Which sectors are likely to experience a boom in the future?

Felix P.: Which sectors are likely to experience a boom in the future? Are there any business sectors that will eventually cease to exist completely? What route do managers and companies need to take to be successful?

Adapting to change

The COVID-19 pandemic has brought about an extremely disruptive surge of changes that have thrown supply and demand out of balance. Such developments can be positive, as was for example the case with the invention of the printing press, the steam engine, and the internet. When such changes occur, the ability to adapt is key. This is also true for crises and catastrophes. When an asteroid hit the Earth 66 million years ago, the sudden change in climate conditions was too much for the dinosaurs. From an evolutionary perspective, they were simply too slow to adapt. This started the rise of the more flexible mammals. The same principle applies in the economy. COVID-19 is causing some sectors to boom and others to collapse. To be successful, economic players need to adapt to the new circumstances.

Covid-driven changes are underway

The lockdowns, hygiene requirements, travel restrictions, and the resulting behavioral changes have had a significant impact on our lives. This is reflected in changing demand structures. Restaurants, organizations involved in culture and the arts, hairdressers, travel agencies, tourism businesses, airlines, and many others saw demand levels nosedive to zero. Some of them were able to compensate some of the losses by changing their business models, while others went bust. At the same time, other sectors have experienced a veritable boom: Online retailers, streaming services, communication software providers, and video game businesses saw demand take off like never before. You need to go back in history quite a bit to see processes of change and adaptation that are as radical as what we’re experiencing today.

A short-lived episode or a fundamental change?

No one knows what life will look like after the end of the COVID-19 crisis. There are many signs that things will not simply go back to how they were before. The virus has forced all of us to participate in a huge real-life experiment. Things that have proven viable during this experiment will stick around. Products, services, and processes where physical presence and face-to-face interaction have no added value over digital formats will disappear. For example, we’ll probably continue having many more online meetings than before, and we’ll go on buying products online. Offices won’t be as important anymore as before the pandemic. In other areas, the experiment has made it clear to us just how crucial direct social interaction can be. The examples are diverse and include for instance inner-city environments, culture and the arts, and education. But further development and adaptation will be needed even in these areas. In many cases, this means that more emphasis will be placed on what makes the experience special when people come together face-to-face in a physical venue. At WU, for example, we’ve long since started looking at the lessons we can learn from COVID-19 in academic teaching.

Will there be a post-crisis boom?

We may also see a positive pendulum effect. People are grateful when they’ve overcome a crisis, and this new-found appreciation for things they’ve had to do without can turn into full-on euphoria. Consider for example the baroque era in the 16^th and 17^th centuries, where people celebrated the senses after the age of the bubonic plague. Or the Roaring Twenties, following the horrors of World War I and the Spanish flu that had left millions of people dead. Judging by these historical examples, we may well see an upsurge in the popularity of restaurants, clubs, parties, travel, and athletic and cultural events. This rebounding demand may open up new opportunities for novel services and products. This means that we’ll likely see changes in these areas as well, triggered by the effects of COVID-19.

The key to success: entrepreneurship and innovation

In some way, the COVID-19 crisis is a condensed case study of the main megatrend of our time: far-reaching change over a short period of time.  We’re living in disruptive times. Social, technological, political, cultural, and environmental developments occur suddenly and are hard to predict. Their dynamics and effects are stronger than ever before. Nothing is safe, everything is susceptible to change. This is a threat – but it can also be an opportunity. Never before has it been possible to become successful as quickly as today. Never before have we seen so many opportunities for entrepreneurs. For companies, this means that size and market power are no longer the main factors for success – agility, flexibility, and innovation have become more important. This implies a fundamental change, with far-reaching effects on strategy, business structures, management, and the workforce. The start-up is the prototypical form of 21^st century business. It embodies adaptability and entrepreneurship in an extremely condensed form.

Governments and societies must become more innovative

Profound and rapid changes also pose great challenges for governments and the framework of our social institutions. The COVID-19 crisis has shown very clearly how important it is to be agile and to learn fast when responding to disruptive changes. Looking at the figures, we have to say that Europe has performed poorly compared to various Asian countries. Taiwan, for example, has recorded only 11 deaths from COVID-19, at a total population of 24 million. So you could say that Taiwan’s response to COVID-19 has been almost 300,000% more effective than Austria’s. There are also important lessons to be learned from other countries when it comes to the economic and social consequences of the pandemic. Stability, transparency, and social justice are strengths that have developed historically in our society. Now we also need to add innovation to the mix. The next changes are just around the corner.

Nikolaus Franke, head of the Institute for Entrepreneurship & Innovation