By Maimun Mustafa
The world has changed and the next normal is here. As COVID-19 continues to present tough challenges, it has become quintessential for stakeholders to chart counter disruptive strategies to overcome the greatest disruption in recent times, the pandemic itself. These ideas and policy interventions should not only be to weather the current storm but also take advantage of equally emerging opportunities.
The learnings from a series of webinars aptly titled “Let’s Disrupt’ focus on talks relevant to the developing COVID-19 scenario and I would like to share these with the reader today. Bangladeshi consultancy firm MCFG partnered with international trade promotion organization, The Global Chamber and the United Nations Development Program in Bangladesh, to examine adversities, speculate potentials and initiate thought-provoking discourse. Over the span of 3 weeks, the sessions explored topics pertinent to small businesses, startups, sustainability and communication in the greater context of the current global crisis. The scrutiny of the state of affairs and future outlook from the economical, technological, academic and social perspective by the cross-section of international specialists panels provide perspective for seizing possibilities.
Some of the broad issues share an interesting relationship in the context of searching for the light at the end of the tunnel. Small and Medium Enterprises (SMEs) are representative of a significant proportion of economic players and by extension macroeconomic activity. Secondly, sustainability highlights long term commercial viability at an optimal level with people and the environment. Finally, clear communication via the media and within enterprises, corporates and the development sector is required to create greater awareness and informed decision making. Therefore the link between the roles of small businesses, sustainable business planning and optimal flow of information are some key factors to come out on top amidst the medical and economic tsunami.
The Economic Phobia
The beginning of the analysis in this piece starts with a bit of insight by Dr Alfred Marcus, Edson Spencer Endowed Chair in Strategy and Technological Leadership at the Carlson School of Management. This policy expert and award-winning author speculate that the global recovery will happen, but not rapidly. The COVID-19 crisis may well be with us for a maximum of 2 years but the resultant economic crisis may plague us for as much as half a decade. With such a proposition looming on the horizon we must pose ourselves two timely questions. First, how and where can we capitalize to recover commercially and economically? Second, is there room to cause innovative disruption? Let us discover if a global roadblock brings with it similar if not more rewarding prospects.
To first combust fear into a formula for success let us begin by examining the smallest business units, SMEs. There are 365 million SMEs in developing markets, but only 80 million are formalized. In non-crisis situations 25% SMEs fail in the 1st year of existence. There are 6 million SMEs in Bangladesh alone employing 7.8 million people in the sector. Their GDP contribution is 25% of the overall GDP. If we approximate 4 people per family, that is around 32 million people dependent on SMEs. According to Zeeshan Abedin, Country Economist, International Growth Centre Bangladesh that even though SMEs drive economic growth it is these very microenterprises who have been among the hardest hit by COVID-19.
LightCastle Partners & Sheba.xyz collaborated on an independent study about the “COVID-19 Impact on the SMEs of Bangladesh”. The survey was conducted in late April 2020 with over 230 SME respondents from all over Bangladesh covering industries involving Trading & Production (48.4%) that includes Perishable & Grains, Poultry, Dairy, Fisheries, Jute Diversified Products, and Retail Store; and Service Industry (51.6%) that includes food catering, electrician services, laundry, beauty salon, MFS agent, and restaurants.
In his talk regarding the SME issue, Bijon Islam, Co-Founder and CEO, Lightcastle Partners shared that It was found in the survey that 52% of SMEs have stopped services, 14% of SMEs have laid off all of their employees and 42% cut down all marketing costs. It was estimated that 46% of SMEs would lay off employees if the shutdown persisted for 4 months. The usual culprits for the failure of SMEs are capital constraints; ineffective marketing; pricing; lack of oversight; and little to no planning. Coupled with lack of access to banks in the pandemic (52% SMEs said they prefer soft loans at low-interest rates), all of the aforementioned factors act as significant hurdles to their recovery.
