Think Well, Think Different: How Will COVID-19 Disrupt The Establishment?

Think Well, Think Different is a series of columns devoted to discussing trends in fintech, both from the consumer and founder points of view. Click here for previous columns. 

For the last few years, we have heard that the establishment is under threat. Challenges from minority political ideologies, democratizing technology platforms and innovative employment and financial relationships. 

Here’s a nonexhaustive list of some of the major political, consumer, and societal trends that have lead us to where we are today: Tea Party, Uber, Occupy Wall Street, bitcoin, Facebook, Tyler Perry, Paypal-Venmo, rise of Square, Netflix, Airbnb, Spotify, Black Lives Matter, Twitter, Amazon, Donald Trump, Bernie Sanders, Tesla, #MeToo, Instagram, and finally, global pandemic, COVID-19.

It is not important to identify when these challenges began, but the key question is what happens next.  

CEOs, investors, and politicians all try to predict where business/consumers/voters are headed (the third group significantly more poorly than the first two). It’s pretty much the whole job.  Steer the company, the fund, the country in the right direction while operationalizing the ability to react and respond as needed.  

There was a time when it appeared the challengers had the establishment on its heels.  Remember when Bernie Sanders was leading the Democratic Party primary to a potential run against Populist President Donald Trump. It seems like ages ago now, but it was only a few weeks ago. Trump, still President obviously, appears to be headed for a general election against establishment stalwart Joe Biden…assuming, that is, we have a General Election in November. Only kidding. Sort of. 

The starts and stops of how the Challengers will upset the establishment go back well beyond the recent examples above. For a time, the gig economy was going to revolutionize how we work. The insurgency was decoupling work from singular W-2 employment with one employer. 

Prior to the 1980s, success was found comfortably within the establishment of corporate America. Not only did working for the same company for one’s entire career offer stability, but the company paid for retirement as a defined benefit (DB) to long-term employees. Here in Detroit, it is not uncommon to meet people whose father worked for the same auto manufacturer for 40 years (and, in some cases, that is the same company where the family’s grandfather worked as well). 

Starting in 1980, the proportion of private wage and salary workers participating in DB pension plans fell from about 40% to 20%, according to the Bureau of Labor Statistics. Though we spent the 2010’s assuming it would be gig economy workers or freelance workers that defined the next 10 or more years of work, the increase in those workers, defined by a primary income source, did not materialize.  Perhaps more salaried workers took on a second or side job, but between 2005 and 2015 the number of gig workers stayed relatively consistent at 5% of workers, at least based on tax filings.

Similarly, the threat of fintech on big banks has been framed as an attack on the establishment.  In fintech, however, there have been more serious threats than those posed by gig workers on corporate America. Technology platforms connecting users with providers more efficiently have improved access and, in some instances, lower costs. 

Certainly, peer-to-peer payment platforms saved time and money over the previous system of reconciling checks, removing cash from ATMs or simply owing someone $20 indefinitely. At the same time, direct deposits never really lost control over the primary source of cash. Cryptocurrency challenged central banking. Bitcoin, Ethereum, and Ripple offered alternatives to a sovereign currency and international money transfer, but regulators have pushed back.

The push and pull of establishment and insurgency is American history in many ways.  

What makes 2020 different is a third threat. A true disruptor to everyone establishment and Insurgent alike.

COVID-19, the novel coronavirus, has everyone rethinking work, home, and even love. Thinking about COVID-19 in the context of a disruption makes sense because it demands we rethink how we do just about everything. From within our businesses to within our lives, everyone is asking the same question. How much will change after the COVID-19 threat subsides? 

For instance, a threat of this magnitude could “scare” consumers (and voters) back to safety, safety in the establishment. At the same time, a threat this fundamental to who we are and how we live could inspire consumers (and entrepreneurs) to take more chances. After all, life is short. 

More than likely these choices will not be binary. It is wrong to prepare for EVERYTHING to change or NOTHING to change. The hard predictions (or bets) are which things stay the same and which change.  As you evaluate your business and start to plan for the future, one helpful framework for trying to prepare for what’s next is to consider the establishment or the insurgency? There is security in the establishment. There is energy in the insurgency.

Just as Donald Trump proved in 2016 that the insurgency can win (and take over the establishment), the COVID-19 crisis response might empower (and inspire) customers and creators alike to break free from traditional corporate America.  Banks may find that customers move to fintech platforms or nonbank lenders more easily, especially if the perception is that the bank is not responsive or attentive during the crisis.  

On the other hand, banks (even old traditional ones) that rise to meet the consumer’s need for flexibility and leniency may win back customers who had started to stray.  In moments of crisis, many people look for comparisons. One common comparison I heard from financial services companies this week was “let’s use the policy we did after 9/11.” 

Right now, your customers are working from home, and, unless you are a hospital or a grocery store, your team is working from home too. It is said it takes anywhere from 22-28 days to form a new habit. Many of us are halfway there. What habits are your customers forming? How will your team and your business respond? 

Step one – watch the technology, market and social media trends over the next few weeks. Indicators on risk and anxiety will inform whether most people are looking for safety or an escape.  

Step two – offer small tests. Marketing and messaging are sensitive areas right now. As the crisis (hopefully) subsides, use discreet offers or, if possible, A/B tests to get a sense how customers might react differently when the restrictions are lifted.

Step three – react quickly. The longer the work-from-home recommendations and social distancing protocols last, the greater the likelihood of changes from the pre-COVID-19 market. When you begin to gather insights and see consumer trends take shape, be early and slightly wrong (and adjust) than late and exactly right.

There’s no historical example from our lifetime to compare to this moment. One advantage we have is information. Historically, the establishment had the information. Today, the insurgency has the same information, a voice, and a stage. The true test is not whether the establishment is invincible, but whether the insurgency or the challengers will be able to overcome this threat to stability and emerge more capable. And if so, what will that mean for you, your products, and your business?

Photo by Ryoji Iwata on Unsplash