Operating in the Coronavirus Age

Newsroom 20/03/2020 | 13:45

The premise I start from is that the Coronavirus crisis will have a lengthy progression (at different levels), and the worldwide long term socio-economic impact will be a systemic one. From many points of view, the world will look very much different from what we used to imagine until yesterday. 

By Radu Negulescu

 

0.1. INTRODUCTION 

  • The purpose of this document is to present a series of strategic decisions concerning Trencadis within the Coronavirus crisis context.
  • All our yesterday’s projects for the company’s developments scenarios need to be rearticulated and repositioned to match the new context. In order to articulate a strategy that makes sense on long term, we have to look far beyond the present phase of the crisis (aggressive containment), to start to envisage the way the world will look like afterwards and, then, enunciate the strategy accordingly.
  • Starting from the current context , I will henceforth try to: 1 – to present and to reason the way I think the crisis will unfold, from a phased perspective; 2 – finally, to project a series of measures which would make as much sense as possible in this totally senseless period.

 

0.2 CONTEXT  

  • World Health Organization (WHO) has declared pandemic on account of COVID-19. The last pandemic, that of AH1N1 flu (swine flu/ Mexican flu), was declared by WHO in 2009. It ended in august 2010, but each season it kept on making victims. The worst pandemic of the last century was in 1918, during the Spanish flu. Around 500 million people were infected, which was a third of the world population at that time. 50 million people died worldwide.
  • COVID-19 epidemic started in Wuhan, China, in November 2019. Officially, as today, over 200.000 persons are declared infected with more than 8.000 dead, however it is commonly agreed upon that the real number is far greater. And it will still increase.
  • Europe has become the epicenter of the Coronavirus pandemic: “Europe has now become the epicenter of the pandemic, with more dead and reported cases than all the rest of the world together. Every day, more cases are reported than in China at the peak of the epidemic.”, Tedros Adhanom/ GM @ OMS.
  • It is a relatively commonplace to accept and declare that the epidemic will affect 50% to 70% of the population. Our intention is no longer to stop the epidemic but to contain it. The stake now is the resilience of the public and social systems under extreme medical and economic pressure.
  • The clear statements of the Western Chanceries only reinforce the premise. The firm general actions, even more. (Ex. Ursula von der Leyen, Boris Johnson, Emmanuel Macron, Angela Merkel, Donald Trump, Spain Government, Giuseppe Conte in Italy).
  • Europe has not yet reached the peak of the crisis. With the Chinese development model as reference, most sources foresee that Europe will face such a peak in April/May
  • Nevertheless, it is obvious that the Western world ( Europa / USA vs China & co) will have a problem in keeping under control the epidemic and the related economic downturn. And once the peak of the epidemic becomes history is it just reasonable to anticipate that the alarm status will be kept long enough (most probably until a large scale available vaccine is found) so that the social and economic mechanisms are long term “seized up”.
  • By intersecting different predicting models for the development of the epidemic with spread control recommendations issued by WHO and already implemented by the states, it is just reasonable to start from the assumption that the crisis peak period will be surpassed no sooner than 6-18 months.
  • Most probably, this crisis peak period will concur with the moment the states of emergency are declared on national levels, time period when the movement of the people, goods and capital within economies will be profoundly restricted and affected.
  • However, in the conclusion of the most recent conference organised by Goldman Sachs with the investors it is mentioned: “Technically the market generally has been looking for a reason to reset after the longest bull market in history. There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalised. It feels more like 9/11 than it does like 2008” . This seems to be a generalised position in the financial markets.
  • I strongly disagree with this philosophy. During lockdown, absolutely all industries will be severely economically affected. No matter how much money will be pumped in economy, it will go to sewerage, with the effect of maintaining a status quo already accepted as obsolete.
  • All that is irrelevant in the new context will disappear, firstly because the forces behind consumption will be profoundly altered. No one (from the individual to the systems) will have the same economic and social behavior. Never.
  • That is why the main question we have to ask ourselves is not “ What do we have to do to get through this time ?” but “What do we have to do in order to cope with the new context the world will settle in, once the initial phase of the Coronavirus effect will be overcome?” . On short term we need to survive – in the most basic and relevant way possible. All together. On long term, if we want to survive, we have to rethink our entire business philosophy. Not only us, Trencadis, but everybody.
  • This is why, from my perspective, in order to be able to navigate meaningfully through these times, we must look at the dynamics of the crisis and segment it into distinct evolutionary stages, with distinct approaches for each of them.

