After several months of lockdown, we grapple with the implications and reflect on the only certainty – that things may settle, but they will not be the same! As we head through the summer and toward 2021, we look at what we have learnt in supporting our clients and the insights gained from the broader market.
We have identified five key themes that are front of mind for all organisations as they focus on the changes that will prevail.
We will tackle each of these over the coming weeks, sharing our collective insights and vision. Last week we looked at The Transformed Workplace and this week we focus on...
2. Reimagining Your Business Model
As we in the West emerge from the initial response and subsequent recovery from Covid-19, there have been some valuable lessons learned about how our organisations work, their hidden capabilities and frailties, and what’s really important to us and our customers or users. Many organisations are applying these lessons to rethink how they work – driving greater focus and efficiency. This has the potential to generate real long-term value, but what if we could go a step further? Can we use this most extreme of all black swans to completely reimagine what we do?
For some organisations, the impacts of the pandemic will force this to happen. There are things that people and businesses simply can’t or won’t do now. For others, there might not be the same imperative, but this is still a once in a generation chance to reimagine the business model, making changes that previously seemed beyond reach or taking advantage of new opportunities.
To help make sense of what this means, we’ve considered four lenses: Society, Customers, Proposition and Operations. By exploring the context and opportunities in each, we provide guidance on what organisations should do next to navigate this global event as it continues to reshape our lives.
Whilst the pandemic seems like it has turned the world upside down, taking a step back paints a slightly different picture. Although immediate needs have clearly changed, the cultural values and trends that are the bedrock of our society are not so susceptible to such rapid, disorientating change. The phrase ‘new normal’ is often used but instead of entirely new norms forming, we will see an acceleration of things that were already happening. We’ve described the most significant of those and the related consequences for organisations below.
A sharper focus on the value of the human workforce
Trends towards automation are not new news but the pandemic has exposed the critical frailty of humans. On the flip side, we’ve never had more focus on the value of real people and connection, whether it’s NHS heroes, local volunteers or the personal and value added services people are yearning for – just consider the 650m+ searches for, ‘when will hairdressers re-open?’!
We see three pathways here. For some organisations, humans will now represent an unacceptable business risk and they will strive towards automation. Others will recognise the innate value of human input and double down on their investment in talent. A third route will be investing to amplify the potential of humans through technology.
Many organisations have seen productivity increases from people who can work from home (and are self-motivated). The work/life distinction, once clearly timeboxed and defined by location is now blurred. We are quickly moving away from 9-5 presenteeism in office blocks. Technology has enabled remote delivery and collaboration. At least some of this will stay so organisations must define clear use cases for where and how they use humans and where they don’t. This will likely result in the need to budget for higher rewards for those that have proven essential and valuable. In parallel, digitisation and automation elsewhere must be accelerated to help fund this and to reduce risk.
Coping with political uncertainty
In recent years, with the rise of populism, we’ve seen a few seemingly unlikely political figures come to power, and with them came significant economic policies. Most organisations were already cautiously navigating these before Covid-19 turbo-charged an already febrile atmosphere. The politicisation of public health and loss of trust in state-led activity (certainly in the US and UK) are making it more difficult for private and public sector organisations to plan and react.
The post-Covid organisation will need to demonstrate the ability to both adhere to government direction and advice, but also to think for itself, exploring and modelling multiple scenarios and developing the insight and agility to change tack quickly. It will also be necessary to challenge accepted wisdom on global risk. For example, pre-pandemic, who would have picked Greece as a beacon of stability and good practice governance?
Diversity and inequality
The impact of Covid-19 on diversity has been complex too. Many women have been bearing far more of the burden of childcare, with a subsequent impact on their careers and well-being. For others, remote working has been an equaliser, eliminating any stigma of leaving ‘early’ for childcare.
And yet, we have seen new sources of inequality rear their heads, such as broadband and technology poverty – a massive digital acceleration has left those who were already struggling far behind. This has been catalysed by social and health inequalities, where key workers – many of whom already experience inequality – continue to go to work and increase their risk of exposure and subsequent isolation, compounding the negative impacts on physical and mental health.
Organisations must rapidly review and develop their policies to ensure all have equal opportunity to thrive in a digital economy. These policies must also move out from the small print to the front page, clarifying how the operation has been reshaped to mitigate these challenges and to take advantage of the opportunities.
