The modernisation of healthcare through AI
COVID-19 has uncovered some critical flaws in the healthcare systems of many countries. Yet, there is a significant silver lining to the situation as it has accelerated the influx of advanced computing techniques into healthcare, which promises some major advances. Artificial Intelligence systems (AI) and other areas like improved medical imaging or VR (Virtual Reality) could make testing, diagnosis, and treatment of patients more rapid and accurate.
Professor Clayton M. Christensen of Harvard Business School, coined the term Disruptive Innovation, showing how it could change technologies in a very short time-frame, for example, the transition from industrialised hot-metal typesetting to cheaper, quicker desk PC-based digital publishing. The pandemic is having this sort of effect on conventional medicine. It takes years and millions of dollars to get a drug to where it can be prescribed to patients. That is clearly not satisfactory now – AI offers various ways to speed up and improve medical trials.
Firstly, we need to be clearer about “AI” – this is not just hospital computers but a whole advanced ICT ecosystem can assist the medical profession in their work. We’re calling this “AI” but it really covers a whole range of person-to-computer interactions including diagnosis bots, GPS, Bluetooth and mobile apps. These will make a lot of medicine cheaper and easier to access. For example, if your smartwatch sends information to your doctor, and the advanced diagnostic system then alerts you if there is a problem and tailors a remedy for you. A pleasant side effect is that this will also reduce emissions by ensuring fewer visits to hospitals, and shorter stays where necessary, as all sorts of medical procedures can be delivered virtually or detected earlier on, making treatment less intensive.
Doctors are busy people, and in some areas of healthcare, there are not enough medical professionals available. Deep Learning computer systems have already proved that they can interpret medical information more reliably and quicker than humans – for example in CT scans, or assessing the progress of heart diseases or the risk of sudden cardiac death based on electrocardiograms and cardiac MRI images. An AI in China diagnosed shows promising results, as it can now diagnose diseases faster and more accurately than ever before. And unlike humans, AIs don’t tire.
New drug development
Bringing new drugs to market is a very expensive and time consuming process. Machine Learning can ensure that lots of the procedures involved can be made more efficient. This has the potential to shorten years of work and hundreds of millions in costs. Using AI can firstly identify good drug pathways, so likely candidates can be prioritised. The machine learning algorithms can run through millions of possible chemical combinations, highlighting the most suitable. Then they can speed up clinical trials – finding suitable candidates or clusters, looking at the best areas of demographics to get results and ensuring that trials are conducted in the most efficient ways. Detecting biomarkers for particular diseases is necessary. Computers can scan through test results much faster than people can manually, assign categories such as “good” or “bad” to molecules – so clinicians can prioritise the most promising for further investigation, as well as being able to predict which test patients are likely to respond to the trial drug most effectively.
Personalised patient treatment
This is a large, and potentially lucrative area for medicine. Human beings have a vast range of physical differences and can react to drugs in various ways. Personalised treatment has enormous potential to produce better health and comfort for patients. Unfortunately, it is difficult to quantify which factors will be beneficial for a particular individual. Machine Learning can automate this complicated statistical work – and indicate which characteristics show a patient will have a positive response to a particular treatment. Thus, predicting more beneficial outcomes and personalising treatment. The system learns this by cross-referencing similar patients and comparing their treatments and results. Doctors can then design a custom treatment plan for their patients.
The AI revolution in medical affairs
Overall, we are in the early stages of a revolution in medical affairs, which is likely to become normal in future. While the traditional consultation with a physician or other healthcare professional will not disappear, it is probable that all sorts of computer moderated interactions will replace some of these systems, resulting in more convenience, speed, effectiveness, combined with fewer travels to doctor’s offices or hospitals. Stays in institutions will be shorter, and drugs or vaccines produced more quickly, with a greater likelihood of them being effective. Costs for consumers should be reduced as the procedures will involve lower expenses for the medical provider.
The modernisation of healthcare through AI and other digital technologies is a trend we will hear more of in the near future. As such, big data and tech companies are entering this space and new technology start-ups are raising investment to enter emerging growth market. Although there are concerns about privacy and the security of important data, deep encryption and proper consent systems should mitigate these issues. This is attracting professionals from non-medical background into the industry. Medical technology or MedTech is a rapidly evolving space investors should keep an eye on.
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Technology companies strong during the pandemic
As the pandemic continues on, reconfiguring the future of the global economy, a great divide between industries that are faring well and those that are struggling is emerging. We witness how technologies that help us translate from physical to digital world excel in these difficult times. But what will be technologies that will shape the next chapter of the future and the way we conduct business for the time to come? And what are the emerging trends that will transform the business going forward?
Our emerging technology specialists Patrizio Prospero, HLB Malta and Alex Duffy, HLB UK recently discussed these questions with Chris Maresca, Managing Partner at C32 and Katie Palencsar who serves as an Investor and Venture Studio Lead at Anthemis Group during the 2020 HLB Audit-Tax-Advisory Conference. In this article, we are sharing the valuable insights collected during this panel discussion, to help make sense of the future and prepare for the new competitive landscape that brings new threats and opportunities that are shaping up to define the economy for the foreseeable future.
Business models that thrive in today’s challenging times
Economic shocks often accelerate the creation of new business models developed as a response to a new environment. For example, the surge in new, nimble companies offering digital financial products was a result of the financial crisis in 2008. Katie Palencsar, involved primarily in investing in early-stage FinTech companies this time sees three areas emerging as relevant and thriving in the post-pandemic environment: risk management, e-commerce and fraud prevention especially as 81% of companies experience payment fraud. Also, as the labour market has been flooded with job seekers, this may have a twofold impact for start-ups: first, there’s a big opportunity for early-stage companies to recruit good talent; and second, as the pandemic has demonstrated that job security is a fragile concept, more people may try their chances with starting their own business.
Another impact of the pandemic is the widespread rise of remote work and digital business models that Silicon Valley pioneered decades ago. While remote working has been around for quite some time in some sectors, others have been sceptical about them. But with the virus outbreak bringing economic activity to a screeching halt, the world was forced to adopt remote working with sudden accelerated wholesale digitisation of businesses. As remote work is gaining credibility, we will see more people leaving expensive cities as employers realise that coming into the office is no longer required to get the job done, said Chris Maresca.
We expect that, as people limit their social exposure in an attempt to curb the spread of the virus, businesses that don’t rely on physical presence and human contact will excel as well as those that managed to position themselves as a solution for the gap which has opened up due to quarantine restrictions. Alex Duffy sees these solutions as products such as chatbots, video content management software, live fitness and virtual conferencing.
Where are companies looking for growth and market share increase?
The question is, how can companies pivot to meet the requirements of the new reality? Alex Duffy illustrated the need for businesses to swiftly adapt with the British shirt maker TM Lewin. A more than 120 years old business has decided to close all 66 UK shops and take all its sales online. Those companies that manage to reinvent their businesses to fit digital and online presence will be well-positioned to survive and thrive in times of restricted social interaction.
Admittedly, pivoting and radical changes will bring new challenges in their own right, as they lead to a completely different growth model. For example, with the easing of restrictions in the UK, pubs will impose a serving minimum, which will decrease the number of customers at the venue but will increase revenue per person – changing their growth model and how they conduct business for the foreseeable future.
With restrictions commanding social distancing and consumers changing their buying habits, businesses that are related to home delivery are rapidly growing. Chris Maresca reports that areas such as third-party logistics, including delivery and logistics backend, have seen explosive growth as many US small businesses which were let down by Amazon over the course of the pandemic are now looking for alternative third-party solutions. Similarly, with wholesale agricultural revenues dwindling during the lockdown, agriculture is seeking to find direct-to-consumers solutions. Direct-to-consumers solutions are reporting growth in other areas as well, but an important consideration is that these models are heavily relying on customer service and human touch.
“We are just at the beginning of some sort of revolution. I am not sure what that means in terms of new services that are going to emerge out of this, but this is the place where we start building completely new dynamics and new business models”, Chris Maresca, Managing Partner at C32.
