We’re in a right state. Of flux.
By Sarah-Jayne Shine
This year’s theme, State of Flux, acknowledges the feelings we’ve all become familiar with over the past two years. Change, fluidity, comings and goings, staying still yet somehow always shifting - we've adapted and dare we say... pivoted. We can all agree the one constant in life is change, from the early buds to the flower, the wind and the seasons, and the eventual changing of the tides. Our lives are in a State of Flux.
I got COVID – the long version and it was pretty rubbish for a while there. My enthusiasm waned, my energy levels nosedived, and my creative juices ran nearly dry. I barely looked outside during this period. But then I got better, stronger and felt enthused again. And I felt it was time to look out of the window again. The new normal is coming I was told. It’s in the post – life is going to be like The Great Gatsby every day. The streets of Levin will be paved with gold. So, I cautiously shuffled across the living room, and I excitedly opened the curtains and I breathed in. And I looked out. I wish I hadn’t!
Levin was hit by a tornado around 6.30am on the 20th May damaging homes, downing power lines and ripping out trees. Drone footage from the Horowhenua District Council shows multiple houses without roofs, and one building completely decimated. The council said drone images showed 50 houses had been damaged. During the tornado a garden shed was flung across the street into a woman's house, which then smashed through the front window of the house.
The woman was taken to hospital.
Another resident said she woke to a "horrendous" noise and was then covered in glass as the tornado hit. It also observed 12,000 lightning strikes in the six hours to 11.30am this morning. The extent of the damage is still unveiling itself, but what we know is that our community still needs help.
Strong winds were experienced elsewhere in the country on Friday. A woman died in Cambridge after being trapped under a fallen tree for around 45 minutes.
In Auckland, the Harbour Bridge was closed for a time as winds reached over 95km/h.
These things happen elsewhere, right? Storm chasers chase tornadoes in America, don’t they? And now Horowhenua obviously. I was told and lead to believe that the good times were coming back after COVID. I beginning to beg to differ.
The cost of living is spiralling. The aisles of value are having a laugh. At us. The situation in Ukraine becomes more serious and heart breaking by the day. On our shores people are still getting sick and dying. Daily. Respected former Prime Ministers are getting assassinated in the street and current comical Prime Ministers are getting the boot. Our Prime Minister said the world is ‘bloody messy’ but remains positive about the future. Watching the news should come with a health warning. Sometimes I want to hide under the duvet, hibernate and take a cautious peek outside in the future when I hope the world be back to normal. But you got to carry on don’t you? My advice is to myself and you, is to concentrate on what we can control. And park what we can’t.
So, I closed the curtains again and then I got thinking. And this is how we can do it. Together.
The uncertain times are leading to an imminent restructuring of the global economic order. Here’s how leaders can begin navigating to what’s next.
‘For some organizations, near-term survival is the only agenda item. Others are peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal. The question is, ‘What will normal look like?’ While no one can say how long the crisis will last, what we find on the other side will not look like the normal of recent years.’
These words were written 11 years ago, amid the last global financial crisis. They ring true today but if anything, understate the reality the world is currently facing.
It is increasingly clear our era will be defined by a fundamental schism: the period before COVID-19 and the knock-on challenges it brought and the new normal that will emerge in the post-viral era: the “next normal.” In this unprecedented new reality, we will witness a dramatic restructuring of the economic and social order in which business and society have traditionally operated. And in the near future, we will see the beginning of discussion and debate about what the next normal could entail and how sharply its contours will diverge from those that previously shaped our lives.
Here, we attempt to answer the question being posed by leaders across the public, private, and social sectors: What will it take to navigate these crises, now that our traditional metrics and assumptions have been rendered irrelevant? More simply put, it’s our turn to answer a question that many of us once asked of our grandparents: What did you do during the war?
The answer is a call to act across five stages, leading from the crises of today to the next normal that will emerge after our current battles have been won:
Resolve, Resilience, Return, Reimagination, and Reform.
The duration of each stage will vary based on geographic and industry context, and institutions may find themselves operating in more than one stage simultaneously. Collectively, these five stages represent the imperative of our time: the battle against COVID-19 is one that leaders today must win if we are to find an economically and socially viable path to the next normal.
The duration of each stage will vary based on geographic and industry context, and institutions may find themselves operating in more than one stage simultaneously. Collectively, these five stages represent the imperative of our time: winning the battles is one that leaders today must win if we are to find an economically and socially viable path to the next normal.
In almost all countries, crisis-response efforts are in full motion. A large array of public-health interventions has been deployed. Healthcare systems are—explicitly—on a war footing to increase their capacity of beds, supplies, and trained workers.
Efforts are under way to alleviate shortages of much-needed medical supplies. Business-continuity and employee-safety plans have been escalated, with remote work established as the default operating mode. Many are dealing with acute slowdowns in their operations, while some seek to accelerate to meet demand in critical areas spanning food, household supplies, and paper goods. Educational institutions are moving online to provide ongoing learning opportunities as physical classrooms shut down.
And yet, a toxic combination of inaction and paralysis remains, stymying choices that must be made: lockdown or not; isolation or quarantine; shut down the factory now or wait for an order from above. That is why we have called this first stage Resolve: the need to determine the scale, pace, and depth of action required at the state and business levels. As one CEO told us: “I know what to do. I just need to decide whether those who need to act share my resolve to do so.”