Many firms have been struggling against industry giants with increasing difficulty. Sadly, the pandemic and its draconian policies around social-distancing will deal a deadly blow to many businesses that do not have the cash cushions of larger organisations. This will lead to a market place of cheap assets that richer companies will purchase, increasing the divide further.
This will be particularly stark in retail, where the trend for increasingly hollowed-out high streets will surely continue; recent figures from the US suggest a huge wealth transfer from small businesses (down 40%) to the major digital players (on average double digit increases). That being said, we are seeing the resurgence of local players, with many small-scale outlets seeing a new lease of life as they provide high quality local produce with minimal exposure to crowds of people.
For private sector organisations looking to acquire, having a clear strategy around scale and scope will be key, identifying which acquisitions make strategic sense beyond just being a good deal. Competition authorities will need to be more active and in general, public services and charities will need to collaborate, rethinking how services are delivered and to whom.
Having experienced weeks of clean air and a resurgence of nature, it’s tempting to think that the world has turned a corner on progress towards environmental sustainability. Sadly, the latest figures on pollution in the Chinese cities first to emerge from lockdown and the huge no-strings stimulus packages offered to carbon-intensive industries suggest otherwise. Whilst policy and government action does not match the ‘green recovery’ rhetoric, voters and customers will likely demand more action moving forward.
Businesses should expect to be challenged harder by customers and investors on their reporting of environmental, social and governance data and adherence to science-based targets. Similarly, public services will need to demonstrate how temporary measures like extra cycle lanes in cities can be made permanent.
These accelerated trends impact all facets of business, from ways of working, to estates, to investment approaches. While some are clearly negative and require reimagination to mitigate, others offer the prospect of positive advances. Whatever the case, the key capability for organisations to focus on is adaptability – and clearly, staying within a hair's breadth of rapidly evolving customer needs will be crucial in doing that.
The need to put customers at the heart of the organisation has been amplified by Covid-19. We’ve seen a huge shift in the ways customers interact with products and services and an evolution in what they want and need during the crisis. How these changes fall away or solidify as lockdown measures ease and new regulations come into force, will dictate the ways in which organisations will need to reimagine their models. Whatever the case, organisations will be presented with both significant challenges and opportunities.
Understand the new ‘jobs to be done’
Covid-19 has had a significant impact on customers, with an effect on the lives and livelihoods of millions. This impact hasn’t been experienced equally, however – while some are struggling financially and being pressed into emergency support like food banks, others find themselves with far lower costs and far more disposable income. Some are striking an impossible balance between work and caring responsibilities, and others have more free time. These extraordinary circumstances have resulted in the rise of myriad new needs, which will continue to evolve. For example, a recent WARC report highlighted an unsurprising shift in needs towards safety and security, but also a less predictable desire for brands that champion independence and freedom.
Taking the ‘jobs to be done’ approach championed by Clayton Christensen, organisations must recommit to gathering the customer insight that can help them understand and adapt to what customers want now. That insight must then be applied throughout the organisation, driving decision-making on products, services and the overall operation.
Dixons-Carphone offers a good example here with their remote advice service. This clearly recognises the need for human explanation and reassurance when buying technology, but delivers it through remote technology.
Build on the emotional connection established during the crisis
As customer needs shift, we’ve noticed a number of success stories for how companies have built meaningful and memorable connections with their customers, whether that be small local businesses or national gym providers going online.
What is clear is that these companies have worked hard at maintaining engagement with their customers, building a sense of community and driving loyalty through visible effort and added value. Future success lies in how they maintain this connection with customers – organisations must be careful they don’t revert back to the way things were.
Others who have fared less well will need to consider how they can repair the damage. Brands like Hiscox, which entered the crisis with strong affinity and brand perception, and Ocado, which struggled to handle the balance of new, long-standing and vulnerable customers, now find themselves on the wrong end of public ire.
For any business that isn’t entirely digital, the return of physical customer interaction will need to be carefully planned and managed. For some, this might seem like an impossible task; how can a bar or nightclub create any sort of atmosphere in a socially distanced world, let alone attract the kind of footfall that makes running costs viable?
A critical focus will be on establishing the basics first by ensuring customers can clearly see their safety has been taken into account. Moving from cheerful, lo-fi solutions to professional signage and carefully designed layouts will make a big difference. Unlocking spending and commitment from customers will be about building trust and confidence. Over-investing in these in the early stages will pay dividends. In the long-term, reimagining the services offered or splitting focus by developing entirely new services alongside ‘Covid-safe’ versions of the existing offer may be necessary.
