Recent sparks of optimism have hinted that stock markets are ready to embrace the next chapter, and consumers are eager to resume the most human of activities – social interaction. But before we set out on the path to recovery, it is critical to reflect on what will pave the way for innovation.
Embracing the Now Normal
This crisis is different than previous ones – it has seen unprecedented investment, accelerated digitalization and ongoing innovation. The paradigm shift of acting in the now normal, not waiting for the new normal, ensued an immediate rethink of the core offer and business models.
Undoubtedly, FMCG companies have had to make decisions across their portfolio: they looked to identify areas to rationalize and act on later, line extension projects were placed in the wait and see bucket and initiatives emerged to address the new consumer need requiring an act now approach.
Evidence from the 2008 Global Financial Crisis (GFC) indicates that companies which innovated during the uncertainty, outperform by up to 30% those that scaled down and return to innovation only when the economy stabilized[1].
Scalable Innovation
So what are the levers that enable brands to innovate successfully during a disruption? Referencing to Euromonitor’s Act Now framework, powered by learnings from the success of innovation during the disruption. Companies will need to creatively activate these five pillars to achieve scale with all new projects.
Needs Centered
The products from yesterday do not meet the need of today or the expectations of tomorrow.
As governments forced nations into temporary containment, consumers were determined to reinstate life-as-usual within the bounds of their home. This resulted in an unprecedented shift in consumer habits, values and affiliations. The experience for everyone has been unique and is only understood with the lens of empathy. Putting the consumer at the center, therefore, has been more necessary than ever.
As the waves of the pandemic continue to sway consumer opinion on what is a necessity vs indulgence, brands will inevitably resort to a consumer-centric approach in future product development.
Purpose Driven
The collision of the health and economic crisis exposed the intricacies of the social fabric by intensifying the focus on welfare and equality. Inevitably this put the companies’ social footprint at the center, employee well-being as a priority and sustainability as the unfaltering next goal.
In the immediate response to the pandemic, sustainability goals made room for crisis management. 29% of food and beverage companies reported a pause in the development or launch of sustainable products due to COVID-19[2]. Yet 91% of global companies supported local communities during the COVID-19 pandemic and 51% report a commitment to a purpose-driven agenda.
As the supply chain stabilized, global businesses have restated sustainability pledges putting purpose at the center. Brands that have constructively contributed to addressing environmental challenges or supporting social cohesion now visibly stand out.
It is becoming unthinkable to innovate without fulfilling not just a need, but a purpose.
Digitally Native
The digital acceleration has landed us five years ahead of where we predicted we would be. Brands moved from tech-savvy to digitally-native which has been impacting all aspects of operations – from monitoring the supply chain to distribution, marketing and staff management.
Consumers adopted a mobile-first attitude and are increasingly making most purchasing decisions with a device at hand. 59% of consumers globally think there will be a permanent change in online shopping as a result of COVID-19 [3] and Euromonitor estimates that global e-commerce sales will reach a new high in 2020 to USD 2 trillion.
Going digital is now a commitment to data-centric decision-making and automation, whilst ensuring that the experience for the customer is up to the high standard you set out to deliver.
Lean Learning
Innovating during the disruption has equipped many with the experience to launch and test quickly, something that innovation teams struggled to embed across organizations for years.
If we learned anything from the past nine months, it is that we must be flexible and adoptable. Here is where the agile principals of prioritizing the customer and testing raw innovation have really helped brands to maintain their position.
Some such shifts have been around incremental innovation to meet the need of the multi-functional home or the pressure on the consumer wallet. Some have been more transformative innovation undertakings like repurposing manufacturing from apparel to PPE. With all, time was of essence, and brands quickly designed a minimum viable option that they sent to the market.
Companies must adopt this mindset and, through learning, master it in order to remain competitive in the future.
Value Focused
However recovery unfolds, consumers, organizations and governments will have large bills to pay.
If the lessons from the 2008 GFC are anything to go by, we can expect an expansion of affordable channels such as discounters, set to grow by 4% in 2021 globally compared to 0.6% growth of the supermarket channel, with Aldi recently announcing the opening of 100 new stores in the UK. And we witnessed long lines of customers in front of Primark in London when it reopened in June 2020, again one of the winners in the GFC recovery.
The challenge for all innovation in the foreseeable future will remain to demonstrate a clear value for the buck – in price, the needs which the product addresses and the purpose it fulfills.
Now What?
The five levers of innovation are innate for young brands; however, the shift to online buying via established sites has inevitably favored the incumbents. These same large brands are now better placed to scale the innovation that has resonated with consumers. It is imperative, therefore, that companies embrace the lessons from the act now approach and use it to fuel innovation during the recovery.
For further insights, watch Euromonitor’s complimentary webinar on demand “Innovating During Coronavirus: A Guide to Recovery and Business”.
[1] https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/reimagining-consumer-goods-innovation-for-the-next-normal
[2] Source: Euromonitor International Voice of the Industry: Sustainability survey, fielded in June 2020, n=201
[3] Source: Euromonitor Voice of the Industry Survey: April 2020
