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Traffic is moving and clocking-in machines are beeping again – life in China is resuming.

China’s economic recovery picks up speed at the end of 2020 – something many other countries are longing for. And it has done so more quickly than most observers expected. According to data from the National Bureau of Statistics, China’s GDP grew by 6.5% in the fourth quarter, being the only major economy to have expanded in 2020. This puts China a step ahead of the rest of the world on the recovery curve.

For me, developments in China provide valuable insights that can help us better understand and prepare for our recovery in Europe and the US. Which is why I am delighted that my colleague Xiaoxun (BJ) Zhu, Head of Siemens Advanta China, has taken the time to share with me his first hand experiences of recent months.

Bettina: BJ, looking back over recent months, what, in your eyes, can countries in the West who are still in the midst of shutdown, learn from your experience in China?

BJ: China recognized the importance of digitalization in the fight against COVID-19 and exploited its potential. Many companies reacted quickly and developed customized digital solutions as a response to the new challenges. And when it came to ramping up the economy, it quickly became clear that a digital monitoring system was the only way to ensure compliance with the strict statutory regulations. Digital tools not only guard against a new wave of infection, they have also driven forward digital transformation in companies. That makes companies more future-proof and more resilient, as demonstrated by a report from the China Academy of Information and Communications Technology (CAICT) which examined the impact of the pandemic on companies in the IoT space.

Bettina: In Germany too, we are looking at ways of using digital technologies to better protect employees on company premises, like with Siemens’ Comfy App. What does your monitoring system look like?

BJ: Our system is a campus management system that we developed ourselves. It has a wide range of features, including access authentication, body temperature measurement, temperature status recording, preventive health advice, plus higher-value insights based on data analytics. It is an important element in our safety concept and has proved to be an efficient preventive tool. Our many years of experience in campus management meant that we were able to develop the tool very quickly. As a result, we were able to provide our clients in China with a cost-effective, efficient solution right when they needed it, as they got their operations up and running again.

Bettina: It is impressive that you managed to develop and scale the system in such a short timeframe! I’m very interested to see whether similar concepts will be adopted in Germany too. After lockdown, many companies are struggling with cash flow issues and are fearful for the future. Where you are, the economy has started up again. How has the situation evolved?

BJ: Small and medium-sized enterprises, in particular, are still experiencing problems with their cash flow, unfortunately - and that includes some of our customers. To help them, we have developed a four-point action plan:

1. Comprehensive analysis of the company’s financial position to identify losses and financing gaps
2. Compile a multi-point budget plan with different scenarios and versions
3. Conduct emergency budget planning to implement continuous monitoring of annual targets
4. Optimize and align all enterprise management tools with the aid of digital technologies

Our experience shows that these steps are essential if a company is to be able to assess the impact of the pandemic on its own business. They form the basis for developing effective targeted measures to secure the survival of the company.

Bettina: I think that the cash flow problems are just the tip of the iceberg. In the current situation, what, as you see it, is particularly important for companies if they are to be equipped for the future?

BJ: With the many internal challenges facing companies at the moment, it is important not to lose sight of one’s own supply chain. Fast, efficient assessment of procurement risks and of the sustainability of the supply chain is absolutely essential. Those who have not yet done so, should first and foremost implement a crisis management system, centralize scheduling and expand their procurement channels. The next step, based on experience gained and using short-term success metrics, is to increase security of supply and improve the quality and efficiency of the supply chain. In the long term, the focus must be on optimizing the supply chain network and on end-to-end digitalization of supply chain management.

Bettina: For me, that last point in particular has become more significant in the current situation. Globalization has meant that supply chains have become incredibly complex in recent decades. Daimler, for example, works with more than 213 tier 1 suppliers worldwide according to LBBW Research and Bloomberg. The 10 largest of these alone have 588 suppliers, and these in turn depend on 2,900 other suppliers. Keeping track of these is virtually impossible without the right tools. Do you agree, that the trend towards Glocalization will continue?

BJ: I think so, yes – you need to ensure that your supply chain is resilient and for this a dedicated risk management in balancing global AND local vendors definitively can help.