The changing customer behaviour and how it impacts customer experience
As an investor involved in collaborating with early-stage FinTech start-ups, Katie Palencsar reports that consumers are currently craving information about the topics that are are all of a sudden more relevant to them as a result of the economic impact of COVID-19. As a result of this a growing number of consumers are becoming more interested in topics such as insurance, financial planning, retirement and end of life planning. Instead of just sending e-mail newsletters for example, companies are responding by creating and delivering content that is within the actual software platform their customers are using.
The current state of start-up funding
Discussing the possibilities of start-up funding in the current environment, Chris Maresca highlighted it is important to distinguish three types of start-ups as not all of them will have the same fate in the post-pandemic economy: 1) Those that have a solid business model and that managed to raise funds for 1-2 year runway before the pandemic hit; they will do well going forward, but might face challenges to raise funds in their next round in one or two years; 2) Companies without a robust business model which pandemic caught in the middle of fundraising; they will struggle to recover from the pandemic shock; 3) Start-ups with solid business models that were either in the middle of fundraising or will shortly have to fundraise; they will survive. There was far too much capital available far too easily in Silicon Valley for the last five to six years, funding a lot of speculative business models. What the pandemic changed is that investors now require companies to generate revenues right away, which is a good discipline. Although there is still a lot of capital in Silicon Valley, the revenue-generating capacity of new companies now takes priority.
Continuing along the similar lines, Katie Palencsar added that she has been witnessing record-breaking pre-seed rounds that go as high as US$1.5 – US$2 million, an amount that would be hard to imagine only a year ago. Another trend on the rise is that corporates are increasingly working together with VC investors, setting up accelerators, venture partnerships and developing initiatives in an attempt to address what is happening in the world but also understanding innovation is a long game, positioning themselves for the future growth of their business.
KPIs investors looking at during uncertain times
Despite heightened uncertainty, ventures are set up in a way that requires active deployment of capital as the funds are committed and there is a life cycle of those funds. What are the KPIs investors are relying upon in these volatile times?
Katie Palencsar works with FinTech start-ups at their pre-seed and seed stages. Her experience mimics that of Chris Maresca’s when it comes to the ability of companies to generate revenues. “What pre-seed and seed investors love to see is some sort of customer validation. Even with some concept companies, we have even seen founders present some signals of customer buy-in, whether that’s a hacked together beta with users or even validated survey data. “, shared Katie Palencsar, Investor and Venture Studio Lead at Anthemis Group. In addition, team is beyond critical when investing in early stage companies.
What is technology that will shape the future?
The world economy is at the inflection point, as almost every aspect of the way we conduct business is changing. The Tech sector is a clear winner during this evolving time, but what game-changing technology is going to be the one that will shape the future that is ahead of us?
For Alex Duffy, that’s blockchain and tokenisation. ‘’One technology that hasn’t yet found its place, but is increasingly doing so in this pandemic is blockchain and tokenisation. Blockchain will be the way forward to keep track of all the things in non-physical reality “, Alex Duffy, HLB UK. With increasing digitisation, cyber risk and fraud, blockchain is going to become more relevant and can position itself as a revolutionary solution for tracking digital transactions, monitoring assets, signing documents. For keeping track of things in the non-physical world, blockchain will be crucial going forward.
For Chris Maresca, that’s low-latency, high-bandwidth internet service with satellite communication. Although remote work gained credibility during the pandemic, we are entering a phase of distributed everything, not only work. For this, we will need a reliable, consistent internet connection. Distributed high-speed networks and distributed computing are going to change the dynamics.
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Transactions Outlook 2020: Mid-Year Review
The outbreak of COVID-19 has brought unprecedented challenges to the global economy, pausing much of the activity across the world. After a long spell of record-high M&A activity over the past decade, deal-making was brought to a screeching halt as the pandemic shock diffused throughout the world economy. What was once expected to be a mostly uneventful environment, soon transformed into an unprecedented disruption that exploded after a good start to the year.
As we weather this historic global health and economic crisis, it’s becoming evident that we are operating in a new – and to a large extent uncharted- M&A environment that continues to evolve. As dealmakers are trying to gain some clarity, the reality is that the economy will need to learn to operate under heightened uncertainty for a prolonged time. As the short and mid-term response continues to develop, and the economy is starting to accept that the resolve of the pandemic will take some time to emerge, the deal-making activity is showing signs of revival.
After the Transactions Outlook 2020: An Overview of M&A Trends across Regions published right at the onset of the COVID-19 outbreak in which we outlined our M&A market expectations for 2020, we are revisiting the deal activity analysis to account for the unprecedented impact of the pandemic and help our clients reach a higher degree of clarity about what is expected in M&A space in the increasingly uncertain times ahead of us.
The Pandemic Impact
As 1H20 was nearing an end, the full impact of COVID-19 across the world economy started to emerge. The disruptive effect of the shock unparalleled both in terms of size and order was reflected in the M&A deal activity, particularly during the second quarter of 2020. According to the Global & Regional M&A Report 1H20 which was recently published by Mergermarket, deal volume fell by 32% from 1H20 to 1H19, (6,938 vs. 10,155 transactions), while deal values plummeted by staggering 52.7% (USD 901.6bn compared to USD 1.9tn) — an environment reminiscent of the aftermath of the financial crisis of 2008.
The difference when contrasting quarters is even starker – deal volume has fallen steeply from 4,308 deals in 1Q20 to 2,630 in 2Q20, with deal values dipping to USD 308.9bn from USD 592.6bn in the preceding quarter.
However, the impact of the virus outbreak propagated unevenly throughout the global economy and hence materialised differently across various regions of the world. Although the first affected by the virus, China experienced the least impact on its global buying activity with deal count declining by just 7% and deal values by 20.1% on a year-over-year basis, offering a glimpse of hope for other countries that the deal environment will head towards gradual recovery as the epidemiological situation improves – still reminding us that resurgences of COVID-19 will continue to constrain the upside. In contrast, the Americas, dominated by the US market, saw the most significant decline. Hindered not only by the pandemic but also political uncertainty stemming from the imminent presidential election and rising social unrest, US share of global M&A by value declined to 33.4% in 2020 compared to 52.8% in 2019, leading to an expansion of other regions, most notably Europe, (with a 32.3% market share) which slightly squeezed out Asia (27.7%) in achieving the largest market share gains. The European M&A activity declined by 30.6% – from USD 419.9bn in 1H19 to USD 291.5bn in 1H20, while the total value of US M&A activity declined to USD 274.5bn, which is the lowest half-year activity since 2003. ORBITT conducted a study covering the M&A market in Africa using data tracked on its platform to compare levels of deal activity between 2019 and 2020, documenting a 71% decrease in equity investors engaging in new investment leads (76 in H2 2019 vs. 47 in H1 2020).
Current Market Themes
Drawing a sharp demarcation line between the industries, the pandemic clearly set apart those that are struggling as highly impacted by the dramatic change in consumer behaviour and the consequences of global lockdown and those that are proving COVID-19 resistant. The former include healthcare, technology, essential retail and construction, while the latter cohort includes non-essential retail/consumer, manufacturing, restaurant/services and transportation.
Although the Global Financial Crisis remains the closest historical reference, the pandemic has generated its own unique challenges and opportunities. Unlike the financial crisis, which resulted in the collapse of the debt market, the debt market and the availability of capital today are robust. There had been more tightening, particularly on the senior debt market in terms of leverage and pricing risk, but also an expectation that M&A transactions will pick up in 2021, with a possible exception of private equity activity which may see a bit slower recovery.
We are already observing that the terms of deals are changing, with a more noticeable presence of earnouts. Valuations are starting to incorporate the effects of the pandemic, with new metrics such as EBITDA_C reflecting the COVID-19 impact as buyers are beginning to price this risk factor to ensure that they have a full understanding of the target’s operations.
