Economy recover after Corona virus.

Where Do We Go From Here? What We Are Hearing…

A couple of weeks ago we presented our thoughts on what a post COVID-19 world might look like (Where Do We Go From Here? Our Perspective…). Since then we have had numerous discussions throughout our network of B2B manufacturing executives and gathered input through our recently launched pulse check survey. Here is what we are hearing so far…

First the Here and Now, 1 to 3 Months Out

  • While demand outlook over the next 1 to 3 months will deteriorate, over 70% believe that demand will return to plan pre the COVID-19 pandemic in 6 months.
  • Similarly, while in the short-term companies are experiencing delays/manageable disruptions to their supply chain, 80% expect supply chains will be healthy and operating as normal by Q3.  
  • Not surprisingly there is significant uncertainty, with a majority indicating they are less than 60% confident in demand and supply chain outlooks.
  • Almost all believe we are just entering the decline, with significant variation across industries. Some industries (e.g. construction) are still before the decline but see it coming, while others are leading the decline and are already feeling the pain (e.g. vehicles).
  • Biggest risks are continued uncertainty, greater than expected decreases in demand, and reduced access to supply.

Areas for Strategic Focus and Expectations Going Forward

  • Focus for key strategic decisions in the immediate term are on the basics: supply chain stabilization/optimization, company financing, and capital expenditure allocation.
  • Several months out longer-term strategic decisions will be at the forefront with market/customer/channel prioritization and organizational restructuring as the highest priority, with a continued eye on capital expenditure allocation and company financing.
  • Most executives remain fairly optimistic on the business cycle their industry is entering, expecting a “Bounce Back” or “New Normal” cycle with few indicating a “Long Term Contraction” (*see below for definitions of each cycle).

Our Evolving Perspective and A Call to Action

Our current perspective is that most industries will experience a “New Normal” cycle, a sharp and short downturn with growth returning but at a slower pace and in fits and starts as businesses adjust to a society and economy continuing to be impacted by social distancing and precaution. For B2B executives, especially those further up the value chain, the challenge becomes understanding what the “New Normal” will look like, how it will impact their industry, and the growth opportunities it offers.

The current situation has forced the world to change significantly, therefore our questions are:  What trends will fade away? Which ones will accelerate? Which ones will only emerge once we are in recovery? We have included some examples and our perspectives on them below…

  • Fade Away: Home food and meal delivery
    • Long delivery times for groceries, and menu items not designed for off-premise consumption delivered in inadequate packaging lead to a poor customer experience, negatively impacting customer interest going forward. As a packaging or materials supplier should you make a big bet on the delivery market?
  • Accelerate: Online design/engineering collaboration tools
    • Solutions exist today, but adoption has been low due to inertia and perceived cybersecurity risks. Organizations forced to move to these tools see them work well and move quicker to them, or at least see the need to have them as a backup. As a SAAS/cloud solution provider how can you take advantage of this acceleration?
  • Emerge: New cleaning and sanitation protocols
    • To get a wary public back into the skies and into hotel rooms consumers will want to be assured they are not putting their health at risk. New cleaning and sanitation protocols will emerge. As a cleaning chemicals or equipment provider what new solutions can you provide? What new business models can you deploy?

Organizations that start to think through the “New Normal” now and adjust their strategy appropriately will be best positioned for success going forward.

Post COVID-19 Economic Scenarios

*Business Cycle Definitions

“Bounce Back” – Sharp and short downturn in industry sector with catch-up growth as pent-up  demand is released. Industry sector quickly returns to how it was before 

New Normal” – Sharp and short downturn in industry sector with growth returning but at a slower pace and in fits and starts as businesses adjust to new normal of a society and economy continuing to be impacted by social distancing and precaution

“Long Term Contraction” – Crisis exposes fundamental weakness in the global economy and depresses industry sector activity over a longer time frame. Growth will be negative or muted for a significant period of time

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