The COVID19 pandemic has been responsible for the global economic slowdown, which has resulted in many businesses shutting down. The way we go about our daily routines and work lives has changed completely, and few businesses have survived by turning this into an opportunity to innovate.
Mohanbir Sawhney, McCormick Foundation Chair of Technology and director of the Center for Research in Technology & Innovation at the Kellogg School of Management, in a TEDxGateway discussion with Govindraj Ethiraj spoke about how businesses have an opportunity to innovate and disrupt long-standing business models.
Edited excerpts of the interview:
While there is uncertainty, there are some things which are clear. One is that is – for many businesses and enterprises, the pandemic has turned into an opportunity. So what are the mega trends that will define this post-pandemic world and what are the business models that people or businesses can design and value propositions that they can take advantage of?
You know, every day when I wake up in the morning I have to pinch myself and ask myself - are we in a dream or is this the reality? And it just seems that we've lived through so much change, so much disruption and unfortunately there doesn't seem to be an end in sight.
Maybe there will be a vaccine that is widespread by the summer next year but we have to prepare for business, life and work to never be the same anymore. What I want to share with you is a positive message, an inspirational message and an uplifting message that hiding in this crisis is an enormous opportunity. The only difference between a crisis and an opportunity in my opinion, is your ability to capitalise on it. You can get swallowed up by a tsunami, or you can have the ride of your life if you decide to surf it.
So what are these mega trends that I think are going to survive, that I think are going to sort of live past the pandemic. In simple words – the pandemic is going to result in a permanent increase in the use of digital and physical networks to access people, products and places. So, let's march through this definition.
What is going on during the pandemic are digital networks and remote work, usage of Zoom and Microsoft Teams has expanded tremendously. People are working remotely and hence, companies like Microsoft are benefiting, the cloud companies are benefiting a lot from the fact that we now need to operate remotely, whether it's shopping, entertainment, eating, healthcare. There has been a rise in the healthcare sector with MDLive and TelaDoc in India. Even fitness is becoming more connected, we can access it over a network. So we're going to use the network a lot more.
The network is not only going to become digital life but a digital lifeline. There are also the physical networks, the delivery networks, whether it's a UPS or whether it's Flipkart or Amazon delivering to your home, or the food delivery companies. They've seen a massive rise. It's no surprise to me that Doordash is going public; Grubhub was sold for $7 billion.
So there's this use of networks to access people, products and places. So, that is the theme that is going to survive. But as we tried to position ourselves towards the pandemic and try to respond to it, I see two phases.
In the short run, what we have to do is we have to pivot for the present, which means we have to protect revenues, we have to protect our costs, reduce our costs, we have to make sure we can survive.
But as we look at the future, we need to think beyond this, we need to position ourselves for the future, we need to actually redesign and reimagine our capabilities and think about next-generation value propositions and business models.
Is this pivoting towards the future? How do we actually reposition our companies, brands, our offerings, our communication, our customers, our value propositions for the future?
So, when I think of pivots, I will think of defined pivots in four dimensions:
1. Pivoting the offering
Let's talk about pivoting the offering, here what is the pain point, what is the problem? The problem is that your current product has lower demand due to the pandemic. So, for some reason, customers can't buy your products. Let's say you're an airline and they can't travel on the airline; you've got fixed costs, you've got fixed capacity, you've still got people, you've still got assets, you've still got operations, you still have all of these people that are on your payroll.
So, here the solution is to figure out how I can take my asset base, how I can take my operations, take my capabilities and build a new product – with the same factory, make a different product, same ingredients but different products.
I deal with a lot of executive education. You look at our beautiful building, this is the building of the Kellogg School of Business. We have a fantastic new building, we do a lot of executive education programmes here, in person programmes, it's a multi-million dollar business for us. Thousands of executives come here every year, but since March, zero executives have come. It has completely shut down. So what do we do? We pivoted.
