The industries likely to stick with their COVID-19 operational shifts

COVID-19 has forced many companies to adjust the way they operate and many companies think it will be lasting.

National Australia Bank (NAB) conducted a survey asking businesses to rate the extent they believe changes in their organisation will be retained post the pandemic.

The average score was 74.9 points out of 100 indicating the majority believe changes will last.

However delving into individual sectors shows differing pictures. Companies particularly hit by the pandemic are more likely to retain changes than those that have not.

For instance, the highest scoring industry was retail with a score of 88. Many retailers shifted their operations online and consequently benefited. Online shopping surged among many retailers including ASX small caps.

The pandemic has been predicted to be the straw that breaks the camel’s back in sending consumers from physical stores to online stores.

Slightly behind is recreational services and hospitality (including accomodation, cafes and restaurants), scoring 86 points.

Many companies were forced to close their doors but couldn’t easily shift online and when they re-open will have to adapt to new post-COVID norms, particularly hygiene standards.

On the other hand, industries that continued “business as usual” are less likely to retain changes. Examples of lower scoring industries included mining, which rated only 51 points, while telecommunications rated 56.

It has been business as usual for many of these ASX-listed companies, particularly junior explorers.

Many have surged off the back of demand and rising prices for particular commodities, especially gold and they have dominated the list of stocks that’ve surged the most in 2020.

Innovation

Several of the changes made by businesses due to COVID-19 have been structural changes and could be considered innovative.

NAB pointed to things like virtual real estate inspections. One small cap in this game AssetOwl (ASX:AO1), rose from 0.3c to as high as 1.4c in April off the back of unprecedented demand because aspiring property buyers had no other choice.

Another example is the rise of telehealth consultations and again some companies have benefited, such as 1st Group (ASX:1ST), Oneview Healthcare (ASX:ONE) and Adherium (ASX:ADR).

Other examples among non-listed businesses included brewers moving into hand sanitisers and cabinet makers pivoting to plastic protection shields.

But these changes have not necessarily been innovation. Despite the changes, NAB’s headline Business Innovation Index actually fell by over 10 per cent from 57.6 to 51.2 over the last year.

Although innovation from doing things differently increased, innovation stemming from doing things more quickly and more cost efficiently both fell.

All industry groups reported lower innovation in the latter two categories. The one exception was personal services, accomodation, cafes and restaurants being unchanged on cost efficiency.

This was also the only group to have higher overall levels of innovation compared to a year ago.