Hyperscale-mini

A conversation with a Postman

The pandemic and lockdown have clearly impacted on everyone. The unthinkable has happened and we have seen unprecedented change. The world has been thrown into uncharted territory – there has also been a lot of doomsday speculation about what will follow. Without doubt the world’s economy will have sustained damage, but this is a time for being alert and using your own judgment, rather than being carried away by the thoughts of the media who are perhaps being starved of news to report on due to lockdown. I tried to set out our thoughts on this in a conversation with a carpenter.

Time has moved on now and even the 2 meter rule is beginning to be relaxed. Where are we though? Where is the market now and what has changed? How do we need to change and where are the opportunities?

Let’s look at one aspect of the legal market. I have spoken to, and have tried to support, a number of law firm leaders though this crisis and it has been a hugely difficult time. Looking forward has been challenging for them. They have had their hands full keeping things stable, but everyone now recognises the need to look forward.

In summary, Managing Partners/CEOs have been saying the lockdown has been like flying a large plane like an A380. The plane was hit by unexpected severe turbulence which sent it out of control. Luggage dropped from the overhead racks, stewards tried to reassure the passengers, whilst the pilot and co-pilot grappled with the plane’s controls. Finally, they got the plane back under control. Now things have stabilised it has become apparent that the pilots are flying in fog, and it is hard to see what is ahead. Something has also happened to the radar and typical instruments which are no longer working. The plane is stable, but the pilots don’t have visibility on their direction, what is going on around them, where or when they can land, or even what the world will look like when they get there. Many are now doubting normal metrics like WIP and are looking to the ever-changing patterns of file opening metrics. For in house teams things are different (and this varies by sector for obvious reasons), but again people are finding it hard to develop a clear view of the future.

And so, what does this have to do with a conversation with a Postman? In short, everything. Often the most helpful and obvious facts can come to you from an everyday interaction. Our postman is called Dave. He is a friendly, helpful guy who has served us well for years. We have checked in with him through the pandemic and asked him how he was doing. His answer was simple but stopped us in our tracks. He was fine and was enjoying the weather but missing his grandkids. He revealed, however, that his world had gone crazy – postal volumes were at above Christmas levels, and had been for weeks as people in lockdown rushed to online purchases. With only 80% of the staff (the others in isolation) Dave was having long, busy days with no sign of let up. This has been borne out by DPD recently starting a campaign to hire 6000 delivery drivers. To the outside world everything looked the same with Dave, but only by asking did we realise that perhaps one aspect of the world (namely logistics and postal volumes) had perhaps been changed forever by the pandemic.

In short, the learning point is that in times of uncertainty when the world has been turned on its head we need to gather as many relevant data points as possible. They will show us how the world has changed. Never in recent times has this been more important as we all need to recalibrate to take the right decisions, to understand what has changed and to collect as many facts as possible. Only by doing this can we begin to understand how we all need adapt to stay relevant and navigate these difficult times.

After speaking to Dave we started to pay much more attention to some of the key stats which have surfaced in recent weeks in order to try to figure out what they mean. This is a moving feast, but the following is a selection of what we have picked up:

Finance:

  • Sterling weakened as much as 1% against the dollar, the biggest fall in a three week period (10/5/20)
  • The FTSE took a huge hit from around 7400 to below 5000 (although it has now rebounded to around 6100)
  • Bitcoin is up 94% since March 16, when the U.S. began widespread stay-at-home measures amid the coronavirus pandemic
  • Inflation plunged to the August 2016 low as lockdown drove a price shift
  • How much has oil price dropped? Market prices plunged to less than $40 a barrel
  • Brent crude oil fell to $22.58 (£18.19) a barrel at one point, its lowest level since November 2002. Meanwhile the price of US West Texas Intermediate (WTI) fell below $20 a barrel (close to an 18-year low)
  • Carnival Cruise Line’s stock was down nearly 60%, with Royal Caribbean and Norwegian down over 70%
  • GDP contracted by around 20 per cent during the lockdown period
  • The euro-region economy is forecast to shrink 7.7%

Human behaviour during the lockdown:

  • Broadband demand – some broadband providers have reported that weekday daytime traffic has increased by as much as 60%
  • Mobile data usage – average usage has been 11GB/month
  • In Dec 2019 there were 10 million Zoom participants per day. This has risen to 200 million participants per day to over 300 million participants now
  • Microsoft Teams: the number of daily active users of Microsoft Teams has more than doubled in recent months, increasing from 32 million users in March 12th 2019 to 75 million as of April 30th 2020
  • Mens’ hair clipper sales soared 228%
  • Best Sellers on Amazon – Face-masks and hand sanitizer
  • Rises in sales in other products such as Jacuzzis, badminton nets, chocolate
  • Exercise equipment, grooming products, and loungewear were the most popular items purchased online in the UK in the past two weeks
  • American footwear brands UGG and Crocs, and fashion titan Calvin Klein were the best performing brands, with the highest surge in online consumer traffic in the UK, according to a new fortnightly report
  • The price of gold – In June gold futures on MCX were up 0.28% or Rs 132 at Rs 47,105 per 10g. Silver July futures advanced to 1.39% or Rs 670 to Rs 48,927 per kg
  • Snack food – chilled dip sales were up by 22%, crisps by 28% and fizzy drinks by 25%
  • Network Rail’s new traffic figures have revealed that passenger footfall has fallen across some of London’s busiest stations by approximately 93 per cent on weekdays, rising to 96 per cent during weekends

Economy/Sales figures:

  • Forrester has predicted that the global loss in the retail sector is estimated to hit $2.1 trillion in 2020, and it will take four years to overtake the levels of growth seen before the pandemic
  • Coronavirus has had a dramatic effect on the auto industry in the UK, with The Society of Motor Manufacturers and Traders (SMMT) revealing that sales fell by 97.3% year-on-year during April
  • Used car prices uncharacteristically rose in June, due to lack of supply and increased demand from customers wishing to avoid public transport
  • Average global sales revenue for online fashion stores in April was 21% higher year-on-year
  • Amazon year-on-year sales were up by 26% in Q1 2020
  • Cashflow difficulties have been reported by 96% of UK retailers
  • Hiring Budgets have been cut by a massive 82% of large enterprises (those with an annual revenue above £50m), phase three of E-consultancy and Marketing Week’s Business Impact Survey has found
  • Amazon set up a $25m relief fund in mid-March and hired more than 100,000 more workers to meet increased demand
  • Netflix gained almost 16 million new subscribers in the first quarter of 2020
  • Microsoft and Amazon’s shares have altered in value: Microsoft shares have increased by 5% Amazon’s sales rose by 26% year-on-year in the first quarter of 2020
  • UK house prices could fall by as much as 10 per cent this year. The latest Rightmove research shows the average price of property coming to market in April dipped by 0.2% to £311,950. (By contrast, in April 2019 UK house prices increased 2.1%)
  • However, demand for property jumped 120% in the week since the property market rules were relaxed, and firms are reporting a healthy upsurge in domestic conveyancing files to buy property, especially outside large cities. Average price of sales is 6% higher than June 2019. In particular, sales of homes valued over £1m have rebounded strongly in recent weeks
  • Average office utilisation is predicted to drop from 56% to 35% post lockdown as many businesses will want to reduce their real estate footprint. Buildings with over 3 floors and lifts may be particularly problematic
  • Food sales soar at fastest rate in 26 years
  • Online grocery shopping rocketed by 75% over the past three months
  • Takeaway deliveries have also experienced a boom, up by 250% year-on-year
  • Ice cream sales are up by 40%; alcohol up by 50%
  • Supermarket sales leapt 14.3% in the 12 weeks to 17 May, the fastest rate since 1994 (Kantar)
  • UK GDP growth fell by 20.4% in April (according to Official statistics from the ONS), following a 5.8% fall in March. The monthly decline in GDP in April, when the country was in full lockdown, was 3 times greater than the fall experienced during the 2008-9 economic downturn and was worse than economists had forecast

Support that businesses are receiving:

  • A total of 9.1 million workers are having their wages paid through the Government’s furlough scheme (HMRC figures published on 23/06/20). This represents more than a quarter of the workforce and is costing over £14bn a month
  • Self-employed furloughing is being utilised by 500,000
  • The number of workers on UK payrolls dived more than 600,000 between March-May
  • The number of people claiming work-related benefits (including the unemployed) was up 126% to 2.8 million
  • The official UK unemployment rate for the three months to April held steady at 3.9%, as the massive State wage support prevented job losses
  • The total number of weekly hours worked in the period dropped to 959.9 million, down by a record 94.2 million, or 9%, on the previous year
  • 200,000 self-employed people have taken government grants meaning the total government financial aid to employed and self-employed workers has reached 2.5 million people
  • Business loans from the Government to help weather the crisis have reached £31bn

 Wider Steps:

  • 74% of Gen Z want social media platforms to provide fact-checked content about Covid-19
  • Facebook is partnering with researchers at Carnegie Mellon University to build an interactive map that shows the symptoms people are experiencing most around the United States, county by county. On April 20, the survey was expanded internationally in an effort to get more accurate data on how many people have had the virus in each country
  • Google is giving away $350 million in ad credits in an attempt to alleviate financial pressure on small and medium-sized businesses (SMBs)
  • As part of the $2 trillion coronavirus stimulus package, the U.S. has reserved a much-needed $370 billion for small businesses loans

Law Firm response to Coronavirus:

  • 77% of law firms have furloughed staff in the UK (IFLM, 2020)
  • 63% of firms have not introduced pay reductions (IFLM, 2020)
  • 53% of firms with planned promotions/pay rises have cancelled or postponed them this year (IFLM, 2020)
  • More than half of top law firms in the UK do not have enough cash on their balance sheets to cover one month’s operating expenses, according to research by litigation funder Augusta Ventures. The analysis of the limited liability partnerships (LLP) accounts of 40 law firms with a combined revenue in excess of £15bn found 55% had insufficient cash to cover one month’s expenses and 38% had insufficient cash to cover one month’s salary bill
  • The research also found that, before the coronavirus crisis, 95% of the firms surveyed had outstanding invoices worth more than 25% of their annual revenue. Law Society president Simon Davis commented that, “There are widespread concerns over liquidity as firms face a dramatic plunge in income with work falling away.” (City AM,2020)

Other:

  • Pollution around the world has dropped dramatically: According to NASA, nitrogen dioxide levels across eastern and central China have been 10 -30% lower than normal. Since Italy went into lockdown, nitrogen dioxide levels in Milan and other parts of northern Italy have fallen by about 40 percent
  • 60,000 pubs in UK affected
  • 88,848 restaurants in the UK affected
  • 256 football grounds in the UK affected
  • How much has footballers pay reduced? Nothing has happened yet – 30% cut was suggested
  • What rises have MPs and nurses had? MPs have 3.1% pay rise to £82,000 in April 2020; Nurse’s pay hasn’t risen
  • Recruitment for London’s tech industry has fallen by 57%
  • Global airlines stand to face a $113 billion hit if the coronavirus continues to spread
  • Hotel occupancy has dropped by over 24% year-over-year for the week 8-14th March, with revenue per available room down more than 32%

And so what can we learn as an industry from the above and our conversation with our postman? We each need to make up our minds and these stats are just the “top of the waves” but there are some clear themes we need to reflect on:

  1. The business world and individuals have received huge amounts of Government support – in many cases for good reason but in others less so. This will need to be repaid and so the tax burden is likely to be high for many years to come. The amounts are huge.
  2. The world will look very different. Some people think that lawyers need a buoyant market to be busy. This is not right, they simply need change and there is going to be lots of it. There will be positive opportunities as well as the more negative effects we have heard about but strategies and priorities will have to change
  3. Lockdown means there will be a lot of pent up demand out there – again see a conversation with a carpenter. We are seeing this in some markets like domestic housing and used cars.
  4. It is inconceivable to think that working methods will not change – we can’t just pretend that the new ways of working which have been embraced (eg 300 million Zoom participants per day) will now just disappear. As a minimum there will be some middle ground. Our working world will be different, and we all need to adapt. This will bring with it the need to operate off new platforms and systems which are capable of dual operating (at home or in the office).
  5. Processes will need to improve – remote working and efficiency will demand this.
  6. Security will need to improve.
  7. We will spend less face time with our colleagues and need to work out how this will change relationships, training etc.
  8. There will be significant redundancies which may potentially impact most on those who have been furloughed. Businesses will have to react to the economy. Unfortunately a negative side effect of furloughing for some businesses is that they have maintained the same productivity levels with less people which raises unavoidable questions.
  9. Those who come back from furloughing will have a different digital skillset to those who have stayed in work.
  10. Those who have stayed in work may be exhausted as they have pushed themselves, whilst sometimes balancing home schooling and care of elderly relatives as well.
  11. Screen fatigue and mental health issues will flow from this, and checking on employee’s welfare and having either difficult or supportive conversations will be harder to do remotely.
  12. It would appear that many people want a better home and for various reasons this may now be out of a city.
  13. People seem to be gravitating away from long public transport journeys.
  14. People will need a lot of help in coming back to work and many will want different things and ways of working now. The importance of the office may be downgraded now IT Departments have helped to prove agile working and “living the dream” is possible.
  15. Businesses will now be able to attract talent from anywhere – location will be removed as an issue.
  16. All businesses will need a dual capability – I am sad to say we may have another pandemic or wave of Covid and so having an “on prem” and “lockdown” dual working capability will be key. The world may become more jittery now we have suffered one pandemic.
  17. Businesses will probably reduce their real estate footprint and some are predicting a shift to the regions (less high rise office premises (no lifts), less need to use public transport and lower cost quality housing).
  18. Some aspects of physical retail were already struggling but this could be the nail in the coffin for many. We need retail to reinvent itself and perhaps this is the moment when our relationship with commercial real estate will change for ever. We are already seeing similar signs with retail and the effect on retail landlords/
  19. Businesses and households will perhaps become more conservative and will try to build stronger cash reserves
  20. Attitudes to travel (public transport, business travel and holidays) seem to be altering. One CEO has already confirmed to me that his packed travel schedule will be replaced by one overseas trip per year, assuming there are planes still flying.
  21. Each country will perhaps look more to the capabilities it has and needs. Germany was quick to mobilise testing as it had the manufacturing capability. It was less than ideal that the UK had to import PPE, and again we suspect this will change in the future
  22. The health service and scientists will get the recognition they deserve. New industries will become trendy and their investment metrics will ascend.
  23. In terms of industries there will be winners and losers, which will affect who law firms want to do business with. Hospitality, tourism, air travel and cruise ships will probably suffer for some time to come. Tech platforms, software businesses, collaboration tools and logistics will probably do well. The clients law firms want to work for will alter.
  24. What it means to be a great employer will change, and it may become more onerous to support multiple generations simultaneously – together with new incoming remote talent which could be based in totally different jurisdictions.
  25. Businesses which espouse strong values will be judged for years to come if they have not lived up to them during these terrible times. IKEA, and others, who have announced they will repay furloughing payments, will stand as a businesses to be admired.
  26. How people sell will probably become different. Events and face to face meetings will perhaps become rarer? The sales stars of the future will get work in different ways.
  27. Supervision, education and teamwork will probably need to find different delivery methodologies and processes.
  28. Businesses which were great will perhaps need to learn how to be great again. The rules will be different.
  29. Law firms will perhaps gravitate more to products and longer term contracts with clients, as opposed to just relying on uncertain annual income for hours worked.
  30. The lockdown and pandemic will have changed us all for a range of reasons, in the same way it will have changed our colleagues and clients. Understanding these changes and navigating them will be key.

I suspect Dave the Postman’s job will now be secure for years to come, despite the recent Royal Mail job cuts in management roles. Strong logistics and delivery mechanisms for online purchases have become more important than ever, and this is a core capability we now need to continue to build.

I am not sure if Dave is classed as an essential worker but we owe him (and all those like him) a huge thank you for their contribution to helping the world through this pandemic. One key lesson or us all is to perhaps value people and their contribution to society in a more objective way than we did in the past.

