The COVID-19 pandemic has put everyone in a quagmire no one knows the way out of. In order to survive the sudden economic shift from physical to digital, people are adopting innovative ways of doing business and connecting with everyone. Now, digital transformation is not just a prospect but a much-needed action for many industries and economies to survive. This applies to both how interactions occur with consumers (online marketing and sales channels, digital products) and the way companies operate (remote working).
Under current circumstances, organizations have to choose whether to invest in digital innovation or to close their doors for good. Instead of planning for growth, branding, and business improvement, these organizations now have to focus on ensuring business continuity and resilience. Besides the necessary shift in operations for survival, opportunities lie for companies to work on future business models with a view to staying competitive when the crisis ends.
Throughout the years, several crises led to long-lasting changes for societies. The Black Death ushered power-shift to increasingly scarce labor resources, World War II accelerated female workforce participation, the 9/11 attacks reshaped transportation and security policies worldwide, and the SARS outbreak paved the way for the rise of Alibaba and other digital giants in e-commerce. All these crises led changes in how businesses and consumers interact. This time is no exception. Companies and communities today have to adopt changes not planned previously. Chinese e-commerce giant JD.com has deployed drones to conduct surveys and design flight corridors. Tech giants like Google, Slack, Microsoft and Facebook are adopting agile working methods and have instructed their employees to work from home until the end of 2020.
With a third of the global population under some type of lockdown, consumers still expect reduced income and less discretionary expenses in foreseeable future. However, there are still some areas of spending, brands of choice, channels and behaviors that consumers are adopting and are planning on maintaining those even after the lockdowns end.
Activities powered by digital elements are attracting new users and increasing the use of previous users manifolds. Consumers expect some of these activities to stay with them in the “next normal”.
Even after the effects of COVID-19 subside, consumers remain hesitant to go back some of their old buying behaviors e.g. travelling. With more than 90% of the world population living with travel restrictions, consumers are not planning to go for international travelling anytime soon with reliably health safety protocols yet to be defined. Besides this, consumer behavior is expected to change as they plan on avoiding shopping in physical stores for grocery and non-grocery items, and keeping visits to mall to the minimum.
McKinsey & Company conducted a research where they asked consumers about the shopping behaviors they will continue to exhibit. In the illustration above, zones marked black indicate consumers’ aversion and the ones marked blue indicate the behaviors they expect to carry on. The numbers signify degree of aversion or inclination to a specific shopping behavior. As the graph shows, consumers will be less likely to visit the physical stores (especially for non-grocery items), malls or even go for domestic travelling in some countries. This indicates a shift of demand towards the online markets.
A research by McKinsey & Company — done before the coronavirus crisis — shows that less than 30% of companies succeed in digital transformation. And in some cases, businesses that failed in transforming are still recovering. But now, the crisis has given the world no choice and the cost of failure is much more than it was under normal circumstances.
Illustrated below are some companies which prioritized digital investments for transformation that later proved to be one of the key factors behind their success.
According to KPMG, following are the key underlying principles which, if followed, will yield to effective digital transformation for a company.
|Cloud||To remove dependencies on physical data centres and increase accessibility by creation of an online secure platform|
|Anything-as-a-service||To identify parts of an organization that are less critical and do not need to be operated internally. These parts can be outsourced or bought as-a-service.|
|Automation||To reduce man-hours used in doing repetitive tasks. The workforce can be repurposed to more valuable work backed by technology investment priorities.|
|Agile operating models||To future-proof organisations by enabling them to accommodate for changes in services, products,channels, and locations.|
The government of Bangladesh has been planning to march forward with the vision of transforming the country into a digital economy by 2021 and a knowledge-based economy by 2041. Four pillars e.g. Human Resource Development, Connecting Citizens, DIgital Government, and Promotion of ICT Industry are playing central roles in this growth story. More than 120 Bangladeshi companies exported ICT and digital products worth nearly USD 1 billion to 35 countries in 2019. Despite the potential, many industries are currently inadequately equipped for the huge share of the population willing to go digital to have their needs met.
The digital or e-health ecosystem in Bangladesh has a limited number of startups with considerable potential. Few of them have strong cash runways. Some of these companies are experiencing growth in demand due to the current coronavirus situation. Tonic, owned by Grameenphone Limited, has been experiencing a 30% increase in telephone consultations and is planning on launching video consultations soon. The company has also launched a symptom checker in Bangla.
As of December, 2019, the e-commerce market of Bangladesh stood at USD 1.6 billion and is expected to double by the year 2023. Since the advent of the COVID-19, the industry has been facing similar challenges as the other industries. The companies saw a huge spike in demand as most of the urban population has been put into isolation. The sale of daily essentials online has increased by 3-4 times. For example, Sheba.xyz, a platform for home services, has seen more demand for deep cleaning services. Despite such growth in demand, companies have been failing to cater to this huge demand for lack of deliverymen and limited postal service available.
Some of the platforms like Foodpanda, Pathao Foods, Uber Eats, and Shohoz Foods are still operational but have been suffering as most of the restaurants have closed down. The demand for such services still exists and has increased to some extent which is evident from the regular flow of orders from some of the restaurants that have decided to stay open for deliveries.
In the grocery delivery business, Chaldal.com has recently experienced record rise in daily average orders of 15,000 per day, increasing from 5,000 in a normal day. An average order on the platform now amounts to more than BDT 3000 whereas, it was BDT 1500 before the pandemic. To meet the growing demand, these online delivery service providers are planning on setting up more warehouses. Companies from other industries are diversifying into this sector to capture market share. Pathao, an online ride sharing platform, has launched innovative services such as Pathao Tong and Pathao Pharma to serve as a platform for buying groceries, medicines, essentials as these are the services being sought by consumers mostly.
Mobile Financial Services like bKash, Rocket, Nagad, and many others have become the most reliable options for money transfer with a large portion of the population practicing social distancing. The pandemic has kept the agents from opening their shops, and has shown how the industry needs to be even more digitized to avoid these vulnerabilities in future. The Bangladesh Bank has been encouraging people to go cashless and has removed transaction charges while purchasing daily essentials and groceries, increased P2P transactions ceiling from BDT 75,000 to BDT 200,000, and removed all charges for MFS cash-out of upto BDT 1,000 at a time. Moreover, Payment Systems Department of Bangladesh Bank has instructed the RMG factories to pay their employees through MFS accounts. As a result, bKash, Rocket, and Nagad have registered 1.92 million RMG workers by May 5, 2020. Despite the growth in user demand, these companies have been reporting lower transactions due to operational challenges resulting from dependence on field-level workers. Since the government declared general leave from March 27, bKash has been managing on an average BDT 4.5 billion per day whereas the amount was approximately BDT 10 billion before the COVID-19 situation.
Saim Ahmed Shifat, Content Writer at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected]
The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.
We provide end to end strategy and entry support services to international investors.
Stay up-to-date with our Thought Leadership and Insights