Innovate and adapt
With the pandemic still in full swing, knowing how the world might change is still impossible, but early signs and learnings from the 2008 recession show that there is opportunity in adversity.
After the 2008 recession, it was the companies that increased their R&D budgets during the recession that were outgrowing their EBIT relative to competitors whose R&D budget had stalled according to Bain and Gartner.
Quantum leaps in innovation
Some traditionally conservative industries like education and healthcare have been forced by social distancing measures to re-invent themselves, with `10 years of change happening in one week’ in healthcare with the forced introduction of telemedicine. Even entertainment has followed, with the Royal Opera House in London streaming Cosi Fan Tutte and Formula 1 moving to esports.
Flexible business models
Most companies have been struggling with negative impacts to the sales line and high costs, as well as operational and supply chain challenges. The government's furlough scheme provides top-down relief, yet some companies have been innovative to redeploy staff where they are needed: in the UK, John Lewis staff have been helping out at Waitrose, and in China Alibaba-run supermarket Hema borrowed staff from severely impacted sectors like hospitality and gastronomy.
In the US, vegetarian fast food chain Clover was faced with store closures and a lot of food waste so they used the ingredients they had bought for hot sandwiches and used them for food boxes instead. Customers are able to buy healthy food and Clover has created a new product.
Companies with the infrastructure in place have been able to quickly pivot to a channel shift towards e-commerce. In China, cosmetics brand Lin Qingxuan saw sales from stores drop by 90% in January, but a committed move to e-commerce saw staff re-deployed as digital beauty influencers with the help of online tools, helping grow YoY sales in Wuhan by 200%.
The travel industry has been hit particularly hard by the virus, but e-commerce has been used as a strategically offensive move to diversify the business model. AirAsia invited domestic retailers to list their products for free on their site and sell without any commission as part of their SOS (save our shops) campaign into the domestic Malaysian market.
Similarly, Singaporean players iShop Changi and Singapore Airline's KrisShop offer tax free shopping for non-travellers, with attractive promotions for home delivery in a move to maintain some revenues, as well as building awareness of the online proposition and a loyal customer base.
The ability to pivot at speed is based on the right strategy and infrastructure, with KrisShop announcing their transformational journey in early 2018, but perhaps now is the time for others to build and accelerate their digital strategies.
Christina Roseler