The situations have metastasized into a burgeoning crisis for the economy and financial system. The acute pullback in economic activity, necessary to protect public health, is simultaneously jeopardising the economic well-being of citizens and institutions. The rapid succession of liquidity and solvency challenges hitting multiple industries is proving resistant to the efforts of central banks and governments to keep the financial system functioning. A health crisis is turning into a financial crisis as uncertainty about the size, duration, and shape of the decline in GDP and employment undermines what remains of business confidence.
A McKinsey Global Institute analysis, based on multiple sources, indicates that the shock to our livelihoods from the economic impact of virus-suppression efforts could be the biggest in nearly a century. In Europe and the United States, this is likely to lead to a decline in economic activity in a single quarter that proves far greater than the loss of income experienced during the Great Depression.
In the face of these challenges, Resilience is a vital necessity. Near-term issues of cash management for liquidity and solvency are clearly paramount. But soon afterward, businesses will need to act on broader resilience plans as the shock begins to upturn established industry structures, resetting competitive positions forever. Much of the population will experience uncertainty and personal financial stress. Public-, private-, and social-sector leaders will need to make difficult “through cycle” decisions that balance economic and social sustainability, given that social cohesion is already under severe pressure from populism and other challenges that existed pre-coronavirus.
Returning businesses to operational health after a severe shutdown is extremely challenging, as China is finding even as it slowly returns to work. Most industries will need to reactivate their entire supply chain, even as the differential scale and timing of the impact of coronavirus mean that global supply chains face disruption in multiple geographies. The weakest point in the chain will determine the success or otherwise of a return to rehiring, training, and attaining previous levels of workforce productivity. Leaders must therefore reassess their entire business system and plan for contingent actions in order to return their business to effective production at pace and at scale.
Compounding the challenge, winter will bring renewed crisis for many countries. Without a vaccine or effective prophylactic treatment, a rapid return to a rising spread of the virus is a genuine threat. In such a situation, government leaders may face an acutely painful “Sophie’s choice”: mitigating the resurgent risk to lives versus the risk to the population’s health that could follow another sharp economic pullback. Return may therefore require using the hoped-for—but by no means certain—temporary “cease-fire”
A shock of this scale will create a discontinuous shift in the preferences and expectations of individuals as citizens, as employees, and as consumers. These shifts and their impact on how we live, how we work, and how we use technology will emerge more clearly over the coming weeks and months. Institutions that Reimagine themselves to make the most of better insight and foresight, as preferences evolve, will disproportionally succeed. Clearly, the online world of contactless commerce could be bolstered in ways that reshape consumer behaviour forever. But other effects could prove even more significant as the pursuit of efficiency gives way to the requirement of resilience—the end of supply-chain globalisation, for example, if production and sourcing move closer to the end user.
The crises will reveal not just vulnerabilities but opportunities to improve the performance of businesses. Leaders will need to reconsider which costs are truly fixed versus variable, as the shutting down of huge swaths of production sheds light on what is ultimately required versus nice to have. Decisions about how far to flex operations without loss of efficiency will likewise be informed by the experience of closing down much of global production. Opportunities to push the envelope of technology adoption will be accelerated by rapid learning about what it takes to drive productivity when labour is unavailable. The result: a stronger sense of what makes business more resilient to shocks, more productive, and better able to deliver to customers.
The world now has a much sharper definition of what constitutes a black-swan event. This shock will likely give way to a desire to restrict some factors that helped make the coronavirus a global challenge, rather than a local issue to be managed. Governments are likely to feel emboldened and supported by their citizens to take a more active role in shaping economic activity. Business leaders need to anticipate popularly supported changes to policies and regulations as society seeks to avoid, mitigate, and pre-empt a future health crisis of the kind we are experiencing today.
In most economies, a healthcare system little changed since its creation post–World War II will need to determine how to meet such a rapid surge in patient volume, managing seamlessly across in-person and virtual care. Public-health approaches, in an interconnected and highly mobile world, must rethink the speed and global coordination with which they need to react. Policies on critical healthcare infrastructure, strategic reserves of key supplies, and contingency production facilities for critical medical equipment will all need to be addressed. Managers of the financial system and the economy, having learned from the economically induced failures of the last global financial crisis, must now contend with strengthening the system to withstand acute and global exogenous shocks, such as this pandemic’s impact. Educational institutions will need to consider modernising to integrate classroom and distance learning. The list goes on. Only by Reform will we get to where we need to be.
The aftermath of these era defining situations will also provide an opportunity to learn from a plethora of social innovations and experiments, ranging from working from home to large-scale surveillance. With this will come an understanding of which innovations, if adopted permanently, might provide substantial uplift to economic and social welfare—and which would ultimately inhibit the broader betterment of society.
As we consider the scale of change that the world has engendered—and will continue to engender in the months ahead—we feel compelled to reflect not just on the crises of immense proportion but also on an imminent restructuring of the global economic order. How exactly this crises evolve remains to be seen. But the five stages described here offer leaders and ourselves, a clear path to begin navigating to the next normal—a normal that looks unlike any in the years preceding the crises. The crises that changed everything.
Take care of yourselves, put the jug on and pull those curtains wide.