On a positive factors side, customer confidence remains positive in the wake of opening up of the economy. As strategic acquisitions are still active, today’s environment represents a ripe market for strategic acquisitions, while corporate divestitures have seen the rise. Further, tech and tech-enabled businesses are performing relatively well and the low-interest-rate environment allows favourable terms of debt financing while the corporate sector and private equity investors maintain healthy volumes of cash and investable capital.
On a negative side, the world economy is confronted with a risk of multiple waves of the outbreaks becoming a reality before a vaccine becomes available, potentially resulting in borrowing requirements tightening due to heightened uncertainty. Finally, pre-COVID-19 geopolitical and trade tensions that continue to remain unresolved further exacerbate economic uncertainties.
As a result of the current environment, traditional private equity leveraged buyouts are side-lined due to pricing risk and ability to raise senior debt, while investors are seeking value acquisitions structured often as 100% equity deals. Strategic acquisitions are aimed at enhancing competitive advantage.
Long Term Market Themes
Although the world is currently immersed in dealing with the imminent challenges brought on by the COVID-19 outbreak, there are long term market themes — both opportunities and challenges — that will stay relevant beyond the pandemic.
On the positive side, we are witnessing an ongoing demographic change leading to the intra-generational wealth shift between the so-called baby boomers and X generation and Millennials who exhibit a lack of the “next-generation mentality“. This will result in an increasing number of family-owned businesses and privately held companies coming to the market, opening up compelling opportunities to capitalise on this emerging long-term trend. Acquisitions will continue to be a key driver, while the professionalization of the Lower Middle Market that has been happening over the past decade will continue. The expectation is that capital will continue to be increasingly available, including debt at low interest rates.
On the negative side of the equation, the uncertainty as to what shape the economic recovery will take still remains, while the question of whether the lack of quality companies for sale will lead to stronger valuations for those that are still available. Finally, as the world is starting to emerge from the immediate pandemic shock, we are witnessing an increasing push for economic sovereignty, which may leave the de-globalized world economy in the post-pandemic world turning M&A markets more domestic-focused.
The Role of Advisors
As the world settles into the new normal where heightened uncertainty is the norm rather than an anomaly, companies and investors alike will start shifting their focus from dealing with short term pandemic shock to managing elements of mid and long term environments that will bring its own set of opportunities and headwinds. In a sort poll survey among our own advisors about the potential timeline of M&A recovery, the majority of respondents expect M&A activity to pick up in Q2 2021 (45.45%), while almost a third (31.82) expect the recovery to materialise in Q4 2021. In contrast, the most optimistic cohort that counts 13.64% of respondents holds that Q4 2020 will bring the expected pick up, while those on the most pessimistic end of the spectrum (9.09%) anticipate that we will have to wait beyond 2021 to see pick up in this space.
As the companies and investors are seeking to gain clarity in these unprecedented times, the role of strategic advisors is evolving to assist the clients in reimagining and remodelling their businesses, enabling them to navigate through these volatile times.
As highlighted by Anant Patel, HLB’s Global Transaction Advisory Services Leader, “This is the time for us as M&A consultants, accountants and advisors to help our clients navigate through these challenging times and reimagine their business, walking them through, asking questions about the change in the customer behaviour, supply chains and distribution channels and putting a short term and long term plan together.”
Sea change or temporary adjustment?
The demand for office space
There have been three key impacts on office real estate since COVID-19. They include significant slowdowns in decision-making, few people returning to offices despite restrictions lifting, and an increase in office space lease listings. For example, despite the 50% capacity that New York office buildings could reopen at and the expected 15-20% return, there was only 9% that actually returned to work. Will shifts in the demand for office space be temporary or are new trends here to stay? While we do not aim to provide property investment advice through this article, we share our thoughts on shifts in the market as we see them, and how we estimate they will have an impact on real estate businesses.
The demise or demand for commercial space
Many are wondering if major cities such as New York, London, and Tokyo are going to experience a reduction or increase in demand for commercial space. There are negative and positive angles we can look at:
- It’s going to take a significant amount of time for people to feel comfortable using public transport in urban areas
- It’s difficult to practice social distancing in elevators and other areas of office towers where there are 5,000 or more workers
- If social distancing becomes the norm, even if fewer workers are present, you might still require a similar amount of space
- There are long-established critical masses of amenities, businesses, clients, and peers that cannot be replicated elsewhere
- In-demand professionals, such as knowledge-based and skilled Millennials, find that downtown areas provide the work and environment experience they desire
- If there is a significant reduction in rental fees, high-end downtown buildings become more feasible for those who found them unaffordable
When it comes to consideration for cities to overcome the challenges of the pandemic, there are two key factors to look at: The business sector’s tenant base and drivability.
The cities most dependent on the sectors hit by the pandemic are going to experience the most difficulties. Examples include the energy sector in Houston and tourism in Orlando and Las Vegas. Cities with stronger and more in-demand sectors should see fewer challenges, such as biotechnology, life science, and technology sectors in San Francisco or Toronto.
London and New York are examples of diverse and established cities that are well positioned to weather the storm. Due to a constant presence of government, cities like Washington DC are insulated.
People might remain reluctant to use public transportation for the foreseeable future. This could lead predominantly car-borne cities to be more appealing than those relying on public transport for their daily commute. People may also gravitate toward smaller communities featuring attractive environments and lower costs.
Reassessing office requirements
In many countries, employers are in the early stages of re-entering the office and large numbers of employees remain working from home. Therefore, it’s going to take several phases of reopening to determine how space requirements will change long-term. Reassessment could mean moving away from companies having a single, downtown headquarters.
An idea that’s gaining traction throughout the US is the “hub and spoke” model. This model means keeping a central headquarters and implementing smaller suburban hubs for workers. Suburban locations are beneficial because, space is cheaper, workers can move around the building, and public transportation issues are eliminated due to car use.
The incorporation of flexible, drop-in spaces is likely going to occur to give work from home employees options to work in a facility. There’s likely going to be a significant number of employees working full-time from home where job specs allow it. A working from home culture is most likely here to stay.
The office will be a destination where people can meet, collaborate and interact, and experience the brand and culture of their employer. A possible requirement for office space in the future is therefore a space that allows more interaction and brand experience rather than traditional workspaces. Ultimately, large companies benefit from offering choice-based strategies in the workplace. One of the most significant challenges workplaces are going to face is that some people (possibly younger staff) might feel suburban offices are less attractive and even boring to work from. Consider individual employee’s needs includes reassessing lifestyles and work-life balances of your workforce.
Implications for real estate owners and investors
There is no one-size-fits-all approach to the implications for real estate owners and investors, or how they should shift their strategies. Depending on the factors we discussed above, strategies are going to vary. That includes market strength, as well as the property’s age and quality. It’s clear that owners want to preserve cash flows (i.e., rental income), and tenants want to lower payments.
There’s typically a rise in “blend and extend” leases during a recession. While tenants see a drop in rent, landlords can secure longer income streams. For several years, capital placed in suburban assets has outpaced downtown property investments. Some wonder if this is going to increase if occupiers move to diversified occupational strategies. A key issue is the extent to which businesses view impacts of COVID-19 on the nature and location of work regarding short-term hiatuses or long-term occupational changes.
The co-working space business model is a subcategory within office real estate that has been severely impacted by the pandemic. The collaborative nature of co-working spaces is making social distancing difficult, and the flexible contracts have led to many occupants to terminate contracts when the pandemic first started. The silver-lining for real estate owners running co-working offices is that the flexible nature of the business models also means it is easier for them to pivot towards new office space products and reinvent the ‘space as a service’ model.
The greatest issue owners and investors might face could be their desire for flexibility. Overall, we can expect occupiers to seek short-term lease commitments. That creates shorter income streams, which might have ramifications on hold periods and valuations. The immediate future might include a branched approach to investment strategies involving low-risk assets or the opportunistic purchase of discounted properties.
So, what will stick?