We all have all been focussed on our day jobs and law firm leaders have been right to prioritise keeping their planes stable. We now perhaps need to focus more on what is changing, where we need to be going and what do our businesses need to look like going forward. The pandemic has attacked people’s strategies; rule books have been ripped up but now is the time to start planning again for the future.

 

Notes:

Hyperscale Group deliver a range of services in relation to Innovation, Digital, Futures, Strategy, Operational Excellence and more. They work for corporates, in house legal teams, software companies, venture capitalists, SMEs, start-ups, law firms and other professional services businesses.

Derek Southall, founder and CEO is a high profile and very well connected figure in the legal technology, innovation, knowledge management and digital marketplaces. Derek has spent nearly 25 years in a range of leading strategic roles for a top 50 global law firm, for most of this time as a Partner and Head of Strategic Development and subsequently as Head of Digital and Innovation. During this period Derek oversaw and helped drive growth from £27 mil TO to in excess of £425 mil TO as well as driving and supporting numerous mergers and international expansion to 18 offices in 10 countries. 

  Derek was ranked by the FT as one of the top three most innovative lawyers in the UK in its first study into the legal market. Derek also led the firm’s technology team to become ranked as the most innovative in Europe and subsequently the firm to ranked as the second most innovative firm in Europe as well as picking up a range of other awards. 

Derek has been the relationship partner for a long list of major household name clients in a range of sectors including Automotive, FMCG, Financial Services, Food and Drink, Fashion and Construction and has a strong track record in sales and product delivery. Derek has been ranked three times in the last three years as an Acritas Star for outstanding client delivery (based on independent feedback).

 Derek chairs and was one of the founders of the Legal IT Innovators Group (www.litig.org) which has 80 or so of the top 100 firms as members and which plays a key role in driving ahead technological thinking and change for the good of the legal profession. In this role he has worked alongside the United Nations and a range of other large organisations. 

18 months ago www.hyperscalegroup.com joined forces with two other leading advisory businesses in the fields of technology, operations and financial management to create the www.intuityalliance.com which has been referred to as the “Holy Trilogy” of Legal IT. Its purpose is to pool experience and intellectual knowhow to ensure we have a more holistic approach to how they give advice. 

Derek also serves on the advisory boards of several start-ups and has recently been appointed to the advisory board of the Global Institute of Innovation, which brings together around 400 academics to solve some of the world’s biggest problems.

 

 

 

 

 

Derek Southall

Derek Southall

Hyperscale Group
Derek Southall, founder and CEO is a high profile and very well connected figure in the legal technology, innovation, knowledge management and digital marketplaces. Derek has spent nearly 25 years in a range of leading strategic roles for a top 50 global law firm, for most of this time as a Partner and Head of Strategic Development and subsequently as Head of Digital and Innovation. During this period Derek oversaw and helped drive growth from £27 mil TO to in excess of £425 mil TO as well as driving and supporting numerous mergers and international expansion to 18 offices in 10 countries. Derek was ranked by the FT as one of the top three most innovative lawyers in the UK in its first study into the legal market. Derek also led the firm’s technology team to become ranked as the most innovative in Europe and subsequently the firm to ranked as the second most innovative firm in Europe as well as picking up a range of other awards. Derek has been the relationship partner for a long list of major household name clients in a range of sectors including Automotive, FMCG, Financial Services, Food and Drink, Fashion and Construction and has a strong track record in sales and product delivery. Derek has been ranked three times in the last three years as an Acritas Star for outstanding client delivery (based on independent feedback). Derek chairs and was one of the founders of the Legal IT Innovators Group (www.litig.org) which has 80 or so of the top 100 firms as members and which plays a key role in driving ahead technological thinking and change for the good of the legal profession. In this role he has worked alongside the United Nations and a range of other large organisations. www.hyperscalegroup.com recently joined forces with two other leading advisory businesses in the fields of technology, operations and financial management to create the www.intuityalliance.com which has been referred to as the “Holy Trilogy” of Legal IT. Its purpose is to pool experience and intellectual knowhow to ensure we have a more holistic approach to how they give advice. Derek also serves on the advisory boards of several start-ups and has recently been appointed to the advisory board of the Global Institute of Innovation, which brings together around 400 academics to solve some of the world’s biggest problems.