 

0.3 HOW DO I THINK THAT THINGS WILL UNFOLD?

  • Taking into account the way things are evolving so far, we can structure the crisis in three stages of evolution:
  • The first, which we are in – (1) The shock stage. Right after, the second – (2) The recovery stage. Finally, the new normal state – (3) The growth stage

(1) The shock stage

  • It is the stage we are in today, and it can take from 6 months to 18 months.
  • At present the main feature is a general restriction on people, goods and capital movement within economies, locally and globally. The national state of emergency is declared on a generalised level.
  • The public systems are under siege, the state mainly directs resources towards crisis management and maintaining operational continuity.
  • Being under unprecedented cumulated pressure – of psychological, health, economic and social nature, the consumers will rapidly and radically adjust their behavior. Not only in Romania, but worldwide. All that is non-essential in this context may soon become irrelevant. Words that heads of states are reluctant to speak today – crisis, recession, bankruptcy, unemployment, decline, deficits – will become the news’ constant headlines.
  • By default, the economy will be down to earth. In less than 3 months, huge pressure will invade the entire economy, regardless of the position of one sector or another in the chain.
  • Under such circumstances, the only natural goal ought to be the maintaining of operational capacity of the entire social system: the public sector needs to cooperate most efficiently with the private system and vice versa.
  • The states will massively inject money into the economy; the economy will participate in maintaining the operational continuity of the state.
  • There will be speculation and speculators. Both in the economic area and in the political area. Both at the micro level and at the macro level. It is a period of great vulnerability, and deviations can occur at any time (secondary crises).
  • (2) The recovery stage
  • Factually, this stage will correspond with the moment a vaccine generally available to people will be found. The epidemic is now contained.
  • Alert states are canceled at a global level. The level of restrictions on the movement of persons, goods and capital is lowered.
  • Based on the 9/11 model, for fear of new epidemics/ pandemics, the level of restrictions goes not much lower than the values before the crisis.
  • Generally, the states are more powerful and find themselves within a full adjusting process to the new circumstances. The political systems and reserves are deeply redesigned.
  • The artificial supply with capital of the economy is stopped.
  • The consumption is still out of breath and much more rational than before the crisis, but enters a recovery zone. Couple of business areas are still in pieces. All that means consumption within the old context implodes. The portfolios are restructured and massively reduced.
  • The oil and gas sector is in clinical death. A lot of banks and financial institutions still have problems due to exposure to areas that are in decline. The best example is the debt in oil corporate part, which now seems extremely vulnerable, a kind of Housing bubble from 2007.
  • It is only in this context that the capital begins to focus on relevance. Massive investments are made in health, environment, automation & co, in particular – in everything that brings long-term sustainability.
  • Companies and initiatives perfectly matching the new context emerge.
  • Progressively, the minimum guaranteed income is introduced, supported by the taxation on automation. Robotic production and remote work become the new reality.
  • All social systems are reformed, adjusted and resettled within the new status.
  • (3) The growth stage
  • Thanks to the scientific progress, the movement restrictions are completely lifted. A new normality is entered. Entirely different from that of yesterday.