And I anticipated this, not the pandemic obviously, I didn't see the pandemic coming, but I saw the idea or opportunity that we could create online executive education programmes that were not MOOCs, that were not the classic Coursera courses, but were really engaging courses that combine live instruction with mentors to create a rich hybrid experience. So, I got to working very quickly after the pandemic hit, I launched a digital marketing programme, a product strategy programme and an AI programme.
Just in the last two years, we have done 30 programmes, which is about 7500 people. After the pandemic hit, the demand for these online courses has gone up and we actually now have been able to pivot and generate almost $1 million revenue a month from these online programmes.
So this is how we pivoted because we still have our people, we still have our faculty, which is the most expensive resource. So we've been able to pivot.
2. Pivoting to customer
Let's look at the second pivot – pivoting the customer. So, in this case what happens is that my current customer can no longer buy my product, maybe they don't have a demand for the product, maybe they don't have the budget.
So for some reason they are not able to access or buy the product as it's no longer valuable to them. So in this case, what I do is I pivot to a new customer. I look for a new customer instead of pivoting the product. I have the same product or a similar product but can I find a new customer for it?
So here a classic pivot is from B2B to B2C; or from B2C, to C2B. Also, look at if you're currently selling to consumers, then can you now do a business product, if you're an enterprise company can you serve the small businesses? So, this is kind of like looking at a different industry, a different customer, a different segment.
So one great example of this is what Fitbit has done right now. Fitbit saw a very interesting opportunity that – employers in the pandemic times need to understand how their workforce is doing. You need to sort of check how their health is, you need to check whether they have symptoms of covid19, or whether they are healthy enough to come to work. So, they created an employer offering called 'Fitbit Care Ready for Work' which allows the employer to build a dashboard and template, and employees have to collect and complete a daily check, and also their Fitbit is recording their pulse and so on, because your vital statistics start to change.
3. Pivoting Channel
The third pivot is the channel. This is a huge problem in the pandemic because now customers are locked out of the channel, like I can't go to a restaurant, we just entered into a lockdown in the state of Illinois and in the US you know that the pandemic is spreading very very quickly. So we are no longer able to go to restaurants, we are now no longer able to go to clubs, to gyms. So, your customers are locked out of the channel. So what you need to do is to invent a new channel, you need to think about a new channel, a digital channel, a mobile channel, some sort of a way in which you want to reach customers in ways that you couldn't do before.
And here again, I'm going to tell you a story from India. So, we have a huge problem at Jio, you know that in India, 80% of the market is prepaid, so people go in and they top-up their phones, and even though you can do digital top-ups, many of you do digital top-ups, but many customers still prefer to go to a kirana store, a local store to do the top-up. Now, the kirana stores are closed, how do we do the top-up if we've had a huge threat that our revenues would decline a lot because there was no way for us to top-up the phones.
So, what we did was the team created a new channel, which we call Jio associates. So, Jio associates are people who are recruited within communities, within localities within housing societies, and they are able to go to their network within their local community and activate phones or do the top-ups.
So, this phone itself becomes a point of sale device, so it becomes a past life as we call it. We have recruited in six weeks 1.2 million micro-entrepreneurs who have now become an entirely new and important channel. And as we were discussing in our meeting recently, why would we start this channel, we would always keep this channel. So this is not a digital challenge, it's a physical challenge. It was a great example of how we pivoted and have actually created a fantastic new way to reach and engage with customers.
4. Pivoting Customer Experience
The fourth pivot is pivoting the customer experience. Here, what happens is that let's say that you are delivering a high-touch customer experience where your sales process or customer support process requires a direct and face to face contact with customers but that's not possible during the pandemic.
So here, what I'm finding is that you can take leverage of digital technology, particularly new technologies like AR and VR, and other engaging ways to create high-touch experiences to connect and engage with your customers to provide customer service, to provide customer advice in creative new ways. So, whether it's chatbots or water sports or conversational commerce or voice assistance or VR or AR, these are all alternative ways to engage customers.