The impact COVID-19 has on the office sector continues to unfold. If the pandemic lingers on, we can see many of the temporary changes becoming entrenched into office cultures. That includes online meetings, social distancing and working from home. If the pandemic lasts, then we can also expect companies to implement longer-lasting changes in their professional portfolio.
For example, some companies might consider short-term suburban property leases until events blow over. If they don’t, that could mean searching for longer commitments. Office sectors can adapt by further embracing two key concepts—flexibility and choice. As we noted earlier, tenants are moving toward a more geographically diverse premises strategy coupled with more flexible lease terms.
In recent years, attracting and retaining talent by providing the best workplace experience is just as critical as its location during property selection. It’s going to be incredibly essential to provide employees with choices regarding where and how they work while seeking to provide the optimum experience.
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Will COVID-19 help advance the digital revolution in agriculture?
The agriculture industry is no stranger to change, but the past century introduced innovation that forever transformed it. In 1920, nearly one in three Americans worked on a farm. About a century later, in 2018, that figure was down to 1.3%.
But despite the precipitous drop in agricultural employment, the Green Revolution and other advances led to greater productivity than ever before. The ongoing story — some might say miracle — is growing more and more food with fewer and fewer people.
Can the industry revolutionise again?
As with the rest of the world, its current push for further progress has largely moved into the digital realm. Known as Smart Farming, this is ushering in a world where “technological advances can support the goal of achieving more resilient, productive, and sustainable agriculture and food systems,” according to the Organisation for Economic Co-operation and Development.
Digitalisation of the agrifood sector is also a prominent theme in the EU’s new Farm to Fork strategy that urges stakeholders to find tech solutions to help reduce carbon footprints and deliver on sustainability goals.
Can digital tools help launch a second Green Revolution for agriculture? Are productivity gains and environmental progress compatible? And will the disruption of the pandemic hasten the pace of change?
Responding to the Pandemic
Like everyone else, companies in the agricultural space are currently adapting to the “New Normal”. They are looking for ways to maintain operations in a world where social distancing is the norm, supply chains may be broken, and transportation has been upended. And they are searching for these solutions amid the worst economic climate we’ve seen in a century.
Technology and innovation have always played a role in the industry, but that role is now growing. Modern communication and collaboration tools are now a necessity in an industry that at times prefers to cling to the old way of doing things. Amid such disruption, efficiency may no longer be just an ambition. It could be essential to survival.
Will this all combine to force the cultural shift that the EU is advocating?
The Farm to Fork Strategy has five specific goals. It envisions a food system that should:
- Have a neutral or positive environmental impact
- Help to mitigate climate change and adapt to its impacts
- Reverse the loss of biodiversity
- Ensure food security, nutrition and public health, making sure that everyone has access to sufficient, safe, nutritious, sustainable food
- Preserve affordability of food while generating fairer economic returns, fostering competitiveness of the EU supply sector and promoting fair trade
Getting there will require legislative and regulatory work — but also tech improvements.
“Food systems cannot be resilient to crises such as the COVID-19 pandemic if they are not sustainable,” states the EU. “We need to redesign our food systems which today account for nearly one-third of global GHG emissions, consume large amounts of natural resources, result in biodiversity loss and negative health impacts (due to both under- and over-nutrition) and do not allow fair economic returns and livelihoods for all actors, in particular for primary producers.”
The Digitisation Ahead
Agtech is already upon us. Some US$1.6 billion was invested into agribusinss startups in 2018, according to the Agtech Investment Review. This may be a drop in the bucket for the tech sector at large, but it represented a big leap forward here. New innovations are emerging and Internet of Things technologies are starting to be deployed.
Data to improve operations and efficiency is the backbone of it all. Crop sensors can monitor growth cycles, improve productivity, and optimise resources. Farm machine automation could be revolutionary. Artificial intelligence and machine learning is on the way. And even simpler efforts, such as systemising logistics and supply chains through software platforms, can streamline everything and eliminate waste.
Now more than ever, companies and governments are realising that there are vulnerabilities and inefficiencies all throughout the global agricultural supply chain. And the pandemic is forcing them to react. Savings and lean operations are no longer a luxury — but essential as society confronts this unprecedented challenge.
In many ways, it is serving as a wakeup call. If not now, when will be the time to change? The digitisation of agriculture had already arrived before the virus, and so far, the pandemic has only emphasised its importance. As a key element of the EU’s post-pandemic recovery plan, the digitisation of agriculture looks set to continue as the industry moves towards building a more sustainable and resilient food supply for the future.
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Tackling the Netherlands agriculture industry’s growing nitrogen emissions crisis
By Arjan Mulders and Martjin Kemperman, HLB Netherlands
The increased focus on climate change, pollution and pressure on resources is not unique to one part of the world. However, one aspect of the discussions in the Netherlands is that of nitrogen emissions. In general, nitrogen emissions destroy flora and fauna, pollute the air, and have become a huge concern in combatting climate change. With the issue being a global one, countries must come together to resolve it, which is why treaties such as the Nitrogen Oxide Protocol were developed. As a result, the Dutch government brought in a strict policy to rapidly reduce emissions. Now, it seems that this legalised policy was much too optimistic in the realisation of the set goals, considering other economic issues and societal welfare.
The Dutch Supreme Court ruled back in December 2019 that the government was obligated to uphold its own policies about reducing nitrogen emissions. In these policies, the Dutch government aims to reduce emissions by a minimum of 25% compared to those in 1990, which is used as a frame of reference in global nitrogen emissions. Since current reductions are set at around 15%, the likelihood of success looks slim.
At this point in time the Dutch government proposes strong measures to be executed, but these have been somewhat relaxed due to the impact of COVID-19. Dutch senators have approved of multiple necessary measures to reduce emissions, as well as ground contamination. These measures have consequences for construction projects, livestock and the improvement and restoration of the nature sites known as Natura 2000.
Next to lowering the speed limit (which has already been introduced during the day) and creating nitrogen limits for events, the government is trying to further reduce the emissions from livestock. After proposing a cut in livestock by half, farmers went on strike several times. In response, senators approved three other motions. One of these motions was asking the cabinet to be more forthcoming and open on their nitrogen calculation models.
Choices for the future
The government has announced they will make 350 million Euros available to buy out agriculture businesses. During the COVID-19 crisis, understandably conversations around this topic died down. But it is still relevant to note because the cabinet still intends to take measures, in fact it has proposed that the amount will be raised significantly.
Next to this there will be an additional 172 million euros made available to enhance stables in such a way that they will reduce emissions. All measures do not mean that the government will buy out all farms in the Netherlands, but it provides, so it has said, older generations with an exit strategy. Next to forming funds, the government has planned to help farmers by providing advisors who can help guide agriculture businesses through the next steps. It is expected that these advisors and other measures will be funded by granting subsidies for qualifying agriculture businesses. Also, general impulses will be given by means of tax benefits on innovation.
This leaves farmers with significant choices to make in times of economic uncertainty. Should they update their stables with the available funds, or is the buy-out a better solution? And if farmers will need to make these choices, other entrepreneurs will need to adjust as well. Since less farmers might result in a more restrictive market and less availability of products.
While the future may still be uncertain, what is clear is that the introduction of this new policy does present opportunities for agricultural businesses. To make any significant change in emissions, more emphasis needs to be placed on what is farmed – not just how. With the continued focus on building sustainability into food production, and digital transformation as whole increasing, the industry can now take the opportunity to use innovation to pivot and thrive for times ahead.
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Space as a service:
What’s next for co-working businesses and office real estate owners?