 

0.4 HOW DOES TRENCADIS RESPOND TO THE NEW REALITIES?

  • Firstly, when it comes to Trencadis, we have to start from the main consideration that the beginning of this “new times” does not find us unprepared. Even more, with respect to the structure of competences that we have accumulated over time, we find ourselves within a full relevance, totally matching the needs of today’s society.
  • From the very moment the company has been set up (in the midst of the economic crisis) we have constantly adjusted to new market conditions and altered our work models so as to sustain the development and growth of the company under challenging circumstances. We are a versatile company with a very well defined reflex of capitalisation under uncertainty conditions.
  • Under the current situation, as we, as society, depend on digital infrastructure and online communication, IT sector is vital. The industry’s reaction will have a major impact in maintaining the new normality. The opportunities for the future will be generated by the companies able to adjust themselves and manage to stay relevant.
  • As for us, we have grown counterintuitively. While almost all the IT market (the domestic one) was focused on externalising the resources (low risks, big volumes, low margins) and, more recently, on product startups (high risks, volumes volatility, high margins), as an answer to the global trend, we stick to the same track: an IT services core company (medium risks, hard to get volumes, medium margins). We are an enterprise IT system integrator.
  • Our expertise is extremely relevant under the current circumstances. We are able to make integrate IT operational systems up and running, systems dealing with large data volumes. We effectively solve complex and inter-discipline organisational aspects (IT).
  • Obviously, it seems that this exactly what the new social paradigm favours.
  • Trencadis’ relevance in this new context is given not only by the business model but also by its place on the market. From the very beginning, in the most idealistic way possible, we set out to “innovate Romania’ public sector trough technology” and we pursued this goal with every project delivered to our clients. We did our fucking best, but the context was not one to rank first, by default, the digital transformation of the governments.
  • Nevertheless, in the last years, as an entity and a group, we have had a wide range of results with positive impact upon governmental environment. We have implemented critical systems and solutions, perfectly operational for Special Telecommunications System, National Trade Register Office (ONRC), or Land Registry.
  • The mix of skills, experience and expertise we have today allows us to implement systems and solutions with wide usability, at national level – such as RO – Alert – in record time.
  • The core of system analysts, consultants and architects is made up of people with wide, specific experience in implementing complex projects in the Romanian public sector. We have essential competences and, cumulatively, decades of practice and performance in the sector.
  • The national systems implemented or managed by our team members – Land Registry, National Trade Register Office (ONRC), Ro-Alert, Schengen Signalling, The National Regulatory Authority for Energy (ANRE) – are today the main tools in their area of speciality, given the “forced” switch to online work. Our experts provide maintenance for the systems and training for the work under high traffic and usage conditions.
  • We are already in the heat of action and we are prepared from all points of view. However, in order to maximize our relevance in the upcoming period, we need to act in a paradigm of long-term vision and strategy.
  • Starting from the premise that we are witnessing the construction of a new reality generated by a social event greater than any entity or business objective, we understand that the opportunity that is being shaped for us is based on a CSR-first This means that our experience and expertise will serve to support the state in this period of crisis, generation of profit moving to background.

 

