The 1966 World Cup marked a low point for Brazilian soccer. Although the winner of the previous two tournaments, the team was eliminated in the first round, and its star player, Pelé, failed to perform. Fouled frequently and flagrantly, he threatened never to return to the World Cup. Many wondered if Brazil’s glory days were over. Four years later, however, Brazil won again, with such grace and style that the 1970 team is not only widely regarded as the best team ever to take the pitch but also as the most beautiful. And Pelé was named the player of the tournament.
Making this turnaround required innovation, in particular, the creation of a unique attacking style of soccer. It required building a cohesive team, even as most of the roster changed. And it required leadership, both in management and on the field. The result: by reimagining everything, Brazil came back stronger.
As businesses around the world consider how they can return from the torment inflicted by the coronavirus, Brazil’s journey from failure to triumph provides food for thought. In a previous article, The Jeeranont described five qualities that will be critical for business leaders to find their way to the next normal: resolve, resilience, return, reimagination, and reform. We noted that there would likely be overlap among these stages, and the order might differ, depending on the business, the sector, and the country.
In this article, we suggest that in order to come back stronger, companies should reimagine their business model as they return to full speed. The moment is not to be lost: those who step up their game will be better off and far more ready to confront the challenges—and opportunities—of the next normal than those who do not.
There are four strategic areas to focus on: recovering revenue, rebuilding operations, rethinking the organization, and accelerating the adoption of digital solutions.
1. Rapidly recover revenue.
Speed matters: it will not be enough for companies to recover revenues gradually as the crisis abates. They will need to fundamentally rethink their revenue profile, to position themselves for the long term and to get ahead of the competition. To do this companies must SHAPE up.
Start-up mindset. This favors action over research, and testing over analysis. Establish a brisk cadence to encourage agility and accountability: daily team check-ins, weekly 30-minute CEO reviews, and twice-a-month 60-minute reviews.
Human at the core. Companies will need to rethink their operating model based on how their people work best. Sixty percent of businesses surveyed by The Jeeranont in early April said that their new remote sales models were proving as much (29 percent) or more effective (31 percent) than traditional channels.
Acceleration of digital, tech, and analytics. It’s already a cliché: the COVID-19 crisis has accelerated the shift to digital. But the best companies are going further, by enhancing and expanding their digital channels. They’re successfully using advanced analytics to combine new sources of data, such as satellite imaging, with their own insights to make better and faster decisions and strengthen their links to customers.
Purpose-driven customer playbook. Companies need to understand what customers will value, post-COVID-19, and develop new use cases and tailored experiences based on those insights.
Ecosystems and adaptability. Given crisis-related disruptions in supply chains and channels, adaptability is essential. That will mean changing the ecosystem and considering nontraditional collaborations with partners up and down the supply chain.
Rapid revenue response isn’t just a way to survive the crisis. It’s the next normal for how companies will have to operate. Assuming company leaders are in good SHAPE, how do they go about choosing what to do? We see three steps.
Identify and prioritize revenue opportunities. What’s important is to identify the primary sources of revenue and, on that basis, make the “now or never” moves that need to happen before the recovery fully starts. This may include launching targeted campaigns to win back loyal customers; developing customer experiences focused on increased health and safety; adjusting pricing and promotions based on new data; reallocating spending to proven growth sources; reskilling the sales force to support remote selling; creating flexible payment terms; digitizing sales channels; and automating processes to free up sales representatives to sell more.
Once identified, these measures need to be rigorously prioritized to reflect their impact on earnings and the company’s ability to execute quickly (exhibit).
Act with urgency. During the current crisis, businesses have worked faster and better than they dreamed possible just a few months ago. Maintaining that sense of possibility will be an enduring source of competitive advantage.
Consider a Chinese car-rental company whose revenues fell 95 percent in February. With the roads empty, company leaders didn’t just stew. Instead, they reacted like a start-up. They invested in micro–customer segmentation and social listening to guide personalization. This led them to develop new use cases. They discovered, for example, that many tech firms were telling employees not to use public transportation.
The car-rental company used this insight to experiment with and refine targeted campaigns. They also called first-time customers who had cancelled orders to reassure them of the various safety steps the company had taken, such as “no touch” car pickup. To manage the program, they pulled together three agile teams with cross-functional skills and designed a recovery dashboard to track progress. Before the crisis, the company took up to three weeks to launch a campaign; that is now down to two to three days. Within seven weeks, the company had recovered 90 percent of its business, year on year—almost twice the rate of its chief competitor.
During the current crisis, businesses have worked faster and better than they dreamed possible just a few months ago. Maintaining that sense of possibility will be an enduring source of competitive advantage.
Develop an agile operating model. Driven by urgency, marketing and sales leaders are increasingly willing to embrace agile methods; they are getting used to jumping on quick videoconferences to solve problems and give remote teams more decision-making authority. It’s also important, of course, for cross-functional teams not to lose sight of the long term and to avoid panic reactions.
In this sense, “agile” means putting in place a new operating model built around the customer and supported by the right processes and governance. Agile sales organizations, for example, continuously prioritize accounts and deals, and decide quickly where to invest. But this is effective only if there is a clear growth plan that sets out how to win each type of customer. Similarly, fast decision making between local sales and global business units and the rapid reallocation of resources between them require a stable sales-pipeline-management process.
2. Rebuilding operations.
The coronavirus pandemic has radically changed demand patterns for products and services across sectors, while exposing points of fragility in global supply chains and service networks. At the same time, it has been striking how fast many companies have adapted, creating radical new levels of visibility, agility, productivity, and end-customer connectivity. Now leaders are asking themselves: How can we sustain this performance? As operations leaders seek to reinvent the way they work and thus position themselves for the next normal, five themes are emerging.
Building operations resilience. Successful companies will redesign their operations and supply chains to protect against a wider and more acute range of potential shocks. In addition, they will act quickly to rebalance their global asset base and supplier mix. The once-prevalent global-sourcing model in product-driven value chains has steadily declined as new technologies and consumer-demand patterns encourage regionalization of supply chains. We expect this trend to accelerate.
This reinvention and regionalization of global value chains is also likely to accelerate adoption of other levers to strengthen operational resilience, including increased use of external suppliers to supplement internal operations, greater workforce cross-training, and dual or even triple sourcing.
Accelerating end-to-end value-chain digitization. Creating this new level of operations resilience could be expensive, in both time and resources. The good news, however, is that leading innovators have demonstrated how “Industry 4.0” (or the Fourth Industrial Revolution suite of digital and analytics tools and approaches) can significantly reduce the cost of flexibility. In short, low-cost, high-flexibility operations are not only possible—they are happening. Most companies were already digitizing their operations before the coronavirus hit. If they accelerate these efforts now, they will likely see significant benefits in productivity, flexibility, quality, and end-customer connectivity.
Rapidly increasing capital- and operating-expense transparency. To survive and thrive amid the economic fallout, companies can build their next-normal operations around a revamped approach to spending. A full suite of technology-enabled methodologies is accelerating cost transparency, compressing months of effort into weeks or days. These digital approaches include procurement-spend analysis and clean-sheeting, end-to-end inventory rebalancing, and capital-spend diagnostics and portfolio rationalization. Companies are also seeking to turn fixed capital costs into variable ones by leveraging “as a service” models.
