Most nations implemented some form of lockdown to slow down the rate at which the virus spread. This presented many business leaders with the immediate problem of how to respond to a sudden sharp drop in revenues. How a lock down might be lifted was unclear. A quick V-shaped recovery was hoped for but a bouncy W or flat lining L were all possible.
At first, it was difficult for business leaders to plan for the recovery. Supply chains had been disrupted and workers laid off. It was not clear how long the lockdown might last nor if the exit strategy would be phased or stop-start.
The Association demonstrated quick thinking by switching from the CGMA exams having to be taken at Pearson Vue’s centres to students being able to confirm their identity at their PC before taking their exams at home. Steve Flatman, VP of exams says, ‘A crisis like this is an accelerator of change. A phenomenal effort of many people across the business allowed us to implement a development which is a first for our industry within a few weeks that might ordinarily have taken up to two years’.
The crisis had given a further boost to the inevitable transformation towards a digital economy with even more business being done online and more work being automated.
The initial shortage of protective clothing and ventilators highlighted a disadvantage in global supply chains. In the UK, there was also a shortage of seasonal migrants to pick crops. Policymakers and business leaders may want to limit exposure to such risks in future.
Major retailers of non-essential goods had promptly shifted their focus to their online channels. Many small businesses suddenly had to find new ways of doing business. Personal services such as fitness coaching and even gardening were soon being offered online.
A quick return to business as usual was desirable but seemed unlikely; a new normal seemed possible: (continued)
Office workers have seen the advantages of being able to work flexibly at home and not having to commute. Business leaders have realised that they have office blocks they may not need. But they also recognised the challenges in managing employees remotely.
There will certainly be pent-up demand from consumers but many might be feeling less well-off having been out of work or because of a fall in the value of their assets, pensions or investments.
People have been making greater use of technology to work, to communicate with loved ones and to socialise. The crisis has been an inflection point in consumers’ adoption of digital technologies. The demand for online shopping and entertainment soared.
The pandemic has been a shared experience that united people but also brought our society’s values into question. Consumerism seemed less important than quality time with loved ones.
‘The social responsibility of business is to increase profits’.
Milton Friedman, New York Times Magazine, 13 September 1970
‘The purpose of the corporation must be defined as creating shared value, not just profit per se’.
Michael E Porter, Harvard Business Review 20114
Lord Jonathan Sacks described it as ‘the nearest we have to a revelation’, saying it would try the UK as ‘the nation was tried during World War Two’. 3
There has been a growing appreciation of the value of ordinary people who are often relatively low-paid. Health care professionals and other key workers, including the army and the police, were heroes. So too were retail staff, delivery people and key workers in supply chains. People who put others at risk by not playing their part in the shutdown by continuing to socialise and travel were shamed.
Governments played a big role in the response. Businesses, charities and volunteers had all helped to address the crisis. The new normal might expect a more inclusive form of capitalism.
This might seem contrary to liberal free-market values. This is not altruism with stakeholders’ funds but an enlightened form of self-interest. This still is capitalism just re-focussed on generating long-term value rather than profits in the quarter. A business cannot sustain satisfactory returns for its investors over the long term unless it generates value for its customers, suppliers, employees and society.
Management accountants will be familiar with the terms ‘value chain’ and ‘the five forces model’ (for assessing an industry’s attractiveness) from their studies. These were developed by Professor Michael E Porter of Harvard Business School.5 Professor Porter has been a champion of a more inclusive form of capitalism.
3 Newsnight BBC 2, 18 March 2020 4 Competitive Advantage, Michael Porter 1985 5 The Big Idea: Creating Shared Value, Porter, Michael E & Kramer Mark R, Harvard Business Review 2011