According to IMF forecasts, the economies of developed countries will slow down by 6.1%, while developing and emerging markets are by 2.2% and 1%, respectively. How severe the consequences of the pandemic will be, we will know after the second wave. As many predict, everything will depend on its strength and geographic reach. But even if it can be avoided, it is highly likely that the global economy will not recover until late 2021. All these factors can lead to a decline in world GDP by $9 trillion over two years and a decrease in the population's real incomes. Together with experts from the corporate accelerator GenerationS, we figure out how this will affect corporations and their investments in start-ups.
Oil and gas companies, airlines, travel agencies, factories, construction companies, retail stores, banks, restaurants, and hotels have been hit hardest by the pandemic. Among the factors that had a significant impact, there are closures of international borders, a decrease in citizens' incomes, and, as a result, a drop in demand, a period of self-isolation and closing of enterprises, disruptions in the supply chain and a massive transition to online functioning.
Nevertheless, there is another, more positive side. Thanks to the same changes, some of the areas were at their peak. These are e-commerce, entertainment, and healthcare. A robust online presence and rapid transformation of business processes significantly contributed to the increase in demand.
The IMF expects a reduction in income among residents of 170 countries, which will lead to an increase in the number of poor and a change in consumption habits. Predictions are already coming true: research by BCG and Romir shows a decline in demand in Russia by 90% of consumer goods. At the same time, 47% of respondents note that times that are even more difficult are still expected. The experts who conducted the study suggest that in the next six months, the cost of everyday shopping, vacations, and going to restaurants will continue to decrease.
At the same time, the researchers believe that the increase in costs is associated with the transition to remote work and health care. If we conduct a rating of those services and services that could get the most significant benefit, housing and communal services, home Internet, OTC drugs, and pay-tv would head it. Online trading has also grown significantly. Consumers quickly appreciated the convenience of online shopping, which increased orders on many platforms by 12% in Moscow and 1% in Russia.
To meet new shopper habits, companies must respond quickly to new conditions. It is best to adapt to those who began to follow current trends and update the operating model of the business even before the quarantine.
With the onset of coronavirus, Airbus launched transport flights from China to Europe with millions of masks for hospital employees. Besides, with the help of 3D printers at its factories in Spain, Germany, and France, the carmaker began to produce protective frames, screens, and visors for the face. Moreover, in the UK, Airbus, along with a group of other manufacturers, received an urgent order to produce 10,000 ventilators for ventilators. In addition, the Airbus Humanity Lab held a hackathon. Employees developed 200 ideas for helping medical services, of which 30 projects were launched. Among them, there is the mask recycling system, filters for fans, and latches that allow you not to touch the door handles.
The second important factor in adapting to the new reality is the digitalization of customer relationships. Here those companies come forward that were able to abandon the paradigm in which online is a secondary channel and realized faster than others realize. The new format of interaction with customers would remain for a long time. For example, banking conglomerate HSBC, faced with the closure of its branches in China, expanded the list of services that customers can access through the WeChat messenger. For example, to find an office or find out the balance, they added the ability to open accounts without visiting the bank.
The third secret of success is the efficient organization of an uninterrupted supply chain. This applies to the delivery of products to the company's warehouses in the context of the closure of production and safe delivery to the end consumer. TradeNetwork was able to solve this problem. This retail chain has faced a complete shutdown of factories in China and the closure of borders. In response to these challenges, the company launched the iTradeMarketplace, where suppliers, buyers, and packaging companies see all the gaps in the supply chain and can quickly close them at the expense of other partners.
The formats of interaction between corporations and accelerators are also changing. Ekaterina Petrova, Director of the corporate accelerator GenerationS, talks about the transition to online and the effectiveness of the new format:
If, in an ordinary crisis, a change in the assortment helped to overcome the outflow of buyers, it will be challenging to overcome the crisis without fundamental changes. Healthcare and e-commerce have had the most innovation in the past three months. These areas have benefited from a financial standpoint.
