Computer programmers talk about refactoring – the process of fixing deficient software code while preserving and ideally improving a product’s functionality.
When the CTO tells the product team that it is time to refactor, we swear under our breath, but usually give the go ahead, albeit grudgingly. We recognize that we need to fix our technical debts to ensure long term stability of the platform.
Sometimes, you ignore the technical debt. And then an edge case comes that you didn’t expect. It crashes your software. And you’re scrambling, in real time, to fix the product.
As Silicon Valley likes to say, software is eating the world. Including all the good analogies.
This is a blog about how the COVID-19 changes business. Better writers than me will be able to tell the story of the terrible human tragedy of the pandemic, as well as the heroism of our medical professionals, first responders, and essential workers.
Where I hope to share are observations on how companies and markets are evolving to deal with COVID-19 and what it might mean to the economy.
I use the term refactoring because just as software developers rewrite code to deliver the same experience in a more robust way, companies will need to rework their businesses to deliver similar value propositions with much better processes.
COVID-19 requires every business to refactor its business model in order to build greater resilience, adapt to evolving customer demands, and drive better results for all stakeholders.
It starts with huge changes in business processes. Physical spaces need to change to support social distancing. Supply chains will need more resiliency. More manufacturing comes back on shore. The health care system needs more spare capacity. Essential front line workers will demand greater salaries. More people work from home, changing the need for office space and reducing gasoline consumption.
Consumer behavior will also change. Live events and airline travel eventually come back – but how long will it take and in what form? How fast will retailers and restaurants build their apps to support order online, pick up in store models? Long standing consumer trends already under way probably accelerate. Do more people cancel cable TV? Will department stores ever recover? Do people use more Instacart even after the virus fades, simply because it is more convenient?
Hence, the critical assumptions driving business models need to change. Key variables that swing a model – factors like adoption, density, throughput, inventory, or utilization – will need to be revised, likely with a good deal of uncertainty.
Some businesses may do better, many will do worse. And iffy business models that didn’t really work before COVID will be crushed after COVID.
The simultaneous refactoring of every sector of the economy will have enormous financial impact and lead to a reset of asset prices and value distribution.
As every aspiring business blog must have a catchy, tech friendly name, I call this coming period “The Great Refactoring.” Recession and Depression were already taken.
There’s another underlying theme to The Great Refactoring, which is the need to address the massive societal debts incurred over the past 30 years – especially in terms of income inequality and climate change.
The majority of economic gains were going to the top companies, the top cities, and the top individuals. In the United States, most people and some regions didn’t participate. Even before the pandemic, Donald Trump, Bernie Sanders, the Tea Party and Occupy Wall Street made it clear that both left and right were unhappy with the way things were going.
If it is to be successful, business refactoring will need to take into account all stakeholders because society won’t tolerate it if we survive the pandemic and end up in a world even more dominated by a few big companies, private equity firms, and billionaires.
Business refactoring will also need to address climate change. The economy eventually needs to be carbon neutral. If we are going through all this refactoring without making tangible progress on sustainability, we may miss our last best chance to avoid tremendous damage to the planet.
The coming months will be challenging – and as I said – others are better suited to write about the human toll, the potential medical treatments, and the real heroes on the front lines.
I’ll be writing about how businesses adapt. The hope is that we end up in a better place, with an economy that does everything it used to do, perhaps paying down at least some of the huge debts we have been building for decades.
The Great Refactoring 