In essence, although everything has changed, the reality is not much has changed from a customer perspective. Understanding customers’ needs and building products, services and experiences that meet those needs is still critical – the stakes are just higher. With that in mind, investing time in creative thinking and continuously testing and adapting to the post-crisis landscape will be ongoing requirements for any organisation with a physical presence.
So if we’ve understood the societal trends that set the frame for the future, and the new customer needs we must meet in the present, then redesigning the proposition comes next.
This should start at the highest level of the organisation with purpose. The scale of change over the last few months should have forced us all to reconsider why we do what we do. Grocery retail has gone from scrapping over share of basket to ‘feeding the nation’. Logistics services have gone from parcel delivery to critical national infrastructure. Broadband has gone from comparison site commodity to connectivity lifeline.
Organisations should take the time to understand what’s really important in what they do, and how they can reinforce and build on this in the future. There won’t be room for vague and tenuous connections to need – clarity is a must and a sense of care for the customer should underpin everything.
Necessity is the mother of all invention, and this ethos has driven an explosion in innovative thinking. April was one of the busiest months for UK patent enquiries and many organisations have seen valuable new thinking across the board as people find ways to get things done under lockdown conditions. The shortening of approval processes, the acceptance of managed risk, and a pervasive sense of ‘why not?’ have been powerful drivers of this.
And while there is an inevitability towards increased control post lockdown, organisations should capture and harness the behaviours that have driven innovation, supporting those teams and individuals that have made it happen. Encouraging people to bring this rapid, connected ‘crisis’ thinking into their settled roles will be critical to providing customers and users with products and services they continue to value.
Focus on quality and service
Many organisations have reacted to the global pandemic by offering sales to clear excess inventory, to stockpile cash and to maintain consumer interest. This is clearly unsustainable, but it also feels out of step in a reimagined market. Given ongoing fears about hygiene and safety, it seems certain that space, quality and service will trump price for those customers still able to spend. We expect to see an unequal split here between the most economically impacted who will reduce consumption, and an increased desire for premium for those that have weathered the storm.
Able businesses will need to consider how they service these needs by exploring ‘fewer, bigger, better’ strategies at the expense of high volume, capacity-dependent offers.
Even before the crisis, disintermediation was a trend. We’ve seen a huge increase in ‘over-the-top’ or direct-to-consumer services. Where this was once driven by a desire for margin, customer proximity and insight, new drivers will be the risk of being reliant on distribution platforms and methods that could be eliminated overnight.
Direct-to-consumer plays were often held back by formal or informal barriers from distribution partners and high costs of entry, but these barriers fall away in a pandemic. Notable examples include the movie industry seeking routes to market for new titles through streaming services and consumer goods firms creating subscription services that give them a hedge against retail distribution shutdown. It’s particularly interesting to see how active smaller players have been, taking advantage of low cost, off-the-shelf distribution solutions.
For some organisations, new challenges have been so significant that they simply can’t go it alone, whether they want to or not. A good example is in the pharmaceutical industry, where the burden and pace of developing, producing and distributing a vaccine has driven unique partnerships like that between GSK and Sanofi.
For others, the crisis has forced the kind of connected working that should always have been present. Many health organisations have been trying to integrate with social care partners with limited success, until now. Crisis working has swept aside any rationale for hold-up, and we’re now seeing a suite of connected and integrated services that offers real, long-term benefit for patients.
To build the kind of proposition that customers need, organisations should think holistically about their ability to meet those needs. This should include a pragmatic assessment of how other partners can offer complementary capabilities as part of a wider ecosystem that benefits all parties.
And yet, however hard an organisation invests in insight and whatever innovative proposition thinking it does, it’s toothless until it can be made real operationally. A reimagined business will need a new operating model to be designed and stood up at pace. This will impact every function, so we have selected some of the key elements to consider.
In a world this uncertain, long-term strategies don’t hold water. Organisations will need to develop shorter strategy cycles, assessing markets, trends and customer needs on an ongoing basis. Whilst challenging, this will drive the kind of pace and responsiveness that underpin the highest performing businesses of tomorrow.
Financial processes had to adapt quickly too – what previously might have taken months of business case development and board approval has been decided in a matter of days. New partnerships have been formed with historical competitors; changes made to manufacturing processes; materials used for different purposes; supply chain and distribution adapted; all to ensure that customer needs are met.
