The pandemic has been an impetus for innovation
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One of the paradoxes of the pandemic is that it has been an impetus for, not an impediment to, innovation. The sudden move to shut down travel and send everyone home has led to an explosion of “digital transformation” over the last two months that might have taken years to accomplish otherwise.
There’s plenty of reason to think an economic crisis of this size might reduce investment and thus lead to less innovation. But the evidence of the opposite is overwhelming. Part of that is the nature of this particular crisis, forcing us all to turn en masse to virtual alternatives. And part of it is because, when faced with crisis, many of the cultural obstacles to innovation crumble. “Move fast and break things” becomes a necessity, for better or worse.
In our new survey of Fortune 500 CEOs, we asked the CEOs whether the crisis would 1) accelerate their technological transformation, 2) slow their technological transformation, or 3) have no significant effect. The result was surprisingly lopsided: 63% said “accelerate,” while only 6% said “slow.”
I spoke yesterday with Doug Merritt, CEO of the data platform Splunk, who confirmed that view. Splunk’s customers include cruise lines, airlines and hotels, yet Merritt says the company “has not lost customers” in the pandemic—although some of those hardest hit are asking for “alternative payment structures.” At the same time, Merritt sees a host of new demands spurred by the pandemic—companies that need to move to remote work virtually overnight, or do “contact tracing” using diverse data sets, or coordinate virus and antibody test deployments and results.
“There are two things we’ve seen,” Merritt says. “One is the rapid acceleration of digital transformation. I am positively blown away by the things I’ve seen. Five-year projects completed in two months.” And the other is how management of the pandemic “has raised the importance of gathering data and interrogating data,” in order to deal with its widespread implications.
The revolution has been hastened. More news below.
The European Commission has revised down its growth projections by around nine percentage points, from the forecast it provided last fall. Now it's looking at a contraction of around 7.5% this year, and growth of around 6% next year. However, as its economy chief Valdis Dombrovskis noted, this is only a tentative forecast as "the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter." Added note of caution: this forecast makes a "purely technical assumption of status quo" in terms of future U.K.-EU trading relations. CNBC
Airbnb has cut around 1,900 workers, or a quarter of its workforce. Here's CEO Brian Chesky's email to staff, in which he says "we are collectively living through the most harrowing crisis of our lifetime"—tempting fate, perhaps, but let's hope he's right. Here's the rub, though; the need for cuts became clear "when we faced two hard truths: 1) We don't know exactly when travel will return. 2) When travel does return, it will look different." Cue "a more focused business." Fortune
Disney took a $1.4 billion hit to its Q1 net income. It's not all down to the lockdown—accounting for the consolidation of assets acquired in its 2019 21st Century Fox deal also played a part. But the former factor will obviously play a much bigger role this quarter. Executive chairman Bob Iger is trying to sound upbeat about the post-lockdown future though: "People find comfort in our messages of hope and optimism." Wall Street Journal
The White House is looking to disband its official coronavirus task force, which operates under VP Mike Pence and includes the likes of Anthony Fauci and Deborah Birx. Pence now claims communities in the U.S. have the resources they need to fight the pandemic. Plus, there's already a shadow task force being run by Jared Kushner, which relies on volunteers from the private equity and consulting sectors. Fortune
AROUND THE WATER COOLER
What does Europe's reopening look like? Here's a gallery showing the resumption of normal-ish economic activities across the continent, including takeaway coffee being served in Rome, churches holding services again in Germany, and the paint-enabled expansion of sidewalks in Spain. Fortune
France's digital affairs minister, Cedric O, has warned that the French government will "remember" Apple's refusal to modify iOS privacy settings to aid the functionality of the government's upcoming contact-tracing app—as though the French government had previously been a fan of American Big Tech firms. The reality here is complex: France, like the U.K., is taking a more privacy-invasive approach to the development of such apps, and Apple and Google are keener on the more privacy-friendly alternatives being taken up by other European countries such as Germany and Austria. Bloomberg
A study by Los Alamos National Laboratory researchers suggests that the coronavirus currently ravaging the U.S. and Europe is a mutated strain of that which emerged in Wuhan, China. The study is yet to be peer reviewed, but the researchers warn of "urgent concern" considering efforts to develop COVID-19 vaccines. CNBC
Where's a good place to invest right now? New Zealand, according to that country's prime minister, Jacinda Ardern, who says New Zealand's suppression of the coronavirus's spread gives it a "safe haven" advantage. Ardern: "We are ready to welcome quality investments and offer a safe place for operations in both the health and business sense." Reuters
This edition of CEO Daily was edited by David Meyer.