Fusing Technology with Adjacency Strategy to Thrive in a Post-COVID World

This article was originally published in BW businessworld.in and has been reproduced here with permission.

Let’s take a closer look at how technology can play a major role in redefining an organization’s strategy using adjacency as a strategy.

In a global order disrupted by COVID-19, the new normal is very dynamic. For any business, the long-term strategy is now no longer sacrosanct. In this dynamic environment, the emergence of Adjacency Strategy assumes critical significance. Adjacency strategy is defined as an extension of the brand’s core business into a hitherto untapped segment or market without disrupting the core construct of the business.

In the post-COVID world, brands are leveraging emerging technology to adopt adjacency strategy and protect their core business. In some cases, they are making the adjacent business itself their new core.

Take online video conferencing tools like Zoom or Teams, for example. These tools have historically been targeted at an enterprise level for cross-border collaboration. However, during the lockdown, these brands created adjacent strategies by targeting opportunities such as online learning and consultation.

Let’s take a closer look at how technology can play a major role in organisations reshaping their strategy using adjacency. Technology firms are increasingly focusing on offerings centred around Digital Workplace for customers. With evidence showing that WFH has increased employee productivity, companies are taking proactive action in this area. A recent study highlighted that 56 per cent of organisations associate “remote working” as the new normal.

The pandemic has negatively impacted banks and financial institutions, especially customer-facing functions such as client acquisitions and servicing. That’s where companies are increasingly adopting adjacency using new-age technology as the backbone. For instance, in India, traditional insurers that rely mainly on agents for sales have seen a decline in policies sold during the pandemic as they are unable to meet with customers during lockdowns.

Banks are trying to adopt adjacent strategies of going more digital in nature and interaction. Though digital has always been part of their core offering, banks need to think if it could become their main value proposition. Customer journeys, which involve branches, will now have to be replaced by their digital equivalent. And, we have already seen evidence of digital propositions succeeding in the time of COVID.

For instance, India-based online insurer Digit Insurance, which has digital onboarding processes, has seen a 50 per cent sales increase during the crisis. ICICI recently introduced digital KYC without physical interactions using online video conferencing and other tools for customer onboarding.

Going forward, it is not hard to imagine the rise of the next generation of neobanks – those that exist solely on the mobile using a combination of technologies such as voice, video, augmented reality, among others to deliver a superior experience to customers. In that sense, COVID-19 provides an opportunity for banks to transform from a mix of physical and digital to going completely digital.

Manufacturing firms are using new emerging technology tools such as AR/VR to collaboratively work and launch new product lines. Many are turning to 5G for building predictive maintenance systems. The more advanced companies are resorting to developing digital twins – a digital replica of a physical machine. Businesses with extensive multi-level supply chains are driving adoption of AI to ensure they have better visibility and can respond rapidly to future market shocks.

The rise of the pandemic has also brought 3D printing to the mainstream. While it is largely being used for medical supplies currently, the interest levels will likely mean that companies will start actively engaging with the technology beyond their innovation labs.

Contactless retail stores such as Amazon Go are a good illustration of adjacency using technology. In the future, we could see retailers use smart inventory management systems and actively mix usage of their stores for the high-street consumer and as a fulfilment centre for online orders as well. There will likely be increased usage of facial recognition technologies, particularly for self-serving, fully automated stores.

One under-appreciated nuance of adjacency strategy using technology is that companies can gain enough competency to start creating businesses out of their adjacent businesses. The case of British online grocer Ocado, which now supplies its technology to competitors as well, is instructive. The time has now come to make such strategies as part of an organisation’s core construct.

COVID-19 has forced companies to focus more on agile execution than ever before. Adaptive business strategy using new-age technologies like AI, ML and 5G should be the way forward. For this, businesses must first realign and reorient their agendas and create business plans centred around new-age technologies that are more amenable to mid-term course correction.

Closely tied to agile business plans is an effective scenario building, taking multiple internal and external factors into consideration. Diversification or adjacency strategy should not be reactive in nature but be part of the organisation’s DNA. That’s where technology can play a major role in not only aiding decision making but also be at the forefront of actual execution.

We are living in a new, fragile world. A robust, workable, flexible technology-driven business strategy that is resilient to the next big disruption in global operations is the need of the hour for organisations today.