Prosperity in Policy
Abedin suggests a series of activities from the Government side. The government has two roles- immediate action role and taking on the recovery side. What could be the strategy to sustain the recovery level? Merely borrowing money is not the answer. On the contrary, there needs to be a complete rethinking on SMEs in terms of what services they offer. Barriers to entry in the SME space have become negligible in recent times, and the crisis is sort of an equalizer in that sense as well. There needs to be more wide-ranging capacity building in the SME space. Training and capacity building needs investment. Business skills are more important than ever. The time has come for the government to step in and take the initiatives. Bangladesh Investment Development Authority (BIDA) and the ICT Ministry have some initiatives, but they need to be scaled up. The country has agglomeration externalities. It is important to remember that not all SMEs are the same, and not all grow at the same rate. The use of data to profile SMEs is something we have not harnessed. Throwing money is only solving part of the problem, but for the recovery to happen, there needs to be a more thoughtful policy that needs to be devised. For example, when MFS first came into Bangladesh, the regulatory framework around the product was not ready and took a long time for the government to operate. The government needs to be more agile and nimble.
Small Steps Giant Leaps
Dishen Maharaj, Co-Founder of BET suggests access to Information; globalization; cost control; and IT management as baby steps for SMEs to become sustainable. Islam adds to this that to survive In the post COVID world, SMEs will need to change strategy. In Bangladesh, there is urban domination of demand. The supply chain is also not very linked but in pockets. It is high time SMEs go into digital channels and integrate into the digital ecosystem through e-commerce platforms. This could be done via aggregators such as Chaldal or ShebaXYZ. Moreover, there needs to be community-based growth. Some best practices in the west may not be best practices in Bangladesh. We need to think of local, communal solutions using technology. The length of the lockdown has imbued certain habits in consumers. The new normal is not just a cliche, businesses will have to evolve. The ability to be agile is going to be really important for SMEs going forward.
Startup Status Quo
Islam states from the report 24% of business startups have stopped business operations. Nevertheless, this should not necessarily discourage startups. In the last global crisis of 2008, we saw the birth of global players like Whatsapp, Uber, Netflix and the like. Alibaba was put in quarantine when a SARs case was found. However, this gave rise to the C2C site TaoBao.com. Concurrently JD.com was also formed during this period coupled with greater internet speeds and an increase in card payments in China. Dr Mazhar Islam, Chase Distinguished Professor at Loyola University believes they’re is the scope for sustainable startups in a post-pandemic world. Sustainable startups lie at an intersection of people, planet and profit. Primarily these fall within two categories: opportunity-driven startups and necessity-based. Dr Islam stresses on the promise of the former as opposed to the latter which is high growth and high tech start-ups often funded by venture capitalists as well as angel investors. There will be some primary groups that may be expected to see in the next few years in this segment.
Pandemic Related Startups
The first subset is Pandemic related startups and these are the ones that are coming up already. London based Epidem allows to track the infection. Lithuania based COVID App similarly tracks people who are affected. Israeli developed Aura allows people to minimize the virus in their house. In other words, these categories of startups directly seek to address the problems related to the pandemic we are in.
Non-contact Technology Startups
This group of opportunity based start-ups allow people to maintain social distancing and allow them to conduct economic activity. For example, Cosmopolify is one such Irish initiative that helps people to match virtual job opportunities. Skilltrain is another such venture that helps children to learn through storytelling.
According to Dr Mazhar, sustainable startups will not have a direct link to the pandemic and will include sectors such as Renewable Energy, Public health and Pollution Monitoring. Dr Barry Lefer of NASA said, “The world’s response to the pandemic is an unintended experiment that is giving us a chance to test our understanding of various air pollution emission sources.” Conversely, COVID-19 resulted in a 25% reduction in CO2 and 50% in nitrogen oxide emissions in the first 4 weeks. On the other hand, the renewable sector challenges currently include low venture capital investment, low angel and oil prices being historically low. Investment from big companies is also likely to go down according to Dr Mazhar. To make these startups succeed through and overcome ‘valleys of death’ substantial government support needs to be there according to Dr Mazhar.