0.5 ADAPTING THE STRATEGY.

  • First of all, the action plan is articulated as per the crisis development designed model. Thus, there will be different approaches for the Shock Stage and the Recovery Stage. 
  • During Shock Stage (while under emergency state) we will act as follows:
  1. In agreement with our clients and partners, all our commercial projects with no critical relevance for the operation of the Romanian State will be put on standby, in an iterative sequence, during the period of crisis.
  2. The entire productive technical personnel will be redirected towards providing all required support, free of charge, for the operational continuity of the critical systems throughout Romania. Through an NGO-type vehicle (of which I will talk about later), we will organize ourselves in the service of the state and not only. During this period, such services will not be invoiced.
  3. Throughout the emergency state, the concept of profit will disappear from the business philosophy of Trencadis – in relation with all interested parties. Whatever capitalisation during this period will be reinvested in enlarging the support effort that we undertake. 
  4. We will provide the company’s financing for the next 6-18 months in three steps: (1) for the first two months, through own resources and support of present investors; (2) open capitalisation round which to provide operational sustainability for the first 12 months; (3) listing on the main stock exchange in Bucharest and on an international stock exchange to secure the remaining funding.
  5. With the help of our investors, we will make no layoffs, nor salary cuts. Furthermore, we will try to scale the operational capacity of the company. We want our team to remain 100% focused and motivated in these times.
  6. The national systems in which Trencadis has investments and ongoing developments – the Red Button together with the White-Yellow Cross Foundation and Cancer Genetic Diagnosis together with OncoGen Research Center Timisoara – will continue and will be supported.
  • Once in the Recovery stage (with the emergency state lifted), we will once again operate in a commercial philosophy, but in an utterly different paradigm:
  1. We will re-launch ourselves as an integrator of enterprise type systems, in a world where the ability to get things done quickly and efficiently will be in high demand.
  2. Trencadis will (as well) act as a solution incubator, intermediary / integrator throughout the transition process that will follow.
  3. We will be a 100% WFH ready organization.
  • The entire R&D effort of the company will be restructured. Any project that is irrelevant to the new context will not continue in the current format. Efforts will be made to redirect current financing towards initiatives meaningful to the new status.
  • In another chain of thoughts, but directly connected to Trencadis’ repositioning, we will set up a non-profit working group with legal personality, under the umbrella of which to accumulate the expertise and competences from outside Trencadis as well, in order to proactively provide and integrate support, mainly to the ROMANIAN STATE, but also to other national critical systems.
  • Basically, the main initial role of the group will be to provide IT assistance to the ROMANIAN STATE in order to ensure the operational continuity under lockdown conditions, but also the capacity to respond to the current crisis. We will provide the full spectrum of required specialists, coordination systems, as well as operating procedures in the new context. We will set up a dedicated call centre. In order to provide more efficient information to the population, we will develop a public information central repository that we will make available to the authorities and we will provide them assistance in operating it.
  • The vehicle is called THE FOUNDATION and will be initially founded by Trencadis. Inspired by Asimov, the name matches the projected mission: to offer free hyper-professional assistance on operational problems of macro / system type.
  • Governed by the principle ZERO COST SERVICES TO THE STATE, we aim to attract other economic partners in THE FOUNDATION, too.
  • Besides the IT area, we want to make communication area expertise join the FOUNDATION, together with the financing area, resulting in organized support for the ROMANIAN STATE.
  • During the Shock Stage, all the assistance offered by the FOUNDATION will focus strictly on the continuity and resilience of the system. Subsequently, once we enter the next stage, the Foundation’s activity will focus on providing input for adjusting to the new paradigms.

 

0.6 CONCLUSIONS

  • We rethink Trencadis’ development strategy in the new context, under the frontal impact of the ongoing effects – which are just at the beginning – of the coronavirus pandemic.
  • The assumptions underlying the new Trencadis strategy start from medium and long term predictions, which imply the effects of the pandemic – at local and international level – on consumer’s behavior, on the business models dynamic from all sectors and operating systems of the state.
  • Each phase of the adjusting strategy has as correspondent a development stage of the crisis caused by the coronavirus pandemic, as follows:
  • (1) Shock stage | Backed by solid financing, Trencadis becomes a provider of expertise, on a non-profit model, by concentrating its activity in an integrating vehicle (The Foundation)
  • The present moment, characterized by the introduction of emergency states
  • Estimated time: from 6 to 18 months, until general access to the vaccine
  • The main identified need: the sustainability and resilience of public systems
  • Stage goal for Trencadis: unique expertise in developing and managing state-level operating systems.
  • (2) Recovery stage | With the expertise acquired in the previous stage, Trencadis relaunch

 

  • itself as a system integrator for major projects (including at the state level) now in need to redefine
  • The period coincides with the introduction of the vaccine and the gradual lifting of emergency restrictions/ conditions
  • The main identified need: redefining/ redesigning public and corporate systems, affected by the crisis wave
  • I strongly believe that we will all be well at the end of this madness. It is not an easy way in front of us, but a harsh one. In the end, we will all look at the future, optimistically and with confidence, although from an utterly different context.

 

About the author: Radu Negulescu is the founder of Trencadis,  a technology company specialized in software development solutions for the government and business environment.

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