3 Obsolete Business Strategies That the Pandemic Has Revived

Apr 6, 2020

The coronavirus crisis revealed the fragility of conventional wisdom and will revive three long-discredited concepts.

The 1980s started with the popularization of the personal computer and ended with the advent of the commercial internet. This onslaught of new technology quickly gave birth, in the 1990s, to three ubiquitous business strategies:

  1. Just-in-time manufacturing.  Advanced inventory control technology allowed companies to implement sophisticated global supply chains.

  2. Core competency. Widespread connectivity allowed companies to focus on what they did best, while partnering with other businesses to fill in the gaps.

  3. Open plan offices. As office work became screen-centric, companies tried to reduce costs by concentrating office workers into common, shared areas.

The pandemic, however, has revealed that those strategies are glaringly fragile. As a result, smart companies will return to the time-tested strategies that were popular before the computer changed everything.

1. Stockpiling (replaces “Just-in-time manufacturing”)

Prior to the 1980s, most companies owned huge warehouses where they stored both finished products and the components they needed to build them. Keeping that inventory around, however, entails risk. If demand for a particular product wanes, you don’t want a warehouse full of stuff you can’t use or sell.

By the 1990s, though, companies could communicate their needs instantaneously across the Web and most companies learned to time their purchase of components and manufacturing of finished product to match demand, thereby eliminating the need for inventory.

The pandemic has revealed that “just-in-time manufacturing” entails its own set of risks. The more exquisitely well-timed a supply chain becomes, the more fragile it is to a global disasters.

As a result, smart companies will begin stockpiling inventory to ensure that it’s available no matter what. This will drive increased investment in A.I.-driven forecasting technology so that companies can stockpile without getting stuck with unusable or unsalable inventory.

2. Diversification (replaces “Core competency”)

Prior to the 1980s, companies were lauded for diversifying though acquisition into “conglomerates,” which were seen as more “robust” than single product companies. Sony, for example, purchased both a film studio and a life insurance company–both businesses far outside their original electronics business.

By the 1990s, though, companies were lauded for adopting “core competency,” the notion that corporations should focus on doing one thing extremely well, rather than trying to hedge their bets. The term “conglomerate” became an insult, a badge that a company had indulged in “di-worse-ification.”

The pandemic has revealed that core competency is a liability when a global disaster clobbers the industry and market upon which a company has exclusively focused.

As a result, smart companies will deploy into multiple market segments and industries so that they have some revenue coming in, regardless of what happens on a global scale.

3. Private Offices (replace “Open plan offices”)

Prior to the 1980s, most “knowledge workers” (as they then were called) had either private offices with walls and doors or worked in cubicles, which were designed to be as much like a private office as possible.

By the 1990s, though, high-tech companies were gravitating towards large common areas where everyone would work together. Companies in other industries followed suit, in the (mistaken) hope that an open plan office would increase collaboration and innovation.

Even before the pandemic, it was becoming abundantly clear that open plan offices were productivity disasters. The pandemic, however, highlights a primary reason open plan offices destroy productivity: They spread disease, especially if the office is hot-desking.

Because open plan designs make social distancing impossible, companies that don’t implement universal Work from Home will be forced to re-implement private offices or, at least, rebuild the cubicle farms, which provide at least some barrier to the spread of disease.

By Geoffrey James