Let's look at a cool example, Lowe's is a home improvement company and one of the things that they do is they work very closely with contractors, and contractors in-turn need to work very closely with their teams on the job. Now, the problem with contractors is while the teams are performing their jobs, it takes a lot of time and effort to reach the sites, and it's not as easy to travel.
So they have created something called 'Lowe's for Pros'. This web-based application allows contractors to engage through interactive tools and a shared camera view. They can work remotely with their team, they can diagnose problems, they can troubleshoot issues, and they can make sure that the work gets done right. So your contractors can engage with their project manager with junior staff, without actually having to do these things. So, this is an example of how you create virtual experiences and virtual collaboration.
Let's look at a quick case study of pivoting and this was, you know, a company in Mexico that came to me and said – what are you going to do with my theatres? "I have movie theatres, movie theatres are shut down", they said. So let's look at this company called Cinepolis, what they have done is very creative pivoting. This is Latin America's largest movie theatre change, by the way, they make the most of the money from food. Now covid19 shut down all of their theatres and they did open in August but with severe capacity restrictions.
Also, when they open, there's no movies to watch, rather most major movie launches have been postponed until next year. So, Cinepolis has done a very creative pivoting. First of all, they would say this – if you have 25 or 15 tickets from us, which is 25% of capacity, we will give you the whole theatre, bring your family only, so that way you're in a bubble.
Also, if you don't have content, let's start doing sports content. Let's start broadcasting the NFL, NBA. Let's start hosting birthday parties. They also created a streaming offering of their own that first runs movies to your home - Cinepolis Klick. They bundled Cinepolis Klick with its food.
So, they will actually ship you popcorn and your hot dogs and your nachos to your house from the same restaurant that they have in their theatres. So, they are also bringing the movie theatre experience to drive-ins and so on. So, by the way, the combination of these tactics, their food revenues and their movie revenues are actually not much lower than what they were prior to the pandemic, what a creative way to stay current and to stay engaged, and to stay, and to survive and thrive.
I hope that this gives you a perspective on the fact that what we are going through is not only a crisis but it's an opportunity, but what you need to do is to capitalise on the opportunity, to pivot away from the threat and to pivot towards the opportunity.
After the pandemic is over, those who adapt, those who pivot, those who can kind of position themselves for the new opportunities will not only survive, but they will thrive. After the pandemic is over.
When you look back or even as you look at companies who've managed – tell us something about their DNA, you know, are these companies that those who are used to facing this and thus, are responding swiftly and innovatively as you pointed out, or are these the companies who perhaps found new energy and resilience in this pandemic to do what they've done?
I just wrote an article on this subject called - How Fast is Your Company and it was in Forbes. There, I think one of the things I looked at was the speed of pivots. How are some companies able to pivot quicker? So, it's a combination of things.
It requires, first of all, investments you've made before the pandemic in technology infrastructure, having sort of the agility that comes from having a platform where you've got customer data in one place, where you've got the analytics and you've got the ability to actually sort of, come up with new applications and new opportunities very quickly. I'll use a case in point, you know that, some of you might be familiar with Jio meet. So it was a web video web conferencing live streaming service that parallels the capabilities of zoom. Jio meet was created in response to the pandemic within three months, right, we were in the market on April 30. How did it happen? Because you have the capabilities and infrastructure in place, you have the team in place, you have agile work processes in place. So, I think that you need to be prepared before.
Another example is Tesla, they have created an end to end customer experience that is zero touch. Buying the car, getting the car delivered, getting it serviced, the trade in, the updates of the car over the air, the mobile vans come to your home to do the service delivery. All this is a capability that they put in place before the pandemic hit, but it is now turbocharging their growth.
But that said, the other thing that is important is to build a culture of agility, a culture that says as a leadership team and as an organisation, we need to create the work processes that allow us to move quickly. So, moving quickly requires the body and the body comes from technology and the infrastructure in place. It also requires mind, which is really the idea of having the intellect and the sort of the agile work processes, but it also comes from heart and soul, which are really the passion and the sense of purpose of what you're about and what is the mission of your companies.
