The world will change – we just still don’t know how far things will go.
I think we still have a variety of different scenarios and I think there is no responsible person who can say what exactly will happen in next months, or even years. We know very little about the virus; we don’t know how long the pandemic will take, we don’t know if it will last or come back regularly, we don’t what will happen to our economy if supply chains break down, we don’t fully understand the costs of fighting the virus, or the consequences government responses, we even don’t know yet what our infrastructure can become (just to give the simplest example: most entrepreneurs try to go online now, but can our IT systems deal with this demand? How quickly can the capacity of the IT systems can be increased?).
There is simply too many factors to predict. There is still a good chance that over the next few months we will simply have serious losses, but we will back to the “business as usual” scenario. And, unfortunately there is a space for many much worse scenarios as well.
Personally, I think it is a “Black Swan”. This is the potential game changer which will transform the way we do business. If you would like to read a bunch of facts and my interpretation of it, which led me to this conclusion, go to section 1.
Also personally I don’t like crying pessimism. I like to see the reality at it is, and look for opportunities. If there is a pain, there is also a painkiller. So if you would like to know more about what I think we should to do with our businesses now, go to section 2.
Section 1. Bunch of facts about coronavirus/covid-19
1. Coronavirus: reproduction number 1.4 to 2.5 (source) – this means that one infected person infects on average up to 2.5 people.
2. Mortality rate: 3.4% (source) (calculated as cumulative current total deaths / current confirmed cases), but the data is based also on data from China, where most cases come from. What is the problem with the Chinese data? Firstly, the Chinese government could apply strict measures which cannot be available in democratic countries. Secondly, there is a problem with data reliability: the Chinese government hid uncomfortable facts in the past, just to look better to the public.
Lets talk about data from Italy: I calculated the mortality rate: 8.3%(source). Issues with using data from Italy – the mortality rate can be higher than everywhere else because:
– when the virus began to spread, they didn’t develop very strict measurements. When they did, people did not follow them.
– the mortality rate is high because there is a significant number of older people who often are smokers.
– In Northern Italy, the health service capacity limit has been exceeded.
3. Incubation period: range from 1-14 days, most commonly around five days. This means that typically, in the first 5 days, an infected person will not have symptoms and will infect other people. Most person have mild symptoms which can be easily ignored. Children don’t get strong symptoms (so schools could soon be the COVID-19 hubs). Also asymptomatic transmission is possible and likely plays an important role in spreading this virus(source)
4. The vaccine is not known – it should be developed some time in the middle of next year(source)
5. We don’t know if the coronavirus is a seasonal virus or a year-round virus
6. The virus is deadly especially for older people. Younger people usually don’t die so often, but suffer from severe symptoms. Partial data says that half of infected people are younger that 56 years(source).
7. A World Health Organization examination of data from 56,000 patients suggests: 6% become critically ill, 14% develop severe symptoms(source).
8. The coronavirus epidemic in the UK might last until spring 2021(source).
9. As many as 80% of the population are expected to be infected with Covid-19 in the next 12 months, and up to 15% may require hospitalisation(source). UK population in 2018 was 66 435 000(source). Over 53 mln people might be infected, 7.9 million people may require hospitalisation. The forecast of the potential of 80% society infected in light of mortality rate is worrying me.
10. Up to 30 per cent of people who are hospitalised due to the coronavirus will need intensive care(source) (my calculation: in total 2 mln 391 thousands).
11. Results from a 2020 study of 138 people admitted into hospitals in Wuhan, China found that 26 percent of those admitted had severe cases and needed to be treated in the intensive care unit (ICU)(source).
12. Number of ICU beds (intensive care unit): 4100 in the UK(source), in Scotland 58(source). The UK government has a plan to deal with pandemic to avoid situation where there are not enough ICU beds to treat people(source) and to isolate the most vulnerable, but there is some scientific critique which shows this strategy is expected to fail(source), even with conservative assumptions.
13. The UK government’s strategy to minimise the impact of COVID-19 “ was to allow the virus to pass through the entire population so that we acquire herd immunity”(source).
