The Business of Pandemics

The COVID-19 Story

Jay Liebowitz

• Publisher: Auerbach Publications
• Year: 2020
• ISBN:
  9781000203912
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

Nations and businesses across the globe have been working through the difficulties of dealing with the COVID-19 pandemic. Industry, academia, NGOs, and governments have been "feverishly" searching for ways to address this deadly virus, which may continue to spread for at least the next year and perhaps beyond (in terms of a resurgence and different strains).

From a business standpoint, there have been dramatic effects on logistics and supply chains, economic downfalls, bailouts of major industries and small businesses, and far-reaching calamities from around the world. Even though the COVID-19 story is still in its making, this book focuses on the business of pandemics as applied to COVID-19. The book brings together a global panel of experts across industries and NGOs to help guide business executives and managers through the complex array of issues affecting business in the time of a pandemic.

Offering solutions to the business of pandemics as applied to COVID-19, the book is written for organizational decision makers and leaders, as well as those involved in crisis management, public health, and related fields. Its chapters focus on key areas that relate to the business of pandemics, including

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• Lessons learned to date

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• Big data and simulation

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• Logistics and supply-chain management challenges

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• Conducting global business virtually

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• Global economic impact

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• Media and risk communication

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• IT infrastructure and networking

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• Social impact

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• Online learning and educational innovations

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• The new work-from-home environment

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• Re-opening markets and businesses

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• Crisis decision making using analytics and intuition

With chapters authored by experts from leading organizations, including the World Health Organization, the RAND Corporation, and various universities throughout the world, The Business of Pandemics: The COVID-19 Story provides high-level guidance and insight for business leaders who must deal with the complexities and challenges presented by this unprecedented crisis.

Chapter 1

Business and Management Lessons Learned from COVID-19

Jaume Ribera

Abstract

COVID-19 has been a pandemic with important health and economic impact in all the countries in the world. In this chapter, we start by placing this crisis in perspective with other important disruptions that businesses have suffered in the last century to emphasize that firms should either be fighting a crisis or preparing for an upcoming one. Unfortunately, the memory of past crises vanishes soon, and most companies are not ready to deal with the next one. We decompose the lifecycle of a crisis such as COVID-19 in five stages: preparation, detection, survival, recovery, and compete again. We draw lessons for business in each of these phases.

Keywords: Logistics, supply chain management, business, management, lessons learned, crisis, value chain, disruptions, risk mitigation, knowledge framework, governance, scenario planning, COVID-19, pandemic

1.1 Management and Crisis

The history of a company oscillates between crisis periods and stable periods. We are referring to an important crisis, not just a customer calling to expedite its order or threatening its cancellation. Only in the last century could we easily list the Spanish flu in 1918, the Great Depression of 1929, WW2 (1939–1945), the oil embargo of 1973, the oil shock in 1979, the AIDS epidemic in the 1980s, the mad-cow disease outbreak in the UK in 1994, the SARS onset in 2003, the financial crisis in 2008, the swine flu in 2009, and the COVID-19 pandemic, among other less known cataclysms.

In the health area, COVID-19 has been more egalitarian than some previous outbreaks, such as the Ebola or Zika viruses, which had an impact mainly in developing countries and spared developed ones. COVID-19 has reached almost every country in the world, according to WHO statistics. Because there was no vaccine or treatment available for COVID-19 as of this writing, the death rate difference among countries and regions could only be explained by how the local healthcare was organized and the availability of health resources to take care of the people infected.

The impact of COVID-19 on business closures and the corresponding increase in unemployment has not yet been thoroughly assessed, and it will be very different among industries. Travel, tourism, and arts and entertainment are industries that will definitely be hit hard, while utilities, finance, and insurance seem to do fine, and videoconferencing services have soared since the beginning of the crisis. Therefore, countries also had to implement economic measures such as delays in tax collection, coronavirus bonds, and subsidies to flatten the recession curve and prevent the collapse of the whole economy.

With their cumulative experience in crises, most companies should already have mastered the skills of navigating them. However, as in the Anna Karenina principle, happy periods are alike, but each crisis is different in its own way. There is also evidence that we experience collective forgetfulness after each crisis. As reported by The Economist in April 2019, in an article titled “Memories of disasters fade fast,”¹ a group of researchers in Prague, led by Václav Fanta, analyzed data from almost 1,300 towns and villages in the Vltava basin over the course of nearly 900 years, concluding that the memories of river flooding only lasted for one generation. The following generation, the grandchildren of those who had suffered flooding, started building downhill, closer to the river, and encroaching on the flood zone again.

The situation in companies may be even worse, with a much shorter memory, because of management turnover and retirement. This forgetfulness may explain why every crisis seems new, and many of the “lessons learned” from one crisis look very similar to the lessons drawn from the previous ones.

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¹ Fanta, V. (2019). Memories of disasters fade fast. The Economist, April 17. https://www.economist.com/science-and-technology/2019/04/17/memories-of-disaster-fade-fast

The aim of this chapter is to examine the lessons we can draw from the COVID-19 crisis to date that can help companies better manage the next crisis.

