By Asma Shabab, Snr. Managing Consultant, Digital Strategy & Experience at IBM MEAT

Consumer needs and priorities have changed. Are companies ready to rethink innovation? 

The world’s history is coded in stories and if you observe these stories closely enough, you will notice that some have a similar vein running across them. Stories of past crises in the world have an inherent mythical narrative, very similar to the story arcs used in Lord of the Rings, or even Die Hard. It’s the story of a hero, who, while going through the banalities of life in a world she is familiar with, experiences a turning point that shakes her life. She goes through trials, tribulations and experimentations in an unknown world and finally returns to her known world a changed but evolved person. 

Asma Shabab, Snr. Managing Consultant, Digital Strategy & Experience at IBM MEAT

This framework, aptly called the Hero’s Story and initially popularized by Joseph Campbell, has a lot of parallels with our experiences in the real world. Observations of past crises – from pandemics to wars – indicate that when societies are faced with tribulations and the unknown, their attempts at overcoming these trials leaves a society and its people transformed. During the first World War, women were drafted in unprecedented numbers into the civilian workforce because men were enlisted to fight the war. This led to changing mindsets and behaviors regarding the role of women and to the evolution of their positions as economic and national assets to countries.

We know that COVID-19 has also transformed how consumers spend their time and use existing products and services. Dining tables have become makeshift offices in many households, online grocery shopping has increased, Carrefour MENA recorded an increase in online sales of over 50 percent compared to the same period in February.

Parenthood has converged the roles of full-time care giver, teacher and friend. Once the pandemic-influenced lifestyle ends, people are likely to continue practicing the behaviors that resonated with them during this time while merging it with the pre-crises ones, example a mix of offline and online shopping versus reverting to only offline retail experiences . According to a report by McKinsey, 40 to 60 percent of surveyed consumers who adopted […] new products and services intend to continue. 

The past few months have not just transformed consumer behaviors but have unveiled, for companies, new markets and greater uses of their existing products and services. Zoom is being used by teachers to host classes, and the car has become the space on wheels that allows families and individuals to participate in birthdays and connect with the outside world safely while they are in the car.

With this shift in consumer behavior, companies now need to reevaluate their existing products and services and understand their role in the new environment. This has massive implications for companies. First, it can provide them with visibility on the innovation roadmap for their products and services, and second, it will inform the changes in business models and value chain, thereby shifting the trajectory of digital acceleration and investments within their companies. 

Companies more open and agile to responding to changes in consumer behavior and willing to challenge legacy investments and pre-COVID plans are going to be primed for success. Historically, economic crises, pandemics and even wars have been characterized by periods of accelerated innovation.

The Black Death in the 1300s gave rise to animal husbandry as an industry as labor-saving techniques became crucial after the death of millions. Similarly, economic crises have also witnessed groundbreaking inventions. The light bulb, radio and the steam engine were invented during the Great Depression in the 1800s. Closer to our times, the SARs pandemic in China influenced the mass growth of technology as people avoided human contact and the 2008 financial crash that impacted the buying power of millennials and Gen Z gave rise to the growth of collaboration and the sharing economy which introduced us to Airbnb and Uber. 

Professor Sunil Gupta, from Harvard Business School, once referred to digital transformation as changing the engine of a plane while its flying and the analogy cannot be more fitting during these times. For companies, how quickly you pivot to address the changing behaviors and needs will be key for success.

We’re already seeing examples of innovation at speed in the region. Dubai Mall pivoted its business model by partnering with Noom and Namshi to open a virtual store of Dubai Mall. Tenants of Dubai Mall who were unable to access customers had an option to activate their presence and bring their inventories and stores online. Imagine the impact on building designs, health gadgets and the acceleration of connected devices that would help ensure low contact interaction in the future.  

What makes the debate on post-COVID innovation so real is the scale of its impact. Virtually, every country across the globe has been hit by the crises; it has forced lifestyle changes across generations with children learning digitally to grandmothers learning whatsapp to participate in family conversations; and finally, it has accelerated digital adoptability that is incomparable in history. Auto dealerships that resisted the e-commerce model are forced to change their business models and succumb to the inevitability of selling online. 

As lockdowns ease across the world and businesses rethink their strategies, there are some trends that stand out. 

Businesses Will Accelerate Their Platform Models  

Companies that were already pursuing a platform strategy had a much easier time responding to the crises. Platform models are the epitome of agility in business as they maximize the potential of digital experiences by trading information, enabling commerce, driving social exchange and identifying shifting value proposition. They are designed to improve processes and reduce friction. Companies that had activated platform models had real-time access to changing behaviors of users than non-platform companies.

These companies also had the opportunity to add and change services on their platform. I already mentioned an example of Dubai Mall that was able to add offerings by participating in a platform; Cement Manufacturing Company, CEMEX, was able to leverage their digital platform CEMEX GO to be in constant communication with customers and provide them with real-time insights into the status of shipments when the pandemic impacted supply chains. The utility of the platform model is its ability to deliver insights in real-time, enable companies to respond to marketplace shifts based on data and communicate with the customer without delays. 

Conversations Around Network Effects Will Be Renewed

The past few months shook the status quo and our belief system on many levels. Businesses discovered that you didn’t need to keep teams in a room to be productive, friends started using Zoom to host weekly parties. Digital adoptability and success also meant using platforms and tools that were also being used by other stakeholders in your ecosystem. For one of the Associations I am a part of, we recently had to change a recommended online tool to host a webinar because our audience was not familiar with it, and Zoom seemed like a better option to ensure a larger turnout. 

Network effects suggests that the value of a product or offering improves as the number of users or participants increases. This was the foundation of many social media and marketplace companies such as Facebook, Amazon, Alibaba and TikTok. 

As companies design for tomorrow, network effects and the ability of people to interact and engage with others digitally will become key. Individuals will look for companies that offer social engagement through digital channels, so networks will effectively drive sustainable usage. 

Companies Will Need To Redesign Their Value Propositions

The obvious questions companies have asked of themselves during this time is how do I reach customers that are restricted to their homes? By only looking at accessibility as a metric, companies are creating cookie-cutter solutions that increase their digital access. These propose no differentiation to your clients and your ‘innovation’ is at risk of being drowned by similar and perhaps louder voices. Companies need to accelerate their understanding of the changing value proposition of their products and services, think of the earlier example of how the car has become a conduit for so many other things. Done right, it can help address the evolving gaps new entrants and current competitors may be working on now. 

Investments In Response Hubs, Innovation Frameworks And Agility Will Increase  

Fresh off the crises, companies have realized they do not have systems and frameworks in place to respond to dynamically changing trends. This is not going to be the only crises we will face, and the experience have taught companies the value of setting a governance model to address the macro changes in the outside environment to remain competitive. Building a nerve center is just the beginning but if you do not have an innovation framework and governance model to tailor your offerings, integrate insights to evolve your products and modify your communication, then you will be late to respond, which will cost your bottom line. It’s crucial to integrate principles of agility and set up a governance model to streamline innovation so that you have a framework to respond to unforeseen changes. 

There is a lot of uncertainty in what tomorrow looks like. Companies who survived will have a choice to either go back to the old ways or evolve into a more resilient, responsive organization that is designed for the changed consumer. They will have learnt that there is no permanence in existing, only in evolving.