The digitalisation industry suffered from the crises of 2001 and 2008. In 2020, it is flourishing. Office work becomes remote work. Paper-based processes become online workflows. Factories and supply chains continue to run thanks to automation. We are about to take a 10-year leap into the future. This will shower us with productivity gains. We can even offset our covid costs this way.
In the spring of 2020, a letter from the venture fund Sequoia on the Covid crisis circulated in the tech industry. Memories of the 2001 and 2008 crises resonated. Sequoia suggested: Batten down the hatches. Prepare for the storm. Downsize.
I understand Sequoia’s letter. I lived and worked in Silicon Valley from 1998 to 2007 and through both crises. The dot-com crisis wiped out almost all start-ups in Silicon Valley. Streets and restaurants were empty, similar to the Covid crisis. Then there was the shock of 9/11. I left my employer McKinsey & Co and turned around a company. I lowered the cost base, built a new product and attracted investment.
From this experience, I founded Zattoo in 2005. I picked up the pace. There was a lot of interest in our offering. We expanded. We hired. We were a small sensation.
The financial crisis of 2008 came abruptly. All startups, not just Zattoo, were hit without warning because they didn’t have time to scan the environment for macro threats. Startups are fully occupied with user growth, product design, revenue growth and building the organisation.
Since there was no more venture capital available in the market, I even sold my flat in San Francisco in January 2009 to pay Zattoo’s content bill. The money was sitting between the US and Switzerland for about two months because the banks didn’t trust each other any more. I was able to pledge shares to raise cash for the company. I was able to convince Tamedia (now TX Ventures) to come in. With inventiveness and cost discipline, we were finally able to gain a foothold in 2010. Zattoo has since grown organically as an SME by about 20-30% a year.
After overcoming this crisis, I built up Zattoo’s Board of Directors. As president until 2019, I dedicated myself to, among other things, keeping the company crisis-resistant and recognising danger signals in advance. I hoarded cash to be able to help the company in case of an emergency. The TX Group took over the majority in April 2019. I relinquished the presidency. We continue to develop the company together.
When I first heard about Covid in January 2020, I was initially spooked. Memories of 2001 and 2008 flared up. I asked myself: How can Zattoo cope with the impending pandemic? The pandemic could lead the advertising industry to curb, delay, rebook or stop its spending. The cloud systems of Zattoo and the telecom industry were not designed to run autonomously for long periods of time. Even worse developments were conceivable.
I consulted my acquaintances, including an executive from McKinsey & Company China in February 2020. In conversation, we came up with a predicted decline in GDP to -3%, and Swiss GDP actually fell to about -3%.
It looked even more threatening in the short term, but it recovered during 2020. It recovered because we were able to keep working thanks to digitalisation. There was no need for an emergency programme at Zattoo or many tech companies. On the contrary, the tech industry was booming.
In the short term, innovations are overrated. The dot-com crisis of 2001 was a crisis of disillusionment, so to speak. In the long term, however, innovations are underestimated. In 2020, thanks to digitalisation, we have just lived through the first crisis in which we were soft-bedded by robots: a moment for the history books.
The economy, education, health, defence, finance, transport and energy were more crisis-resistant in 2020 thanks to digitalisation. Digitalisation is finally in full bloom:
- There is a massive need for urgent digitisation projects in business and administration
- We are all upgrading our IT at home, Apple, Google and Microsoft are booming
- Digitisation is making its way into schools
- Thanks to enterprise resource planning systems, production automation and logistics, our shelves stay well stocked. Parcels arrive. Payment is contactless.
- Remote working helps us stay healthy at home and keep working
- Social media allows us to share concerns, vent anger, offer comfort and discuss perspectives: A very important function.
- When live performances are restricted due to a lockdown, we are kept well entertained with online videos instead.
- The pillars of digitalisation are remote work and online workflows, which are mapped in the cloud, as well as online commerce.
The cloud allows collaborative work on letters, presentations, spreadsheets and more. It relieves us of server administration and provides better load distribution and higher availability than if we administered the servers ourselves.
The cloud is growing rapidly. Office work is increasingly done on Google Docs or with Microsoft Office 365 in the cloud. Privately, over a billion people now use the Apple Cloud. For all loads that are elastic or fluctuating, and for all workpieces that are handled by several actors at the same time, the cloud makes sense.
Zattoo itself offers examples of cloud services: Instead of storing recordings locally, our viewers access our cloud. Ideally, only one master copy is needed of many recordings that would all be the same. This saves money. Our B2B customer base (telecommunications and cable companies) also uses cloud services: instead of feeding TV signals from satellites via so-called headends themselves, they use our cloud service. Out of many thousands of headends in Europe, which all do roughly the same thing, it will ultimately take a handful in the cloud. Since each headend involves an investment of about CHF 10 million and ongoing costs, this saves a lot of money.
Online retail and delivery services are growing strongly and sustainably. Once users have broken old habits, opened a user account and ordered online, it is easy for them to order the pre-configured shopping basket again. Once they have practised the new behaviour, they stick with it.
