Hope is not a strategy, but strategy gives you hope.
Hunker down, or innovate? What’s your instinct telling you about the ‘bets’ you have to make to navigate a way forward from the current Covid-impacted economy? The only thing we know for sure about life after Covid is that it will be different, and like any crisis, there will be challenges – and opportunities, if you chose to see them. Doing nothing may seem a safe approach whilst you try to make sense of the situation, but upping the pace of your innovation can be a source of advantage in a ‘sense and respond’ strategy.
It will be some time before we understand the full economic impact of the pandemic, but the history of such shocks tells us two things. First, economic downturns provide opportunities to move your business forward; secondly, crises produce not just a raft of temporary market shifts, but also some long-term, permanent market realignment. For example, the 2003 SARS outbreak in China is seen as the catalyst for accelerating a structural shift to e-commerce, paving the way for the rise of Alibaba.
The immediate headlines on the ‘to do’ list in financial services are easy to write:
Faster digital transformation of the enterprise
The crisis will only speed up the need for digitisation, which will need to happen faster, deeper and smarter, with stronger integration from the backend instead of divided complex legacy layers. Digitising processes for both efficiency and cost reduction will happen at the interface of customer facing and back office process.
Increased digital financial services
Digital financial services such as lending advice, as well as credit requests, will only further be consumed online. Before the crisis, a lot of providers might not have offered digital services, but now they will see this as the only way to engage with clients.
Changes in consumer behaviour
With home working driving increased adoption of online meeting tools, there will be efficiency increases with more client meetings able to be scheduled in a day. Once physical engagement can resume, there may be an audience that still prefers the face-to-face option, but there will certainly be a larger group of customers who prefer digital-based services.
Further reliance on digital security
The online environment creates new risk exposures above and beyond regulation and compliance, meaning that cybersecurity takes on even more prominence. Cyber resilience processes and software, as well as staff training, will become even more crucial. Data privacy and data protection to create and ensure consumer and brand trust will be key.
Increased need for prediction of fraud as a form of protection
Rather than a business defence, there will be new challenges around digital fraud and other ways to steal or mimic customers’ identity to get access to data. New tech to both protect the perimeter and the ability to discern true positives from false ones will be required.
One way to move forward in this environment is what I call a ‘sense and respond strategy’.
The ‘sense and respond strategy’
The pandemic has disrupted consumption, forcing both organisations and customers to unlearn old habits and adopt new ones. From the organisation perspective, it’s about how to sense growth opportunities and respond with innovation initiatives to accelerate the engagement, experience and satisfaction of the customer in the ‘new normal’.
Organisations seeking to emerge from the crisis with momentum to build a stronger future must develop a systematic understanding of changed customer needs and habits. The first step is to map the potential ramifications of changing expectations and trends to identify specific products or business opportunities that will most likely grow as a result.
Unless we respond to new habits and demands, and their cascading indirect effects, we will fail to spot signals and miss opportunities to shape markets. One approach is to categorise demand shifts on the basis of whether they are likely to be short-term or long-term, and whether they were existing before the crisis or have emerged since it began. I’ve put them into a framework, the ‘ACID test’:
What are the Advancers?
These are temporary departures from existing customer behaviours you’ve seen in the market, but they’ve increased demand for certain aspects of your business model. An example we’ve seen in the pandemic is the uplift in demand for home food deliveries from supermarkets. As part of your updated business model, what can you make this a sustainable driver of growth?
What are the Catalysts?
These are accelerations of existing trends that the pandemic has boosted further. A good example is video streaming, with the internet completely changing how we watch films and television, no longer are we shackled to schedules, it’s on-demand and we don’t have to pay hand-over-fist for the latest film releases. Where are the catalysts for high-growth you’ve seen in your business?
What are the Innovations – what has had a seismic shift in customer demand?
For years, videoconferencing enjoyed growth by focusing on corporate clients. Now Zoom, with simple setup and viral connectivity, has become, overnight, the go-to connector in the pandemic. We are all ‘zooming’ for a myriad of purposes, including family and fitness. Where in your business is your ‘Zoom’ innovative growth offering?
What are the Dislocations?
What has the pandemic brought an abrupt halt to in your business? According to McKinsey, 96% of businesses have changed their go-to-market model since the pandemic hit – sales coverage has been completely redefined, virtual teams a core part of the organisation structure. What do you now need to repurpose and redefine, and bake into your business model innovation?
This framework can be used to highlight which trends to follow and which to shape more aggressively – you cannot pursue all possibilities and should not try to – but use this to get an idea of which ones to back, asking yourself whether any shift in demand is temporary or permanent?
Any analysis of growth opportunities must go beyond a simple assessment of what you already know. You need to challenge your thinking about what’s happening in your domain by taking a fresh, careful look and actively seek out anomalies and surprises.
Armed with an understanding of where your opportunities lie given the new shape of demand, you can now move to the next step – reshaping your business model to create and deliver value.
To make a difference, your tech investments should focus on specific business-model innovations to address identified opportunities, rather than increase the use of digital technologies as a comfort blanket to pay catch up or simply reduce cost.
‘Digital transformation’ may be a good management soundbite, but what does it mean to you customers?
In the current environment, organisations that are willing to entertain some risks are likely to benefit the most. Rather than hoard cash and agonise about what might befall you, engage in more-aggressive, dynamic tech innovation thinking. Now is the time to be bold and not sit there letting your tea go cold. Heightened uncertainty means you cannot accurately predict which innovations will be most successful, so take an experimental approach and go with an approach like the ACID test to provide some validated thinking.
In times of crisis, it’s easy for organisations to default to old habits, but these are the times in which new approaches are most valuable. John F. Kennedy once observed that the word ‘crisis’ in Chinese is composed of two characters, one representing danger, the other opportunity. He may not have been entirely correct on the linguistics, but the sentiment is true enough: a crisis presents a choice.
As companies position themselves for the new normal, they cannot afford to be constrained by traditional business models, processes, and behaviours and complacent about customer behaviours, habits, and expectations. Instead they must challenge mental models, and revamp their business model. Prioritising innovation today is the key to unlocking post-crisis growth of tomorrow.