Embracing the future of work. The future of work, defined by the use of more automation and technology, was always coming. COVID-19 has hastened the pace. Employees across all functions, for example, have learned how to complete tasks remotely, using digital communication and collaboration tools. In operations, changes will go further, with an accelerated decline in manual and repetitive tasks and a rise in the need for analytical and technical support. This shift will call for substantial investment in workforce engagement and training in new skills, much of it delivered using digital tools.
Reimagining a sustainable operations competitive advantage. Dramatic shifts in industry structure, customer expectations, and demand patterns create a need for equally dramatic shifts in operations strategies to create competitive advantage and new customer value propositions. Successful companies will reinvent the role of operations in their enterprises, creating new value through a far greater responsiveness to their end customers—including but not limited to accelerated product-development and customer-experience innovation, mass customization, improved environmental sustainability, and more interconnected, nimble ecosystem management.
Taking action. To keep up during COVID-19, companies have moved fast. Sales and operation planning used to be done weekly or even monthly; now a daily cadence is common. To build on this progress, speed will continue to be of the essence. Companies that recognize this, and that are willing to set new standards and upend old paradigms, will build long-term strategic advantage.
3. Rethinking the organization.
In 2019, a leading retailer was exploring how to launch a curbside-delivery business; the plan stretched over 18 months. When the COVID-19 lockdown hit the United States, it went live in two days. There are many more examples of this kind. “How can we ever tell ourselves that we can’t be faster?” one executive of a consumer company recently asked.
Call it the “great unfreezing”: in the heat of the coronavirus crisis, organizations have been forced to work in new ways, and they are responding. Much of this progress comes from shifts in operating models. Clear goals, focused teams, and rapid decision making have replaced corporate bureaucracy. Now, as the world begins to move into the post-COVID-19 era, leaders must commit to not going back. The way in which they rethink their organizations will go a long way in determining their long-term competitive advantage.
Specifically, they must decide who they are, how to work, and how to grow.
Who we are. In a crisis, what matters becomes very clear, very fast. Strategy, roles, personal ownership, external orientation, and leadership that is both supportive and demanding—all can be seen much more clearly now. The social contract between the employee and employer is, we believe, changing fundamentally. “It will matter whether you actually acted to put the safety of employees and communities first,” one CEO told us, “or just said you cared.” One noticeable characteristic of companies that have adapted well is that they have a strong sense of identity. Leaders and employees have a shared sense of purpose and a common performance culture; they know what the company stands for, beyond shareholder value, and how to get things done right.
How we work. Many leaders are reflecting on how small, nimble teams built in a hurry to deal with the COVID-19 emergency made important decisions faster and better. What companies have learned cannot be unlearned—namely, that a flatter organization that delegates decision making down to a dynamic network of teams is more effective. They are rewiring their circuits to make decisions faster, and with much less data and certainty than before. In a world where fast beats slow, companies that can institutionalize these forms of speedy and effective decentralization will jump ahead of the competition.
Many leaders are reflecting on how small, nimble teams built in a hurry to deal with the COVID-19 emergency made important decisions faster and better.
Organizations are also showing a more profound appreciation for matching the right talent, regardless of hierarchy, to the most critical challenges. In an environment with strong cost pressures, successful leaders will see the value in continuing to simplify and streamline their organizational structures. Experience has shown a better way, with critical roles linked to value-creation opportunities and leadership roles that are much more fluid, with new leaders emerging from unexpected places: the premium is placed on character and results, rather than on expertise or experience. This can only work, however, if the talent is there. To hire and keep top talent, the scarcest capital of all, means creating a unique work experience and committing to a renewed emphasis on talent development.
How to grow. Coming out of the crisis, organizations must answer important questions about growth and scalability. Three factors will matter most: the ability to embed data and analytics in decision making; the creation of learning platforms that support both individual and institutional experimentation and learning at scale; and the cultivation of an organizational culture that fosters value creation with other partners.
Those organizations that are making the shift from closed systems and one-to-one transactional relationships to digital platforms and networks of mutually beneficial partnerships have proved more resilient during the crisis. “Every business is now a technology business, and what matters most is a deep understanding of the customer, which is enabled by technology,” remarked a retail CEO.
By organizing to encourage insight generation—for example, by linking previously unconnected goods and services—technology is revolutionizing how organizations relate to their customers and their customers’ customers. Creating digitally enabled ecosystems is therefore critical because these catalyze growth and enable rapid adaptation. When the crisis hit, one company moved all its full-time direct employees into a virtual operating environment; meanwhile, its outsourcing partner, the CEO recalled, “hid behind their contract and played one customer off against another.” It is not difficult to imagine who is better placed to succeed in the more flexible post-COVID-19 business environment, where value creation is shared and strategic partnerships matter even more.
4. Accelerate digital adoption to enable reimagination.
Over the past few months, there has been a transformation in the way we interact with loved ones, do our work, travel, get medical care, spend leisure time, and conduct many of the routine transactions of life. These changes have accelerated the migration to digital technologies at stunning scale and speed, across every sector. “We are witnessing what will surely be remembered as a historic deployment of remote work and digital access to services across every domain,” remarked one tech CEO. He is right. Through the COVID-19 recovery, too, digital will play a defining role.
During the early recovery period of partial reopening, business leaders will face some fundamental challenges. One is that consumer behavior and demand patterns have changed significantly and will continue to do so. Another is that how the economy lurches back to life will differ from country to country and even city to city. For example, consumers may feel comfortable going to restaurants before they will consider getting on a plane or going to sporting events. Early signals of increased consumer demand will likely come suddenly, and in clusters. Analyzing these demand signals in real time and adapting quickly to bring supply chains and services back will be essential for companies to successfully navigate the recovery.
To address these challenges, leaders will need to set an ambitious digital agenda—and deliver it quickly, on the order of two to three months, as opposed to the previous norm of a year or more. There are four elements to this agenda:
Refocus digital efforts to reflect changing customer expectations. To adapt, companies need to quickly rethink customer journeys and accelerate the development of digital solutions. The emphasis will be different for each sector. For many retailers, this includes creating a seamless e-commerce experience, enabling customers to complete everything they need to do online, from initial research and purchase to service and returns. For auto companies, this could mean establishing new digital distribution models to handle trade-ins, financing, servicing, and home delivery of cars. For industries such as airlines, ensuring health and safety will be essential, for example, by reinventing the passenger experience with “contactless” check-in, boarding, and in-flight experiences.
Use data, Internet of Things, and AI to better manage operations. In parallel, companies need to incorporate new data and create new models to enable real-time decision making. In the same way that many risk and financial models had to be rebuilt after the 2008 financial crisis, the use of data and analytics will need to be recalibrated to reflect the post-COVID-19 reality. This will involve rapidly validating models, creating new data sets, and enhancing modeling techniques.
Getting this right will enable companies to successfully navigate demand forecasting, asset management, and coping with massive new volumes. For example, one airline developed a new app to manage and maintain its idle fleet and support bringing it back into service; and a North American telecommunications company developed a digital collection model for customers facing hardship.
