IN FEBRUARY 2014 a strike on the London Underground offered management theorists a lesson in resilience and adaptation. Because the shutdown closed some but not all Tube lines, frustrated Londoners were forced to rethink their commutes to and from work. Researchers at Oxford and Cambridge universities subsequently found that around 5% of passengers stuck to their new itineraries even after normal service resumed. The long-term economic gains of one in 20 travellers adopting new and improved ways to get to work turned out to be greater than the short-term costs of the disruption.
The global covid-19 outbreak presents a far greater challenge to the corporate world than striking transport workers. Profit warnings are spreading nearly as fast as the disease. Analysts at Goldman Sachs, a bank, estimate that earnings growth for firms in the S&P 500 index could grind to a halt. Gauges of business activity, such as purchasing managers’ indices, have cratered in Asia and are expected to weaken elsewhere as the coronavirus crosses more borders. Consumers are spending money on little except sanitary wipes, face masks and tins of Campbell’s Soup. Fears of a pandemic have wiped $7trn off the market value of listed firms worldwide in the past fortnight (see article).
Some companies will, like most of London’s commuters, revert to autopilot once the threat recedes. But for others the interruption will have a lasting effect, accelerating trends in business organisation that were already under way. Two are particularly important. The next few months are set to be a giant experiment in whether new technologies can allow successful mass remote working for employees, speeding up the reinvention of the office. And for firms already worried about rickety supply chains amid a trade war, the virus gives another reason to reconfigure them.
Take employees first. Companies have had to ask themselves whether to let employees travel, attend conferences or even come into the office. In all three cases the answer is increasingly “no”. Many big firms, including Amazon and JPMorgan Chase, have banned all non-essential excursions. Airlines and hotels are reporting steep falls in bookings. Corporate Travel Management, a listed Australian firm that organises business jaunts, has warned the impact could last up to six months. It has slashed its earnings forecast for the year by up to 16.5%. A survey by the Global Business Travel Association, an industry body, found that business travel, which costs companies over $1trn a year (and emits roughly as much carbon as Ukraine in flights alone), could fall by over a third while the epidemic rages.
Large corporate events are being called off. The oil industry’s biggest annual jamboree in Houston and the Geneva motor show will not take place this month. Google and Facebook have given the term “teleconferencing” a whole new meaning by moving a few of their big shindigs partly or wholly online. With Milan and Paris fashion weeks curtailed, Armani streamed its autumn/winter show from behind closed doors. This is bad news for events firms such as Informa, whose share price is down by a fifth since the start of February, especially at a time when many high-profile industry powwows are already losing their lustre.
At the same time more companies are learning to love telecommuting. On March 3rd JPMorgan Chase told thousands of its bankers in America to work from home as it tests its contingency plans. Twitter has asked its 5,000 employees to do likewise. Sony went so far as to shut some of its European offices altogether, just in case. The affected workers are nonetheless expected to toil remotely.
As well as highlighting how bloated some travel budgets are, virus contingency plans may also reveal how inefficiently office space is used. Big British and American firms pay on average $5,000 per employee in annual rental costs. Just 40-50% of desks are actually used during working hours—often not very well. Last year two in five respondents to a survey of 600,000 desk-jockeys by Leesman, a data provider, said their office prevented them from working productively. If their managers now find that productivity does indeed rise—or at least doesn’t dip—as staff self-isolate at home, the case for teleworking may look irresistible. Investors are betting it will. In the past month the share prices of Slack, a corporate-messaging platform, and Zoom, which makes videoconferencing software, have shot up by 18% and 35%, respectively.
The second way in which companies are rethinking their business has to do with supply chains. Since the 1980s these have become more complex and global, with large firms now dependent on thousands of suppliers. The embrace of lean manufacturing and just-in-time delivery of components, pioneered by Toyota in the 1970s, has made production more efficient but more vulnerable to disruption, as companies stockpile fewer and fewer necessary materials. The median firm in the S&P 500 carries only 66 days of inventory, and some have far smaller buffers than even that—Apple has just nine days, according to data from Bloomberg.
When natural disasters strike big companies usually get by, shifting production temporarily from afflicted areas to those that are not. But unlike a flood, an earthquake or even the Sino-American trade war, all of which companies have some experience in planning for, covid-19 could affect all of a firm’s actual and potential subcontractors simultaneously. In such a scenario carrying bigger inventories and having suppliers at home may no longer look wasteful. It may come to be seen as necessary.
