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14.05.2020

Business Transformation in the Distance Economy

In an interview for Kommersant-South, Dr Vasily Vysokov, Chairman of Center-invest Bank’s Board of Directors, spoke about the business mood, competition among banks, and the positive effects of the pandemic for the financial markets. Center-invest Bank has conducted an online survey, allowing businesses to independently assess their potential and to create a development strategy for the short-term.

Over 400 businesses participated in the "My Business Transformation" survey (www.centrinvest.ru/transformation), conducted by Center-invest Bank together with business associations from the Rostov region. More than half of the respondents (52%) represent companies, while the other 48% are sole traders and freelancers. Reflecting southern Russia’s economic diversity, the respondents come from a fairly broad range of sectors, including trade (33%), agriculture (14%), social services (13%), construction (10%), transport (7%), manufacturing (6%) and the real estate business (4%).

"This crisis is not the first, nor is it the last; it is just the latest. And it will end when businesses have their own post-crisis development programmes," says Dr Vysokov. "This is why we launched the "My Business Transformation" project. The data from the survey showed that every business has its own challenges and its own hopes. But both the "optimists" and the "pessimists" are confident that their businesses will pull through and that in the medium term they will recover their short-term losses many times over."

The survey respondents are realistic about the difficulties they will face in the next 1-2 years. The main challenges will be: a reduction in payroll and staff numbers, increased costs, zero profit and minimal revenue growth. However, businesses are more optimistic about their prospects for the 3-5 year time horizon. They anticipate average revenue growth of 6%, payroll growth of 1.1%, and a 1% reduction in profits. The distance economy will change personnel structures: the number of employees will increase by 2.7%, while the number of contractors will increase by 5.4%. Costs will also increase, by 6.6% on average.

The survey revealed that businesses are starting to understand the growing importance of big data and big data processing methods for project success — this was mentioned by 6-12% of respondents. Data is used in business management by 11-18% of the respondents. Eighty percent of respondents said that their own data was the most important, and 60% mentioned open sources. Roughly one in four businesses will be willing to pay for useful information in the future.

A capacity for transformation is in the genetic makeup of entrepreneurs. To choose their own transformation trajectory, businesses need to know about global trends and the transformations in their customers’ and partners’ businesses and in other sectors. The distance economy is a global trend, affecting all the economic subsystems. Transformations will emerge differently in each sector and each business will find its own combination of the different types of capital. The analysis of the survey data allows businesses to compare their own transformation strategy with those of other businesses, to identify the best strategies, to learn from other sectors’ successes and mistakes, and to start looking for solutions in open data.