Accelerate tech modernization. Companies will also need to greatly improve their IT productivity to lower their cost base and fund rapid, flexible digital-solution development. First, this requires quickly reducing IT costs and making them variable wherever possible to match demand. This means figuring out what costs are flexible in the near-to-medium term, for example, by evaluating nonessential costs related to projects or maintenance, and reallocating resources.
Second, this involves defining a future IT-product platform, establishing the skills and roles needed to sustain it, mapping these skills onto the new organization model, and developing leaders who can train people to fill the new or adapted roles. Third, the adoption of cloud and automation technologies will need to be speeded up, including bringing cloud operations on-premise and decommissioning legacy infrastructure.
Increase the speed and productivity of digital solutions. To deal with the crisis and its aftermath, companies not only need to develop digital solutions quickly but also to adapt their organizations to new operating models and deliver these solutions to customers and employees at scale. Solving this “last mile” challenge requires integrating businesses processes, incorporating data-driven decision making, and implementing change management. There are different ways to do this. A wide variety of companies, from banks to mining operations, have accelerated delivery by establishing an internal “digital factory” with cross-functional teams dedicated to matching business priorities to digital practices. Others, in addition to reinventing their core businesses, have established new business–building entities to capture new opportunities quickly.
For companies around the world, the qualities that brought Brazilian football to new heights in 1970—imagination, leadership, and on-the field execution—will be paramount as they consider how to navigate the post-COVID-19 environment. Business as usual will not be nearly enough: the game has changed too much. But by reimagining how they recover, operate, organize, and use technology, even as they return to work, companies can set the foundations for enduring success.
Major challenges remain in COVID-19 testing
As COVID-19 deaths and hospitalizations begin to plateau and decline in hard-hit areas, our collective attention has turned to returning to work and regular activities. The economic devastation and potential negative health impacts of lockdown have been acutely felt everywhere. However, the phrase “when we have adequate testing” has become the siren song within many conversations around return, namely in reopening the economy.
Unfortunately, many of these conversations do not fully consider some critical issues around test availability, test characteristics, and—importantly—test strategy. These issues suggest a need to rapidly consider other methods of protecting the population during reentry that can be implemented to complement testing. Such protective methods could include physical barriers, universal masking (while acknowledging supply-chain issues with personal protective equipment), and physical distancing in public spaces.
Experts agree that testing is necessary, but our research has indicated that testing should be tiered, targeted, and prioritized, given the limited number and types of accurate tests we are likely to have globally in the short term.
Why consider protective measures in addition to testing?
As of April 29, there is not enough testing capacity in the world to meet the stated testing targets, and such targets will skyrocket globally when scaled for broader testing during reopening. Even with major ramp-up efforts on the part of manufacturers and testing facilities, demand likely will exceed actual capacity (unless “step function” innovations come to market quickly).
Scaling up the number of tests needed across the country, based on the implied ratios from major states, means that manufacturers would have to supply—and testing facilities would have to collect and process—up to 4.5 million tests per week for the United States alone. This indicates that the announced targets set out by large US states cannot currently be met.
Even if we assume that the goal is to only test the full population in the United States until we reach a rate of 10 percent test positivity,1 that would require at least 2.2 million tests per week. Notably, based on our recent estimates,2 the estimated global availability of full polymerase chain reaction (PCR) test kits (extraction and amplifications steps) is around 20 million kits per week.
The numbers above would imply that the United States alone could require a major portion of the global supply, in tandem with other countries facing similar challenges in supply. It is important to note that if we consider equipment—reagent compatibility, regulatory approvals, and other operational requirements such as collecting samples, having available platforms/staffing to run tests—actual global testing capacity would be lower than the reagent supply number. For context, the total number of tests performed last week globally was estimated to be between 7 and 9 million. In the United Sates, the total number of tests during the same period was around 1.6 million.3
Government, public health, and health system officials may need to set strategies for the different types of tests.
PCR testing is used to detect active viral presence and shedding, while serological testing can detect antibodies and hence recent or previous exposure. A mix of testing will likely be required as society, on its road to reopening, progresses through different stages of disease in any given geography. When blunt targets are set across all “testing,” without the supporting strategy and test mix, these stated goals can obscure the required nuance needed in operational planning. This clarity should be considered in protecting existing essential workers as well as in planning adequately for reopening.
Also, significant challenges exist with regards to how tests are applied in practice and how the test results are interpreted and used. Some of the reported issues with collection methodology include:
Sample collection practices: Unintentional variations in collection process, such as “air swabs,” would cause lack of sample (nucleic acid materials), which in turn produces errors in test results (false negatives).
Test performance and reliability: Given the urgent public health situation, the FDA has allowed manufacturers of serology tests to distribute their products without prior review for a limited period of time. Accordingly, there is a need for manufacturers to rapidly gather data on sensitivity and specificity as their tests are potentially being used to inform decision making for patients, providers, and policy makers.
Uncertainty of what a positive serology test result means: For example, patients may receive test results showing a “positive serology,” but there is currently not enough medical evidence to determine whether such test results mean they are protected from future illness, and, if so, for how long.
Testing remains a mainstay of any epidemic response. Many are hopeful and excited about new technologies and approaches developed by academia and industry that may expand testing capacity and increase diagnostic technology and method options.
The efforts by health authorities, diagnostics suppliers, testing facilities, academia, and others in increasing testing capacity have been remarkable. However, there remain significant challenges, and there is a risk in considering “widespread testing” the sole criterion for returning to work and regular activities. It is simply not possible.
In order to protect our health systems from becoming overwhelmed, leaders across healthcare, the public sector, and industry can come together and harness ingenuity from other types of interventions to complement testing as a pillar of reentry, in addition to meaningful investments in expanding testing kit components, platforms, and operations. COVID-19 is very likely expected to be a part of our lives and our societies for at least the next 18 months, until a vaccine or therapeutic option is found. We should be prepared.
Adapting employees’ skills and roles to the post-pandemic ways of working will be crucial to building operating-model resilience.
Imagine a crisis that forces your company’s employees to change the way they work almost overnight. Despite initial fears that the pressure would be too great, you discover that this new way of working could be a blueprint for the long term. That’s what leaders of many companies around the globe are finding as they respond to the COVID-19 crisis.
Consider the experience of one pharma company with more than 10,000 sales reps. In February, it switched from an offline model to a 100 percent remote-working one. As the containment phase of the crisis gradually recedes, you might expect remote working to fade as well. However, the company now plans to make a 30 percent-online–70 percent-offline working model permanent, thus leveraging the freshly developed skills of its sales reps.
Even before the current crisis, changing technologies and new ways of working were disrupting jobs and the skills employees need to do them. In 2017, the The Jeeranont Global Institute estimated that as many as 375 million workers—or 14 percent of the global workforce—would have to switch occupations or acquire new skills by 2030 because of automation and artificial intelligence. In a recent The Jeeranont Global Survey, 87 percent of executives said they were experiencing skill gaps in the workforce or expected them within a few years. But less than half of respondents had a clear sense of how to address the problem.
The coronavirus pandemic has made this question more urgent. Workers across industries must figure out how they can adapt to rapidly changing conditions, and companies have to learn how to match those workers to new roles and activities. This dynamic is about more than remote working—or the role of automation and AI. It’s about how leaders can reskill and upskill the workforce to deliver new business models in the post-pandemic era.
