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Quarterly Insight: Lying Beneath The Furlough Curtain

Written by

Jacques Bonfrer

Jacques Bonfrer

Summer is here, the vaccine roll out is going seemingly well and critical Covid cases are remaining low;  It's time to breathe a sigh of relief and finally look ahead to better times in front of us.  This is definitely the mood here in the UK and I'm sure the same sentiment is being shared in other parts of the world.

However, only a couple of days ago whilst in casual conversation with some work friends, I was reminded that the furlough scheme (an emergency UK government employee payment plan), is still very much in place.  Since June 21, the furlough scheme has begun it's incremental retract decline, meaning that the 12% of UK employees who are still being propped up by government bailout, will either need to return to work or be declared unemployed by the beginning of October. The stark reality of these numbers soon washed away any signs of an emerging summer glow acquired in recent weeks.

Whilst the media narrative portrays a feeling of optimism, the sad reality is businesses, particularly in hospitality, retail, transport and manufacturing, arguably face the toughest challenges they've had to face since the beginning of the pandemic.  It seems crazy to think, but in economic terms, the true impact of Covid 19 might yet still be to come.  

It's with this sentiment, that I'm laying out our views on the quarter ahead and what lies in stall for businesses.  

Unlike previous quarters in the past 18 months, heading into September feels somewhat different. For the first time in a long time, we are no longer waiting for the "magic vaccine" to liberate us from our shackles. The fact that the majority of us in the UK have now been fully vaccinated and contracted figures remain alarming shows us that Covid 19 is not going away. So what does this mean for the automation industry?

Well, in the main, the automation industry has remained buoyant throughout the pandemic. Despite there being an initial blip in gross sales, the industry has profited from companies looking for knee-jerk solutions to labour shortages and social distancing measures. This has brought about a wave of new customers particularly in areas such as food, e-retail, healthcare and household goods. However, for the large majority of industry, the general flavour has been to lay low, batten down the hatches and ride out this period of uncertainty. Of course, companies can be excused for agreeing to take such actions given the unprecedented nature of recent times.
Nonetheless, there has most definitely been a tacit understanding that a time will arrive where the furlough plaster (or band-aid for American readers), is going to be taken away.  From September onwards, we believe that time is now here.  As organisations see out the rest of 2021, the time has come to take action and map out what the future of our organisations look like.  It's a fast transition from short term survival mode to long term arrival mode.  Big questions such as the future of work, ESG policy and technology have been the subjects of many webinar forums in recent months but now the time has come to make decisions.  

As a group of young minds, it's perhaps easy for us jump to hasty conclusions.  Being bright eyed and busy tailed upstarts means we of course do not have to contest with legacy issues of the past.  Greenfield territory compared with brownfield territory has to have some benefits, this is definitely one of them.  However, despite this, we profoundly believe that organisations who have not yet realigned their long term objectives amidst the global pandemic, are now faced with a choice.  We believe that choice is actually quite simple;

Pre-Covid 19, most organisations particularly established SME businesses, operated on a "Two Up, One Down" model. That is to say that each year, two significant items of improvement would occur with one business area encompassing notable regression. This of course epitomises the general course of any evolutionary process, (i.e. nothing ever goes in straight lines but the general course of life typically entails steady improvement and optimisation).

However, every once in a while, shit gets real and something considerably more dramatic gets thrust upon us. This of course becomes cause for more dramatic change. In the case of Covid 19, this has not just been a bump in the road, this has been a tectonic shift across all walks of life. So it's no surprise that we're of the opinion that organisations need to act with radical change if they are to stay relevant in the next 10 years.  Over the past 5 years, we've all looked back at the 2008 financial crash and pointed to that event in history as being the catalyst for the rise in new digital platforms that have shifted the way we live our lives today.  Companies like AirBnB, Uber, WhatsApp, Slack, GroupOn, Pinterest & Instagram all started from humble beginnings by taking advantage of market shifts that took place during 08 and 09.   If we fast forward to 2030, I'm confident that we will experience the same thing again, with the difference being that the speed of this change will be faster and even more profound. On the contrary, businesses who failed in real time to recognise the true impact of the 2008 crisis have seen a gradual demise in their capability to grow or in a number of cases, have been forced to shut down. Whilst it's easy to sneeringly look back with hindsight and point the figure, the fact of the matter is that business leaders of certain organisations failed to place their heads above the parapet and recognise the severity of what was happening at that time.

We believe businesses who fail to act in the right manner today, will suffer the same fate as those of the 2008 recession.  

So, I hear you, what is the purpose of this quarterly commentary?  Is it to drown you all in a large pool of misery?  No, of course it isn't.  Quite the opposite in fact!  

Yes, it's true that we fear for certain businesses, particularly in manufacturing.  For businesses that operate in a steady, earnest mono-prolific manner, we believe their days are limited, with the risk of a new technology-enabled competitor entering the fray being more likely now than ever before.  The days of fast gear changes, agility, flexibility and modularity are here.  No industry is without change and no industry will not be touched by the fourth industrial revolution in some way shape or form.  This is why we believe businesses need to shift and shift quickly.

The question which remains of course is how to go about this change.  What does this look like for my business?  These are not questions that can be answered overnight but can definitely be explored over a period of weeks through meetings, workshops and outside opinion.  This is again why we believe the next quarter is a vastly significant one for businesses.  Throughout the summer and leading into Q4, it provides us all with the perfect opportunity to map out what our organisation is going to look like.  We firmly believe that businesses need to THINK BIG, develop a long term view on where they're heading and behold a deep understanding of why they're doing it.  By establishing this core mission, the creation of a micro-step pathway will become evidently more clear and more focused.

It also has to be said that these change plans need to be all encompassing; From staffing to product offering, from company values to technology no facet of an organisation can be left untouched.  With a growing focus on customer-centricity, we believe products and services need to increasingly become on-demand by nature.  This in turn means supply chains, production management and distribution need to become far more agile.  Whilst this might all sound like the sort of messaging we're used to hearing from the likes of Mckinsey & Accenture, the practical utility of flexible automation is indeed far better suited to organisations who have not yet automated. Flexible automation in its very design enables organisations to introduce automated technologies in a more iterative and low cost manner and this is where we see the opportunity for organisations to begin their journeys in process automation.

So as we look ahead into the second half of 2021, we see cause for great excitement.  We see the need for organisations to be bold, act with integrity and return to a more long term planning mindset.  As always, thank you for engaging with this article and if there are any themes you wish to question or explore further with us, please do not hesitate to get in contact.

Thing Big.
Think Bold.
Think Bot-Hive.

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"Are we happy with slow burn change and gradual business improvement? Or are we ready for a paradigm shift?"

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