The events of 2020 had a huge impact on the world as we know it. Consequently, organisations, their employees, and crucially their customers, face 2021 and the future with changed experiences, attitudes and behaviours. Yet, uncertainty and opportunity often go hand-in-hand. As we take tentative steps into the post-pandemic world, organisations face the challenge of reshaping their business to adapt to new and uncertain realities. To maintain relevance in a fast-moving world changed forever by the Coronavirus pandemic, organisations must look beyond cost reduction to enact a Strategic Transformation that puts the customer at the heart of their business model.
The events of 2020 placed unprecedented stress on business models
Previous articles have discussed the choice that organisations in the 21st century face: to transform in the light of technological change, or risk extinction.
2020 and the COVID-19 crisis brought change of a fundamentally different scale and nature, invading every aspect of life, and putting unique stress on current business models. Lockdown measures and the new realities of pandemic life incurred economic downturn across all developed countries, with an average contraction of 6 per cent.
Business models have been disrupted, or worse, in every market. The extent of this impact has varied, depending on the nature of the business model. Dramatic drops in customer numbers have threatened the viability of models dependent on footfall, such as transport, aviation and hospitality. In contrast, retailers with the capability to reach customers via e-commerce channels pivoted swiftly to adapt to the altered circumstances and preferences.
While lockdown restrictions have now been removed, COVID-19 will leave an indelible mark on the future lives and choices of customers, incurring social change that must be considered by organisations for the remainder of 2021 and into the future. There is no guarantee that models which survived and thrived in the period before or even during COVID-19 will do so in the future. To adapt, organisations must enact strategic transformations that place the new realities of consumer preferences at the heart.
COVID-19 forced short-term reinvention on many organisations
Prior to the pandemic, organisations embarked on business model transformations based on extensive evaluation of their competitive positions, expected risks and modelled costs and benefits. The short-term volatility and inherent danger of the early COVID-19 environment took all notion of choice away, and organisations made rapid shifts to ensure their model continued to deliver value to the customer or the organisation. With tourism strongly impacted, Airbnb shifted to target key workers seeking longer-term stays, allowing them to quarantine away from families; BrewDog pivoted from craft ale to hand sanitiser; and almost every corporate abandoned office-centric models overnight. Some of these reinventions were short-term survival plays. Reinventions that succeed in reflecting altered norms and preferences, such as flexible ways of working, may sustain. The message is clear: post-COVID-19 business models must be founded on understanding and listening to the post-COVID-19 customer.
As we exit lockdown and adapt to the post-pandemic world, organisations should look beyond cost reduction to business model reinvention as the source of long-term growth
Historically, the typical responses of organisations to impending recession have been similar: they have focused on shoring up liquidity, before protecting and maintaining existing successes over reinventing their business model. Cost control is unquestionably a necessary and beneficial reaction. Enabling a move towards a more elastic cost base, from which surpluses can be directed towards investing in growth, will result in a more resilient organisation. However, cost reduction programmes will not succeed in reflecting the changed realities of the post-COVID-19 world. Experience-based business models, such as pubs and bars, face the challenge that even as the health risk associated with socialising decreases, the COVID-19 experience will live long in the hearts and minds of consumers, and government measures may hinder their typical ways of working. To stay relevant, organisations must show endurance and be prepared to transform their business model in light of a changed environment.
Organisations should put the consumer at the heart of their new business model, whilst maintaining alignment between strategy and operating model
The organisations who are prepared to consider and understand shifts in customer sentiment will be best placed to take advantage. Amidst volatility and uncertainty, the immediate post-lockdown period will see a flux across all industries as organisations adapt to these emerging behaviours. This necessity represents an unparalleled opportunity. Organisations must take the opportunity to reshape not only in light of COVID-19, but in line with broader evolutionary changes in preferences – namely, the importance of both digital capabilities and putting purpose at the heart of business models. To enact a successful Strategic Transformation, organisations must take the opportunity to consider broadly the how consumers preferences have changed in the 21st century, and reinvent accordingly.
Leon executed a consumer-focused and digitally enabled strategic pivot, increasing their relevance and revenue both during and post the Covid period
Select few organisations were able to react to COVID-19 with a strategic transformation that succeeded in adapting to changing preferences, whilst maintaining alignment between the strategy, business model components and operating model. Alongside taking the required safety precautions, healthy-fast food restaurant Leon promptly pivoted their value proposition to focus on selling raw, restaurant-quality ingredients direct to customers via their e-Commerce site, FeedBritain.
By shifting channel to online and re-shaping their customer relationships through contactless delivery, Leon used existing resources to open up a Covid-resilient revenue stream, whilst executing on their vision to help people to eat and live well. FeedBritain has now become a key part of the Leon service offering, expanding with a new platform in 2021. The most successful business model transformations succeed in meeting an unmet need with a solution that consumers value, enabled appropriately by technology, in a business model that allows the innovation to scale profitably. This is the blueprint that companies must follow.
Even if the immediate threat of the virus may fade in the upcoming months, the real work now starts for organisations across the world. To succeed, the post-pandemic business model transformations must reflect the impact of the crisis on consumers. As Leon’s example shows, by placing consumers at the heart of the business model transformation, with digital capabilities and purpose embedded, organisations will extract and deliver more value – for both the organisation and the consumer.
Rob Beard, Consultant
Rob is an Innovation and Strategy consultant with experience within public sector/government, financial services and consumer products. He has a particular interest in business model transformation.
Matteo Ceccarelli, Associate Consultant
Matteo is a consultant in the Enterprise Model & Strategy team, with experience in retail & consumer products and public sector. He is mainly interested in innovative and strategic business transformations, led by sustainable approaches.