By Ralph Mitchison, Global Real Estate & Construction Industry Leader
The ‘Space as a Service’ product has been a successfull concept within the real estate sector in recent years. But the COVID-19 pandemic has severely disrupted the business model, which may not bounce back in quite the same way once the dust settles. Globally, the co-working industry was a $26 billion dollar industry in 2019, helping small business owners work collectively, yet separately and giving them access to amenities such as:
- business-class printers
- high-speed internet access
- spacious common areas (which often include desks, chairs, lamps, and lockable file cabinets)
- free refreshments
- an onsite staff
- private phone booths
Companies like WeWork also host events such as wellness sessions, networking events, one-on-one introductions with investors and industry leaders, and catered lunches where members share tips, knowledge, and expertise. For freelancers and small businesses, co-working and flexible working spaces were just what they needed to start and grow their companies. Co-working spaces started popping up from early as 2000. Space as a service was a profitable product for real estate businesses and flexible working spaces were set to grow up to 30 percent annually for the next five years across Europe in 2019. The characteristics of the space as a service model enable landlords to charge higher rents because of the short-term commitments and generate a higher return. The flexibility allows the business to cut their cost quickly if they don’t succeed. But today, the strengths of the business model become its Achilles heel, as tenants are struggling through the pandemic and cut their cost by working from home. Then there is the safety aspect as well. Since the threat of COVID-19, co-working spaces have been temporarily shut down. This has led many to wonder whether the co-working industry will be able to recover.
Let’s take a closer look.
Impact of COVID-19 on the real estate industry
As a result of the pandemic, co-working space companies are suffering a huge financial loss since people can’t work in close proximity to one another. While some companies have waived their fees for small business owners, others are still charging their monthly fees, despite the pleas of many business owners or freelancers.
COVID-19 has caused many of the world’s largest developers to have to rethink the future, which meant canceling current projects and coming up with new solutions that fit the “new normal.”
People won’t be able to share the same common area without being at least six feet apart, which means developers have to think about how to address these changes when it comes to the floor plans and layouts of space as a service businesses.
The future of ‘Space as a Service’ for real estate businesses
Real estate businesses must figure out how to adapt. That means considering how to repurpose their properties and how to make them attractive again to their potential clients as we prepare for life after COVID-19.
That might entail creating a new business model in which landlords, tenants, and flexible space providers work together to create a scenario that allows everyone to come out on top. A more collaborative approach is on the horizon for the post-pandemic environment that many are still trying to find their way to. Real estate businesses will have to determine how best to provide the flexibility freelancers and small business owners need in this new landscape while keeping them safe.
Despite the effect the pandemic has had on co-working space occupancy rates, some expect the demand for co-working spaces to increase, possibly even higher than before the pandemic. However, the way occupants use space is likely going to change. Buildings need to be redesigned in a way that caters to a contactless existence. Think automatic doors and lifts, contactless interfaces, increased reliance on robots, an upsurge in digital events, and a strengthened digital infrastructure.
And co-working spaces are also increasingly competing with home-offices. About 60 percent of the UK’s adult population is currently working from home because of the Coronavirus lockdown. And since research suggests that working from home might boost productivity (about 65 percent of people said they’re more productive working from home), this could spell trouble for the space as a service business. Now that employers increasingly adopt home-working policies, the need for office space in general declines.
A post-COVID-19 world may look a lot different than what people are used to seeing, but it is a necessary part of preparing for an uncertain future. As the world begins to reopen, the co-working space business is adjusting to a new way of life.
So, what’s next for co-working businesses?
While the future may seem uncertain, everyone is quickly learning to adapt to the “new normal.” The real estate sector is no different. Real estate businesses will have to pivot to new business models to turn a profit despite the current state of things. People will eventually go back to the office and they will need office space to do that. So for all the co-working space businesses out there, adapt your product, and prepare for your customers to come back soon.
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The retail re-launch:
How to revive customers' appetite for sales
Late summer has always been a hot season for retailers, eager to move some overdue stock and capitalise on customers’ anticipation for good deals. In 2020, most brands are facing a challenging choice when it comes to seasonal discounts — liquidate deadstock as fast as possible to gain an immediate cash injection and restart the supply chain operations or stick with the ‘no sales’ strategy to avoid diluting the brand and alienating loyal customers who are hesitant to start spending again? In this article, we attempt to provide a data-backed answer to this dilemma.
How the global retail sector was doing in Q2 2020
In the UK, retail prices across all product categories dropped by 2.4% in May — that’s the largest monthly plunge since 2006. However, retailers that rapidly shifted to digital channels could move past the slump. The Boohoo Group said that their sales across all stores were up by 45% year-on-year in the three months to May. Online grocery delivery services also remain in-demand, even post-reopenings. Him and MCA Insight report that the demand for deliveries of breakfast, dinner, snacks and recipe boxes keeps growing.
Globally, the retail sector is expected to see a $2.1 trillion loss this year, per Forrester. E-commerce, however, holds a strong potential for minimising those deficiency. The Digital Economy Index by Adobe indicates that the US e-commerce market grew by 49% in April 2020, compared to the same period in early March 2020. The growth, along with the pricing strategies, has been largely asymmetric across various product categories.
Online apparel sales grew by 34%, however, the prices decreased by 12% in April. Yet, only select few garment types were flying off-the-shelves:
- Pajamas (+143%)
- Shorts (+67%)
- T-shirts (+47%)
- Jackets (-33%)
- Pants (-13%)
Even the Chinese retail market reduced by 16% YoY, during the first months of 2020. Yet the online sales grew by 8.6% to $360 billion within the same period and digital still remains the most preferable avenue for most consumers. During the annual grand promotion in June, JD.com saw a 100% YoY increase in sales for all product categories, compared to 2019. The demand for fresh produce and groceries was even higher — 140%.
Navigating the summer sales season sustainably
Restarting the supply chain is a mission-critical for brands, especially in the apparel industry. However, turning products at a heavy discount means lower profit margins that, in turn, erode the ability to order new stock. At the same time, retailers have to battle with the consumers’ reluctance and low appetite for shopping per se. Despite the recent reopenings, the high street brick and mortar locations remain half-empty in the UK.
So how can brands rekindle customers’ interest without diluting their value with huge discounts? Here are several strategies to consider:
Increase your consumer acumen
As we wrote in our new report, high consumer acumen is one of the five strategic priorities for success in the post-pandemic world. Aligning your offers, sales channels, messaging and service to the new customer needs and behaviours is essential to raising consumer trust, loyalty and subsequent profitability.
Rather than enticing your target audience with generic seasonal sales pitches, think about the additional value you could deliver. At the moment, most B2C shopping decisions are still driven by:
- Availability (49%)
- Price (36%)
- Quality (34%)
To attract more (foot)traffic to your business, you can create real-time stock alerts and provide a simplified route for checking inventory across various locations. Instead of discounting individual products, consider offering product bundles that match the current changes in customer lifestyle. For example, upsell beauty products with relevant skincare goods that are in higher demand.
Match your discount strategy to your brand
Apple, Tesla, MAC Cosmetics are among the rising number of brands that never place their products on sale. Instead of winning over one-time, price-sensitive shoppers, these brands attempt to retain existing customers via various loyalty schemes — referral programs, trade-ins, loyalty statuses and so on.
While retailers such as Topshop, Miss Selfridge and H&M are offering discounts of up to 50% online to recuperate at least some profit, brands like Everlane decided to launch a “Choose What You Pay” campaign — a promotion that allows customers to choose between three pricing tiers (low, medium, high). In either case, the company clearly explains what each price tier covers, as part of their brand’s digital practice of radical transparency and honesty. Doing so has allowed them to maintain integrity as long term brand fans know where their full-retailer dollar goes and how much profit Everlane retains, while still turning over some overdue stock effectively and attracting more price-sensitive consumers.
Experiment with social e-commerce
China has started a new retail trend during the lockdown — social e-commerce. Digital native consumers (Millenials and Gen Z) have become keen participants in shopping live streams and community-led buying. During and post-lockdown, JD.com has been hosting ongoing, influencer-lead live stream campaigns with both local and international brands. Ports 1961, a Canadian luxury fashion brand, managed to attract over 1.3 million consumers during their 9-hour livestream and score $1.4 million in sales within one day (despite the prevailing consumer reluctance to shop for luxury).
