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05/02/2020

How to Prepare for Our New Unrehearsed Business Model

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Uncertainty has become SOP as the retail industry continues to grapple with the effects of COVID-19.

While the breadth of this disruption is unprecedented, we can still set expectations on how business will continue as we move forward.

Be prepared to play business ‘Whack-a-Mole’

You’ll be mirroring the arcade game in which players use a mallet to hit toy moles, which appear at random, back into their holes. The Atlantic’s Ed Yong describes the only viable endgame to COVID-19 as like playing whack-a-mole, suppressing it for a period in a location, only to have an outbreak and resurgence, all the while laboring under constantly shifting government-dictated closures and distancing mandates.

this uncertainty will be long term, not short

This will be the business reality for the next 18 to 24 months before there is a vaccine. This will be the environment that businesses will operate in, and life as most people know it will not fully return.

All business intelligence models will need rethinking. Predictable consumer behavior will no longer be present, as everyday behaviors for many assume a life or death risk.

Michael Osterholm, an infectious-disease epidemiologist at the University of Minnesota, told Yong: “I think people haven’t understood that this isn’t about the next couple of weeks. This is about the next two years.”

Expect cycles of re-openings and closings

Markets run on information, and information travels in loops: The start of a supply chain, in a market-based system, is fed by the end. Knowing what people want to buy tells you what to sell them. There are no substitutes for the collective decisions of consumers if you need to know what sells.

But for the next 18 to 24 months the collective decisions of consumers will be marred by continued shutdowns and massive expansion of testing, Paul Romer, a Nobel-winning economist, professor at New York University, and Chief Economist at the World Bank from 2016 to 2018, told The New Yorker.  

Absent large-scale testing, the most likely outcome is a series of reopenings and renewed shutdowns, as the infection rate rebounds, he says, which is almost as bad as a permanent shutdown from an economic perspective.

Short-term hyper-local insights will be the norm

In today’s COVID-19 environment, and for the next two years, access to that collective decision-making will become harder and harder to parse. Today’s empty shelf is tomorrow’s supply priority. But with the chaos in local market conditions fueled by shifts in re-infection, social behavior, economic resources and mobility, understanding why shelves are empty will be the primary challenge for business.

It is ridiculous at this point to think in terms of the long game, when the short game is so chaotic. What has been the norm — operations and planning at a national or regional geographical level — will not be useful.

Hyper-local demand forecasting and customer prediction will be the new norm. Quarterly or yearly plans will require pivoting to much shorter planning horizons, as infection outbreaks and consumer fear or trust in their safety and government response will be the unstable factor in planning.

New short-term modelling approaches are needed now

New modeling techniques that can forecast with limited data inputs and provide probabilistic cones of possibility will become the new norm. And for many business operators this will present a new challenge — operating in an environment of ongoing uncertainties.

Challenges include:

  • Quantifying changing risk at the location, product and customer levels
  • Adapting new demand forecasting techniques
  • Creating new supply chain inputs
  • Smarter openings and closing planning and changing operating processes
  • Making fast, agile digital marketing and hyper-location planning and execution
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Eric Hillerbrand is CEO of Shortest Track, a company that delivers the broadest set of advanced data science and artificial intelligence solutions tied to relevant business outcomes today. The company uses a low risk, low-cost business model, providing clients with the ability to test drive before buying. Before founding Shortest Track, Hillerbrand was founder and CEO of three AI startups, including Talkthree, a cognitive computing company that delivered cognitive computing and artificial intelligence. Talkthree produced solutions which enhanced real-time, customer-journey based predictive modeling and personalization. He helped design the massive cognitive computing investment undertaken at Sears Holdings. Costing several hundred million dollars, this cognitive computing capability eventually ran all of marketing and merchandising. Prior to this role, he held leadership positions at McGraw Software, and Enleague – a Coca-Cola Innovation company.