We’re now a quarter of the way into 2022 and, despite many positive signals out there, we’re still dealing with the impact and consequences of the Covid-19 pandemic. The pandemic has absorbed so much time, effort, and headlines that one could easily be forgiven for believing that the world has been on hold during the last two years.
That the very opposite is true could be seen during the FT Global Boardroom conference that we attended, virtually, recently. The theme of the fourth edition of this event was ‘building sustainable growth’ and, although the pandemic was often the subject, or at least the starting point, of the discussions, much of the conference was focused on developments that are likely to shape our collective future far beyond it.
A crisis often accelerates innovation and development, and the pandemic seems to have done just that in many disparate areas. We take a look at three of the most interesting of these below.
Healthcare: extraordinary speed of innovation
Speaking about the possible end of the Covid-19 pandemic, Vasant Narasimhan, the CEO of global healthcare company Novartis, pointed out the extraordinary speed of recent development in the healthcare sector that it had accelerated. Patient treatment had been based almost entirely on chemical molecules for more than 70 years, biological treatment (antibiotics etc) had been the order of the day for 50 years, but the last five years had seen the advent of a hugely diverse range of treatments such as cell therapy, gene therapy, mRNA, sRNA, base editing, and CRISPR gene editing, with others on the way.
An example of such innovative treatment is the use of small interfering RNA to treat chronic cardiovascular disease. Another is the elimination of cancerous cells by matching molecules and radio particles to directly deliver micro doses of radiation. An amazing aspect of this treatment is that it demonstrates a disciplinary cross-fertilisation that has become a trend in many research areas. This particular novel way of treating cancer stems directly from research done at the CERN laboratory.
An advantage of many of these ground-breaking treatment methods is their efficiency. One-time therapy replaces chronic therapy, thus reducing the pressure on the healthcare system and improving the patient’s overall experience. It is impossible to overstate how ground-breaking such development on a large scale might be.
Supply chain: severe disruption
The global supply chain was severely disrupted in 2020 and 2021, with global shipment of goods particularly affected. The disruption had an impact on production and consumption around the world as shortages were experienced by both businesses and consumers. The participants in an illuminating discussion on the supply chain crisis identified the pandemic as its primary cause both on the demand side, with changing consumer behaviour, and on the supply side, with the network of passenger aircraft on which cargo distribution heavily depends suddenly no longer being available as a conduit for goods.
Interestingly they also identified the East/West trade imbalance as compounding the disruption. This trade imbalance has meant that, in the absence of air freight, shipping, dependent on containers and ports, has been unable to cope with the sudden increase in demand for transportation capacity, particularly against the backdrop of staff absences.
Responding to the crisis has led directly to the acceleration of digitalization and innovation in the sector, including the fast-tracking of new products and technologies. Although seeing delivery drones in urban areas is not likely in the near future because the technology is not yet mature enough, UPS, for example, has placed an order for a 2.5 ton battery-driven drone with autonomous capabilities to be delivered in 2025. Scott Price, President of UPS International, said that such drones would be deployed in point-to-point delivery between central storage hubs (such as Singapore) and secondary hubs (such as the islands of Indonesia).
The startling thing here, of course, is the relative proximity of the delivery dates. Is it really possible to imagine a distribution network that is drone-based and possibly autonomous in three years’ time?
Investment obviously has a cost, but the payback is potentially very attractive, particularly as much of the innovation, including the example of battery-operated drones, is well aligned with key sustainability objectives. This change is also leading directly to a reimagined supply chain – with less intercontinental cargo and a shift to more local production and distribution.
Fintech: behavioral shifts
As with the supply chain, the pandemic put the financial markets under enormous pressure as a result of a shift in consumers’ and businesses’ behavior. Account openings, contactless transactions, and credit applications were only some of the banking services that skyrocketed in both developed and developing economies. And in many economies this sudden surge in demand was compounded by the expectation that banks would step in to actively support government action to protect people and organizations affected by Covid-19.
As a result, the banking system was forced to scale in a totally unexpected way and this accelerated digital transformation and innovation. It has given established players insight into how they will have to operate in the future to be able to compete with the new entrants whose innovative platforms, as the FCA Strategic Review of Retail Banking Business Models shows, are yielding higher levels of customer satisfaction and continuing to win market share. Increasing competition from these digital challengers has provided some further impetus for change. The announcement by JP Morgan about its intention to spend $12bn on technology in 2022 underscores this trend.
In turn, the pandemic has been an enormous opportunity for the FinTechs. These new, more nimble and efficient market entrants have been able to scale more rapidly than traditional players and so, during the pandemic, penetrate markets faster than even they had hoped. According to the FCA Strategic Review, the digital challengers have been able to expand rapidly, winning market share from both the four largest banks in the UK as well as from their second tier competitors.
And, as part of a wide-ranging discussion of the state of the financial services sector, panellists at the FT Global Boardroom conference talked about how FinTech is transforming emerging economies and societies.
Using payment as an entry point, the more successful of the FinTechs have been able to use the customer data it generated to improve consumer access to credit, insurance, and all the other things that are part of a mature financial eco-system. This has been driving their growth and at the same time, offering under-banked customers access to products that would have been entirely out of their reach a few years ago.
The shift to technology driven, cost-effective, and efficient customer-centricity is leading directly to more comprehensive financial inclusion, which in turn spurs economic growth and job creation – particularly in developing countries. The scale and importance of this issue should not be underestimated – for example approximately 66% of all people in the Middle East and North Africa are ‘unbanked’ – in other words they rely entirely on cash transactions and do not have access to any financial services. Although not always as pronounced, this situation is similar in other developing countries around the world.
Is global imbalance a key stumbling block?
Listening to the speakers highlighting how technology and innovation is making the world a better place filled one with real optimism for the future.
A more worrying theme that connected the sessions, however, was something that the pandemic, and in particular the drive to vaccinate the world, has made more prominent.
This is the fact that all of this is happening against a backdrop of disquieting global tension, between East and West, between those nations that are developed and those that are developing, between those with aging populations and those with youthful ones, and, indeed, between those who have and those who do not.
One can but hope that these tensions and counter-currents, if not directly addressed, can at the least be assuaged by continuing innovation in all the areas covered during the conference.