2020/03/31

The Other Side of the Coin

Any crisis always contains the seed of opportunity

by Kay Freiland

… this proverb belongs to the standard repertoire of every manager and, in fact, this insight could almost be consigned to the category of platitudes. Yet natural disasters very vividly illustrate that there is also a lot of truth in it. The Portuguese showed what can be done in their response to the horrendous earthquake of 1755. The catastrophe began at 9.30 a.m. A gigantic earthquake that came in three waves destroyed the capital. Forty minutes later, a tsunami slammed into the coast. Fires broke out in the ravaged city and raged for five days.

At first, this sounds very much like a crisis and hardly like an opportunity.

What consequences do such disasters have for the economy and society? To start with, the negative consequences, above all for the economy, are very difficult to assess. The European Union and the German government have at their disposal a number of resources they can use to alleviate some of the effects of the corona crisis.

But once the initial shock of a crisis has been digested, events of this nature are also a rare opportunity for fundamental reforms of the economy and society. Portugal did indeed take advantage of opportunity at that time. Despite the many victims and the substantial economic damage, Portugal ultimately benefited economically from the earthquake of 1755. The reconstruction of the city proceeded quickly; by 1780, more people lived there than in 1755. Driven by necessity, the government undertook a far-reaching restructuring of the government and the economy in the years following the quake. The administration was modernized, bureaucracy was reduced, and centralized government structures were established. Without the earthquake, none of these reforms would have been possible.

That was Max Frisch’s opinion as well, and he said, “A crisis can be a productive situation. You just have to get rid of the aftertaste of disaster.”

Just like the government in Lisbon, a company can, out of necessity, dare to undertake its own radical restructuring after a quake. Times of crisis are times for courageous decision-makers. They are aware of their responsibility and the resulting opportunities and can come up with ideas that could not have been realized previously – emergency situations usually give rise to the best ideas.

If we can set aside the negative aspects of the corona crisis for a little while, something remarkable comes to light. While the world has apparently come to a standstill for people during the crisis, this is not true of nature. In the lagoon city in the north of Italy, the water in the canals, normally cloudy, is now crystal clear and cleaner than ever before, and small schools of fish have been sighted for the first time. The water has become clear because there is less traffic in the canals and the sediments remain on the bottom. This is good news for the animal kingdom. Dolphins are suddenly seen frolicking in the harbors of Trieste and Cagliari. Videos on social networks show how the animals dare to come right up to the walls of the quays. Dolphins, which react very sensitively to underwater noise, are happy about the lack of shipping traffic.

The decline in industrial and economic output, everyday mobility, and travel during the crisis is reducing pollution. The measurement values from northern Italy reflect what has also happened in China where, according to an analysis from the Center for Research on Energy and Clean Air, carbon dioxide emissions in February fell by 25 percent compared with the previous year – “savings” of about 200 million tons of CO2 that benefit the climate.

Nor has public order collapsed as had been predicted by some. And long-derided virtues such as abstention and moderation have suddenly regained their status as admired traits. In the face of the corona pandemic, society is displaying solidarity and cooperation. Care is provided to elderly people, food is left on the doorsteps of infected neighbors, and hospital staffs enjoy solid support. This is how an intact society works. In Italy, people set specific times to come out on their balconies and sing as a way to lift their spirits while in isolation. In Rome, people applauded rescue workers from their balconies.

Corona as an opportunity? “Why not? I think that such crises force people to reconsider their lives and find a way back to the basic question of what is really important.” The point now is “that we must develop a new system of values,” believes Eckert. (Marc O. Eckert, third-generation head of the luxury kitchen icon Bulthaup). Psychologist Stephan Grünewald has said that the corona crisis could lead to a pause for reflection, and if we withdraw to the study, it could lead to our reinventing ourselves and the world.

Necessity is the mother of invention – US car companies want to build medical devices, wrote the Handelsblatt on 21/03/2020. Both General Motors and Ford plan to manufacture ventilators for the treatment of COVID-19 patients instead of cars. In China, the production of masks and medical protective clothing was partially taken over by other manufacturers such as Apple’s partner Foxconn or GM’s joint venture with Chinese partners.

Shifting more shipments onto the railroads to reduce the truck traffic that is harmful to the climate is a noble goal of the German government. As of now, only 17 percent of goods in Germany are transported by rail; the government wants to see this figure increase to 25 percent in ten years. Because trucks are backed up at both inner-European and international borders owing to the restrictive border checks, the state-owned corporation is offering its freight trains as an alternative to cross-border truck transport, which could bring about achievement of this goal faster than originally thought.

Economic opportunities also open up to those who keep their eyes open. The automotive supplier ZF Friedrichshafen found a special way to implement the Chinese government’s demand that companies require workers to wear protective masks or otherwise face the threat of a production stop. Because masks quickly became a scarce commodity, the ZF people took advantage of the opportunity and bought a small factory in southern China. ZF employees loaded the factory’s equipment onto a truck, drove to the plant near Shanghai, and set it up again. After only two weeks, they were producing 100,000 masks a day. Output above what the automotive supplier itself requires is given to people in need or made available to the government.

Chemical giant BASF will produce hand disinfectants for hospitals in Rhineland-Palatinate free of charge to ease the bottleneck. “The idea is to support those who are now most important: the doctors and nursing staff in hospitals,” said BASF board member Michael Heinz. BASF produces in Ludwigshafen some of the raw materials that can be used to manufacture disinfectants. Other required raw materials are purchased externally.

For Stephan Stubner, rector of HHL Leipzig Graduate School of Management, the current corona crisis shows how important it is for managers to deal skillfully with radical changes. “We are entering an environment that is even more volatile, uncertain, complex and ambiguous than ever before,” said the economist. This is just as true of a pandemic as it is of the upheavals caused by digitalization.

Hillary Clinton once paraphrased this principle as “Never waste a good crisis.” This advice should be heeded by everyone in these days of crisis.

 

The original article was published on 23.03.2020 on Linkedin

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