It is obviously too early to draw conclusion on the long term impact of the pandemic, however some trends are starting to emerge:
Acceleration of the Digital Transformation — and slow down
The pandemic, as I pointed out in the previous posts, has accelerated the execution of the Digital Transformation in several areas. In a way we can say that it is accelerating the future (watch the clip) -lights. At the same time we are also seeing some slowing down, like the foreseen uptake of robo-taxis. The fear of contagion is leading people to avoid sharing transportation means. Ford is delaying the delivery of robo-taxi, previously expected in 2021 to at least 2022 and will evaluate the impact of the pandemic on consumers expectations; GM has shut down the Maven car sharing service. To stay in the automotive industry all the bigs have lost big bucks in the first quarter and signs are not that encouraging for the next two quarters. The loss is in the order of billions $ and this will affect investment on self-driving cars (remember that the first customers where supposed to be sharing services, the Uber of this world). Besides it seems that technology and regulatory framework are not just available for full autonomous cars, so better wait a few more years and focus on incremental driver assistance functionalities.
Impact on jobs
The last few years have seen a significant decrease in unemployment (broadly speaking, with differences in different world’s areas) that pushed up minimum wages (4.5% in the US in 2019). The pandemic has reversed this in just a month leading to millions of job losses. According to the National Bureau of Economic studies 42% of lay-offs will become permanent job losses. Part of this will be the result of a decreasing GDP but part will be a side effect of the accelerated DX with more automated function, more work in the cyberspace (less office space needed…). Moreover, we are seeing first signs of increasing investment in robotization/automation both as result of
- increased labour cost/decreased efficiency because of social distance in the factory
- risk in off-shore manufacturing (when the Wuhan region was locked down as many as 80% of major worldwide manufacturing value chains felt the heat) that pushes towards in-shoring and this goes along with new automated factories to keep cost low
- massive deployment of AI to replace humans in call centers and other office activities
- use of robots in janitors/sanitation activities
- lower cost of automation as robots and AI gains volume leading to decrease cost and increased performances
The shared and gig economy have been badly hit, in general, however in certain areas (like increasing the workforce to support the spike in ecommerce, in healthcare support…) the gig economy has seen a tremendous increase. However, those who lost their jobs in the gig economy because of decreased demand did not have any social/government “parachute” and most likely are those that are suffering most.
e-commerce and retail
In just a months we have seen a 10% shift of commerce to e-commerce (in the US), deeply affecting major retail chains (several are closing in the US and 100,000 stores are forecasted to close in the next 5 year). However, at least looking at the US, although a 10% growth of e-commerce (from 15 to 25%) in a single month is unprecedented one has to observe that 75% of commerce still relies on brick and mortar suggesting that people really like the physical shopping experience. In these 2 months of lock down most people simply stop buying (clearly the loss of jobs has been a factor) and from the first signs I am seeing in Italy as stores re-opened people are now flocking back to make up for the time lost (at least my wife does!).
Telecommunications infrastructures turned out to be reliable and “scalable”. In just few days most backbones have doubled their capacity and managed an increase in traffic that was unprecedented (100% in Italy). This has clearly made clear the importance of the telecom infrastructure for Countries both in terms of business and social continuity. Yet, very seldom we have heard praise on these infrastructures in these months. They are taken for granted. Operators did not see an increase in their revenues (whilst other infrastructures operators, like Amazon, did). Rather they experienced an increase in their cost. This is going to slow down investment in the deployment of 5G (4G is ubiquitous and it proved it can meet demand).
Healthcare Infrastructures and services
The pandemic has developed quickly and although there are several critics pointing to a tardy reaction in several Countries it has become clear that the scaling of “care” requires a completely different approach. Hospitals and care centres cannot sustain an avalanche, There has to be a way to provide care at home, using remote diagnoses and monitoring. In the US 11% of people used some form of tele-health in 2019. During the pandemic the percentage has skyrocket to 46% and according to McKinsey 76% of people in the US are now interested in using tele-health. Companies providing tele-health services have seen the number of transactions growing between 50 and 175 times in April, versus the number served last year. This means that they have been able to scale the services in the cyberspace. Most interesting is the forecast of revenue growth: tele-health care services ahrvested some 3 billion $ in 2019 (US market) and may grow enormously since McKinsey estimates that some 250 billion $ of today healthcare services can be “virtualised”, i.e. provided via the cyberspace.
The different severity of the disease in different people clearly pointed out to the need for a personalised medicine and here the role of genome based medicine has become clear. We are already seeing accelerated investment in this area. Likewise the need for a vaccine “as soon as possible, actually sooner” is leading to the adoption of new tools based on machine learning and AI. We do not know if they will turn out to be as effective as we hope but it is clear that the increased effort in this area is bound to create results.