Bettina: COVID-19 still has the whole world in its grip in the second and also third wave. Where do we go from here?

BJ: As the author Hal Borland put it so well - No winter lasts forever, no spring skips its turn. The pandemic is a turning point in the digitalization of the economy and society. If we are to be prepared for the upcoming uncertainties and the complexity of a digital, global economy, then a smart approach to the digital dynamic or as Christian Schuldt from the Future Institute aptly describes it - a digital resilience - will be critical to our success. Siemens, with its experience and insights, can make a valuable contribution to driving further developments in this area. In so doing, we make companies more flexible, more agile and, as a result, more competitive in the long term.

Bettina: Transformation of corporate culture also has a key role to play in building digital resilience. Digitalization must not be just a buzzword in organizations, it must be embraced actively by all employees.

Thank you very much BJ for these fascinating insights. I am certain that the four-point plan to address cash flow issues and the supply chain measures you described will be very useful for other companies too, as a way of mitigating the impact of the crisis. 

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The effects of the coronavirus pandemic have significantly affected everyone across the globe. The economic downturn experienced by businesses has decisively impacted various industries, such as travel, oil and gas and automotive. Rethinking business models to keep up with the changing economic situation is the new normal. But which long-term trends has the pandemic initiated in our society? What do businesses have to keep an eye on? And which actions can they take to remain relevant during and after the pandemic?  

Supply chain disruptions, reduced physical interactions and international travel restrictions are some of the challenges which we are experiencing today. Companiesmust look for ways to mitigate the risk. Digitalization offers several opportunities as it will accelerate and further gain traction. Digital transformation aims at combining talent and technology to boost operational efficiency, customer experience and ultimately competitiveness in the market. A business needs to focus on all aspects of its value chain to achieve this:  
 

• Strategy 
  Adapt and define new business models leveraging e.g. the Internet of Things (IoT) or Artificial Intelligence​ (AI). 

• Innovation and R&D 
  Speed up innovation cycles in Research & Development (R&D) and Product Lifecycle Management (PLM) by incorporating, for example, agile approaches or DevOps. 

• Supply Chain & Manufacturing 
  Focus on process automation, remote operations and flexible production(based on e.g. additive manufacturing). 

• Organization 
  Manage increased complexity with the help of digitalization, optimize system architectures and drive modularization. 

• Sales & Marketing 
  Improve customer experience through e-commerce and multichannel selling. 

Companies need to consider the opportunities that digitization offers in various sectors to ensure that they remain competitive and continue to grow while building up a resilient business.  

As Covid-19 continues to unveil the vulnerability of businesses, it is getting more and more important that companies prepare for potential setbacks. Next to investing in digitalization – like these three concrete examples from Aymeric Sarrazin, CEO of Siemens Advanta, outline –  improving the overall strategy is a good point to start with. This can be achieved by adjusting to changing societal and economic needs, focusing on portfolio optimizations and innovations, or adapting diverse business models and sales channels.  

For supply chain and operations resilience, businesses can focus on diversifying their supplier network and re-localizing their supply chain activities. It’s worth to think about making the office space and production facilities more flexible to accommodate changes during crisis situations. 

On the financial side, companies need to increase liquidity buffers during crisis. They can apply short-term and medium to long-term measures to raise financial resilience, think about insurances for particularly vulnerable businesses, or evaluate on subscription models which have a high relevance in stabilizing cash flows. 

Lastly, investing in people, the core of every business, is key to build up resilience. Home office becomes the new normal. So, companies need to support their staff by introducing new forms of collaboration, provide relevant trainings and necessary IT equipment to make sure the workforce is prepared for and confident with work changes. An increase of variable salary proportions gives a mean to appreciate employees during intense home office times. 

For many companies the effects of the coronavirus have resulted in a decline in business growth rates. Global GDP forecasts expect a decline by -5.2% depending on the scenario of recovery. But how can businesses grow during this challenging period?  