Waste of an Opportunity
Many entrepreneurs may want to explore the business viability of excessive waste management required as a consequence of PPEs and other disposables. According to Dr Sahadat Hossain, Director of the Solid Waste Institute for Sustainability at the University of Texas at Arlington, there can be a few business areas to pursue such as:
○ Processing of additional medical waste
○ Processing of plastic waste
○ Collection of municipal waste
○ Safety training for waste professionals.
However, Dr Hossian asserts the need to adhere to proper safety protocols which are not done in developing nations like Bangladesh. As PPE and masks will be considered medical waste they should also not be used for disposal in incinerators as it has been proven that upon burning Corona cases may rise in neighboring areas.
Sense and Sustainability
Sustainable business digital platform Impacti’s Co-CEO Yolanda Saito shares an interesting take for businesses to become sustainable in the wake of COVID-19. In her delivery, she raised two rationales. First, how does the global pandemic present a legitimate opportunity for the private sector to collaborate and charter a path to a sustainable world? Second, how can the private sector reimagine sustainability and prepare for the next crisis?
Saito shares, “In the short term, concerns about hygiene & low oil prices will make sustainability hard but in the long term, the business will need to take sustainability seriously to meet consumer/investor expectations and survive in the next crisis.”After the economic & social distress of COVID-19, now is the time to mainstream businesses sustainability & green/low-carbon operations as core business practices. The Impact top Executive asserts that too many businesses were unprepared. In the 1970s, occupational health & safety and emergency response plans went mainstream after disastrous workplace accidents. The Panelist believed that we just cannot have fire drills anymore.
A few vital sustainability lessons can act as important takeaways from Saito’s delivery: virtual work; workforce protection; the importance of SMEs; low carbon supply chains; and rapid business innovation in response to the crisis.
Translating the Sustainable Development Goals (SDGs) into business-friendly language can be an important step to communicating sustainability values. The impact is one such company which provides a free digital tool to do just this.
Information and Beyond
Accurate information flow is key to proper functioning as asserted by the Editor of the Dhaka Tribune Zafar Sobhan. Noted Sri Lankan journalist Nalaka Gunawardene mentioned that fake news acts as hindrances to transparency and as we are more exposed to online media than ever we must be vigilant to fact check. As we make our business decisions a lot of it can be based on rumours so fact-checking becomes more important than ever. A serial entrepreneur from India, Dr. Jagat Singh had an interesting anecdote to share regarding positive news marked with green and negative with red. He went on to explain how readership went up in a Keralan print daily for the positive news. This would also highlight that if we do expose ourselves to positive information we become more optimistic in handling our work. Regarding dealing with customers the following learning came from Sarah-Jane Salfmarsh, Head, Programme Enterprises Communication at BRAC, “It is important to not only give instructive information to citizens but informing them why this information is being given and making them feel part of the solution.”
A Brave New World
We go through similar crises almost every 10 years. The 2000 internet bubble, 2008 Financial Crisis, and now the pandemic are different faces of the business cycle. In the world presented to us beyond this pandemic, companies of all sizes, especially SMEs, need to refocus their goals. Governments need to be sensitized so that SMEs can do what they aim to do and not act as obstacles to the very energy that SMEs bring to the post-COVID market that we have in front of us. Agile policies and enabling business environments will be very crucial. Policymakers should not stand in the way but show the way.
It is important to get the right kind of skill sets. If SMEs can survive this, then there are always growth opportunities. It’s all about learning, unlearning and relearning in such a changing world. We have to stay sustainable going forward into the future while also treading newer disruptive roads. The initial climb may be demanding but so maybe the long term rewards if we can upskill our organizations, set sustainable goals and communicate effectively.
So how will you disrupt the storm?
*The Writer is an Executive Director of the Global Chamber ®. He can be contacted at email@example.com