Proponents of “future proofing” business have gone strangely quiet recently. And not surprisingly.
Covid-19 has forced companies worldwide to revisit their business model. Even the ones who had watched for years the word “pandemic” ominously recurring in the top left-hand corner of the annual Davos Global Risks Landscape have been caught unawares.
But then again, future proofing has always been an illusion. Business – including the investment sector – has always been about dynamically balancing and integrating three business environment realities.
First, identifying growth markets and closely tracking underlying trends. Second, understanding their own strengths and comparative advantages. Third, remaining flexible and resilient, able to respond opportunistically to rapidly changing events. In short, being entrepreneurial.
Too often, complacent businesses have been caught saying they make the best widgets in the world and remain in denial and defensive when the tide goes out on widgets (or competitors make a better and cheaper widget).
Looking ahead this decade, there are at least five game-changing trends that smart European business will now be factoring into their planning.
Covid-19, 20, 21 …
The first is Covid-19. There is no telling when the pandemic will end. Companies that ramped up production of healthcare products to meet market demand are the best examples of the entrepreneurial spirit. So, too, are those that have adapted their truncated businesses to the on-line and 1.5 metre worlds.
For many it means battening down the hatches, or starting new businesses.
With the likelihood of second and probably further waves, even with a choice of vaccines and anti-viral treatments, there seems no early end to greater attention to the health care and food sectors, a preference for local suppliers of goods and services, and less reliance on global supply chains. The education (including distance learning) and IT sectors should continue to enjoy the “Zoom boom”.
While a return to the old office mode may be possible at some stage, there’s the question of whether it is desirable. A network of employees and consultants may be better integrated in local communities and able to act as radar for new business opportunities.
Whatever Brexit package is ultimately agreed, the cost of doing business between the UK and the EU is going to rise. Where there were well-understood trade rules and mutual trust, there will be uncertainty, confusion and mistrust. It will take time – years – for the new normal to sort itself out. In the meantime, the myths, beliefs and hopes will be given reality checks.
Businesses dependent on supply chains between the two entities will be most affected and will need to look for new (and, again, probably local) suppliers and markets. Investors will be looking harder at business plans to respond to Brexit. UK companies with important EU markets will continue to set up continental bases and partnerships, and vice versa.
EU commission’s green deal – including plans to build a world class, competitive, job-creating green economy – will be reinforced by Covid and Brexit. EU companies with offerings in the green infrastructure, clean energy, circular economy sectors can be expected to benefit from increasingly supportive (although not always consistent) policies.
Nationalistic tendencies, already in evidence in several member states, seem likely to favour local business endeavours. In the post-Covid-19 era, job creation will be a high priority. Here, political calls for jobs in every community, particularly in disadvantaged areas, may attract more support.
Which leads us to the trade policy sabre-rattling between the US and China. Not to mention the spectre of widening trade bans or sanctions (think Russia, Iran, North Korea, and so on.). There is a significant emerging risk of global trade being affected variously by nationalistic, strategic and anti-globalisation considerations.
Again, this seems to point to increased business opportunities within the EU and the UK, with shorter supply chains and aimed at European and UK markets and essential needs.
Other game changers
These, however, are not the only seismic shifts ahead. Leading edge business thinking has already identified mass movements such as #metoo, Black Lives Matter, and the climate and extinction rebellion protests as reflecting important, growing and permanent features on the business landscape.
Individually and collectively they seem set to move the needle on recognising long-accepted (but still not respected) human and environmental rights. Therefore, European business future proofing, at least in the next years, looks a lot like the old adage: think global, act local.
A former diplomat and associate fellow of the Royal Institute for International Affairs at Chatham House, Paul Hohnen has advised governments, international organisations and business on high level sustainability policy issues over a 40 year career.