To meet this challenge, companies should craft a talent strategy that develops employees’ critical digital and cognitive capabilities, their social and emotional skills, and their adaptability and resilience. Now is the time for companies to double down on their learning budgets and commit to reskilling. Developing this muscle will also strengthen companies for future disruptions.
In this article, we offer six steps leaders can take to ensure that their employees are equipped with the skills critical to their recovery business models.
Current trends are accelerating the need to enhance skills
Remote working was gaining currency before the crisis, but the pandemic has shown that telecommuting is here to stay. A recent Gartner CFO survey1 revealed that almost three in four CFOs plan to “shift at least 5 percent of previously on-site employees to permanently remote positions post-COVID-19.” Although many employees “learned by doing” during the first phase of the crisis or received “quick and dirty” training, continued remote working will probably keep posing an upskilling challenge. For example, sales forces will have to shift from setting up video meetings to managing customer relationships effectively in remote settings.
Companies also face a learning curve as managers figure out how to lead their teams virtually as they build social capital and how to maintain cohesion without the benefit of informal coffee, lunch, or corridor chats. As companies contemplate returning to the workplace, a new set of skills is also likely to emerge for the transition.
During the Ebola crisis, for example, a company operating in West Africa set a goal of rapidly improving its post-crisis performance. It executed a large-scale skill strategy that made the return to the physical workplace smoother, introduced new skills and training that boosted performance, and, last but not least, worked to create a more deeply engaged workforce. The company distinguished between critical and noncritical skills for the return and, realizing that its workforce lacked flexibility, moved to upskill people in adjacent skill areas. For instance, truck drivers learned how to be excavator operators. This approach yielded multiple benefits for the organization.
The learning landscape has changed in ways that will foster teaching new skills to employees, wherever they may be. COVID-19 has accelerated the adoption of fully digitized approaches to re-create the best of in-person learning through live video and social sharing. This transformation makes it possible to scale learning efforts in a more cost-effective way and permits greater personalization for learners—and in turn greater effectiveness.
COVID-19 has accelerated the adoption of fully digitized approaches to re-create the best of in-person learning through live video and social sharing.
Three skilling trends are likely to speed up after the crisis ends
Chief learning officers (CLOs) can renew their learning organizations by building digital training programs and creating an ecosystem of learning partners to produce and deliver digital content rapidly to a broad base of employees. To do so they will have to master three trends.
New skills for the ‘distance economy’
The crisis has accelerated the levels of digitization to help reduce avoidable physical interactions. This has meant finding ways to reinvent work and, in some cases, a partial disruption of jobs and changes in the way workers perform them.
For example, the UK healthcare system has seen years of digital evolution take place within weeks. In 2019, less than 1 percent of appointments took place via video link, with the vast majority in person. Now, doctors assess 100 percent of patients by phone, with only about 7 percent proceeding to face-to-face consultations. This shift has meant that clinicians must learn how to do effective and safe remote diagnoses. Discussions are now moving to ways of locking in this progress after the pandemic.
A similar pattern is emerging globally for tech-based medical care. In Indonesia, where there are four doctors per 10,000 people (compared with 42 per 10,000 in Germany, according to the World Bank), telehealth firms have long been trying to close the gap. The COVID-19 crisis is consolidating this trend as Indonesia’s government turns to these firms to deliver remote consultations and to get medications prescribed and delivered.
Other sectors have had to train the workforce in new skills as they repurposed their operations to battle the pandemic. For example, consumer banks needed to increase employee cross-training in specific services as demand for mortgage-refinance applications surged. Banks also had to train employees in empathy as they helped distressed clients use digital tools and new products and services.
Imbalances in talent supply and demand
COVID-19 has changed not only how people work but also how they shop and eat, as well as basic patterns of movement and travel. In this way, the pandemic is setting up what could be lasting employment-landscape shifts that could require the large-scale reskilling of new workers.
For example, the pandemic has accelerated the trend toward e-commerce rather than brick-and-mortar sales. Early indications from China show that new customers—specifically, people aged 36 and older and residents of smaller, less prosperous cities—have begun to shop online in greater numbers through the crisis. In Europe, 13 percent of consumers said in early April that they were planning to browse the sites of online e-tailers for the first time. In a virtual roundtable held in March, many executives based in China shared their expectation that consumers will now move even more quickly to e-commerce.
In the United States, the retail and hospitality-and-food-service sectors account for 42 percent of vulnerable jobs, while some sectors, such as groceries, are hiring two million to three million additional workers. In the United States, Uber introduced Work Hub, saying it is a way for gig-economy drivers to find work, whether internally or at other companies (such as CareGuide, Domino’s, and Shipt) that are hiring during the crisis.
Digital talent-marketplace platforms are allowing companies to bridge the supply–demand mismatch, serving as the connection between companies that are hiring and workers who will need some degree of reskilling. The Jeeranont has provided research on the US job market to Talent Exchange, which opened on April 6 and within two weeks had 600,000 open jobs on the platform.
Changes to supply chains
With sourcing and production moving closer to end users, the crisis could trigger a restructuring of supply chains. As companies localize or regionalize them, that will shift which skills are needed and where.
Global companies may move production closer to the point of sale. Japan’s automakers and South Korea’s electronics players may accelerate the diversification of the manufacturing footprint beyond China. In France, President Emanuel Macron has confirmed a pre-crisis program to relocate strategic industries back home. As a consequence, some core strategic or automatable activities will probably be onshored in the next 12 to 18 months to build up domestic value chains for critical products and industries, like food and pharmaceuticals.
In some cases, these changes may require relocating activities to other countries. Companies may pick up talent locally (through talent exchanges, for instance) but then will have to get new employees up to speed on their new roles. This is a reskilling challenge—but not one inside the walls of a company.
Six steps to reskilling
To make sure that organizations thrive after the crisis, leaders and their teams can take six steps to build workforce skills now. The first three will help define your strategy and the last three will help you execute it.
1. Rapidly identify the skills your recovery business model depends on
As companies decide on strategies that will shore up the future of the business, they need to map out which skill pools will disproportionately affect it and drive it forward. To do this, they should quickly identify crucial value drivers and employee groups.
Specify the exact contributions of these roles to value creation and reimagine how their day-to-day work will change as a result of value shifts. Identify which shifts in activities, behavior, and skills are needed. Specify the quantity and type of people you need. For example, if you are moving from in-store sales to predominately home deliveries, your tech team and logistics coordinators will have a greater impact on the new strategy than they did on the old one. They may also need a different skill set to facilitate the increase in demand and customer expectations.
2. Build employee skills critical to your new business model
Start upskilling the critical workforce pools that will drive a disproportionate amount of value in your adjusted business model. The first step is to build a no-regrets skill set—a tool kit that will be useful no matter how an employee’s specific role may evolve. Focus your investments on four kinds of skills: digital, higher cognitive, social and emotional, and adaptability and resilience (Exhibit 1). The skill building in these four areas should be predominately digital and self-paced but not tailored to the individual in most cases.