Western retailers can take the lead and hype up the interest in low-selling product categories via active social and influencer-led campaigns, limited in time and by stock type.
In short, the retail sector has a long way to full recovery since consumer interest in most products is yet to pick up. What’s certain for now is that digital channels will play a core role in moving the ‘overdue’ stock. In fact, brands that would be able to achieve seamless integration between offline and online sales experiences will see the largest returns on their investments.
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Returning to the workplace: Considerations employers need to be aware of to protect staff
As of early June 2020, more than 7 million cases of COVID-19 have been confirmed around the world.
Since the outbreak first started to spread, millions of businesses closed their doors or switched to remote operations. Now, many countries are beginning to reopen for business.
If your office is starting to think about reopening, you likely have a lot of questions about what that will look like and how you can keep your employees safe. Check out what you need to do to protect your staff and comply with safety guidelines.
Start with a risk assessment
Before employees can return or you start to welcome customers back, it’s important to evaluate the risks and difficulties you’ll be facing so that you can be prepared. Businesses have a responsibility to their employees to provide a safe and healthy workplace. In many countries, laws are in place to dictate the level of care and preparation that you’ll need to take.
For instance, in the U.K., the Management of Health and Safety at Work Regulations requires that, at a minimum, employers:
- Identify potential hazards that could cause illness or injury
- Decide how likely it is that someone could be injured and or become ill
- Take action to eliminate or minimise those risks.
Usually, these risks and hazards are industry-specific. But thanks to COVID-19, businesses are dealing with new responsibilities and risks.
The best way to deal with these new challenges is to start with a risk assessment. To do this, take a close look at your business operations, employee responsibilities, and customer spaces. Ask yourself where individuals may come into close contact with one another, touch the same surfaces, or otherwise put someone at risk of contracting coronavirus. If your employees are a part of any worker or trade unions, consult with those unions about their own risk assessments or requirements in the wake of COVID-19.
Once you’ve created your risk assessment, you can use the results to implement cleaning and social-distancing measures and to plan out the phases of your business’ reopening.
Plan for your employees return
After you’ve assessed the risks that your employees and customers will face, it’s time to plan for how and when employees will return to work.
Check with your local government to find out whether there are restrictions in place. For instance, some cities and countries are requiring certain types of businesses to remain closed or to operate on reduced capacity.
Once you’ve confirmed you’re compliant, it’s time to decide what makes sense for your own business. If your employees, or a portion of them, are currently working from home, consider whether this is something you plan to continue. Depending upon your business and the roles of your employees, remote work can make it easier to minimise the risk of spreading the virus, and help you reduce the cost of operations while business is still slow as a result of COVID-19. As much as 56 percent of employees in the U.S. have a job that could be performed remotely, but prior to the COVID-19 outbreak, just three percent worked from home. After the virus has subsided, it’s likely that number will have grown.
If you do need your employees to return, decide whether your office has space for employees to practice social distancing, as well as whether you have the tools and manpower necessary to sanitise your space adequately. If you have a large enough space and a small number of employees, you may be able to have them return at the same time for normal work hours. But if not, a phased reopening may be a better choice.
There are several options for a phased reopening. You could start by bringing back essential employees, then allow other employees to return at a later date. Alternatively, you could have employees work reduced hours to give you more time to sanitise or even rotate shifts. You’ll also need to decide whether to allow individuals who are considered high-risk to continue working from home.
Establishing office policies
Next, you’ll need to use your risk assessment and reopening plan to set new office policies for employees to follow.
Perhaps the most important policy you’ll need to have in place is to ask that your employees stay home if they or anyone in their household presents symptoms of the coronavirus. Even with that measure in place, you may also choose to implement health checks. Many businesses are choosing to perform temperature checks on employees and customers as they enter.
In the U.S., the CDC has also issued a series of questions to help employers screen their employees. These questions include:
- Do you have any of the following: fever, shortness of breath, cough, chills, muscle pain, headache, sore throat, or new loss of taste or smell?
- Are you ill, or caring for someone who is ill?
- If you answered yes to either of the above questions, in the two weeks before you felt sick, did you have contact with someone diagnosed with COVID-19 or live in or visit a place where COVID-19 is spreading?
Asking these or similar questions can help you prevent an outbreak in your workplace. It’s up to you to decide whether employees who do answer ‘yes’ to these questions or who have a fever will work from home or shelter at home without working until their symptoms subsist.
Sanitising the office space
Another office policy you’ll need to think about is sanitising your space. Whether you choose to bring in an outside cleaning service or clean on your own, sanitising all surfaces regularly throughout the day, setting up hand sanitiser stations, and providing disinfecting supplies to your employees to use at their workstations are all important.
For high-traffic areas or those where customers may be touching surfaces, it’s a good idea to set up hourly disinfecting schedules. You’ll also need to find a way to hold employees accountable for this disinfecting and cleaning. This could include setting up signature sheets or having supervisors do check-ins.
Considering your office layout
You may need to make changes to your office layout and how your facilities are used.
For instance, the number of people allowed in your store or office may need to be limited. This could require having an employee count heads as they enter, and setting up space for a line outside when capacity is reached. Seating areas or waiting rooms will also need to have limited capacity or be eliminated for the time being.
Even businesses that don’t have customers on-location may need to change their office layouts. Desks placed close to one another should be moved to keep employees at least six feet apart. If that isn’t possible, setting up dividers is another way to protect your employees.
Other office policies to consider
Some businesses are going the extra mile to encourage their employees to stay healthy at this time. Unless your city requires it, it is up to you as a business owner to decide whether employees and customers will be required to wear a mask in your business.
If your business is located in a city, encouraging employees to avoid public transportation or to not commute at this time might be necessary. You may decide to require that employees let you know if they travel out of the country or to an area that is experiencing an outbreak of COVID-19.
While it may not be the popular choice, closing vending machines and communal kitchens, and turning off coffee makers in the office are also small measures that can make a big difference at this time. Even limiting the number of people allowed on the elevators at one time is a smart, if not a bit inconvenient, measure to take.
Preparing to go back to the office
There is no clear-cut answer for when businesses can return to work. Instead, it’s up to you to decide what works best for your business and to take the necessary measures to protect your employees and customers at this time. While these guidelines are a great starting point, you should also think about your business’ unique needs and the needs of your employees when choosing when to allow them to return to the office or when setting office policies
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COVID-19 free zones: A proposal for a new tourism product
By Giannis Malisovas, HLB Greece
When COVID-19 hit, the world went into lockdown ceasing the vast majority of international travel. The impact on the tourism industry is enormous. Countries that predominately rely on tourism as faced with major economic consequences. While it is unlikely the tourism industry will return to its pre-pandemic normal once travel restriction are lifted, we ask the question what the alternatives are. In this article we discuss the impact of the pandemic on employment rates and GDP growth from tourism, and explore an alternative tourism product to restart the industry.
Running the numbers
Forecasts from United Nations World Tourism Organization predict that, this year international travel will drop by 850 million to 1.1 billion or by 60% to 80% in comparison to 2019 as a result of the pandemic. The degree of decline varies depending on the duration of containment measures and is broken down into three possible scenarios. The table below summarises each scenario outcome and assumption.
The global economic impact of COVID-19 to travel and tourism industry will be five times greater than the impact of 2008 global financial crisis.
Travel and tourism contribution to GDP in 2019 amounted to US$8.9t or 10.3% of the global economy. In 2020, we expect a loss of US$2.7t or approximately 3.1% of travel and tourism GDP contribution to global economy1.Loss of US$0.9t to US$1.2t tourism export revenue. Total exports from international tourism amount to US$1.7t and comprise of US$1,448b international tourism receipts (visitor spending in destinations) and $256 billion in international passenger transport services. Tourism exports account for 7% of overall exports of goods and services and 29% of global service exports.