The coronavirus will not make business travel or lean global supply chains disappear. Chinese factories are cranking up again and high-flyers will, in all likelihood, be back in airport lounges soon enough. But the crisis offers a chance to experiment with new ways of doing things—and to question the wisdom of old habits. Chief executives should not be immune to the opportunity.■
This article appeared in the Business section of the print edition under the headline “Plan V”
‘Please, I Don’t Have Insurance’: Businesses Plead With Protesters
In downtown Chicago, people crawled through the partially shattered exterior window of a Nike store and ran out carrying brightly colored athletic gear and sneakers.
On Melrose Avenue in Los Angeles, they ignited garbage cans and broke locks on luxury stores, sweeping up armfuls of designer handbags and jeans.
And as night fell on Minneapolis, the heart of widening protests set off by the death of an African-American man in police custody there, business owners stood outside their doors and pleaded with agitators to spare the enterprises that many said they had spent their life savings to build.
“I was outside saying, ‘Please, I don’t have insurance!’” said Hussein Aloshani, an immigrant from Iraq, waving his arms in frustration as he recounted the scene Friday night outside the deli his family owns.
Businesses across the country suffered destruction over the weekend as protesters unleashed their anger over the death of George Floyd on commercial enterprises — from the offices of major multinational corporations and banks to family-owned restaurants and bars.
In some places, demonstrators scrawled graffiti on storefronts decrying police brutality against African-Americans, or echoing some of Mr. Floyd’s final words: “I can’t breathe.”
In others, they hurled crowbars and hammers at windows, and used gasoline to burn buildings to the ground.
Public officials said they were investigating whether political agitators posing as protesters may have led some of the looting. In some cities, peaceful protesters marching against police violence were outnumbered by others, such as white anarchists, who seemed more bent on destruction than messaging.
Regardless of who the perpetrators were, many store owners said they felt like the victims of misplaced aggression. They said their businesses, already ailing from an outbreak of the coronavirus that has been particularly devastating to small and minority-owned businesses, may not recover.
“A lot of people don’t know the blood, sweat and tears that go into being a business owner and the type of sacrifices we had to go through to be where we’re at right now,” said Kris Shelby, who woke around 1 a.m. Saturday to the sound of gunfire outside his North Atlanta apartment, which overlooks the luxury clothing store he manages.
Mr. Shelby and his business partner opened Attom in 2016 with the goal of bringing luxury brands more widely available in New York and Los Angeles to their city. They have drawn in celebrity clients such as the musicians Migos and Justin Bieber and supplied clothing for the movie “Black Panther.” The store has also been a welcoming space for a diverse group of Atlanta residents, Mr. Shelby said.
But when he returned to the store at around 5 a.m. Saturday, Mr. Shelby found that all of his merchandise was gone. He watched videos posted on social media of masked young people of all races swarming through the smashed front windows and leaving with pieces of clothing and accessories worth hundreds of dollars each.
Mr. Shelby said he shared the pain of people protesting Mr. Floyd’s death but did not believe that stealing would stop such incidents from happening in the future.
“It hurt. It seriously hurt,” Mr. Shelby said of Mr. Floyd’s death. “But as a black man, and this is a black-owned business, it’s just sad. It really leaves a bad taste in our mouths, to be honest.”
Ricardo Hernandez spent the weekend sleeping in a van outside the Mexican ice cream shop he runs with his wife in South Minneapolis. He negotiated with protesters by handing over ice cream and Popsicles so they would leave the shop intact.
“Just looking at this is terrible,” he said of the rubble and broken glass strewn across the neighborhood. “It’s unreal.”
On Saturday afternoon, Latino business owners in Minneapolis met in a parking lot to prepare for another night of unrest. Most owned commercial enterprises on Lake Street, where dozens of buildings had been vandalized the previous two nights.
They established shifts to ensure that the neighborhood would be monitored throughout the night. Organizers advised proprietors against brandishing weapons, and said they planned to order T-shirts with the logo “Lake Street Latino Security” to avoid being confused for looters by the National Guard troops and police officers responding to the unrest.
Maya Santamaria was at the gathering but said she planned to stay home that night because she had nothing left to protect. The building she previously owned — where she had once employed Mr. Floyd as a nightclub security guard, and where her new business venture, a Spanish language radio station, was also housed — had burned down Friday night.
Ms. Santamaria blamed the police for Mr. Floyd’s death and said they had not done enough to protect businesses in the aftermath.
“We were calling 911 and we were calling the Police Department and there was no response,” she said. She did not want officers to resort to violence against protesters, she said, but “they can’t just not come and leave us to burn, either.”
Kester Wubben’s new mail and printing business in Minneapolis had just been getting off the ground when the pandemic hit. Then over the weekend, it was looted. Televisions, an iPad and a U-Haul truck were stolen.
He had sacrificed greatly — pulling money out of his retirement savings account and working overnight shifts seven days a week at a lead factory — in order to start his Mailboxes Plus outlet.