1.2 The Life Cycle of a Crisis

We will follow most common models of crisis management and consider different stages of crisis management:

Figure 1.1 The life cycle of a crisis

These five stages are not linear but circular, so that every time one stage is complete, it’s time to revisit the earlier ones to ensure that lessons learned are also applied there. The frequency of change and review depends mainly on the volatility of your industry.

1.2.1 Prevention

An ounce of prevention is worth a pound of cure. The best response is to get ready before disruption hits, when preparation is less stressful and more options are still open. The first step in managing something is understanding the behavior that needs to be managed. In the case of the company’s value chain, we need to map it and capture the basic parameters that define its behavior.

Map the Existing Value Chain

The value chain, a concept developed by Michael Porter,² is the series of activities that a company needs to perform to deliver value to its customers. These activities are the basic units of competitive advantage of the firm. The first step in understanding the value chain is to map it and measure what is possible. The following steps can prove useful:

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² Porter, M. Competitive advantage: Creating and sustaining: superior performance. New York: Free Press, 1985.

Map your value chain as part of a larger value system that includes upstream companies (the suppliers) and downstream companies (the customers). Map customers’ customers, suppliers’ suppliers, and so on to get as good a view as possible of the value chain from end to end. Value chains are complex and often opaque. Your ability to get the information will strongly depend on the power you exert on the chain and how other players respond to your request. In the automotive industry, the power in the chain lies in the OEM, while in the food industry (except for some large manufacturers), the power lies more in the distribution and retail chains.

Focus on the few most important actors in your value chain. Not all are equally important, and your strategies should be adjusted to these differences. For instance, focusing on the upstream suppliers, we can classify the nodes in the value chain network along two dimensions: risk of disruption and profit impact if the disruption occurs.³ Risk is assessed in terms of availability, number of alternatives, competitive demand, make and buy opportunities, and substitution possibilities; the profit impact of a node can be defined in terms of the volumes purchased, or, in case of a disruption, the impact on product quality or business growth. The combination of these two dimensions define four types of actors that can help you determine the actions to launch.

Focus on actual production sites. When mapping the value chain, pay attention not to where the players’ headquarters are, but where their production facilities are. That your supplier invoices from the Netherlands does not tell you much. It is much more important to know if the factories that ship the products to you are in Florida, Milan, or Wuhan.

In parallel to identifying facility locations and flows of value, inquire into installed capacities and their uses. Checking the installed capacity and the utilization of the critical players in the extended value chain may help managers identify potential trouble spots.

Identify and Assess Possible Disruptions

Once your value chain has been mapped, it is time to explore where in the chain the disruptions are likely to occur. Following similar steps to the FMEA method,⁴ we try to assess what could go wrong, why, and how important a disruption would be for each of the nodes and links in the value chain map.

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³ We use profit impact because it is a common measure, but it is straightforward to substitute profit impact for other similar dimensions that are better aligned with the mission of the organization, as will be the case for nonprofits.

⁴ FMEA, Failure Mode (how something may fail) and Effects Analysis (consequences of the failure).

Besides the identification of the vulnerable nodes, you may also want to consider causes of disruptions. These may include cyber threats, trade wars, climate change, tougher environmental regulations, economic sanctions, natural disasters, black swan events, and so on. You can then try to identify, alone or with the help of consulting specialists, where your value chains are most exposed to these risks.

An article published in the Harvard Business Review⁵ focused on the impact of potential supply chain failure points, rather than on identifying the causes, which may be unpredictable. Their methodology quantifies the financial and operational impact created by a particular critical supplier facility being out of work for a defined period, independent of the reason. The central measure proposed by the authors in their model is TTR, the time to recovery—th...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Illustrations
• About the Editor
• Contributing Authors
• Foreword The Business of Pandemics—Or Building It While We Fly It
• Foreword A Public Health and Knowledge Management Perspective
• Preface
• Chapter 1 Business and Management Lessons Learned from COVID-19
• Chapter 2 Using Data, Computer Models, and Simulations to Predict the Spread of Diseases Like COVID-19
• Chapter 3 Conducting Global Business Virtually During a Crisis
• Chapter 4 Global Economic Impact Resulting from COVID-19
• Chapter 5 COVID-19 and the Seven Pillars of Effective Risk and Crisis Communication
• Chapter 6 Flying into a Geopolitical Storm
• Chapter 7 Growing Organizational Capacities for Increased Online Learning, Working, and Health
• Chapter 8 The Social Impact(s) of COVID-19
• Chapter 9 COVID-19 and the Education Innovation Gap
• Chapter 10 The Global Remote Work Experiment and the Future of Work
• Chapter 11 Re-Opening Markets and Businesses That Have Been Shut or Severely Curtailed
• Chapter 12 Supporting Decision Making During a Pandemic: Influence of Stress, Analytics, Experts, and Decision Aids
• Index