For a sustainable future growth, business leaders need to have a well-strategized plan. One potential action field is to shift businesses to promising growth verticals. They can think about engaging in the production of complementary products, whether electronics and semiconductors, pharma, food and beverages, or health care products – whichever fits their business portfolio best. 
 
Additionally, companies can focus on adapted regional exposure by balancing all types of markets depending on their individual use case – starting from the US and China to the European market and the promising emerging countries.  

Again, digitalization can be a strong lever, not only making the business more resilient but also promising future growth. Leaders should consider leveraging technology with strong potential, such as IoT.  

Globalization has continuously accelerated since the 18th century. However, during times of crisis nationalism gains popularity and political regimes change. As a result, there is a potential increase in local requirements for foreign goods admission to enter local markets, such as in food and beverage, electronics or in automotive industry. This change leads to increased costs for suppliers.  

A second driver to counter globalization is the shift of supply chains to own economic spheres. Especially critical parts will be increasingly integrated to achieve a better access to and responsibility for the supply chain.

The pandemic has made social inequality and environmental shortcoming particularly visible. Social responsibility and sustainability are gaining importance.  

In April 2020 the US unemployment rate achieved a peak of 14,7% – the highest since the great depression – with Covid-19 clearly revealing societal gaps. Poor and underprivileged people are hit by the pandemic to a disproportionate extent. Our societies are highly dependent on the economic status of our countries. Raised unemployment rates and social unrest are triggering the need for business models that focus on social impact and governmental interventions, such as an unconditional basic income or other ways to support people during very high unemployment rates. 

The pandemic further made transparent how our daily actions affect the environment. As economic activities have been slowed down during the lockdowns and travelling dropped immensely, the global CO2 emissions saw record drop by 4.6% or 2.5 gigatons. Consumer awareness starts to shift towards sustainable products, which on the business side will lead to investments in sustainability. Next to that, a raise in governmental stimulus programs to promote climate-friendly technologies is expected which will help companies to gain foothold. Germany’s national government, for example, boosts electric-vehicle incentives to raise demand and heavily invests the ramp up hydrogen technologies.  

Government interventions have been witnessed in different parts of the world as a way of responding to the impact of the Covid-19 pandemic. Though the measures differ from one region to another, they are all aimed at helping businesses mitigate the short- and long-term effects. Some of the modes of government intervention include tax reliefs and short-time work compensation. Others include availing loans to companies and equity investments by the government to distressed companies. The European Commission, for example, is mobilizing emergency support packages for specific countries. To benefit from government interventions, companies should always be on the lookout for policy updates and ensure total compliance to take precautions.

Consumption trends have changed and will continue changing due to the effects of Covid-19. The demand for some commodities is falling while others are rising. For example, restaurants are witnessing a fall in demand for food and drinks. On the other hand, the demand for sanitizer, sports equipment or food delivery raised as people try to reduce leaving their homes and avoid exposure to large gatherings. The changes in consumption patterns call for the restructuring of business models. Businesses need to think about new ways to serve their customer. Is their product or service still relevant in the new normal?

Following the unprecedented effects of the pandemic, many companies have adopted the work remotely policy. This global trend will not only be fit to use during the pandemic but may also be a long-term trend for most businesses. Siemens, for example, officially announced to establish mobile working as a core component of the new normal. It allows its employees to work two to three days per week from anywhere as a permanent, worldwide standard. This trend will significantly change the way people live and work. Many will opt to live in remote areas away from the crowding in big and mostly expensive cities, while still working remotely. As the New York Times reports, empty apartments in Manhattan reach a record high leading to rent drops at 10%. Companies need to evaluate the overall impact of this trend on their business: how will it impact their growth after Covid-19 and, beyond that, how will it impact the company culture and its people? 

These eight, only briefly addressed, trends and fields of action provide initial indications of where companies need to be attentive and alarmed. Digitalization, Business Resilience, Business Growth, Globalization, Social & Environmental Responsibility, Governmental Interventions, Changed Consumer Behaviors, Less Urban more Remote – Make sure that your business stays relevant during and after the Covid-19 pandemic.