Disruptive change of a different sort

Firstly, I hope that you are all well and safe – many of us now have family, friends or colleagues who have suspected or confirmed cases of Coronavirus, so it’s beginning to become more personal and real for all of us.  For those of you who were on the Spring Meeting webinar two weeks ago, I’m glad to say that our colleague René Herrmann is feeling much better, though remains untested, in line with German (and UK) policy.

We have used disruptive change as a theme for some years, referring to forces like consumer behaviour, digitalisation and the industry megatrends (though back in 2012, nobody had coined the term ‘ACES’ or similar to describe them.  We referred to a Wikipedia definition that included a definition of the process (“a new market and value network”), timescale (“few years or decades”) and the outcome “improve a product or service in ways that the market does not expect”.  Now we are all facing disruptive change of a different sort, from an unexpected source – the blackest of black swans that we have also covered in our research.

Although President Trump seems to be on different planet to everyone else, first saying that the churches would be full at Easter, now saying that US deaths will peak in two weeks and everyone will be back to business by the end of April, the rest of the world is taking a more fact-driven approach.  Apparently 30% of the global population is now under some form of lockdown, and the share price of Zoom Video, the video-conferencing platform that we use for our webinars, has doubled in the last month.  Since the middle of February, flight bookings have been in freefall, with year-on-year declines between 62% and 93% across the EU-5 markets by mid-March.  NASA and ESA have released satellite data showing dramatically lower levels of NO2 as industrial activity and transport have fallen.

Clearly at some point – “up to 6 months” according to the UK Deputy Chief Medical Officer – things will start to return to normal, but will that be the ‘old normal’ or a ‘new normal’?  Will behaviours bounce back, or will we have learned new behaviours that remain embedded even when all restrictions are removed?  From an automotive perspective I look at this at two levels – how will we all as industry participants do business with each other differently, and how will changes by car owners and users affect the industry?

From the internal perspective, I think there will be a permanent change in behaviour.  The ball has been kicked further down the road of the digital revolution, so that we will make more use of digital channels to “meet”, share information, make business decisions and do deals.  Something will be lost in that process as we won’t really get to know our counter-party in the same way as when you have exchanged some small talk, and maybe had a drink or meal together.  But it will work, and it will probably be impossible to measure whether the knowledge transfer or quality of deal done has been impaired by the fact that there was no face to face meeting.  In the end, diary management and travel cost savings, will rule the day, reinforced by a few months of actual experience and a need to address some of the financial damage that will affect companies for months at least after we are all allowed out.

Which takes us to the second point of how customer behaviour will change, and how that will feedback into the speed and scale of a recovery.  The Chinese experience is that things are returning to normal very quickly (including the reopening of the wet markets where the Coronovirus is thought to have originated).  Car dealers, particularly for premium brands, are reporting close to normal levels of activity and are holding to their 2020 full year forecasts for sales and aftersales.  Business has been delayed, not deleted.

It would be tempting to use this as reassurance that things will be the same in Europe or the US, but on a per capita basis we will probably have more people who have lost a loved one, lost their job, or dug deeply into their savings.  Governments in Europe were just starting to look beyond austerity, and now are declaring emergency budgets that represent 10% or 15% of GDP, but will only buy a couple months breathing space.  I fear that it is the economic consequences of Coronavirus that will have the longest-lasting effect rather than any behavioural changes as a result of discovering that we do more online or do not need to travel as much as we did.  I hope that I am proven wrong.