The coronavirus pandemic redefined the way we live, work and do cross-border trade. It marked the beginning of a new decade – a global refraction point where trends and transformations that were developing before the crisis were suddenly catapulted forward.
In this article we explore the business implications of seven accelerating trends that you need to understand, adapt to and leverage to improve your odds of winning in the new business landscape.
1.Shifting points of gravity
The countries that have curbed both the societal and financial impacts of the pandemic – and made successful progress toward recovery – will take a prominent role in the new world hierarchy of economic power. Within these regions, new hubs of innovation, growth and production will appear rapidly and attract global talent, capital and new technologies.
Conversely, some emerging markets are likely to fall behind in the next decade as public health concerns, loss of FDI and poverty stall their previous speed of development and status as growth markets. As countries strive for a higher level of self-sufficiency and take steps to diversify trade partners, foreign direct investment and new business will increasingly take place between nations with favourable geopolitical relations.
Monitoring developments in new markets and adapting sales, production and supply networks is critical. Diversifying revenue streams and tapping into growth opportunities, standards and trends in new regions will also be key to future growth for Swedish companies. This, for example, could mean looking beyond Silicon Valley and China to emerging tech and production hubs in Vietnam and Mexico.
2. A more policy-driven economy
Governments were forced to step in and save businesses and jobs during the pandemic via targeted support measures and massive economic stimulus. These stimulus packages, some of which are still forthcoming, will have a major impact on how the world’s economies develop over the next decade.
In addition, growing tension in trade relations means that governments are set to take on a larger role in international business. In 2020, state owned enterprises accounted for assets worth close to 50 per cent of global GDP. Some of the ownership changes that took place during the pandemic are likely to remain long-term and redefine business dynamics. Specific sectors will see increased government influence as regulations, incentives and subsidies set the course for technology development.
Tariffs will be used to increase nationalisation and emission regulations to boost sustainability. Governments will also push their agenda via policies and collaborations in multiple industries using the public private partnership (PPP) model.
Business leaders will need to navigate new regulations and policies, primarily related to workforce, financial security and risk management. Some companies and sectors will need to adapt to government intervention by building stronger business-to-government (B2G) capabilities, including learning how to influence policy makers, perform B2G sales and engage in PPPs.
Increased transparency and trust in critical sectors such as infrastructure, technology and artificial intelligence will also be vital. By strengthening relations with key stakeholders and monitoring government agendas, incentives and regulations in each market, Swedish companies can capture new business opportunities worldwide.
3. Emerging data borders
Data will be one of the most valuable commodities in the next decade and increasingly drive data protectionism and the rise of new “data borders”. These borders will primarily be defined by regulations related to data protection and data transfer. The nations that can gather, store and use the most public and private sector data are likely to gain a competitive edge.
New political alliances will be formed via data sharing and joint regulations for data integrity and collection. Furthermore, new standards for collaborative cloud computing and emerging technologies such as 5G and IoT are likely to differ from region to region.
As a result, parallel “digital universes” will emerge between regions where standards and the types of services will be different. The EU’s GDPR laws are already solidifying the data border between Europe and the rest of the world. Meanwhile, China’s regulations state that data must be stored locally. The risk of digital trade wars between countries and regions is also overhanging. India’s boycott of 56 smartphone apps is just one recent example.
Companies need to stay informed and have a clear understanding of international data regulations as new data borders emerge between nations and regions. This includes identifying the different “digital universes” that exists and knowing how to engage effectively. As each region moves toward independent data rules and digital services, strategies for digital expansion will need to be carefully adapted to each region and market.
4. New competitive ecosystems
A wave of consolidations, mergers and acquisitions during the pandemic has prompted fierce competition between remaining players looking to secure new market positions. Adaptability, resilience, speed and digital capabilities are key criteria for staying relevant – all of which requires collaboration.