The impact on employment is substantial too. According to the World Travel & Tourism Council, an estimated 100 to 120 million direct tourism jobs are at risk: the equivalent of approximately 33% of industry jobs and 3.3% of global employment. In 2019, jobs within the tourism industry were estimated to account for 10% of global employment. Therefore, job losses in the tourism industry due to coronavirus are estimated to translate into a 2.9 percentage points global unemployment rate increase.
When we look at the consequences by country, economic impact varies. Economies with significant dependence on tourism are hit harder. Especially, where tourism receipts are generated from international arrivals. The table below shows the importance of tourism for a selected number of countries.
Scientific estimations about the virus confrontation vary. Some say a vaccine may not be available before summer 2021. But even then, experience shows that it will take time for tourism demand to return to normal. For example, the impact on tourism in Sierra Leone after the first case of Ebola was reported in 2013 was immediate. Tourist arrivals declined by 50% in 2014. To date, neither arrivals nor spending from international visitors have returned to their pre-epidemic level1.
Countries in which the economy strongly relies on tourism easily fall victim to severe poverty problems. The consequences of the pandemic to the tourism industry are unprecedented. Is there anything we can do to mitigate the impact?
A new product
To resume tourism, the industry needs to consider new business models and products that fit safety compliance rules, while remaining attractive to travellers and generating profit. One proposal is the development of ‘’virus-free zones’’. Destinations that can successfully offer a virus free environment can become new tourism hotspots. What would be the characteristics of such product?
Customer demand is different today than it was in pre-pandemic times. The holiday package is likely less focused to traditional tourist attractions such as sea, sun, cultural sites, sport activities, natural beauty and so on. Instead, packages play into the new demand for care-free socialising. The social distancing policies in place all around the world keep infection rates down, but also cause people to feel disconnected from one another. In some cases, the lack of social contact can cause severe mental health issues. Some groups of people are more vulnerable than others. Those in higher risk of serious illness if infected by COVID-19 are under stricter confinement and may have an ever greater desire to visit a destination where care-free social interaction with others is possible.
Year-round sales cycle
Pre-virus, there were several tourism products depending on destination type, such as city breaks, beach holidays, winter spots and summer destinations. These products were often subject to seasonal demand. Post-virus, we can distinguish virus free and virus risky destinations. Virus free destinations can be marketed all year round, effectively changes the sales cycle.
A product like this will be more expensive to develop and maintain but can also be priced at a premium. Considering virus spread and containment difficulties, virus-free destinations will be limited. The cost of developing and maintaining virus-free destination such as an all-inclusive resort will also be greater than pre-pandemic times. As such, tourism businesses can price a premium for products like these. Keeping in mind that visitors are will spend their full stay within the virus-free zone, all spending will be concentrated within this one area. Travel in itself will be more difficult and possibly more expensive and time-consuming. This can result in longer stay once people have arrived to make the investment worth their while.
The development of virus-free zones won’t not an easy task, and strict safety and compliance protocols must be in place to ensure its sustainability. It requires close collaboration between government bodies such as urban planning and local centres for health and safety, and hospitality businesses ranging from transport operators and cleaning companies to hotel and restaurant businesses. Yet, as seen in the economic forecasts, the return on investment for local economies is worth it.
Before declaring a zone as virus free and deciding about its size, a careful evaluation of natural morphology, use of land, facilities, infrastructure and tourism contribution to local economies would be required. Urban planners would call this assessment zoning and labelling. Here are some of the virus free zone characteristics:
Virus-free zones could be a broader geographic area of one country. For example, an island. Natural morphology is an important factor of isolation. Smaller zones such as an all-inclusive large resort after a period of self-isolation can be smaller scale zones as well.
Physical interaction with people from other areas would be subject to restrictions, but totally free inside the virus free zone. Protocol for who is allowed into these areas needs to be in place.
Virus-free zones may expand only to the extent that tourism contributes to the economy without deteriorating anyone’s life. A virus free zone can only be small enough to secure safety from virus and large enough to include necessary facilities and infrastructures (i.e. schools, hospitals). The impact of those living and working within these zones must be taken into consideration, as they can’t leave the zone without the risk in contamination once they return.
Destinations should evaluate their bearing capacity in relation to their healthcare systems.
The perfect traveller
Sooner or later the pandemic will be over. People will travel again. It is part of the very human nature to be curious and to explore. The Greek writer Kazantzakis wrote: “Every perfect traveller creates the country where he travels”. Before we start travelling again, it is worth to reconsider our travel expectations.
While tourism brings growth and prosperity to many economies, in some cases it also has negative consequences. There are numerous examples of intensive and irresponsible tourism development which have led to many landscape alteration, exhaustion of natural environment, and loss of cultural and folklore tradition. The pandemic poses an opportunity to rethink the tourism model and its long-term sustainability. It may also force countries with high dependence on tourism to reconsider their development model and diversify their economies.
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Raising confidence during a crisis:
How can brands maintain customer loyalty and trust?
Challenges arising from the global pandemic caused major operational, strategic and financial havoc. As businesses work to adopt new safety measures and adjust their operational model to adapt to the ‘new normal’, one important aspect often gets pushed lower on the agendas — customer confidence and trust.
The constantly aggravated anxiety about the future finds direct reflection in consumers’ trust levels in businesses. Edelman reports that 50% of customers believe that companies have failed at putting people before profits. Furthermore, only 38% are confident that corporations are proactively protecting their employees’ wellbeing and job prospects.
Failure to retain and raise consumer confidence at the early stages of reopening can cast a ripple effect over your operations in the long-term perspective. So what can be done to win over consumer trust and foster new growth?
Time for transparent communications and bold moves
The lack of confidence directly stems from the lack of communications. Conveying your general stance on COVID-19 and preventive measures in place is not enough to win over consumer trust. In fact, shortcomings in the transparency department already lead many consumers to believe that not enough is done to protect their interests. Amazon has been under major ceasefire during the current crisis, with multiple employees, consumers and other business leaders stepping forward to criticise the company’s ways of maintaining undisrupted operations at the cost of employee protections.
While few (if any) retailers were prepared to face the pandemic, most now recognise that there’s no easy return to “doing business as usual”, even as reopenings loom on the horizon. Acknowledging and communicating the changed vector of operations is now the top of mind agenda to win over the customers’ affinity.
One of the potential vectors to take is by proactively addressing the preventive measures you now have in place. As Renaud Caeymaex, from Delhaize, commented in a recent interview: “Investing in health measures is essential to gain a return on “customer confidence”.
Brick and mortar shopping will remain anxiety-provoking for some demographics. Implementing advanced customer protection provisions such as compact airlock disinfection units, stricter social distancing enforcement and widespread usage of personal protective gear among employees would be key to restoring confidence with the local communities. According to Caeymaex, such measures also act as a strong marketing strategy that already generates a return on investment for his company.
Even before COVID-19, strong brand affinity and emotional connections were essential to winning consumers. In fact, the demand for greater accountability and contribution of brands to sustainability and social causes has been around for some time. One study found that 71% of Millennial consumers prefer brands that drive social and environmental change. Just last week, a UK survey revealed the majority of Millennial and Gen Z respondents believe brands should lean in on the current #BlackLivesMatter discussion, while support did decline as respondents’ age groups went up.
Transition to the experience-lead growth
While today’s increased levels of economic uncertain require business leaders to navigate an ever more complex international marketplace, customer acumen regrettably does not hold a top position within business strategies. Our proprietary global survey of business leaders found that only 24% identified customer acumen as an area of focus that can strengthen their business in the next 12 months.
Lack of alignment between the corporate strategy and actual customer demands further aggravates the confidence gap. Developing a new experience to match consumers’ on-the-moment needs and anxieties is key to forging new paths for growth.
Modifying an existing offering is one option. In response to COVID-19 lockdown measures, Netflix launched Netflix Party — a synchronized video playback service to group-watch, and discuss films together with friends — to engage and delight their users. Pivoting to a new business model or product range is the second route. Flying Elephant Productions — an Irish manufacturer of exhibition sets — turned to manufacturing desk and outdoor furniture after the core products were no longer in demand.