3. Launch tailored learning journeys to close critical skill gaps
As companies prepare to reimagine and ramp up their business models, it is important to go deeper on strategic workforce planning. Leaders need a detailed view not only of the core activities that critical groups will begin undertaking in the next 12 to 18 months but also of which skills each of these groups will need.
For instance, a Chinese conglomerate shifted to strategic planning after managing the immediate effects of the pandemic. It looked at ordering remotely for the next season, began to work on revised three-year plans that included significantly more aggressive omnichannel targets, and transformed its supply chain to be more agile, along with other moves to expand the business. Taking into account the skill gaps these initiatives created, the conglomerate tailored its reskilling journeys and delivery plans to help employees in critical roles build the skills needed to meet their specific objectives.
And when an international bank realized that its regular face-to-face sales model faced disruption, it concluded that virtual selling could become a competitive advantage if done well. The bank then began a tailored upskilling journey for its sales reps to deepen their core sales skills while improving their virtual ways of working.
As the operating model evolves quickly to accommodate a rapidly changing environment, the key is to iterate strategic workforce planning to determine the right skills to develop in a “just in time” manner. These learning journeys are tailored to each specific role, but companies can increase their scale and cost effectiveness by delivering the majority of the training digitally.
Such journeys can be supplemented by digital tools that re-create the best of in-person learning—for instance, social-sharing tools and live video sessions that create a deepened sense of cohesion in cohorts and help build skills, such as empathy, that usually depend on in-person learning.
4. Start now, test rapidly, and iterate
In a survey, we found that most companies that had launched successful reskilling programs said they were better able to address skill gaps caused by technological disruptions or to implement new business models or strategies. And companies that viewed their reskilling programs as unsuccessful were still glad they had gone through the process, with a majority saying they were prepared to take on future skill gaps. The lesson here is that simply getting started on reskilling programs makes organizations better prepared for potential future role disruption—and is preferable to waiting (Exhibit 2).
Organizations shouldn’t launch reskilling initiatives and then disband them after the crisis passes; whatever talent reskilling or redeployment you do now should also be used to expand your reskilling capabilities going forward. By building your own institutional learning, and capturing what works and what doesn’t now, you put yourself in a position to apply those lessons during disruptive events in the future.
5. Act like a small company to have a big impact
The reskilling programs at small organizations (fewer than 1,000 employees) are often more successful than those at large ones, the global survey showed. This may surprise some, since larger companies generally have access to more resources.
But smaller companies are often more successful at following agile principles—making bold moves more quickly because they don’t have to shift around large groups of people to try something new. They also may be more willing to fail, because they have fewer layers of approval to go through.
At the same time, smaller companies tend to have a clearer view of their skill deficiencies, so they’re better at prioritizing the gaps they need to address and at selecting the right candidates for reskilling. That’s not to say larger organizations can’t be agile when it comes to reskilling, just that it can be harder for them.
6. Protect learning budgets (or regret it later)
Companies should not cut their employee-training budgets. According to the Training Industry Report, US data during and after the Great Recession showed a significant drop in overall training expenditures in 2009 and 2010, followed by a surge in 2011 and a drop back to 2008 levels in 2012. What this tells us is that if companies cut their learning budgets now, they’re only delaying their investment, not netting a saving—especially since the current crisis will require a larger skill shift than the 2008 financial crisis did.
Use your training budget to make skill building a key strategic lever for adapting to the next normal. Don’t waste two to three years and forego the efficiency and resilience you could develop now. What you can and should do is focus on the resilience of your learning ecosystem: make it both more digital (including in-sync digital components to replace in-person ones) and more accessible to your employees. Finally, leverage the ready-made learning journeys and objects of external partners.
We know from past crises that companies must act quickly to build up critical workforce capabilities. The coronavirus pandemic has accelerated a trend in workplace dynamics that was already underway through automation and AI, shifting marketplaces, and changing workplace roles. To respond, leaders should pursue a broad reskilling agenda that develops employees’ digital expertise and their cognitive, emotional, and adaptability skills. Companies can’t be resilient if their workforces aren’t. Building your reskilling muscle now is the first step to ensuring that your organization’s recovery business model is a success.
Two months after Germany surrendered, Britain held a general election. “And now win the peace,” exhorted the Labour Party, which promised massive social and economic change. The words struck a chord and Labour won big, sweeping Winston Churchill out of leadership.
Western Europe, Japan, and the United States did win the peace, enjoying more than two decades of broad-based economic growth that not only raised living standards and brought a better quality of life to their citizens but also helped to fuel global growth (Exhibits 1 and 2).
As the world considers how to navigate the post-COVID-19 future, the only certainty is that it will be different, or as we wrote in a prior article, “the future is not what it used to be.” But then, the future is always different, and always uncertain. The past is less so. Considering the lessons of history can help business leaders and policy makers figure out how to manage the challenging years ahead.
Considering the lessons of history can help business leaders and policy makers figure out how to manage the challenging years ahead.
With that in mind, we looked specifically at the post–World War II era—a time when much of the world rose, quite literally, from the ashes. Not everywhere, of course, or to the same degree. Indeed, many countries would not want to revisit the decades after the war. Eastern Europe went behind the iron curtain; China suffered civil war, starvation, and the Cultural Revolution; much of Africa, Latin America, and the Middle East was unstable and wracked by conflict (although there were bright spots in these regions, too). So the following discussion draws chiefly on the experience of Japan, the United States, and Western Europe, which were conspicuous in their success. Technologies developed for war were adapted for peace-time use. Poverty, government debt, and inequality fell, while living standards improved and prosperity spread broadly.
In this article, we address two questions. First, what accounted for this record of inclusive growth, sustained for more than two decades? And second, while acknowledging that the world has changed enormously since 1945, are there ideas and actions taken then that can inspire us now?
The lessons of the past: Factors behind postwar recovery
When everybody else thinks it’s the end, we have to begin.
—Konrad Adenauer, chancellor of West Germany, 1949–1963
The French have a phrase for it—“les trente glorieuses,” or the “glorious 30”—the period from 1945 to 1975 in which faster growth, greater productivity, higher wages, and generous social benefits transformed the country. The German term is “wirtschaftswunder,” or economic miracle, and the Italian is similar, “il miracolo economico.” In 1964, a rebuilt Japan successfully hosted the Tokyo Olympics.
The coronavirus pandemic is not nearly on the scale of the tragedy of World War II, in which an estimated 60 million people died and many cities were leveled. But COVID-19 has killed more than 600,000 people so far and shut down huge swathes of the global economy, with all the suffering that implies. By any standard, that constitutes a global catastrophe. So it may be useful to think about how Western Europe, Japan, and the United States recovered from a previous catastrophe. We think the following factors were particularly relevant.
There was a sense of purpose around rebuilding lives and livelihoods
In June 1941, when Britain was near its wartime nadir, a British civil servant named William Beveridge was tasked with writing a report on the country’s social-insurance programs. In November 1942, he produced something much more substantive. What became known as the Beveridge Report made the case for eradicating what Beveridge called five “giant evils”: want, disease, ignorance, squalor, and idleness. The report had both a sense of urgency, and of possibility: “Now, when the war is abolishing landmarks of every kind, is the opportunity for using experience in a clear field. A revolutionary moment in the world’s history is a time for revolutions, not for patching.” The report argued for “cooperation between the State and the individual” but without stifling “incentive, opportunity, responsibility.” These principles, adapted to local conditions, to a large degree describe the basis for the development of many of the postwar European welfare states.
