Perhaps more than ever, it’s time to innovate to lift Marin County out of coronavirus economic impact

As of Sept. 15, Marin County had moved out of California’s most restrictive COVID-19 Tier 1 (“widespread”) category to Tier 2 (“substantial risk”) category. This means more businesses have started to open.

Although Marin is the most affluent county in the nine-county Bay Area, with a median income of $126,373 (in 2018), there is a disproportionate section of the society which is being more severely impacted by the disease, namely small businesses and the Hispanic and Latino community. One of the key reasons is because of the very economic structure – and constraints – of the Marin economy.

Marin’s entrepreneurship and business ecosystem has grown organically over time. Marin’s economy is heavily driven by industries such as real estate; professional, scientific and technical services; government; health care; and retail trade.

However, of the 14,000 businesses in Marin, 40% are small businesses with fewer than four employees. Most of the small businesses that exist here are primarily because the founders or owners are Marin residents. The businesses lack the necessary networks to attract capital and talent, and coupled with the high cost of business in Marin, these result in difficulties to incubate new businesses here.

A recent study by Marin Economic Forum showed that the biggest business challenge of Marin County is hiring and retaining employees, and what businesses are crying for is the talent to grow. Because Marin has a small resident workforce, a high cost of living, and a lack of housing for its workforce, workers need to commute from outside of Marin. This poses additional pressures on the already limited transportation infrastructure.

The Hispanic and Latino population in Marin have experienced more COVID-19 cases than other populations because they perform “essential” jobs which are mostly low-wage jobs that require them to work and commute rather than shelter-in-place, thus exposing them to a higher risk of getting the coronavirus.

On the other hand, Marin’s workers who are highly skilled, for example, those in finance, technology, and media, tend to go outside of Marin for employment. That’s primarily because there are not enough of those jobs in Marin – there is no ecosystem that allow them to switch jobs within or between industries.

When you compound Marin’s economic, demographic and infrastructural characteristics with what COVID-19 has done to businesses and the workforce, you get a small business sector that is severely cash constrained. Closures lead to layoffs of workers who claim more unemployment insurance benefits. Layoffs also result in lower consumption spending by households; this further causes business closures. Hence, we have an overall downward spiral.

On the brighter side, this might be an important time to rethink about Marin’s economic future. One important framework we could consider is how to build a “Triple Helix” model for Marin. The Triple Helix model, initially developed by Stanford researcher Henry Etzkowitz, proposes that the hybridization of university, industry and government will help generate new formats for production, transfer and application of knowledge.

Educational institutions such as Dominican University of California can play a bigger role in the local economy, working alongside for-profits and nonprofits alike, to not only identify the demand priorities of the market but also help shape the local economy and the business ecosystem.

For instance, the MBA in Healthcare Leadership and the recently launched Masters of Science degree in business analytics by the Barowsky School of Business at Dominican, were designed after much input from various public and private stakeholders in Marin – and beyond. These programs might now be more relevant than ever as the economy faces one of the biggest healthcare crises in American history and remote work becomes part of the “new normal.”

In fact, a study by Harvard Business School Professor Prithwiraj Choudhury suggests that remote work will become more strategic. People and organizations would need to think about “working from anywhere” instead of just “working from home.”

Workplace will become more virtual but not necessarily in a synchronous way as we see it today (e.g., through Zoom or Skype). There will be a rise of asynchronous communication, where you’re not face-to-face on a screen (e.g., through Slack or Google Docs). Employees can work in Google Docs and explain what they did, and some other employees can wake up in a different time zone or city, open it up, and see the work done. So, people won’t need to be in live meetings as much.

Organizations will also need to develop honest conversations with employees, thus creating a trust-based culture as other experts from Harvard point out. Senior management would need to engage in conversations with employees on many issues (including work conditions, remote work, health and benefits) and this requires trust, commitment and clear communications. There will be a need for strategic initiatives that involve more input from employees.

Supply chain managers will have a tougher job. Prior to the crisis, businesses didn’t realize the complexity of their supply chains, e.g. how the supplier to a restaurant’s supplier is being impacted. Smaller businesses in the service industries who are losing revenue will have a hard time replacing cash flows. The implication is that many businesses will need to start thinking about diversifying their risk and supply chains, either domestically or globally, or risk the possibility of disappearing.

As Marin reopens for business, firms need to ask at least two fundamental questions: How they will be different and how their customers will be different?

Firms would need to figure out how to deploy resources: They would need to decide whether they should pivot their business model, engage in technology breakthroughs (e.g. using Artificial Intelligence or Machine Learning), redeploy human capital, or change organizational systems, capacity, and their brand value. They would also need to revisit their strategic agility and risk management practice.

As regards to consumers, firms would need to figure out what consumers’ attitudes are to new technologies, their familiarity with online platforms, their preference to local versus national or global produce, and their attitudes to different types of risks. Firms would also need to figure out what are the best B2B practices and technologies that can deliver the best customer satisfaction.

Clearly, we can dismiss the possibility that the economy will bounce back in a “V-shaped” recession: a short and sharp shock followed by a return to previous levels of employment and economic growth. Instead a U or L-shaped recovery appears to be more likely. During the pandemic, the crisis can – and should – be a catalyst for innovation. As the pandemic slows down, business needs to be agile. In the long run, businesses need to think strategically what they need to do.