Bangkok, the capital of Thailand, where a lot of government and private schools are located. Photo: Wikimedia Commons
A typical traffic jam in Bangkok. Many workers will not be anxious to return to daily commutes post-pandemic. Photo: Wikimedia Commons

It has been remarkable how well many businesses have continued to function during the lockdowns caused by Covid-19. As discussed earlier, an important enabler has been the quality and diversity of the communications technology that facilitated group interactions and data availability nationally and internationally.

New communication technologies will continue to improve business processes, but will not eliminate the need for human interactions.

As organizations are gradually reopening their facilities, the commonly asked question is whether dispersed organizations are now the model for the future. The perceived benefits are obvious: lower real-estate needs, the ability to hire widely dispersed people, perhaps greater employee satisfaction from more flexible working hours and eliminated commuting.

It is hard to argue with such perceived benefits. But experience suggests that a big unseen price is paid for them.

Covid-19 has limited our personal and group activities but it has not changed human nature. We remain sociable beings who enjoy and benefit from personal interactions.

I suggest that one reason the dispersed industrial activity has functioned so well recently is that people continued to collaborate with people they knew. If the dispersion continued indefinitely in a virtual organization, new people who had never met personally would increasingly be part of the organization.

Collaborating with people new to the organization without the social factors is never the same. I expect that the lack of social interaction will result in less corporate “identity and loyalty” and hence higher turnover.

However, the biggest loss may be the pace of corporate innovation in a way that cannot be measured. Losing innovation in a business cannot be measured, but the long-term impact is bad. 

The first area to feel this impact is basic business that needs to change and adapt as conditions change. Hence, management needs to be constantly exposed to the industry realities in which the business operates. This is a continuous process that exposes the senior management to inputs from employees, customers, consultants and business acquaintances.

In effect, many information sources surround management, most of which are informal rather than online, and gleaned through personal contact. Isolated management will miss much of that process.

The second area of innovation is in product development. Of course, we have all heard of lone inventors inventing amazing things, but in practice new product development is a team effort where informal interactions, across and within functional groups, play a big role.

For material products, groups working together in physical facilities are of course needed. For software and related products, individual contributors may be separated, but teamwork requires frequent interactive personal contacts. This is particularly important in training and bringing new contributors into a program.

A corporation that lacks a physical structure will rely on remote connections and much less teamwork based on personal interactions. This is not a good recipe for generating the creative “sparks” that come from informal personal contacts among creative people discussing problems.

And, in my experience, such sparks frequently herald important innovations.

Henry Kressel is a technologist, inventor and long-term Warburg Pincus private equity investor. Among his technological achievements is the pioneering of the modern semiconductor laser device that enables modern communications systems.