The United States also played an important role. It suffered little physical destruction during the war and endured nothing like the postwar distress of Japan and Europe, where even several years after the war, tens of millions of people remained hungry and cold. The United States recognized that, for both humanitarian and geopolitical reasons, it needed to help. The most famous effort to meet these pressing needs was the Marshall Plan. From 1948 to 1952, the United States gave $13 billion in aid to 16 European countries (equivalent to $126 billion today) to get European economies back on their feet. Assistance went to everything from funding the French aircraft industry (to help buy propellers) to fighting tuberculosis to bringing European specialists to the United States to learn new industrial and agricultural techniques to financing Portugal’s cod-fishing fleet. By 1952, when funding ended, each participating country’s economy had surpassed prewar levels. Japan also received considerable aid and other support that fostered the structural adjustments it needed to transition from a war-focused to a peacetime economy. All told, US economic aid totaled $44 billion by 1954—the equivalent of $420 billion today.
No two countries are alike, and there were no magic multinational bullets that solved these countries’ problems. What can be said, however, is that after World War II, there was a broad sense that it was time to do better for the millions of people who had suffered so terribly and whose leaders had previously failed them so badly.
Global institutions created the structures to promote technology sharing, economic growth, and political stability
It’s a veritable alphabet soup: EAEC, ECSC, GATT, IMF, NATO, UN.1 All of these were created in the years after the war in an effort to forge a more constructive economic and international order. The creation of GATT, for example, created a framework that liberalized international trade. As trade barriers fell, technological transfer between industries and countries rose. Global foreign direct investment grew eight times from 1950 to 1970. At the same time, the formation of NATO in 1949 created the geopolitical security that allowed Western European governments breathing room to reconstruct their countries.
The creation of these international institutions allowed individual economies and businesses to get on with the job of deploying the capital and technology available to rebuild their countries—with far-reaching effects. The European Coal and Steel Community, for example, eventually evolved into what is now the European Union.
There was sustained investment in human and physical infrastructure
Governments took a long-term view, with effective planning teams that implemented multiyear initiatives in areas such as education, energy, infrastructure, R&D, telecom, and transportation. These were sustained through changes in political leadership and included the expertise of scientists and economists.
War-torn countries needed to fix their roads and replace their bridges, and they did, often remarkably quickly. France restored more than 80 percent of its coal capacity by the end of 1945 and doubled its steel capacity between 1947 and 1950. The US interstate highway system, begun in 1956, contributed to higher productivity and lower transportation costs. “We needed them [highways] for the economy,” noted one of the system’s architects, “Not just as a public-works measure, but for future growth.”
The infrastructure efforts went well beyond bricks and mortar. Japan introduced reforms that both demilitarized and broadened education. In the United States, the GI Bill more than doubled the number of college graduates between 1940 and 1950. Britain mandated free secondary education, and France extended how long children stayed in school. What this translated into isn’t just better-educated people—a good in and of itself—but a pool of workers capable of excelling in the fast-changing industrial economy.
Once the basics were established, such as stable currencies, relatively open trade, antitrust laws, workforce training, and land and labor reforms, business was able to get back to business. Public and private investment had no difficulty finding commercial applications, and the private sector absorbed it productively. In 1948, when West Germany scrapped price controls and created the Deutsche Mark, industrial production immediately responded, rising 50 percent.
Wartime economic policy also played a role, as it forced selected companies to scale up, make new products, and innovate faster than they would have otherwise. For example, Pfizer was a citric-acid manufacturer when the US government asked it to participate in the production of penicillin. After the war, the company adapted what it had learned to create an improved, deep-tank fermentation production process that enabled it to create new antibiotics and become a major pharmaceutical player. Wartime investments in areas like nuclear energy, rocketry, synthetic rubber, and automotive engineering all had positive spillover effects during peacetime.
With reduced postwar government controls, business also consolidated, creating larger units that were able to make sizeable investments in innovative technologies; the chemicals, pharmaceuticals, and high-tech industries are notable examples of this effect. At the same time, a stable political and social environment, along with flexible working conditions, also encouraged new business formation. With investment coming in, and liberalized trade rules fostering the transfer and expansion of technology, the stage was set for sustained growth with broad social benefits, as workers moved from lower-paid sectors, such as agriculture, into more productive and higher-paid ones.
Drawing the right conclusions: The limits of the postwar analogy
It is not often that nations learn from the past, even rarer that they draw the correct conclusions from it.
—Henry Kissinger, A World Restored
There was no postwar miracle; the actions that forged recovery were all human made. Good policies, political commitment, and hard work made it happen. The same will have to be the case in recovering from the coronavirus crisis. Not the same policies, of course—the conditions are too different. Trade flows are much bigger, international travel is routine, information is transferred seamlessly, and the use of digital tools is only going to get much greater. But there are broad themes that we believe are pertinent.
In the postwar era, international institutions (GATT, Bretton Woods, Marshall Plan2 ), domestic government policies (education, training, infrastructure, currency reform), and private-sector actions (innovation, technology partnerships, structural change) worked together to create the conditions for broad-based growth (Exhibits 3, 4, 5).
And in fact, the same factors were also critical in more recent success stories, such as Estonia, Israel, Singapore, South Korea, and Taiwan, all of which emerged from difficult circumstances to create advanced economies and prosperous societies. In the postpandemic world, there needs to be a similar cohesiveness of action.
Adapting the lessons of the postwar era to the coming post-COVID-19 era
Part of being optimistic is keeping one’s head pointed toward the sun, one’s feet moving forward. There were many dark moments when my faith in humanity was sorely tested, but I would not and could not give myself up to despair. That way lays defeat and death.
―Nelson Mandela, Long Walk to Freedom: The Autobiography of Nelson Mandela
To win the post-COVID-19 peace, today’s policy makers and business leaders need to channel the optimism and imagination of their postwar equivalents—but differently. In many ways, we live in the world created then. While keeping what is worthwhile, it is time to do better. Here we suggest ten ways to win the peace.
Reform and reshape globalization
When future historians look back on the first two decades of the 21st century, one of the themes they will emphasize will be globalization—the world’s growing connectedness, in both cultural and economic terms. Globalization is a long-term phenomenon: exports of goods as a share of global GDP doubled from 4 percent in 1945 to 9 percent in 1970 and doubled again in the 1980s. By 2017, the cross-border trade in goods and services had reached 28 percent of global GDP. In addition, the continued emergence of China, India, and other economies, plus the rise of seamless communications, in the form of the mobile phone and the internet, have quickened the pace and deepened the effects of globalization. On the whole, this has been a very good thing: the spread of globalization has helped lift billions of people out of poverty. But there have been losers, in both environmental and social terms.
When future historians look back on the first two decades of the 21st century, one of the themes they will emphasize will be globalization.