New ecosystems are taking shape where more and more companies are finding new revenue streams that allow for growth outside of their core business. This trend is currently illustrated by retailers and software providers who have found new ecosystems and sales channels in sectors such as logistics, entertainment platforms, EdTech and health.
Unexpected collaborations are also emerging as traditional players look to strengthen their ties with startups. Banks have set a precedent as they take a clearer position in ecosystems for e-commerce, digital payments and InsurTech.
Finding a new competitive role in business ecosystems will be decisive for competitiveness. Companies need to identify potential partners, establish close collaborations and co-create new solutions seamlessly across sectors. Companies should also look at expanding R&D activities to other sectors to identify new business opportunities, as well as be prepared to move up and down the supply chain, while also considering non-traditional collaborations that can strengthen market positions.
5. Regionalised and automated supply chains
Supply chains were set up over decades to be global and to facilitate just-in-time deliveries with optimised cost structures – not to withstand crisis. This reality is changing fast as more and more companies rethink the geography of supply chains to mitigate risk and bring operations closer to customers in regional markets.
More and more companies are setting up production, and to some extent R&D, with a local and regional strategy in mind. Coupled with the rapid development of automation and new technologies for Industry 4.0, the shift toward regional production hubs will pave the way for innovation, shorter lead times and reduced supply chain volatility in times of crisis.
During the pandemic, supply chains faced serious disruptions worldwide and the risks associated with relying on China for intermediate goods became clear. As companies diversify their supply networks in Asia away from China, economies such as Vietnam, Taiwan, Thailand and India are likely to reap the benefits.
Rethinking supply chains will be a critical step in all strategic planning. Companies need to adapt their portfolio of suppliers and logistic providers and focus on short- to long-term scenario planning and risk assessment. This may also involve allocating resources to building smart factories and sales capabilities in new manufacturing locations to gain long-term cost and quality advantages.
6. Accelerated servitisation
Service-oriented business models are on the rise in every industry and will continue to surge over the next decade. Digitalisation is just one of several drivers of the services economy. In the wake of the pandemic, companies will be left with limited liquidity and will therefore need greater flexibility and cost transparency.
A shift from capital expenditures to operational expenditures is expected for entire industries as decision-makers are less willing to finance larger investments in goods. In the automotive sector alone, services are expected to account for 19 per cent of revenues by 2030 (3 per cent in 2019) and 36 per cent of profits (4 per cent in 2019). At the same time, the lower up-front costs of services will allow for new opportunities for premium goods in traditionally price sensitive markets.
While many Swedish companies have been in the forefront of digitally powered services, more companies need to speed up the transition to service-oriented business models to stay relevant and capture new opportunities. This requires building a network of cross-industry service partners in each market while, in addition, establishing processes to educate customers and partners on lifetime value and cost of ownership. Organisations should also ramp up the adoption of services for internal purposes such as sales performance measurement, service innovation and customer relationship management.
7. Conscious and connected consumers
Prior to the pandemic, the increased wealth and prosperity of the growing middle classes was a growth engine for the consumer market. With the subsequent surge in e-commerce as countries went into lockdown, consumers have become far more discerning online – carefully weighing the pros and cons of products in terms of quality, affordability and sustainability.
In addition, the pandemic has driven consumers to pay more attention to their home environments, personal health and lifestyle preferences. This development is prompting an upswing for sectors such as health, insurance and finance. While the younger, digitally native generation had higher expectations on customer experience and seamless online services before the crisis, these expectations on fast and user-friendly digital solutions are rapidly migrating to all age groups.
Understanding how consumer behaviour has changed and adapting offerings, marketing and sales is critical for success. Companies in all consumer-facing industries need to boost their focus on customer experience, digital solutions and data analysis. To persuade the modern, post-pandemic consumer, the sustainability performance of products and services should be communicated in a transparent way to avoid greenwashing. In addition, finding ways of customising offerings in global markets will be key to winning customer loyalty.
Want to know which transformations have accelerated during the pandemic and how they will affect your business? Continue reading.