Listen loud and clear
To locate and effectively fill the emerging market demands, businesses should increase communication with the customer — a mantra most product-led companies have been practising for years. As our research also revealed, most leaders are taking proactive steps in this direction:
- 53% conduct more frequent market researchers to stay abreast of the shifting consumer behaviours.
- 45% rely on social listening and sentiment analysis online.
- 43% invest in improved Client Relationship Management (CRM) processes and platforms.
Strive to understand how the crisis is affecting your target audiences and provide them with the information they need to make more informed, conscious and safe choices. Shift the focus from explaining how your business is adapting to the new normal towards explaining how you can help your customers cope with the overwhelm and perhaps even find some ‘silver lining’ amidst the current gloom of uncertainty.
Moreover, it’s not just the external listening that you should practice. Acknowledging and reacting to your employees’ concerns is the second part of the equation. Instilling trust within the communities you serve is virtually impossible when your team is struggling to internalise where the future lies for them.
Proactively support your teams if the business is slow right now. Do even more so, if your company is dealing with unprecedented growth. Over the past few months, Slack’s user base surged as companies’ around the world embraced remote operations. However, such a positive impact on business bottom lines placed a higher toll on the in-house personnel.
Rather than forcing Slack employees to put in more hours, Stewart Butterfield, CEO of Slack, tactfully acknowledged the teams’ current successes and urged everyone to “If you can, help others. If you need help, do not hold back — just ask”.
When consumer confidence is down, you have to be extra careful with your messaging, positioning and corporate responses to the current events. Listen carefully to the subtle changes among your communities and within your teams. Learn progressively about your customers’ needs. Incorporate direct feedback into your product development, communications and marketing. Build a rapport of personalised candour, over generalistic reassurance. That the new trajectory to pursue if your goal is to restore consumer trust and instil higher confidence in your business.
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Business as unusual:
Are business leaders ready for life after lockdown?
Almost three months since COVID-19 was declared a pandemic by WHO, it’s clear that business will not be returning to normal anytime soon. Leaders around the world have noted that normal life won’t return until a vaccine is widely available, and there is no concrete timeline for the development of one. Even when a vaccine does arrive, officials acknowledge that we’ll be turning to a ‘new normal,’ rather than the lives we knew before. So, what does business as unusual look like? In this article, we discuss the different approaches from across the globe to reopening and returning to work after lockdown.
Current state of affairs
While countries in Europe and North America see their curve of infections flatten, an upward trend in cases is still seen in places across South America where the full impact of the virus is now unfolding. An increasing number of governments are easing lockdown measures, businesses will have to manage re-opening under new restrictions that vary by country and jurisdiction. Yet, experts warn of a second wave which will have a continued impact on how people live their lives and how businesses operate.
Some of the hardest-hit countries have started re-opening in an attempt to return to normal life. In Northern Italy, people allowed to dine at restaurants again, and in some American states, the public can visit beaches. Other countries in the EU, such as Germany have made the use of face masks mandatory in public places.
Businesses that are looking to return to work should consider what kind of adjustments they must make to their usual operations to comply with certain physical distancing guidelines. That can include making shopping aisles one-way, or installing plexiglass barriers at areas where staff members serve customers. The hospitality sector in particular needs to rethink its model of operations to keep both staff and customers safe, while keeping the business profitable. Personal protective equipment remains a sought-after commodity, and the U.S Centres for Disease Control (CDC) encourages employees to wear face coverings in the workplaces.
The CDC has also provided a decision tool for businesses that are unsure about whether they should open and what precautions they’ll need to take. The New York Times pointed out that some companies and employees in office spaces have their reservations about returning to the office, citing the amount of precautions that’ll need to take to ensure safety guidelines are met. “If followed, the guidelines would lead to a far-reaching remaking of the corporate work experience,” their article reads. Some corporations are considering the possibility of not returning to the office at all, like Twitter whom insinuate that they might permanently have employees working from home.
As deaths continue to mount in Brazil, a country which is set to overtake Italy to have the third highest number of deaths, experts are warning that lockdown measures must continue to bring the virus under control. The country has the second highest number of confirmed cases, yet, life in the public sphere is starting to re-open and non-essential businesses like furniture stores and car shops are up and running again.
The scene is similar in other parts of Latin America, and the World Health Organization and top doctors have warned the region that re-opening too quickly could be harmful. “What is happening is an absurdity,” said Paulo Lotufo, an epidemiologist at the University of São Paulo in an article on The Guardian. Yet, politicians feel the pressure to re-start economic activity as soon as possible to migrate the economic aftermath of lockdown measures. The IMF expects the global economy to contract by a sharp 3%. Germany, the largest economy in the EU by nominal GDP could decline by up to 10%.
So what does re-opening look like?
Despite the expert opinions of some, the fact is that businesses are re-opening around the world, and they have lots of considerations to make as a result. In office life, this means that working from home is likely to continue for longer than anticipated. In customer service-based sectors, business leaders need to make adjustments to their normal operations and get their workforce prepared. A national survey in Canada shows that most businesses aren’t prepared for an imminent return to work, and another business journal pointed out that employers will have to take increased measures to make sure that their employees are ready to come into work.
Some questions to consider are: do your workers feel safe coming in to work? Do they have the childcare support needed while their kids are home from school? Will you have enough protective equipment and measures in place to ensure an outbreak doesn’t occur in the workplace? It’s these kinds of workforce issues that can slow the re-opening process and overall business’ recovery. The process of gradual re-opening is also underway in Spain and the UK. The Harvard Business Review suggests businesses can look to this re-opening as an opportunity. A well-managed, responsible and successful transition into the ‘new normal’ could define a brand for years to come.
In Canada’s largest province, Ontario, many businesses have also used the immense need for particular goods as an opportunity. Craft distilleries and breweries are churning out hand sanitizer, and sports companies like Bauer are crafting face shields and other medical equipment. Business leaders with a growth mind-set are in a good position to turn the COVID-19 crisis in an opportunity for their brand.
Australia provides a good idea of what a “new normal” could look like for other countries since they’ve largely managed to flatten the curve. While the country has relatively few cases, most states and territories are only allowing ten or 20 people to dine in a restaurant at once. And since the food sector in Australia was heavily bolstered by tourism, restaurants will be taking a hit for months to come as the pandemic continues. Employers in certain industries can receive up to $1,500AUD from the government for each person they employ and are required to pass the money on to employees to help keep businesses afloat during the pandemic. Retail businesses also started to open in May.
As cases mount much more rapidly in North America and Europe, it could be a sign that further re-opening efforts in other parts of the world could take a long time to come. Stimulus measures like the provisions for employers were originally established for a 6-month period, but that could be subject to change as the global crisis continues. Businesses around the world will have to prepare for a transition to becoming self-sufficient once government relief ends.
In China, where the virus originated, the country has been an outlier when it comes to COVID-19 and managed to slow the infection rate with an aggressive lockdown strategy. The Chinese government made similar moves to the western world when it came to injecting cash into the economy through stimulus. It also boosted consumption by issuing subsidies and coupons. Businesses started re-open in Wuhan, the original epicentre of the outbreak, as early as March, relying heavily on electronic thermometers to check customer temperatures for fevers. In late May, cities like Hong Kong had reported days without any new cases of COVID-19, and entertainment even venues such as nightclubs are beginning to re-open. Many parts of the country are starting to relax their lockdown measures, allowing businesses to re-open while limiting them to serving half the number of customers that they usually would at a time. But China was also one of the first countries to experience a small second wave, after more cases started appearing from foreign arrivals after the government slowed community spread of the virus. It’s a reminder that countries and businesses will have to remember that a second wave is likely, if not inevitable, and that restrictions could return and set people back once again.
In short, when re-opening your business, operations will look far different from normal. It is up to all of us – government, the private sector, and consumers alike – to help restart the economy while staying safe. That means there is no return to business as usual but finding a way to generate a profit in a new world.