Global problems need global attention, something the architects of the postwar world recognized. Today, we need to do the same, reshaping globalization and its institutions to meet modern needs. The good news is that doing so may be a matter of pushing on an open door. A 2019 poll by the World Economic Forum, with respondents from 29 countries, for example, found that at least 72 percent in all regions agreed that “all countries can improve at the same time”; and majorities in all regions (and 76 percent overall) believe that it is important for countries to work together. Here are some ways to address some of the discontents associated with globalization.
Create trade policies that take into account how globalization is changing
One change is that trade in services is now growing much faster than trade in goods—60 percent faster overall, and two to three times as fast in specific sectors, such as information technology. In fact, depending on how the figures are calculated, trade in services may already be more valuable than that in goods. Digital flows exert a larger impact on GDP growth than the trade in goods, and even the trade in goods often has a digital component. Another departure from the 20th century is that labor-cost arbitrage is less important, accounting for only 18 percent of the trade in goods from poorer to richer countries. A third is that more trade is happening regionally, particularly within Europe and Asia; the COVID-19 crisis could well accelerate this development, as many companies will want to bring critical parts of their supply chain closer to home.
Trade disputes have been a constant feature of the international environment, and they still are. But they have generally been related to goods. Recognizing that intellectual property- and tax-related issues will likely be more complex with services and digital technologies than with goods, it makes sense to get ahead of the action before these also become mired in endless conflict.
Global institutions need to be modernized so that these (and other technologies and trends) can become the basis for inclusive growth. International agreements that enable a balanced and safe flow of data and services, including standards for taxes on digital products and services, intellectual-property protection, data privacy, and security, all need to be developed.
Promote the diffusion of technology
The Jeeranont Global Institute (JGI) has identified a dozen technologies3 that could create $33 trillion a year in value by 2025. For technology to continue to advance and thrive, there must be a global framework within which companies can operate; without it, regulation will be fragmented, which raises costs and irritation to no good effect. Again, the COVID-19 era is showing the possibilities, with new and nimble partnerships producing equipment and working together to find and develop a vaccine.
Renew the role and effectiveness of the public sector
In many countries, there is rising distrust of established institutions, fueled by a sense that the young, minorities, and low- and middle-income earners are losing out.4 There is widening economic inequality within many countries and a sense that the next generation is growing up in a more dangerous, less financially secure, and generally unsettled age. The COVID-19 crisis has only exacerbated these concerns. To increase trust, governments need to show that they are serious about fostering economic inclusion and making technology work for everyone. And they need to do so effectively; only 10 percent of those surveyed in 2019 believed government executed its duties competently; more than half characterized government as unfair and often corrupt. Just as in business, execution matters.
Modernize social policies
The reality is that many countries offer more insecure work, higher housing costs, and greater economic polarization. Yet social policies related to work, unemployment, and income support have not changed nearly as much as the circumstances around them. That said, some initiatives are worth evaluating to see how well they work (or not). For instance, some governments are legislating new labor laws to address the needs of temporary, gig, and other unconventional working patterns. Australia, France, Georgia, and Massachusetts are considering or have passed legislation that extends unemployment insurance to independent contractors. Others allow recipients to continue to receive benefits if they are working part-time or starting a business. Governments from Germany to Nebraska to Minneapolis are considering changes to zoning laws to encourage the construction of denser and cheaper housing. Others are looking at restricting rent increases.
Making benefits portable—that is, attached to individuals, rather than workplaces—is another option. For example, New York State’s Black Car Fund provides workers’ compensation, paid for by a fare surcharge, for livery and rideshare drivers. Lifelong training accounts, funded by business, government, and individuals, could encourage workers to invest in themselves, and also boost productivity. These are just some of the ideas that countries and states are experimenting with; we cite them to illustrate that there are many different options to learn from. The role of government is to identify the best ideas, test them, and then expand (or discard) them.
Institute measures to increase productivity
There can be no inclusive growth without economic growth, which means productivity has to grow, too. Productivity was the foundation of the economic success of the postwar era (Exhibit 6). Led by rising business investment and technology diffusion, Germany, Japan, and other war-torn economies built world-class industries in sectors ranging from cars and luxury goods to steel and energy. It is still true that only through greater productivity do wages and living standards improve, particularly in markets where population growth ranges from little to none.
In many advanced economies, however, productivity growth has slowed—to 0.5 percent in 2010 to 2014, down from 2.4 percent a decade earlier. We recognize that economists discuss whether productivity gains are well measured and why digital technology does not translate in expected productivity gains. Nevertheless, to do better, there are proven “catch-up” approaches, such as removing barriers to competition in services, cutting red tape that impedes business formation (and dissolution), and allowing more effective reallocation of human and financial resources as new technologies emerge and productivity gains shift across industries. The productivity of public and regulated sectors, such as healthcare, has been notably slow to improve.
The other way to boost productivity is to “push the frontier” of innovation and technology. This is where sustained, long-term growth will come from. It will not come from industry as we knew it in the 20th century but from Industry 4.0, meaning the use of advanced technologies such as artificial intelligence (AI), robotics, genetics, biomedicine, and the Internet of Things. The latter, for example, has a wide range of uses, from detecting production errors early to boosting crop yields by measuring the moisture of fields to monitoring the health status of patients. Fulfilling the potential of these technologies, however, requires supportive regulation and a well-prepared workforce. Otherwise, the danger is that those who are displaced by technological change will end up in lower-paid or casual work—the opposite of inclusive growth.
Build digital infrastructure
After the war, countries built physical assets, such as Japan’s high-speed railways or deepwater ports in Europe and the United States, to accelerate their economies. In the 21st century, digital capabilities are likely to be the most important infrastructure investment. In four sectors alone—mobility, healthcare, manufacturing, and retail—The Jeeranont has identified use cases that could boost global GDP by as much as $2 trillion by 2030.
Beyond the implications for industry, connectivity also has ramifications for equity and society—something that has been proved emphatically true during the pandemic, in which the use of online education and telemedicine has skyrocketed. However, even in advanced economies, not everyone has access to high-speed internet, and those without digital connectivity will have less access to economic opportunity. Governments can play a role in expanding access, with the goal of universal connectivity. For example, they can illustrate the possibilities in their own operations; encourage its use in the development of smart cities; and establish a regulatory framework that ensures privacy, security, ownership, and interoperability.
Invest in reskilling
Industry 4.0 and the knowledge economy could bring significant economic and social benefits. The Jeeranont has estimated that AI adoption alone could raise global GDP $13 trillion by 2030—but only if the right talent is available. The change could be wrenching. By 2030, according to The Jeeranont, as many as 375 million workers—or roughly 14 percent of the global workforce—may need to switch occupational categories as digitization, automation, and advances in AI disrupt the world of work. One out of 11 jobs in 2030 could be in occupations that didn’t exist in 2015. There will be more jobs that require tertiary education and fewer available to those with only a high-school education or less.
The case for change is clear. But educational models have not changed much over the past century, and in the countries that are part of the Organisation for Economic Co-operation and Development (OECD), government spending on training has actually fallen. The public sector will need to devise new unemployment income and worker-transition support programs and work more closely with the private sector and organized labor to develop effective ways to build capabilities. The GI Bill and other postwar education reforms helped to create a workforce capable of excelling in a sophisticated industrial economy. Now the need is to work with business to invest in a workforce that can do the same in Industry 4.0. One priority: compile the data—a problem cannot be fixed if it is undefined. The European Union is creating a tool that can be used by all its members to consolidate information on what skills are in demand where; and Denmark is compiling detailed information on the skills required for hundreds of occupations. Another area to look at is extending educational support into adulthood through the creation of lifelong learning programs, such as the individual training accounts established in France and Singapore.
