furloughed an estimated 100,000 employees, slashed executive pay up to 50 percent, and taken out a $5 billion line of credit to bolster liquidity. “From great to good to bad to ugly,” Michael Nathanson, a leading media analyst, wrote in a report of Disney’s extreme reversal in fortunes.

At the other end of the spectrum lies Amazon, who had reported weaker than expected earnings in their third-quarter release. Amazon operations were negatively impacted by COVID-19 and there was concern that they were not taking the health of their employees seriously enough, providing some paid leave to some employees but keeping warehouses open. One Amazon executive quit over the unsanitary conditions and treatment of workers. Yet, their cloud services saw a huge increase in demand by businesses and customers flocked to its online stores because they were afraid to go to the brick-and-mortar store, to the point where Amazon had to do away with their delivery guarantees and restrict the amount of product that customers could buy. Overall, the company has managed to come out more profitable and more dominant than before going into the crisis.

Not many executives would have expected such a reversal of fortunes before the COVID-19 pandemic. Disney was expected to continue doing well while Amazon was leaning in on its status as a dominant but not particularly profitable player. COVID-19 challenged those assumptions significantly because they introduced a risk profile that executives at Disney had not expected.

How Do We React To COVID-19?

“You don’t reward reaction; you reward results.”

–Edwin Louis Cole

Before the COVID-19 pandemic hit, companies were focused on Customer Experience and on improving their bottom line. The concern was about how fast to grow market share and on optimizing revenue. and maximizing shareholder profits. They knew their target customer well enough and were working in various ways in which they could keep their customer happy.

The global supply chains were well established, companies knew where and how to find their customers and their BC-DR plans were tested regularly, with multiple contingencies in place. IT was seen as a cost center to be managed, needing higher-skilled and more expensive staff.

COVID-19 proved that this was essentially a Jenga tower, about to collapse. As COVID-19 spread globally, governments starting forcing lockdowns on companies. Customers started staying home and focusing on essential spending. Companies that provided essential services had to choose between staying open and employee safety. 

Influence of Hysteresis & Inertia

As businesses expanded, their IT budgets lagged behind the business spending. Conversely, as COVID-19 shrunk the market for these companies, their business revenues, as well as budgets, were reduced rapidly but the IT budgets could not be brought down to the same efficiencies because those skills and knowledge were not easily transferable or replaceable. In essence, both IT spending growth, as well as spending reduction lagged behind the increases and fall in demand. This phenomenon is called hysteresis. It is well understood in the engineering fields and there are attempts made to reduce any negative repercussions arising out of it.

Did We Learn Anything?

“There are certain life lessons that you can only learn in the struggle.”

― Idowu Koyenikan

COVID-19 was not all doom and gloom though. Some GREAT companies did better under the circumstances. These companies shared some common characteristics

1. They provided services essential to the consumers, like food, medicine or toilet papers
2. They provided the ability to connect, like Facebook.
3. Enabled remote working or remote collaboration, like Zoom.
4. Provided entertainment, like Netflix or Houseparty.
5. They provided backbone infrastructure services, like Amazon, Microsoft, and Google.
6. They had access to a highly-skilled talent pool and the ability to pivot on a dime.

These companies beat the odds and either increased their market share or were able to keep the downsides to a minimum. They managed to provide valuable services to their customers and deepen the relationship to mutual benefit.

 Sanjeev Pai, Founder, Mrisan LLC – With over 25 years of experience in developing and managing innovation for top banking, hospitality, telecommunications, and retail organizations, Sanjeev helps our clients and partners stay on the cutting edge of technology.  His extensive experience in Risk Management & Cost Containment, Artificial Intelligence, Cloud Enablement, Full Cycle Information Management, Network Security and Data Privacy, providing our partners with the technological expertise necessary to quickly adapt to a rapidly changing business environment.