Author: Jay Zhao, Partner, T Fund
Like everyone else, I’ve been spending a fair amount of time trying to understand the length and impacts of this pandemic.
The “hammer and dance”
First, let’s talk about duration. I will be the first to admit that a lot of us were in the phase of denial, thinking that “oh, it’s an outbreak in China” and “oh, it will last only a few months, and things will be back to normal soon.” But in reality, we will likely be living in this “hammer and dance” dynamics for the next couple of years.
At a high level, what the researchers present here is that our social activity will emerge and retreat based on the cyclicality of the virus. Since we cannot completely contain or remove COVID-19, the situation will continue until the vaccine comes out and is distributed to billions of people worldwide for the next two years.
It’s a very dim vision, I know. But if it’s the truth, we should keep a rational mind and prepare ahead. Specifically, as founders and investors, we should be thinking about the future, what our society needs in which what will change, and what will not.
I will start with something simple — things that won’t change, perhaps never will — the basic human needs. People still need to eat, shelter, work, socialize, feel worthy, love, and be loved.
However, a lot will change, mainly how we deliver/resolve those needs, if not entirely reimagined in the post-COVID world. Whether you agree with it or not, the pandemic is forcing humanity to overhaul our status quo and to re-examine our priorities.
In a way that’s not trying to predict the future, I’m convinced that we are likely to see a few megatrends playing out in the few decades owing to COVID19. I will list the following three as examples.
1. The “stay-at-home economy” would further penetrate our society, taking more values away from the conventional offline economy.
The “stay-at-home economy” category is not new — it consists mostly of the internet companies we see today. Netflix, Zoom, Amazon, Doordash, Facebook in the US, along with Meituan, ByteDance, Alibaba, Tencent in China, were all founded before the pandemics and are all taking the tailwinds.
But that’s not all. Some of the “tougher” categories would be cracked: Grocery, higher education, healthcare, mobile payment, cloud-kitchen, fitness, etc. In a post-pandemic world, how people buy, learn, care, pay, eat, and work out will be changed in an accelerated fashion.
A months-long window of habit-forming is a powerful thing. Just when the global B2C opportunities were nearing to the tail end in 2018 /2019, I expect we might see a new breed of “stay-at-home” companies that will be created in the next few years and completely reimagine the way that we live.
The “losers” owing to the pandemics are the traditional economy consisting of restaurants, shopping malls, gyms, office spaces, and so on. Their values are being squeezed out and will have to find a new place to go. What this means is that the “offline economy” will either have to embrace the digitalization more aggressively or compete harder with new offerings. I don’t think restaurants, theaters, airlines would go away, despite popular beliefs. Instead, they would be “upgraded,” perhaps much more “personalized,” catering for a new type of experience. That takes me to my second prediction.
2. Social norms will never be the same. In-person time will be “luxurious.”
Many years following the potentially two-year-long pandemic, we will continue to keep our distance with each other. Handshaking is likely not going to happen in most social settings. We will start to see in-person meetings much like a “luxurious” experience, reserving it only to those we love, care for, and consider important.
By “luxurious,” I don’t mean the service will be expensive; it may very well be affordable and minimalist — it just means that psychologically, people are going to set aside a special place for the in-person time. And they would want it to be unique, well planned, and about who they are.
I don’t know what format and at what price this new type of service will be offered. And I don’t know how technology would be leveraged to achieve a reasonable scale such that more people will be able to enjoy it. But I know there will be needs for it. And people will pay for it.
3. Digitalization and AI automation will be accelerated.
During (and after) this pandemic, most enterprises worldwide are (and will continue to be) pressured on two ends.
First, the frontend. Following consumers’ demand for digital experience, companies will be replacing a more considerable portion of their “fat infrastructure” (e.g., physical space, human-interacting staff) with leaner tech stacks (e.g., cloud, bots). For instance, certain restaurants might not need to rent a full venue to serve their customers. Instead, they would open shops on delivery apps. Physicians might only see patients in person on a very selected basis, with most people comfortable with telehealth service going forward.
We have seen this consumer digitization trend taking place in China over the past ten years in areas like food delivery, remote health, and mobile payment. However, it would be fascinating to see the US is finally getting on the transformation. Tremendous values will be generated as companies in various verticals are switching to a new “interface.”
Second — probably a more important point — we would expect businesses worldwide to be challenged on the backend- the company operation side: e.g., logistics, manufacturing, warehousing, sales, marketing, recruiting, planning, etc. What it means is that as the economy takes on further downward pressure over the next few years, companies will have to work out a more efficient, automated way to operate on the backend, *while* many of them are forced to adopt a more digital frontend.
This represents a significant challenge and opportunity for enterprise software companies. For one, it will push B2B companies to demonstrate their ROI even more. The nice-to-have “vitamin” B2B solutions would be washed out, quickly. And two, just like a sick patient in need of good medicine, corporate customers are more eager to experience and try new solutions, particularly solutions that can solve their transformation dilemma. But the catch here is that you will have to show results quickly.
On the backend, a mere “digitalization” or “change of the interface” is not enough. For example, with manufacturing, it has never been about making digitalized records but rather how to use that digitalized information to make intelligent decisions, or better yet to automate certain tasks so that efficiency can be created. We are seeing startups like PlusOne Robotics, Kubit.ai that are taking an AI-first approach to demonstrate such ROI through automation, and will expect to see more.
In all honesty, the solutions will continue to come and evolve, but in the enterprise space, market readiness is the key. In a post-pandemic world, most enterprise customers worldwide will not only be ready but will demand a new form of software or solutions that will help with the automation of business tasks. It goes beyond “digitalizing” or “moving to the cloud,” it will push us into a new era of enterprise tech that is enabled by AI and automation.
Like every generation ahead of us who have gone through famine, wars, and the Great Depression, we are experiencing our own crisis. In Chinese, crisis (危机）is written as “danger and opportunity” in a single word. It cannot describe what we are going through any better. It is a tragic occurrence worldwide, but it’s also a forceful catalyst for our society to evolve, improve, and adopt a new, more reflective norm. When we look at humanity’s history, we have always come out the other end, stronger and more unified than ever before.
And this time is no different.