McKinsey: COVID-19’s effect on SMEs in the US
Noting a large rise in unemployment figures...
McKinsey has released a new report examining the economic impact of COVID-19 on small businesses in the US.
Noting a large rise in unemployment figures since lockdown measures were introduced in March, the consultancy company projects that as many as 33% of jobs may still be vulnerable, despite ongoing discussions about reopening the economy.
The strain is palpable for all enterprises, but McKinsey considers that SMEs (250 employees or fewer) are likely to face more arduous challenges - prior to the pandemic, they accounted for almost 50% of all private-sector jobs and now represent 54% of the most vulnerable.
The lower the staff size, the more vulnerable
The report found that approximately 50% of jobs within the smaller SMEs (99 employees or less) could be considered at risk, compared with 44% for those with 100-499 employees and 40% for 500.
According to this trend, the larger a company is the safer it is, and vice versa. “Two occupational categories—food service and customer service and sales—account for more than four in ten vulnerable small-business jobs,” added McKinsey.
There is a strong possibility, therefore, that the people most likely to reap the negative consequences will be those less able to weather them, such as lower wage or unskilled workers, the report reasons.
The solution: recognise the value of small businesses
The problem identified by McKinsey is not limited to any particular state or region of the US; Eastern (New York, Pennsylvania and Florida), Mid West (Illinois and Ohio), Southern (Texas) and West Coast (California) states have 1mn to 3.3mn jobs at risk each.
With small businesses representing such a large demographic, it is, therefore, imperative that sufficient investments are made to ensure their survival.
“Small businesses are a recognized proving ground for entrepreneurs, a vibrant source of innovation and competition, and an essential source of employment,” the report states.
“They are suppliers and customers to the broader economy and deeply embedded in local communities.”
In a previous article, Business Chief explored how Mastercard has created a five-year $250mn fund to alleviate the financial struggles faced by SMEs, as well as offering cybersecurity solutions to bolster digital defences
“When our small businesses suffer our nation suffers, so it is incumbent upon all to ensure that we’re supporting the businesses who are the lifeblood of our economy and pillars of our communities,” said Michael Miebach, President of Mastercard.
“We are leveraging our network, insights, technology and partnerships to deliver the resources small business owners need now to help them sustain their business as they quickly adapt to a new way of operating and evolved customer needs.”
To read the full McKinsey report, please click here.
How innovation is transforming government
According to Washington Technology’s Top 100 list, Leidos is the largest IT provider to the government. But as Lieutenant General William J. Bender explains, “that barely scratches the surface” of the company’s portfolio and drive for innovation.
Bender, who spent three and a half decades in the military, including a stint as the U.S. Air Force’s Chief Information Officer (CIO), has seen action in the field and in technology during that time, and it runs in the family. Bender’s son is an F-16 instructor pilot. So it stands to reason Bender Senior intends to ensure a thriving technological base for the U.S. Air Force. “What we’re really doing here is transforming the federal government from the industrial age into the information age and doing it hand-in-hand with industry,” he says.
The significant changes that have taken place in the wider technology world are precisely the capabilities Leidos is trying to pilot the U.S. Air Force through. It boils down to developing cyberspace as a new domain of battle, globally connected and constantly challenged by the threat of cybersecurity attacks.
“We recognize the importance of the U.S. Air Force’s missions,” says Bender, “and making sure they achieve those missions. We sit side-by-side with the air combat command, intelligence surveillance, and reconnaissance infrastructure across the Air Force. There are multiple large programs where the Air Force is partnering with Leidos to ensure their mission is successfully accomplished 24/7/365. In this company, we’re all in on making sure there’s no drop in capability.”
That partnership relies on a shared understanding of delivering successful national security outcomes, really understanding the mission at hand, and Leidos’ long-standing relationship of over 50 years with the federal government.
To look at where technology is going, Bender thinks it is important to look back at the last 10 to 15 years. “What we’ve seen is a complete shift in how technology gets developed,” he says. “It used to be that the government invested aggressively in research and development, and some of those technologies, once they were launched in a military context, would find their way into the commercial space. That has shifted almost a hundred percent now, where the bulk of the research and development dollars and the development of tech-explicit technologies takes place in the commercial sector.”
“There’s a long-standing desire to adopt commercial technology into defense applications, but it’s had a hard time crossing the ‘valley of death’ [government slang for commercial technologies and partnerships that fail to effectively transition into government missions]. Increasingly we’re able to do that. We need to look at open architectures and open systems for a true plug-and-play capability. Instead of buying it now and trying to guess what it’s going to be used for 12 years from now, it should be evolving iteratively.”