The coronavirus pandemic compressed five years of digital transformation in the United States into five months, according to Shark Tank star Kevin O'Leary who was the keynote speaker at the 2022 CCA Global Retail Group Summer Convention in Nashville, Tennessee. At the convention, O'Leary shared his thoughts on how the pandemic and technology have changed business.
1. Accelerated Adoption of Technology
O'Leary said if the pandemic had happened 25 years ago, businesses wouldn't have had the technology to make it work: "Nobody knew what Zoom was 36 months ago; now it's like Kleenex. These tools, this technology, the internet got adopted by people that never had even used it because they had no option but to make it work for them."
"The entire economy adopted to a digital format— everybody, every age—and that's a huge opportunity for American business," he added.
2. Forced to Operate Remotely
Being forced to operate remotely during the pandemic moved many businesses to a direct-to-consumer model. Yet, there's still a lot of productivity in the market because people who know what they're doing can work remotely.
"We started getting to know our customers in a new way, communicating with them on a daily basis—and they were in lockdown," O'Leary said. "It changed the fabric of how companies communicated with their customers and supported their customers."
3. Enhanced Focus on Direct-to-Consumer Strategies
O'Leary said the pandemic's silver lining, if there is is one, is that it completely changed the economy. "It started to bifurcate winners versus losers. Those that adopted technology, those that did not. Those that understood customer acquisition, those that did not. Those that learned how to work with social media and those that didn't. The no-dos are being left behind."
O'Leary says iconic companies like Nike were able to grow direct sales to customers by an unprecedented degree amid the COVID-19 pandemic. He said small businesses are focusing on the direct-to-consumer channel and the amount of data being generated by online direct sales.
4. Reassessment of Real Estate Investments & Costs
What O’Leary calls “the great digital pivot” also presents changes in real estate:
"A year ago, we had about 10,000 employees in our supply chain. I went to our managers and said, 'Okay, listen. We spend millions of dollars on leasehold and leasehold improvements. Can you give me an estimate of how many people are gonna come back into the office when this whole thing is over?"
The estimate they gave him—which represents the S&P 500—was 15%.
"We downsized accordingly, like many other people did. And my perception was that it would probably be in the areas of accounting, logistics, compliance...why would they want to come back? But listen to this: how many didn't return? Fifty-five percent."
5. Potential for Long-Term Operational Enhancements
O'Leary said that after doing this business for 14 years, 75% of his returns have come from companies run by women: "You know that old adage: if you want something done, give it to a busy mother. There's something true about that. Entrepreneurship is very difficult to balance."
He said that his women-run businesses were hitting their goals 95% of the time with average growth estimates at 15% annually. His male-run companies were hitting their goals 65% and have average growth objectives of 30% annually.
The difference between the two was attrition.
"When you're a small company doing $50 million, $20 million, $10 million, $3 million sales, and you lose the man or woman running sales or manufacturing or advertising or social media or accounting, it's very disruptive. It hurts the business," he said.
In the case of the companies run by women, they had virtually no attrition of staff. Those that are run by men were missing those sales goals. They had huge attrition.
"When you are in business and you have a cohesive team and they want to show up for work beyond just being paid because they wanna be part of a winning group, that's very powerful," O'Leary said. "The minute I saw that, we changed our whole policy. I said, 'Bring down your targets to ones you can achieve and achieve them.' Ninety-five percent of the time, our returns over the next two years grew by 20% measured by free cash flow. Women know what they're doing in business."
6. Supply Chain Management Reboot
O'Leary said every sector is still navigating the remaining problems with the supply chain:
"What's going to happen there over the next five to 10 years is a lot of repatriation of manufacturing to America—it's certainly happening in the chip business. We don't want to rely on foreign countries for essentials. Whether that affects the flooring industry today or in 10 years, I don't know, but it's all about quality and cost."