At the same time, with the onset of the crisis, not only the number of innovative solutions and technologies increased but also the speed of their implementation. This is mainly due to skipping the testing stage on a small number of users and testing several hypotheses. This can be seen in the innovation perception curve, which shows how much time it takes from corporations to master new technologies.
Nevertheless, even this acceleration does not mean that all companies are dramatically innovative. Sometimes corporate and personal barriers can impede the implementation of new solutions. Various creative tools help overcome them and develop non-standard solutions, including “10 Doblin Innovation Models”.
Doblin helps corporations find growth points by leveraging business expertise, audience research, and design thinking. Their methodology is based on ten possible areas of improvement — from the financial model to customer service — and a ready-made set of tactics.
At the same time, there is an opinion that the current changes are temporary. It is unprofitable and risky to invest resources in business restructuring. However, GenerationS thinks a little differently. Their experience of interacting with start-ups and innovations suggests that what the world is facing will become a specific period. Still, the first stage is forming a new reality. Companies that have analysed and established an understanding in which direction to move further to stay afloat will resort to the introduction of new technologies and solutions. Innovation can bring significant competitive advantages to many companies, and this is more important than ever.
In large companies, innovation is either born or developed within the corporation or is attracted from the outside. However, regardless of the model chosen, change begins with the search for new ideas and opportunities. During isolation, this becomes difficult.
To search for innovative solutions in metallurgy at the beginning of 2020, ChelPipe Group launched an accelerator joint with GenerationS. One of the goals of scouting was to attract foreign start-ups. Still, during the pandemic, the focus of most of them was on keeping their companies afloat. Hence, testing technologies in such a difficult period seemed to be a complicated process for them. It was decided to individually study the application with each of the declared foreign start-ups, during which the advantages of the program were highlighted, thereby slightly shifting the focus from a problematic situation in the present to new opportunities and prospects in the future. As a result, out of 300 applications collected within the joint accelerator framework, 109 fell on foreign start-ups.
During the quarantine, all events typical for searching for new ideas — hackathons, ideathons, pitches, demo days, educational sessions — also moved to the online format.
However, scouting start-ups for specific customer requests is not all that accelerators help corporations with. As the example of GenerationS shows, they are also involved in developing an innovative culture:
Understand which creative areas are especially in demand.
Organize training for employees in the practices of their implementation.
Help form an internal team that will develop innovations from the inside.
GenerationS' extensive experience and a vast pool of contacts help build this process and find professional personnel in the field of innovations for partners.
The current situation showed the solutions and the directions they were most in demand. Here we are talking about solutions related to end-users and the improvement of existing production processes in enterprises. Adaptation to new conditions and safety requirements has also left its mark on the direction of finding innovative solutions. Among the TOP-5, the most demanded areas are the following.
— Autonomy. The focus is on innovation aimed at eliminating the risk of the human factor. Most companies are now moving towards systems that can operate without direct social control.
— Identification and tracking. The quarantine regime has demonstrated the importance of tracking the virus early and identifying contact with sick people. Technologies in this direction are also widely in demand in the logistics sector.
— Automation. Complex supply chains will become even more transparent and structured thanks to new technologies in the fields of artificial intelligence and the Internet of Things.
— Online entertainment/learning. The online entertainment industry is now one of the most popular. More and more new and exciting products appear on the market, and companies that provide these services to their customers focus on keeping their level of satisfaction high. Technologies in this direction can also be applied in various educational online programs.
— Cybersecurity Remote operation has affected many head offices of various companies. In a short period, all processes went online, which led to an increase in the number of cyber attacks. For example, in the United States, the distribution of fraudulent emails increased by almost 600%. Confronting such threats is essential for corporations, so innovative solutions in this area are now, especially in demand.
A crisis for many companies is an opportunity to look at their business processes from a different angle. Technologies and solutions in these five areas will become drivers that will help large companies overcome the consequences of the pandemic crisis. Therefore, large corporations are looking for such solutions now. For example, among the graduates of GenerationS, some start-ups develop business solutions in each of the priority areas.
By: Dmitriy Sharov.