Six Patterns Of Broad And Deep Business Change
When parts of the economy begin to open after the first wave of COVID, the term "restart" is often heard. But it's a fictitious premise, since much of the economy has changed irrevocably. Instead of restarting, we are restarting. For many industries, this is a historic restart for corporate realignment, and the updates will bring about epochal changes.
In a moment we will examine six ways in which this will happen. First, however, consider how economic earthquakes occur. World War II produced one of these when women entered the world of work in large numbers, the US economy became more closely linked, and global trade patterns were realigned. There have been several others throughout history, such as the transition from slavery and serfdom to mercantilism and from mercantilism to capitalism. More recently, the information revolution has changed business competition, corporate responsibility and the way people work. Each of these earthquakes brought about major changes in who works, how it is done and what kind of businesses run.
While COVID may not be valued at the scale of World War II in reshaping the economy, it is not just trembling. At least in the industrialized countries, we have hardly ever experienced such a profound change in such a short time. This breaks inertia – one of the most powerful economic phenomena there is. In normal times, companies are wrong to maintain the status quo, and committee decision making, complex business ecosystems, and fear of customer and competitor responses prevent sudden, breakthrough changes. Sluggishness is an important reason why market participants so often lead to disruptive innovations. The upstarts have essentially no strategic advantages, but they are not tied to the strong energy of inertia.
New business patterns are emerging
These patterns stop with COVID. In an overwhelming number of cases, business operations were discontinued or changed. Economic uncertainty has skyrocketed. The sources of income have shifted radically. Companies had to realign trading partners. The urgency has required quick decisions and reduced the impetus to build consensus. As soon as economic activity resumes, it will take place in phases and the marketplaces will not look the same as before. As with other major discontinuities in economic history, everyone changes at the same time who works, how it is done, and what types of companies run. And this time the shifts did not take place over decades or years, but over weeks.
The Great Reboot includes six patterns of extensive and profound industry change.
Each industry has its own transfer pattern, but there are six common patterns that make this period a major restart:
1. Virtualization: Most obviously, our business and personal life has become virtual. As interactions, ranging from large workshops to complex sales to medical consultations, have become virtual events, the skills required for excellence have shifted. More than ever, the bottom tends to be those with extensive backgrounds who use virtual platforms, and highly differentiated companies can expand their global reach, while locally oriented and less developed companies may have problems. Companies with strong digital skills stand out. In fact, Amazon announced plans to employ shocking 175,000 people last month with massive job losses.
After the work is virtualized, some behavior changes remain. Students may prefer online learning, employees migrate from expensive cities to telework, and salespeople do electronic rounds with their customers. Your selection as a buyer and seller of goods and services will multiply just as much as your competitors. Competition strategy can be a very different game.
2. Transformed customer experience: COVID has changed the customer priorities or the tasks to be done as well as the possible possibilities for the interaction of the employees with your company. The ways in which customers understand and consume products and services have changed radically for B2C and B2B companies. These principles don't just apply to digital experiences. Expectations for a good restaurant meal can change significantly in the coming months. Even auto mechanics now cover the inside of a car before doing any work to convey the care they need for hygiene.
3. New supply chains: Even before the corona virus, companies were pursuing an ABC procurement strategy – Anywhere But China. While trade tensions highlighted the risks of single country dependency, COVID has highlighted the need for more robust supply chains in general. Complicated supplier networks, some of which rely on exclusive partnerships, can be very vulnerable to shocks. The massive earthquake in Japan in 2011 taught local businesses how to make their supply chains more stable to avoid these problems. Now the rest of the world is learning the lesson. The answers can vary from an increasing vertical integration of the offer to a greater variety of the supplier base. In both cases, however, the decisions are determined not only by the typical financial indicators but also by the company's risk assessment.
4. Direct sales and service: As virtual interactions increase and companies try to reduce complex dependencies, many will have direct relationships with suppliers and exclude channel partners who may have mastered local sales, distribution, and service in the past. This opens up space for companies that are ready to break with traditional sales patterns, even for virtual types of products such as insurance policies. The skills required to succeed in these direct relationships can differ significantly from those that make channel partnerships successful.
5. Competitive Shakeout: Economic upheavals win competitors. The winners are the strongest or most adaptable. As competitors consolidate due to economic pressures and the search for new strategic advantages, the way companies differentiate, evaluate and interact with customers can all change. Think about how the auto industry has changed due to the great recession and the need for massive investments in electrical and autonomous vehicle technologies.
6. Costovation: We are used to developing innovations and developing new products on the earnings side of the business in order to gain market share or increase prices. However, such a severe downturn with such a change in consumption and production patterns requires costovation, which uses the innovation tools on the cost side of the business. This is a time to radically rethink how a company works, reducing complexity, costly customers to serve, and other hidden cost drivers as well as the more obvious line items. There is a lot of positive potential in this; However, we should also acknowledge that this process can result in many jobs not returning as companies find ways to automate and virtualize the past person. This will have further effects on the labor markets and the pressure on social change.
As soon as moments of enormous discontinuity have passed, the inertia resumes. The big restart won't last forever, and business models will solidify into a new state, just as the late 1940s created a shape for the western economy that would last decades later. With COVID, we can expect time to be compressed and move at internet speed. Business patterns will soon reform, committees will govern, and managers will revert to conservative business habits after being exhausted by the current waves of confusion.
The time for business changes will be short, but the world is shaken. The big restart has brought the economy to a standstill, and together we are creating the transformations that will shape the new operating system. As with other economic revolutions, the nature of the work, how it works, and how it is run can be very different, and this time it will be hurricane-like. Are you ready?
Contribution to the Branding Strategy Insider by: Steve Wunker. You can find more about these concepts in his new book Costovation.
At The Blake Project, we support clients from all over the world at all stages of development. redefine and articulate what makes them competitive in critical moments of change through online strategy workshops. Please email us for more.
Brand Strategy Insider is a service from The Blake Project: A strategic brand consultancy that specializes in brand research, brand strategy, brand growth and brand building
Free publications and resources for marketers