In less than a year of business, he had developed regular customers. Miss Diggins stopped at the store a few times a month to ship packages to her daughter at college, and the pastor from Mr. Wubben’s church strolled in with a smile almost daily to check his mailbox and catch up.
Mr. Wubben, who is black, said he grew up five blocks from the site where Mr. Floyd was detained. He let out a weary sigh when asked whether his business would be able to recover from the damage, responding, “We might just have to let it go and try again another time.”
At the same time, he said, he understood the frustration over what had happened to Mr. Floyd. “That could easily be me. And so that’s how I look at it. That could easily be me. And it’s sad that there’s no humanity.”
He said he thought about the loss he had faced as a business owner compared with the loss of the Floyd family. “So when you equate the life to the money, which one is greater?” he said. “I can make some money again, I can start another business, but you can’t start George Floyd’s life back over. It’s ended.”
The protests in Seattle were an opportunity for Jordan Davis-Miller to demand a better future for black Americans. But it disturbed him to watch some of the thousands of people gathered downtown seize a different opportunity: to smash windows and loot retail stores. Many of them, he pointed out, were white.
“Looting Nordstrom’s and small stores is not going to do anything for us,” Mr. Davis-Miller said as he watched two white people inside the flagship Nordstrom store throw items out a shattered window. “It’s going to cause more flame to the fire and it’s going to give black people and people of color bad names. It’s not what we are here for.”
At the same time, Mr. Davis-Miller said, “It makes sense to be angry. It makes sense to want to destroy things and take things, because that’s all that’s ever been happening with any people of color. Our land, our homes, our livelihoods have been taken from us. It makes complete sense that we’d want to take that all back.”
Some business owners said they have tried to signal support for the protest movement in the hope that it would also help protect their establishments.
Derrick Hayes put up signs Friday night in the windows of his restaurant in downtown Atlanta that identified Big Dave’s Cheesesteaks as a black-owned business.
Mr. Hayes opened the restaurant after his father died, naming it in his memory. His “Dave’s Way” cheesesteaks and beef egg rolls often draw lines down the block and are favorites of black and white Atlanta residents alike.
He came in Saturday morning to find that the windows had been smashed, despite the signs he had displayed.
“Honestly, I was in disbelief,” Mr. Hayes said. “If we’re all in this together, let’s show that we’re all in this together.”
Mike Baker and Eric Killelea contributed reporting.
N.S. small businesses hopeful for regional travel bubble to help with loss of cruise season – Halifax
The recent announcement that the 2020 cruise ship season for the Port of Halifax will be suspended due to the pandemic means millions of dollars in revenue will be lost, not only for the provincial economy but small businesses that rely on international visitors for a large proportion of their sales.
“International visitors would represent roughly about $15 million in revenue,” Dennis Campbell said, the CEO of the Ambassatours Gray Line tour company in Halifax.
The 2020 season was expected to be a record-setting year for the largest number of vessels on the schedule to visit Halifax.
“We were looking at 203 vessel calls, carrying 350,000 cruise guests,” Lane Farguson said, spokesperson for the Halifax Port Authority.
The impact of cruise ship tourism is wide reaching for the provincial economy as a whole. Most guests depart in the early morning hours when their vessels dock and head out on excursions within a 1.5-hour range of the city, spending money as they go.
“Places like Peggy’s Cove are very popular. Lunenburg as a UNESCO World Heritage Site, the Annapolis Valley has been really growing in popularity for wine tours. Plus, a lot of other guests will just take their own self-guided tours through Halifax,” Farguson said.
For visitors that opt to wander throughout the downtown core, small businesses reap the benefits.
One of those businesses is Garrison Brewing Company, directly across from the cruise ship terminals.
“They don’t show up, then that money’s not spent and that beer is not sold and that doesn’t come back,” Brian Titus said, the founder and president of Garrison Brewing. “So really what we have to do is kind of look at this as a year that’s not going to be a record year.
“We’re going to make money but we’re not going to make a lot. We’re going to be able to keep people employed, as we have been to this point.”
The loss of the cruise ship season has many small businesses now focused on the local community for support. The ultimate hope is that a regional travel bubble will be created with the Atlantic provinces, but that is all contingent on how effectively the spread of the COVID-19 virus is contained.
“We’re hoping people will travel within that region and so we’ll meet some new friends, some Atlantic Canadians and that will be great. We’ll share a beer and it will be wonderful,” Titus said.
Regardless of whether Nova Scotia opens its borders to out of province guests, Campbell is confident the season will still be a success for local staycationers.
“This is still going to be something that we can have a half-decent season with our vessels on the water, and our Harbour Hopper and restaurants, and patios, and so on,” he said.
© 2020 Global News, a division of Corus Entertainment Inc.
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