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Going back or leaping forward?

A graphic showing customers’ change of behaviour in buying groceries during the Covid-19. In general people are buying less frequently and over half changed their supplier. Interestingly, half of the customers declare the intention to continue with the new shopping habits once the epidemic is over. Image credit: McKinsey

The pandemic and the lock-down, that affected many Countries and most businesses, have created a crises and most likely a point of disruption.

A disruption is a dividing line marking the change of market that affects the value chains or a radical change in technology/production processes that reshapes the market. In this latter case we can place the digitalisation of music made possible by technology that resulted in a dramatic change of the music market. Notice that the Digital Transformation effects are usually falling in this second category, a system’s change resulting in a radical change of the market.

The pandemic effect is, on the contrary, mostly focussed on the market, the changing trends of customers, because of fear, economy depression, change of values.

Now, I appreciate that this is a scheme in black and white whilst reality is full of greys. Indeed, the change in tech and processes influence the market that in turns reinforces the changing force and similarly a change in the market leads to industries scrambling to change their processes and use/adoption of technology to meet the new market trends.

In the current situation industries have discovered that today’s wonderfully efficient value chains are prone to fail in unexpected situations (like the lock down of an entire country) and that the manufacturing processes are difficult to reroute to support the production of different products (like moving from producing apparels to producing masks…). This is something that is pressing the industry to re-think their processes independently of the market change resulting in an acceleration to the shift towards Industry 4.0. At the same time the market has shifted its perception of values and is forcing industry to reposition their offer.

The big question, of course, is to predict if once the epidemic will be over the market sentiment will go back to the pre-epidemic mood and behaviour or if it will keep on the new course.

In this sense it is interesting to look at studies on the retail sector, like the one shown in the picture, indicating that indeed consumers habits have changed and that part of those habits will remain after the epidemic, this is what some 50% of polled people indicated. Notice that the changes in terms of frequency have been significant (consider the timeframe in which they occurred)
My personal bet is that most industries will go back to the pre-epidemic era: their processes have been optimised for that market and there will be a significant market for them to stay in business. At the same time, because of endogenous reasons most of them will start a drift to accommodate the new demand and to decrease risks in case of a new pandemic affecting the supply chains.

However, there will be a few companies, mostly small size and start ups that benefitted from the new landscape and they will continue pressing on with their offer. In the longer term, read end of the decade, some of these small players may will the market attracting more and more market share, leading to the disruption.

This is not unusual. Big changes take some times to consolidate and there will always be a part of the market that will long to return/stay in the previous frame. Overtime, however, what has been set in motion will become an avalanche sweeping away the good old time.

Hence, this is a time of big opportunities, changes have been proven possible under the crises and some will linger and pick up steam. It is a great time to be young, entrepreneur and having a vision of the future because this is the right time to turn that vision into reality.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.