The globalized global economy is threatened by the COVID-19 pandemic. Supply chains are at risk of interruption, events are canceled, and many companies send their employees home with the help of the Human Resource and Human capital department. Stock markets are collapsing and interest rates are falling. There is no doubt that the new virus is causing problems and suffering for many. But is there any chance it will create business opportunities?
Professor Nicolaus Franke, Academic Director of the Professional MBA Program in Entrepreneurship and Innovation, addresses this issue in detail.
Austrian-born management expert Peter Drucker has taught us that change is the single most important source of business opportunity. In a world devoid of change, supply and demand strike a balance. In other words, entrepreneurial opportunities are slowly gravitating to zero. Changes, however, ruin the balance. Suddenly a new demand is born, followed by an equally sudden realization that the supply is missing.
Technological change is an obvious example of transformations that create business opportunities. The rise of the Internet in the 1990s, for example, opened many new avenues for entrepreneurs. The complex interaction between newly created opportunities and new offerings constantly leads to new products, services and business models. Search engines, online shopping, and social networks are just a few examples of entrepreneurial opportunities. Sergey Brin, Larry Page, Jeff Bezos, and Mark Zuckerberg are among the businessmen who saw the opportunity and seized it.
Every crisis is a business opportunity
Various catastrophes, crises, and incidents can also be changes that temporarily shake the balance between supply and demand. After the conquest of Constantinople by the Ottomans, many Greek scholars left the city to move west. The wealth of knowledge thus conveyed contributes to the rise of the Renaissance. The disasters caused by floods and the urgent need for safety and protection (new demand) not only provoke counter-measures. The newly created supply and dams eventually give rise to the idea of the systematic use of hydro energy.
Major fires have pushed progress in the construction industry and the development of new materials. World War I caused the spread of inventions such as zippers, sanitary napkins, blood banks, watches and solariums. In general, disasters, crises and accidents nourish the inventive spirit of humans because, after all, a person is naturally tasked with solving problems.
Changes and opportunities caused by coronavirus
What changes does the coronavirus cause? And what opportunities lie in the media coverage of the pandemic? Of course, at present, there are no or only preliminary answers to these questions. The suffering of all those affected by the disease is also beyond doubt. But one thing is for sure: many things have changed for those who are not affected – and fortunately, this is the vast majority of the world’s population.
One example is the increased demand for protective masks and disinfectants. The rapid response and delivery of the goods sought opened up entrepreneurial opportunities that did not exist only a few weeks ago.
And maybe as a result, we will soon see cheaper and more effective remedies of this kind. In addition, the development of more reliable rapid tests and vaccines is a promising new field of action. In the medium term, emergency planning and security measures can be improved by the virus so that humanity is better prepared for the next pandemic.
Perhaps this experience will also serve as a motivation for vaccinating many people who have paid too little attention to preventative health measures so far.
For example, in Austria, only one-tenth of the population is immunized against the flu. Given that 1,500 flu-related deaths are registered each year in the country, a change in thinking would certainly be an improvement. Against this background, the fact that coronavirus is a serious threat to humans today can also have positive side effects and lead to business opportunities that should not be overlooked.
A benefit to society or pure greed?
Successful use of a business opportunity usually becomes a profit for the entrepreneur. The first places in the ranking of the richest people in the world are occupied by businessmen. Entrepreneurs are rarely led by altruism.
However, this does not mean that they do not contribute significantly to the well-being of society. This insight dates back to the time of Adam Smith: butchers, brewers and bakers are crafting for their own interest, but at the same time producing useful products. Does this also apply to coronavirus-driven entrepreneurial activities?
Certainly not for everyone. Exploiting the general sense of anxiety about persistently marketing respiratory masks known to offer very little protection against Covid-19 is clearly unethical. In this case, the personal interests and benefits to society are in no way in harmony. Speculative buying of certain goods also does not contribute to the common good. In Germany, entrepreneur Timo Klingler gave a dubious example.
Back in January, he realized that there would soon be an increased demand for masks and bought large quantities of 60 cents apiece, which he now sells for 20 euros. A return of over 3000% over a period of just two months is an amazing feat. However, for social benefit, the amount invested would have had a greater impact if it had been used to stimulate production. Generally speaking, not all suggestions designed to satisfy a particular new search are a change for the better.
Crises create a climate of uncertainty. It is easy for one to take advantage of anxious people, and some even feed the panic of self-interest. Innovations designed to solve artificial problems are not useful in a world where there are a sufficient number of real problems.
Still, it makes some sense to look for business opportunities created by crises and disasters. The problems are real, as are the search for new solutions. It takes real entrepreneurs who are bold, creative, dedicated to their cause and ready to take risks to come up with new ways to meet the challenges. Only businesses with these qualities can help control the effects of a coronavirus pandemic while generating long-term benefits for society.
The article is accepted by a supervisor from the PM.MBA supervision’s team.