So, to that extent you know, when you quote the example of Jio or Reliance in general, a high performance company, they've always grown, they've grown through dips and recessions and existed and you know sustained their progress so to speak, but have you seen in the last seven or eight months companies who perhaps you would have not thought being capable of resilience of grit or determination, showing that?
Yeah, if I look at the example in India is – if you look at the kirana stores, I mean they're small guys, and they suffer, they're suffering from an existential challenge in two dimensions, one is the organised retail and, that is hitting them, the other is e-commerce that is sort of, you know, taking away their market share. Another third challenge is of course the pandemic.
So, they are highly threatened but if you look at a kirana store person, they are very 'jugadu' as we say in India, which means they're very creative, and they're very good at managing customer relationships. So, an interesting sort of pivot that I'm seeing some of them do is that, let the back end, which is the information and the supply chain be run by a large organised player, but then I focus on my front end, on customer service. So that's an example of how even a small unorganised player, which by the way 90% of the retail in India still is, can pivot to exploit this opportunity.
So, I think that one of the things that I find fascinating is that technology is a very democratic force. It's a democratising force, you all have access to 4g networks, you all have access to the cloud, you all have access to the capability. Today, a startup, with two people can access the same world class infrastructure in the cloud, that, you know, a Salesforce or Microsoft can, so take advantage of that leverage, those capabilities – how can I now engage with my customers differently? How can I actually sort of manage in a virtual world? How can I organise my work world in a way that my teams can be remote, that can be working from home?
So, don't think of this merely as a large company opportunity, technology is available to all of you, and it's available by the drink, you know, I pay as you go, you don't have to pay millions of dollars to get access to this. So, that would be kind of the idea, whether it's mobile networks, whether it's devices, whether it's computers, whether it's collaboration technology, go and access it, it's available.
The other trend that we are seeing in India for sure and it's evident and visible elsewhere too is the monopolisation. The large companies have become larger, we're seeing it in manufacturing, and we're obviously seeing it in technology. Now, how do you see this playing out as we go further along the line? Your own company is another classic example, which is a late entrant, but has really, you know, eaten up and edged out most incumbents after a long time.
That's a tough question, I hate the word monopoly and monopolisation. Jio does have 47% revenue market share, which is more than the number two and number three players combined. So, the one thing that everyone always keeps in mind is consumer welfare, our customers coming out ahead. So, I think that if a company gains market share but it leads to consumer welfare, I think that's okay and I think in the case of India, the fact is that the consumers are winners, the price of data, the price of internet access has gone down. Data used to be like $20- $100 per gigabyte when it was 2g, and now it's five cents. India has one of the cheapest data in the world. ARPU is Rs 135, that's less than $2 a month in the US. In the US, it's $70 a month.
So, I think that one thing that regulators need to keep in mind is if consumer welfare is being compromised or not. Well, with that said, I think that the other challenge for these big companies is the amount of data that they control. So, this is where you're starting to see antitrust actions against Google and Facebook around their sort of monopolistic behaviour around customer data, and so on. I think that there is a lot of responsibility that is placed on the shoulders of these companies, and sometimes they are not up to the task. And if things go to the extremes, there will be pressure to break up some of these very large companies, which I think is a concerning development. I will admit that more and more economic power is being concentrated, when we look at the financial markets, 60% of the growth of the S&P over the past years is five companies, so it's a very narrow base, so if the stock market is up, not because everybody is doing well but because a very small number of companies with very large valuations are doing extremely well.
So, that is also dangerous because this is not a broad based recovery, it's a very narrow base, so the power is moving, economic opportunities are moving closer to these smaller companies and that is the nature of technology because technology has network externalities. So, I say let's see where this all leads. I think it's going to be a combination of regulatory action but also paying attention to an increasingly responsible behaviour on behalf of the larger players.
Watch the full interview on YouTube or click on the link here.