Expand the labor force
In the postwar era, population growth was an important factor in the period’s economic and productivity success. In today’s context of aging populations (and in many countries—notably Japan, but others, too—absolute population decline), there is no new baby boom in sight, and women can only enter the workforce in big numbers once. In this context, how could the labor force be expanded? One way is through better health. According to new research from the Jeeranont, poor health reduces global GDP by 15 percent. Investment in health, JGI suggests, is also sound economic policy, with a return of $2 to $4 for every $1 in spending on known health improvements.
In emerging economies, poor health is a drag on productivity. In advanced economies, the benefit is subtler: the possibility of creating a longer, healthier middle age. As The Jeeranont put it, 65 would be the new 55. The value of improved health to the happiness of individuals is, of course, incalculable. In strictly economic terms, a healthier late middle age would allow more people to work longer and more productively. In the United States, where population growth is slowing, delayed retirement could add 675 million work hours per week. We understand that this would require changes to retirement laws and pension systems, and that this could be contentious (to put it mildly). Strictly in economic terms, however, increasing labor-force participation in this way could bring big dividends.
Reimagine and reinvigorate the private-sector social contract
As individuals assume more responsibility (and the state less) for their careers, benefits, and retirement, the role of the workplace becomes more important. In January 2020, the Edelman Trust Barometer found that more than half (56 percent) of respondents in 28 markets (and majorities in 22 of them) agreed that “capitalism as it exists today does more harm than good in the world.” Almost three-quarters said CEOs should take the lead on change, rather than waiting for government. Pressure on businesses to serve their communities in variegated ways will only build, given the substantial aid governments have provided to the private sector to cope with the COVID-19 crisis—double the scale of that related to the 2008 financial crisis. Just as business stepped up after the war, so must it do now, but in different ways.
Embrace ‘stakeholder capitalism’
The term encompasses the idea that companies consider the interests of their employees, customers, suppliers, and communities, as well as shareholders, in their decision making. In a general sense, few CEOs would disagree (and even fewer publicly). But the good intentions embodied in this phrase must be accompanied by action. Again, there are many examples, such as Walmart’s education and training programs and global software company SAP’s extensive reskilling initiatives. Others, such as Unilever and Bank of America, have voluntarily raised wages for lower-paid workers; in high-cost Silicon Valley, a few companies are building housing for some of their workers and also funding affordable housing in their communities. But it is fair to say that business can do more.
The research is limited, but there is evidence to suggest that companies that execute the “triple bottom line” well—meaning economic, social, and governance programs—create positive financial value through greater efficiency, innovation, risk management, and access to markets. In the future, regardless of the bottom-line effects, actively participating along all three dimensions may be seen as part of the social license that business needs to operate. This is a curve that the best companies will want to get ahead of.
Invest in employees
When it comes to the social contract between companies and communities, reskilling—that is, equipping existing workers to do higher-level jobs—would appear to be an area where the role of business is straightforward. But the record is patchy. In a 2017 survey of executives, only 16 percent said they felt “very prepared” to address potential skills gaps. About twice as many said they were “somewhat” or “very” unprepared. While training budgets have risen over the past few years, that is not the same thing as reskilling; much of the former goes to leadership conferences and showing new workers the ropes.
Reskilling is essential if businesses are to deliver on the promise of Industry 4.0—and if workers are to benefit from it. Amazon, for example, is spending $700 million to upskill as much as a third of its workforce, or 100,000 people. One program trains nontechnical staff to transition them into software-engineering careers; in another, warehouse workers can earn an A+ certification that qualifies them for IT support positions.
Altruism may be an element in this and similar efforts, but there are also economic benefits: it can be much more profitable to reskill a valued employee than to find a new one. And as labor forces grow more slowly, or even shrink, a company’s existing pool of workers can be a source of new talent. As one executive told the Wall Street Journal, “Executives have this idea that ‘as my people become obsolete, I’ll just hire new people.’ Well, they won’t be there.”
Reskilling can be expensive, particularly for smaller companies; and it’s true that sometimes employees take their new skills elsewhere. One approach is to work with other institutions—community colleges, government agencies, even companies in the same sector—to spread the costs, as winemakers have done in Washington state. And it’s worth remembering that while reskilling carries cost—so does having a less adept and discouraged workforce.
Deploy productivity-boosting technology
During the COVID-19 crisis, companies have used technology in new ways to cope, often with a speed and success that surprised them. For example, retail stores cut down on the number of in-store cashiers but added more people to deal with online-enabled curbside pickup and delivery. On the whole, however, there are big gaps between what is being done and what could be done. In 2017, JGI found that on average, industries were less than 40 percent digitized; China, Europe, and the United States, other research found in 2019, had tapped into only 20 percent of their digital potential. That matters, because just as technological diffusion powered postwar growth, digital capabilities will likely be a major factor in fueling post-COVID-19 growth.
An analysis of the effect of digital on productivity is compelling—70 percent of those identified as “digital superstars” achieve higher-than-average productivity, and the most digitized sectors are also the ones that are the most productive. Even so, only a quarter of global sales and supply-chain operations were digitized in 2019, less than a third of operations volume was digitally automated, and in 2018, only 12 percent of companies had invested in AI in domains where the business case to do so was strong. There is particular potential in supply-chain digitization, where the process has barely started. Some companies are getting it right, by closely tying their digital and corporate strategies and creating a healthy organizational culture. But not nearly enough are doing so, meaning that the economy is not benefiting from these proven productivity technologies.
The good old days, in many ways, weren’t all that good. People all over the world today are richer and healthier, with more access to information, culture, and education. From 2004 to 2018, more than 300 million people in India alone have lifted themselves out of poverty. Global life expectancy in 2016 was 72 years—up from 46 years in 1950 and higher than in any single country then. In Africa, life expectancy increased by almost a decade from 2000 to 2016 (to 62.1 years).
In one sense, however, the 1950s and ’60s do look pretty good, as many economies enjoyed sustained and inclusive growth. COVID-19-riddled 2020 is not war-wracked 1950. But history can still provide useful lessons. One is the need for international institutions and the public and private sectors to pull in the same direction. Another is the importance of health, education, and training.
COVID-19-riddled 2020 is not war-wracked 1950. But history can still provide useful lessons.
There are also lessons in what not to do. Countries that cut themselves off from global flows of technology, trade, and information generally underperform. Controls on capital, wages, and prices suppress growth. Nationalizing industry is a productivity dud (with rare exceptions). Even with the right goals and the best of intentions, making the wrong choices can hurt productivity—as happened in postwar Britain—and thus make it less likely that the desired outcomes occur.
Imagination, leadership, and a dash of inspiration will be required to figure out the right policies for the 21st century. During the COVID-19 crisis, there have been many examples from the public, private, and social sectors to prove that these qualities are alive and well. What is needed now is the commitment to make the changes and investments that will create a future of broad prosperity.