Companies are taking risks out of necessity, operating in a way that reads: ‘better to try and fail than to never try at all’. Finance departments will therefore need to decide how they codify such enabling behaviour whilst balancing risk and mitigating exposure.
Employees have had to adapt to new ways of working, and recent company surveys have highlighted that most employees have enjoyed the flexibility of modified ways of working. It has resulted in a delivery model less anchored to traditional working hours, and forced companies to proactively develop better employee experiences to retain a healthy work/life balance, especially where caring responsibilities are concerned. It’s therefore unlikely that people will accept a full return to previous conditions if they have been able to prove value and ensure business continuity whilst working remotely.
Organisations will need to embrace this more flexible way of working and should go further to understand how they can leverage the autonomy employees have to choose how they work. Leaders will need to handle a double-edged sword carefully, where high performers are accelerating and looking for new challenges, whilst low performers are becoming less productive and necessitating more intervention and direction.
Most of these proactive measures in employee experience and modified ways of working are directly linked to the provision of digital solutions at an enterprise level. IT improvement roll-outs have been prioritised to enable business continuity, with videoconferencing tools becoming a technology baseline – Microsoft Teams recently announced a new daily record of almost two million minutes of global meetings per minute.
In healthcare, video capabilities for GP appointments have been rolled out across the country; this had previously been stalled in layer upon layer of sclerotic bureaucracy, not planned for delivery for another few years. In retail, businesses have ramped up their online offerings. And in education, lessons are being taught remotely using software like Google Classroom, and university lectures may shift online in their entirety. This technology is here to stay, so any business that hasn’t yet figured out how to use it effectively will need to catch up quickly.
We’ve also seen marketing and brand strategies change in response to the shifting customer needs described earlier. Whilst people are spending more time at home, TV and media consumption has increased exponentially – and advertising spend on these channels has followed suit.
User generated content has increased as advertisers have been unable to produce glitzy adverts, and customers are liking this newfound, personal feel. People are buying into brands that provide this, supporting companies that recognise them as individuals; loyalty is paramount and customers want to be rewarded for this.
Don’t assume your audience is consuming content the same way they always have. Brands will need to be on the right side of the right movements and must pay razor sharp attention to their message and tone as societal dynamics change faster than they have in decades.
A successful business after Covid-19 also needs to define a much sharper use case for expensive physical spaces – searching questions should be asked about whether a permanent physical location is required at all.
Whilst in many cases this will probably still be true, every organisation should seek a physical footprint that reflects new patterns of working. And where offices are required, they should be reconfigured for activities that can’t be done remotely.
It’s also likely that there will be new regulations on proximity, flow and ventilation, and a focus on digitally-enabled contactless experiences that account for basic activities like catching the lift, pouring a coffee, or printing a document.
Supply chain and manufacturing
Everyone will remember the start of the pandemic when people panic-bought toilet roll and paracetamol. And when panic-buying stopped, buying out of boredom kicked in, with amateur bakers decimating the national supply of flour to beat into anaemic loaves of sourdough.
Retailers have responded to these needs, working hard to ensure their supply chain stays stocked with the key products people are using, and expanding and prioritising delivery slots based on their view of customers’ need. Local retailers have also responded by ramping up their activity, resulting in shorter supply chains and a selection of new enterprise-level risks around just-in-time manufacturing and offshoring.
Organisations will likely need to run twin-track approaches, sourcing goods and services at the lowest possible cost but maintaining higher cost, alternative supply options to ensure business continuity. Whilst people tend to have short memories and can expect to see a relatively rapid return to lowest cost global sourcing options, no organisation should allow itself to be caught without a clear and viable contingency plan in the future.
So in the context of this global change, organisations will need to rebuild the way they learn, think and operate if they are to meet new customer needs and thrive.
There’s a delicate sequence to getting this right and many organisations will still be smarting from the fragility that this pandemic has exposed. As if that wasn’t brought into sharp enough relief, recent cultural events have further highlighted that change is in the air, pumping the oxygen of innovation into our blurred personal and professional lives.
These accelerants have accumulated in a matter of months and have shaken businesses with decades of experience to the core, so it won’t be easy to reimagine what we’re here to do and how we do it, but the prize of being able to survive and thrive in a post-Covid world is clearly worth it.
If you would like to get in touch to discuss the above challenges and opportunities for your organisation as we rethink and reimagine a new normal, please don’t hesitate to contact James Easterbrook.
For more information please email firstname.lastname@example.org