Business

Innovation Born from Stagnation

Innovation from Stagnation

This past year has presented some very interesting challenges for businesses. Many of those that applied for and received Paycheck Protection Payments (PPP) loans were barely able to stay afloat. Businesses worked with their accountants to allocate those funds exclusively to expenses that qualified for loan forgiveness, such as overhead, employee paychecks, etc.

More than $800 billion was appropriated towards these loans to offer businesses impacted by Covid-19 a way to keep their doors open. Businesses applied at their local banks to qualify and were awarded amounts based on estimates of their expenses including up to twenty-four weeks of payroll expenses.  Many service-related businesses, such as restaurants, we’re able to stay afloat thanks to the quick turnaround time for approval (within two business days in most cases).

Yet, there were, unfortunately, manner losers. Some restaurants could not survive the extended lockdown periods. Any type of business offering an event, such as a wedding, was shuddered for months. Even surgeons felt the heat as they were not permitted to perform many procedures at a time when hospitals were at capacity.

Surprisingly, Some New Business Models Popped Up During These Strange Times

Although new business models emerged, most accounting practices remained the same. The method of accounting used from the onset should typically be used continuously as the Internal Revenue Service makes it difficult to change. For most companies, First In First Out (FIFO) is preferred as it involves moving the freshest product through first. This is especially important for goods that can spoil such as food, chemicals, skincare, makeup, and other products made with liquid.

For startups, concerns were greater than average, but inventory business models that provided a solution to the challenge persevered.

Some Of the Successful New Business Models Included:

Fog-Free Wipes for Glasses

Mask wearing posed new challenges for eyeglass wearers. Wipes designed to prevent fogging gained instant popularity.

Customized Masks

In addition to the patterned designs often found in the local drug store, companies began offering masks with company logos as an opportunity for branding. These were common in workplaces where masks were compulsory, such as restaurants.

Food delivery kits

Restaurants and other food companies began offering pre-measured ingredients and recipes as a time-saving strategy for consumers who were compelled to cook at home more often.

Wedding favor kits

Virtual wedding gatherings replaced in-person galas. Champagne companies can now send champagne to your wedding guests who will toast you from afar.

Hand Sanitizer

Hand sanitizer was in demand everywhere and stores were initially all sold out. Companies that manufacture alcoholic beverages already had the necessary licensing to create hand sanitizer with alcohol.

Ventilators

Although we produced far more than needed, many companies stepped up to produce these very complicated medical devices to ensure hospitals had an adequate supply on hand.

Sanitizer For Handheld Objects, i.e., phones

A variety of sanitizing methods became popular, some using ultra-violet light to disinfect everyday objects.

And some businesses were easily able to adapt their production line to manufacture some of the personal protection equipment that was in high demand.

So, What Should We Expect with A New Variant on The Horizon?

If all the American states react as they did in the past, we are destined to see the same patterns of behavior repeat themselves. The Wall Street Journal reported that grocery stores have already been preparing by stocking up substantially on the goods that were in highest demand to subdue the severe shortages as much as possible. Paper products were at the top of the list followed by frozen food products such as pizza and dinner entrees. Produce, meat and dairy will be the most difficult products to supply as they do not have long shelf lives. Truck drivers delivering goods across state lines faced huge delays in the past and must prepare to work around them once again.

For manufacturers, wholesalers, and distributors, the key to meeting demand will be careful inventory management. Now is the time to look at historical sales for last year and determine how much raw material or parts are needed to produce the number of products likely to be ordered. Having an efficient system in place, namely a multi-faceted software system that integrates all areas of the business, is essential to tracking inventory as it arrives, adding on all costs, labor, and overhead, and creating transparency in reporting so owners can identify areas where improvement is necessary.

But what should businesses suppressed by lockdowns do to stay above water? Finding people willing to work when the government is paying them more to stay at home is one of the biggest challenges. This has resulted in increased labor costs. Companies have had to stagger work schedules, erect plexiglass dividers, and reduce the flow of customers in their establishments.

We are likely to see new business loan budgets brought to the Congress floor for a vote to prevent a market crash at a time when the dollar is struggling to maintain any value. The authorities have been inconsistent in their messaging, leading to further confusion and the virtual extinction of brick-and-mortar retail shopping. Hopefully, our government will come to its senses and find a way to encourage workers to return to work instead of rewarding them for avoiding it. That issue, all by itself, could solve a huge problem with labor availability and costs.

Unless you’re Amazon, your business model will require ingenuity to vie for local shoppers’ dollars. Ultimately, our true challenge is to learn to live and thrive in a world filled with pathogens. When a two-week lockdown leads to months of closures on end, the best skill to acquire is how to persevere no matter what the government imposes. If we are to thrive, we must invent new business models, and become highly adaptive individuals. If that entails adding ways to communicate with remote workers or to serve new markets, it will be our path to endure another hardship and emerge stronger for it.

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