The power of knowledge gained during COVID

By Andrew Smith | Oct 13, 2020 | 0

If knowledge is power, then many brands and consumers have learned a heck of a lot about what is possible in the last 8 months during this global pandemic.  The trick is in understanding what this new knowledge actually changes, whether we have the chance to use it to our advantage, and if so, how quickly.

What knowledge have consumers gained.

Firstly, let’s talk about it from the consumers point of view.  The people who buy our products and services.  Now, I am not solely talking about retail as most people describe it (there is another article coming about why retail should be described more broadly than we do now).  In this instance, pretty much anyone who offers a product or a service is impacted by this knowledge gain.  So, what new stuff have consumers learned in the last 8 months?

For a start, they have probably learned more about digital shopping.  Those who are digitally native will have discovered new brands or pivoted to newer ways to digitally shop (QR, SMS, mobile, AR), those who are not digitally native maybe forayed into digital shopping for the first time.  All these experiences generate knowledge.  That knowledge means that my future behavior will change.  It would be ill-advised to assume that those changes are the same for every person or every vertical.  It sounds exciting to say things like “more than one-third of consumers shop online weekly since coronavirus hit” or “80% of shoppers expect to increase BOPIS and curbside pickup over the next six months, and 85% of shoppers have significantly increased curbside pickup since the pandemic began”[i].  However, when you break these numbers down there are big differences in segments with the bulk of the volume contributing to these numbers coming from segments like Medical, Household goods, Work from home supplies, and groceries.[ii] So it is safe to assume, that consumers shopping habits have changed in different ways for different segments and will continue to do so and with varying levels of elasticity (likelihood to return back to the way things were pre-COVID).

Another piece of juicy knowledge consumers have gained is their awareness to what processes can actually change and what can’t.  This is a big one that is not talked about enough in broader circles but is being felt deeply in places like airlines and hotels.  When I used to work for a telco, I remember sitting in many meetings discussing international roaming revenues.  It was delicious, high margin, and there was not a lot of pressure to remove it.  However, as consumers increasingly became informed about it and other players globally started shifting towards reducing this margin as a differentiator, we had to wave goodbye to its lovely consistent appearance in the profit pool each year.  I am being dramatic, it was the right thing to do by consumers and the brand, and therefore was very much supported broadly by the business.  That does not mean it did not cause pain, though.  We had to make up that gap in other ways through cost reduction and growth.   In this instance, increased knowledge of roaming margins and an increasing feeling that they are unfair, led to less patience for the way we had done things.  During COVID, the only way that the travel industry could survive was to offer the safety net that is “no change fees”.  These fees are a nuisance to consumers, they do not feel intuitively fair, and have always been scoffed at.  However, for the airlines they are big money.  “United took in $625 million in change fees in 2019, while Delta earned $615 million. Industrywide, change fees brought in $2.8 billion in 2019” in the US.[iii] That is a lot of pennies that are now gone.  Not to mention the actual lost revenue of potentially reselling seats that these now lost change fees are meant to make up for.  They are gone now, and it will take a brave airline executive to bring them back.  This and many similar experiences of what is possible, and the increased power of connected consumers being more informed, leads to an increased expectation that businesses “do the right thing” by consumers. In short, consumers patience for processes that do not allow flexibility or feel fair, is dead.

What knowledge have businesses gained?

It has been a rough ride for the last 8 months for many businesses.  Impacts on culture from people losing their jobs or working from home.  Impacts on performance metrics that shareholders have some understanding and forgiveness for (but probably not much).  For some lucky few, the challenges of ramping up operations to meet significantly increased demand.  However, amongst the challenges sits some great stories, too.  Rarely has innovation moved at such a rate of change, and the knowledge we have gained about adaptability and flexibility of business operations will make us stronger for it.  So, what are the big knowledge gains for business?

No matter whether you were fast or slow before COVID, rate of change is possible at a faster rate than you thought.  So many brands had innovation as an embedded capability that meant they could adapt to COVID quickly.  For many brands though, big and small, they didn’t have the resources or capabilities to keep up prior to COVID, or at least they thought they didn’t.  Once the crisis hit, we saw brands everywhere ditching the internal nuances that caused friction, and instead moved and changed what they needed to in order to respond and adapt.  Rate of change (which is one of the best measures of an ‘innovative’ organization) was increased dramatically.  This reduced level of friction will have some elasticity, i.e., we will return to the way we’ve done things in some parts, but knowing what is possible (and has been achieved by many) is powerful if it is harnessed by leadership and used as a catalyst to create a more frictionless innovation engine.

Another biproduct of this crazy time was the ruthless prioritization of effort.  What projects kept going, which ones stopped, and where people focused their time and energy.  Sometimes it was executed as a smart strategy during times of disruption to ensure the right projects happened faster, and in some instances it was a necessity as the workforce had to be reduced and therefore there wasn’t as much ‘effort’ to go around.  Either way, there are lessons in there for the organization if it has the capability to learn (organizational memory is hard!).  One of the most common causes of innovation friction is a lack of evidence dictating where to put our organizational ‘effort’ (a measure of combined resources, people, money, time etc.).  All too often, it is invested in what the leadership team tells the business to be doing, or worse, a spray and hope approach to choosing where to put energy.  In times of disruption, we are forced to retreat to an organizational equivalent of our biological state of “fight or flight”.  This means we focus on the things we need to get done to survive.  Unsurprisingly, the passion projects or the ideas that came from one subjective leader from a conversation with a friend at a BBQ, rarely make the cut.  Instead, we focus on ideas that deliver on the golden rule (deliver value to the business, value for the customer, and is aligned to our core purpose) and are backed by evidence.  The evidence in this instance, was on the news everyday, people were in some state of lock down, unable to travel, and needed to work from home.  Suffice to say that prioritization of effort and using evidence to select the right ideas to pursue, leads to much better results.

What happens when we add these two together?

Consumers are going to shift behaviours, some short term and some more permanent.  It won’t be every consumer in every product set, we need to observe behavior and collect data over the next year to determine where the elasticity lies and where it doesn’t.  To recap the things we do know:

  1. Consumers shopping habits have changed in different ways for different segments and will continue to do so and with varying levels of elasticity (likelihood to return back to the way things were pre-COVID).
  2. Consumers patience for processes that do not allow flexibility or feel fair, is dead.

To respond to these changes, businesses have some new knowledge they have gained that can help them respond:

  1. Knowing what is possible (and has been achieved by many) is powerful if it is harnessed by leadership and used as a catalyst to create a more frictionless innovation engine.
  2. Prioritization of effort and using evidence to select the right ideas to pursue, leads to much better results.

If we reframe the definitional measure of successful innovation to be that of rate of change, i.e., how often we can adapt to changing environmental conditions, then to be ready for a disruption (such as a global pandemic), we need to have an organization that has low amounts of friction in innovation processes.  We know consumers have gained knowledge, and so have retailers.  If knowledge is power, then we are all much more powerful than we were before this whole thing started and have what we need to start reframing our views on innovation.

 

Sources:

[i] Evans, K, Digital Commerce 360, 1st October 2020. https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/

[ii] Commonthread Co, Coronavirus ecommerce impacts, Source: https://commonthreadco.com/blogs/coachs-corner/coronavirus-ecommerce#coronavirus-ecommerce-data

[iii] Hawkins, A, The Verge, Aug 31 2020, https://www.theverge.com/2020/8/31/21409152/united-delta-airlines-change-fee-eliminate-covid

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