Potential issues are:
– I was looking for information if anybody has done something like that before. I didn’t find any. Can we really steer the epidemic?
– are we really able to isolate effectively older and ill people?
– RNA-viruses mute quickly. Let say the government plan works, we lost “loved ones ”, and then the virus mutate. We may not be resistant to mutations.
– we don’t know long term consequences – there is pre-printed research (please be carefully with this data – it has not been fully reviewed, so it should be treated as an option, not a fact) which suggests that COVID-19 may cause kidney and testis damage(source) and other issues.
– There is no proof that recovery of the disease gives lasting resistance.
14. The UK government shifts towards ‘suppression’ after new analysis of coronavirus death rate(source) (250000 deaths). If I understand this properly, they based previously on hospitalisation rates for a different disease, with lower rates of intensive care needed(source).
A few more thoughts on the facts. It looks we have two main ways to deal with the outbreak:
- “quarantine and isolation” – more safe for people, but very expensive. Very difficult to predict the real cost of the measurements and the cost of the impact on the economy (e.g the data indicated roughly 5 million people in China lost their jobs amid the outbreak of the new coronavirus in January and February(source)) and time needed for recovery (and there is still no certainty that the coronavirus will not appear again when people are back to normal duties). Anyway – the government doesn’t have own money – finally we will have to pay the bill.
- “acquire herd immunity through infection” – which can help to maintain economy, but for me this is very dangerous for people and still doesn’t provide us security in the long term. The UK society is ageing, many of the key people in the economy can be badly affected by coronavirus which will make the things very difficult in the long term.
Coronavirus hits demand and supply simultaneously. That puts governments in a very unfavorable situation (manipulation of interest rates can be very difficult).
My point is: an event which affects 60-80% of the population and modifies our behaviours, has to change how we do our business. Soon or after we might observe that old, well performing solutions don’t work anymore (I’m talking about all levels: strategies, business models, processes, management systems, relations – every single element of the business can be affected and will need an adaptation).
I think there is one more threat: the epidemic can atomise us and disintegrate the social capital. We can’t be selfish, we have to pull together if we want to overcome it.
Section 2. Time for agile strategy and transformation
I believe we need to use the approaches, tools, methods and paradigms which can help us observe, learn and change better and faster. There is a few of my thoughts about how you can secure your business:
- Invest in relations: with customers, employees and partners
a) More than always, we need to understand our customers, we need to understand their worries and their world. Be with them, speak with them, ask how can you add value to their plans. Ask what else could you do to help them better. Ask what is the biggest obstacle which prevent them to use our services – and resolve it. Adapt your company to serve them better.
b) Talk with them, involve them in the decision-making processes, engage them in brainstorming about strategy, allow them to take initiatives to improve your company, appreciate and reward (you can do this not only in a financial way) all efforts made to be better. Give them the business framework (explain the business boundaries), let them define the problem and solve it. Coach them to help them to be more responsive to emerging situations.
c) Speak with your partners – understand what is your impact for their businesses and their impact for your. Try to figure out if there is any point of optimisation. Check the relations regularly and focus on creating win-win deal.
- Don’t plan your business – just model it. The business planning is great when you operate on the market without rapid changes – you can focus on planning and execution of the business. In cases where the environment is changing quickly, use agile tools which give you well-structured learning (it means proper perception of reality and better decision process making). Focus on it, in case that market will change ultra-quickly you will need to build products and services with very short life cycles.
- Adopt an experimenting process. Don’t make decisions based on ideas, build a business hypothesis (something which need to be true for your business idea to work) and test it. Learn from it, build a better version if needed (implement learning) and test again (repeat as long as appropriate). This is a great way to mitigate the risks.
- Invest in organisational culture – the right culture is like a vaccine against problems. It’s like the immune system. Talk honestly to see potential issues as quickly as possible, build a culture which will help your employees to see the reality as it is, cooperate for creating and delivering the value and promote being responsible for your own actions.
If you would like to have a chat about your business, discuss how to transform it to prepare for the Black Swan just drop me an email.