Economy

Go digital or die: Covid’s challenge to industry

“Covid-19 has facilitated the final death throes of the industrial age. Any business that hasn't moved fully into the digital space, or isn't able to quickly, is in a pretty perilous position,” Brett O’Riley, CEO of the Employers and Manufacturers Association, tells Rod Oram.

The shift from the industrial age to the digital age has been fast forwarded by Covid-19, says Employers and Manufacturers Association CEO Brett O'Riley. “Some business, like manufacturers and exporters, will always produce real things,” he adds. But if they haven't adopted all the digital technologies they can to facilitate that, “they’re probably going to struggle.”

He says this was best captured by a cartoon he saw recently: “Who’s responsible for digitising your business? A)The CEO; B)The CTO; or C) Covid-19.”

He’s greatly encouraged, though, by the creative and energetic way businesses are rising to this challenge. One of the EMA’s manufacturing members, for example, was urgently seeking more staff. “He asked me: ‘Can you find me some unemployed baristas? They know how to run a production line’.”

Also notable is the way companies are helping each other. Early in the crisis, the EMA launched a closed Facebook page as a way for its members to seek help. They quickly began sharing tips and experiences. When non-members heard about its usefulness and asked to join, the EMA opened it up to them. Currently there are some 1,800 participants, marking a partial shift in the EMA’s business model from fee-based membership to facilitating a community.

“It's fascinating to see the openness that businesses are willing to have with each other. It’s good for mental health to realise you aren’t on your own. Other people are facing the same challenges.”

In response to the crisis the EMA and its three fellow regional organisations - Business Central, Canterbury Employers' Chamber of Commerce and Otago-Southland Employers' Association - and Business New Zealand, the national body they support, are working more closely and faster with each other and with government.

The CEOs of the five organisations have been meeting virtually twice a day over the past two weeks; BusinessNZ has embedded a member of its staff, Phil Love, in the Ministry of Business Innovation and Employment; and MBIE reciprocated by assigning it a senior person. This structure has enabled them to escalate issues rapidly and to resolve them. “And some of the ministers have been very, very willing to get involved. As collaboration goes, this has been pretty good,” O’Riley says.

“I haven’t seen that sort of pace before. People are being driven by wanting to get announcements out there, wanting to give people confidence. There’s also been plenty of candidness. Some of the formality of the interaction with the public sector has disappeared. It could be a good model to continue - less hui, more doey.”

Overall, the Government’s support package is helping but there have been some frustrations along the way. For example, the loan guarantee scheme has taken a while to set up. “But it looks like the banks are ready to go. I think we'll now see a flurry of activity.”

There’s a good case, though, for the Government, to now turn its attention to supporting big companies, O’Riley says. Given there’s not many of them, it would be better to tailor individual packages with them rather than setting up blanket programmes, which would then need to be modified for each of them.

Also, “the Government should considered lifting the level of wage subsidy to the median wage level which is about $56,000.”

“By and large most of the businesses that I've talked to want to survive. But undoubtedly there will be people who don't; and businesses that we've seen are complying by the rules. I have seen a couple of situations where businesses have not followed employment relations law and we’re very quick to point that out to them.”

The Auckland region, though, is mainly a service economy so it faces a long recovery, O’Riley says. A big push on building infrastructure and housing must be a key response

There’s also a rapidly growing need to redistribute, retrain and re-skill people, O’Riley says. One aspect of that is helping people through mental health issues, “given we are a country that it was already prone to a high incidence of depression.” People who are losing their jobs, careers or businesses are particularly at risk.

“One of the questions on everyone's lips is, "what does recovery look like?’’ The EMA is already working with the Government on, for example, how manufacturers could resume activities using the right health protocols as the country moves in due course from Alert Level 4 to 3, then later to 2.

“Probably some of those businesses could have actually operated in a bubble but they weren’t given time to organise themselves” before Level 4 was applied. Some of them also make the case they play essential roles in global supply chains so they should be allowed to operate.

The Auckland region, though, is mainly a service economy so it faces a long recovery, O’Riley says. A big push on building infrastructure and housing must be a key response, including, for example a mechanism for attracting private sector investment from home and abroad to projects.

“The two places that worry me most in New Zealand are Rotorua and Queenstown” because of their dependence on tourism. Perhaps their recovery could begin with the resumption first of tourists from Australia. “But I imagine people are going to be pretty conservative about border control in the short term.”

Overall, though, “I think we’re in a better position than most countries to deal with Covid-19 and to recover from it. All the usual clichés apply. We produce things that the world wants, the China market has come back so quickly; and some of our exporters haven't missed a beat.

“But given the assault under way, what's the world trading environment going to look like? Maybe we're going to go back to a lot more industries being encouraged to market domestically as well as internationally. Knowing that everything comes in cycles, this next cycle could be pretty interesting.”

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