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It has been some time now since the COVID-19 pandemic has taken hold of our personal and professional lives. Businesses are experiencing disruptions that are unprecedented. Most business leaders have never experienced a crisis of this scale during their tenures. The pandemic has put to test the business continuity plans of even the most mature companies.

As everyone went into lockdown and consumer confidence declined, we have seen the change in consumer behavior in terms of channel preferences, spend on different categories, frequency of buying trips, and choice of brands. It has accelerated trends that could have happened anyway, albeit at a slower pace. For instance, more consumers will continue to buy online. More employees will continue to work from home often or forever. More and more companies, and not just tech majors, are supporting this change. So, how do organizations respond to this new reality and compete going forward?

New Technology Adoption accelerated by COVID-19

In the middle of every diversity lies an opportunity. As was found based on research findings from past recessions, corporations that deploy a specific combination of defensive and offensive moves have the highest probability – 37% – of breaking away from the pack. COVID-19 has proved to be an unexpected catalyst for tech adoption. According to a recent survey, 70% of respondents from the DACH region in Europe expect the coronavirus pandemic to accelerate the pace of digital transformation.

Many companies think of technology adoption using McKinsey’s Three Horizons model of innovation, as depicted below. Here, the Horizon 3 opportunities focus on the creation of new capabilities and business to take advantage of or respond to disruptive opportunities or to counter disruption. In early 2019, Steve Blank, the creator of Customer Development method had made a point in a Harvard Business Review article about how and why this model no longer applies. He cited examples of startups like Uber, AirBnB, SpaceX and Tesla because of their ability to disrupt industries using existing technologies in an extremely short period.

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Figure 1: McKinsey’s Three Horizons model of innovation

In the past, large companies that had embarked on Digital Transformation projects as part of their innovation charter experienced failure due to legacy technologies, lack of capabilities, or disjointed efforts. They however expected some of these projects to pay rich dividends in the long term. The biggest barrier to success of these projects was consumer and employee diffidence to try them. For example, although the technology for telemedicine already existed, it is only now that consumers have started adopting it in a big way, as in-person visits to the doctor have become impractical. Consumers who have shopped for groceries online now for the first time will likely to continue to do so after the pandemic. Many of these behaviors will stick.

What this means is that now is the perfect time to accelerate some of the Horizon 2 and 3 innovations. Today, they can be delivered as fast as Horizon 1 ideas and the consumers are more open to them. Let us look at how some of these technology-driven Horizon 2 and 3 innovations can help companies tide over the crisis and beyond.

Artificial Intelligence (AI): Companies that have already started on their AI journey will be in a better position to adapt to immediate disruptions and create a foundation for the future. Here are some examples of how AI can help them respond to changes in consumer preferences, supply-side uncertainties and disruptions in business operations. For example, Starbucks has created an AI-powered Deep Brew platform that helps make personalized coffee recommendations based on the location, weather, inventory, and price.

Challenges AI-powered solutions
Change in consumption patterns • Deliver personalized products to consumers
• Early detection of changes in consumer purchase patterns
• Use market signals to accelerate new product development and create new data-driven business models
• Hyper personalize marketing messages
Supply side uncertainties • Faster supply forecasts to aid decision making
• Optimize the value chain in real-time
Disruptions in business operations • Dynamic allocation of workforce to match demand
• Matching of on-demand workforce to meet short-term contingencies
• Predictive Maintenance and planning in manufacturing operations

Internet of Things (IoT) and Augmented Reality (AR): In spite of the lockdown, many jobs cannot be done remotely, like in factories, retail stores, hospitality, farms or process plants. Even as the lockdown is relaxed, many companies will have to maintain social distancing at workplaces to restart operations. To address the need for safety, real-time tracking and remote monitoring, companies can implement IoT-enabled solutions for monitoring people and assets. In a controlled environment like an office, you can use smart phones or smart watches to know the real-time position of each employee and try to ensure physical distancing through a simple warning system. In an industrial setting, you can use the sensor data and predictive analytics to predict equipment breakdowns in advance and schedule the maintenance, instead of sending technicians after the breakdown occurs.

You can also combine IoT with AR or Virtual Reality (VR) to take it a notch higher. For instance, you can enable field workers to seek detailed instructions from experts who are working from home – a use case supported by PTC’s Vuforia Chalk. Interestingly, since PTC decided to provide free access to the Chalk AR collaboration tool, the daily traffic for Chalk soared to levels 10 times higher than it was before crisis. Additionally, AR or VR can be leveraged to build remote and virtual sales or service models to engage with customers. This is particularly important for companies that sell high touch, high value products such as cars, real estate, jewelry or luxury items where customers might still be reluctant to visit in person. By starting with such simple use cases to address the immediate challenges, you can build the foundation for adopting IoT and AR/ VR to achieve sales growth, efficiencies and sustainability goals.

Direct to Consumer Models: A trend that was kick started even before the crisis was the shift to Direct to Commerce from Amazon led by big brands like Nike and Ikea. Several reasons were cited for this shift, including lower priced knockoffs and difficulty in handling customer service directly. Although Direct to Commerce startups like Casper, Lane, and Rent the Runway that started this trend are struggling today, it is an opportunity for established brands to quickly optimize their online channel. Companies who have predominantly relied on retail can quickly augment their online channel capabilities by collaborating with online retailers or launching their own channels like PepsiCo and Kraft Heinz. Others can launch new products and services quickly by building their own D2C channels. One of the better examples of how a company accelerated its e-commerce and D2C approach across the company during COVID-19 is Henkel. The company could increase the digital sales by a double-digit percentage with a strategy that included leveraging digital B2B and D2C sales platforms, complemented by marketing effort.

In summary, innovations driven by AI, IoT, AR/ VR, and D2C models are no more for the future, but they can help organizations get back on the recovery path stronger than before the pandemic. The confluence of lockdown measures, changing consumer behavior, and supply-demand disruptions created by the crisis is an opportunity to adopt some of the Horizon 2 and 3 innovations at an accelerated pace for now and beyond.



About the Author

Sameer Ram Bhagat
Principal Consultant

Sameer possesses 10 plus years of experience primarily in the research and consulting space. Currently he works as a Principal Consultant and helps develop sales plays for offerings in Digital.

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