GDP fell by CHF 25 billion in 2020; it will rise in 2021. A capital injection of CHF 70 billion flowed from the federal treasury. Let’s take this sum as a yardstick and ignore how this money from the economy ends up back in the state, because it will sooner or later. Let’s see if we can make it up in 10 years: That would be CHF 7 billion per year, or 1% of the gross national product in Switzerland of about CHF 700 billion.
This is possible: Assuming 700,000 remote workers, this amounts to CHF 10,000 per capita per year. We can achieve savings in these areas:
- In urban centers in particular, a high proportion of salaries is sunk into the real estate market. These costs should ease somewhat (without inflation).
- Fewer commuter movements relieve traffic congestion. This eases investment in infrastructure (assuming we use public transport again).
- By digitizing business processes, we reduce transaction costs and gain speed in the economy.
- Remote working enables specialization of resources and increases quality at lower costs.
For Switzerland, remote working can be the salvation from our graphical constraints. Employees can be geographically distributed throughout Switzerland or abroad. We no longer need to limit recruitment to a 100km radius around the workplace. Remote working opens up a larger pool of candidates for recruitment and promotes diversity and specialization. With remote working, it becomes cheaper to establish a startup in Switzerland.
Remote work increases employee satisfaction. Deloitte-Switzerland studies from 2020 and 2021 show: A majority of employees want to work in a hybrid way and by no means want to give up the benefits of remote working. Employees have lost a considerable amount of time commuting – they no longer want to bear this burden. They enjoy the freedom of working in places with low costs and high quality of life – this opens up new perspectives. They save time through fewer obligatory business trips. Remote work makes it easier for women to re-enter the world of work by allowing them to divide their time between the office and home.
Remote work preferences are not the same across age groups, and they also differ between industries and countries. In Japan, the loss of the “presence culture” is a major challenge. An anecdote from Japan was brought to my attention. A boss had never organised a video conference from home and asked if it would be possible for his assistants to help with this task. This type of work was always done in the office by specialists. For traditional bosses, remote work is a challenge.
There have been other times: in 2013, the then boss of Yahoo, Marissa Mayer, was still trying to get employees away from remote working. “Innovation happens in the pressure cooker of Yahoo’s development centre in Silicon Valley,” is how I would summarize her words. She saw innovation as a contact sport. Innovation is now possible online because the tools of work have improved.
The IT industry is now seizing the opportunity to offer employees attractive working conditions with remote working. It is by far the best prepared for this. Other sectors have also discovered that remote working works. Security is better than feared. So far, no new data has emerged from private banking.
Corona has done more to accelerate the digitalisation of Switzerland than all the digital initiatives we have had so far. From maybe 10’000 remote workers in Switzerland before the Covid crisis, we have made a leap to over 1 million (out of a total workforce of almost 5 million). When we talk about 700’000 remote jobs over the next 10 years, we understand the scale of change.
The digitalswitzerland initiative, the CH++ science initiative, Open Data Switzerland, the industry association asut and others can help us carry the momentum from covid digitisation. They can contribute to the flourishing of Switzerland with inspiration and know-how transfer.
We know this: a clever strategy is announced, and we fudge about it because we like it differently. Does our force of habit now nullify the benefits of COVID digitization? Shall we return to box 1?
Let’s start with ourselves. We’ve learned how to organise ourselves in a home office. A zoom room would be ideal. We’ve learned to cook food, plant seeds, bake bread. Ideally, we would have our own garden. We travel more individually, less in groups. A camper would be perfect.
We improvise in the way we teach. An age-appropriate mix of face-to-face and online teaching would be ideal:
- For kindergarteners and primary students, face-to-face interaction remains important. Face-to-face teaching will dominate, but not as rigidly as before. Online teaching tools complement it. Children like to use iPads and learn with them in a playful way.
- At higher levels, it will become increasingly important to use the best teaching tools. They allow interactive learning and complement frontal teaching, for example with tools like Mathematica or with Khan Academy.
We may say to ourselves, “my stock portfolio has gone up, my real estate is worth more now, I don’t need to put up with the new world of work.” Or we’ve been ruined and can’t do it anymore. The Covid crisis is causing older workers in particular to leave the workforce.
For us to reap the benefits of digitalisation, we need to break the habit of returning to old-fashioned offices where we wear headphones to work intently. Instead, let’s reinvent offices and embrace the remote working opportunity that served us well during the Covid crisis.
About Bea Knecht
Bea Knecht digitalises media services with her start-ups Zattoo, Genistat and Levuro. Genistat employs experts in media data science. Levuro employs experts in social media engagement. Wingman is a VC fund she supports: By Entrepreneurs, For Entrepreneurs. Bea Knecht serves on the boards of the Society for Marketing and CH++ and is a member of the Federal Media Commission. She is a recipient of the IAB Lifetime Award, the Best of Swiss Web Award and the Emmy Award.
