From a health perspective, COVID-19 seems like a universally bad thing. But economically speaking, it’s not as clear cut.
Yes, the hospitality sector is struggling at the moment. But there are signs that the rest of the economy is embracing a new wave of technology and that digital transformation is in high demand.
So what’s going on here?
Well, there are several forces at play. Perhaps the biggest is the need for enterprises to reach out to customers via the internet and provide online, contactless services. The technology to achieve this was available in the past. But it is only during lockdown that brands have had the incentive to pursue it. For instance, a thriving city-centre restaurant didn’t need to digitalise before the pandemic because it was already doing well. But during the time when the government banned sitting down in a restaurant by law, they had to think of new ways to sell.
This change in business focus means that companies are embracing digital technologies like never before, out of necessity. What we’re seeing is similar to what happens during wartime. Everyone has to innovate to survive, creating new technologies and approaches that allow them to weather the storm.
Far from being a drag on economic performance, COVID-19 could actually be a catalyst. In the aftermath of the Great Depression and WWII, the economies of the world saw unprecedented growth – something that economists call a “Golden Age.” In the 1950s and 1960s, output rocketed and the middle class emerged in all its glory.
Something similar could be happening today. The pandemic means that brands have to conduct business virtually. And that means that they are becoming much more acquainted with the usefulness of the technological developments of the last twenty years or so. They’re learning about machine learning, the cloud, automation, software-as-a-service and many other innovations that allow a new kind of economy to take shape. Now that we’ve had a crisis, firms will be looking at stacking these technologies on top of each other and using them to their advantage. It is an exciting time to run a business.
What’s even more incredible is that technological development doesn’t look like it is going to stop here. We’re just at the start of things like artificial intelligence and blockchain. These innovations have the power to transform the world, creating more wealth and transforming business models in a way we haven’t seen before.
COVID-19 is helping in another way: it’s encouraging businesses to expand their markets. Think about it: in the past, companies would only serve customers in their local area. But now firms have a unique opportunity to spread the value of their brands worldwide. They don’t have to restrict themselves to any particular geography. And that changes the dynamic yet again. We could see small, boutique UK firms growing by thousands of per cent, just because they decide to open their markets up to the rest of the world.
COVID-19 is undoubtedly accelerating the digital economy. It’s just a question of waiting and seeing what happens.
