During the COVID-19 lockdown I decided to play poker with some friends and it got me thinking about how quickly fortunes can shift. In poker, a game can change significantly with the fourth community card laid out by the dealer. This card is known as ‘the Turn’ because it can and will turn the tide of the hand.
So it got me thinking, is COVID-19 ’the Turn’? Is this the event that will turn the way we interact, learn, play, communicate, run our businesses, and our lives in general? The last 3 months has seen a phenomenal rate of adaptation by both businesses and consumers, and given it looks set to continue well into next year, I think we can comfortably say we are creating a number of new normals.
The Turn - The opportunity for interconnectedness
As an exercise, I thought I would explore some of these changes to daily life with my daughter. So, we created a mind map of some of these impacts. Almost nothing around us remained untouched. While there was no more going to school, e-learning was actually pretty good and fun at times; we had stopped dining out on weekends, but we had picked up an interest in baking. We were missing meeting friends at school and home, but we were speaking more often now to friends and family who were living far away!
Looking at our mind map, it seemed to me that there are many openings for businesses to go further with their digital innovation and emerge from COVID-19 with new ways to make money. For example, when I am searching a cooking website for a recipe to make a cake, I should be able to hit a button to auto-fill my shopping cart with the ingredients – with a commission struck between the site and the home grocery service. Such simple connectedness can reduce overall friction and drop-outs and improve convenience for the customer.
The same argument can be extended to other industries like the one I mainly focus on, banking, wherein knowing a customer’s non-banking transactions can reveal information about customer segment, interests, and overall risk. All of which can lead to quicker lending decisions.
So to return to my poker analogy, to continue playing a strong hand in the COVID-19 era requires:
- Unbiased risk assessment of current processes, technology, supply chain (a business’s current hand)
- Investment to redefine for new normal (continued table stakes)
- Odds assessment of the last card to be played
While assessing the first two, a decent player will make assessment on odds for the last card, which is called the River. In Poker, the Turn got its name because it can and will turn the tide of the hand. The River got its name because the last card can sell you down the river.
To win from here, a business needs to take a crystal ball and predict the likely scenarios in the future.
The River – Watch for the fast-moving flow of changes
The new normal will require digital collaboration amongst businesses. They will need to redefine the value chains where they participate, benefit and add value, so they can find the additional productivity and profit available when you deliver an improved customer experience.
Take education, for example. During the COVID-19 lockdowns the adaptation of schools and universities to e-learning models was remarkable.
It opened many people’s eye to models that were there all along. Distance education has improved dramatically over the last decade and with the pandemic this will likely be accelerated and developed even further.
This period also brought about some new collaborations. Teachers and professors explored opportunities with businesses and external organizations that gave kids the opportunity to turn to the strengths of distance education and allow them to gain critical real-world experience.
I can see how education might redefine its value chain and bring new players in their digital cycle. Not only does this digital connectedness bring more people into the ecosystem, it adds to the quality of education while breaking barriers.
Similarly, in the manufacturing industry there is now stronger demand for digital connectedness. Suppliers and partners benefit from connecting digitally to the supply chain in areas of invoicing, order taking, inventory management and R&D for future projects.
Finally, in the banking sector, if a small business owner from the above manufacturing supply chain needs a loan and can make all required information available digitally – invoices, buyer and supplier details, inventory, collaterals, etc — the bank’s ability to assess risk is simplified, allowing the business to focus on running their shop instead of arranging funds. To be clear, this is not only about efficiency in lending. A true digital connect will also provide huge value in terms of financial advice, suggesting the right products and pricing. All of this enables businesses to invest more and expand.
Businesses today must participate in defining, creating, and building this digital virtuous cycle with their partners. Financial institutions in particular, given their central place in a nation’s economy, need to lead this digital connect. Many are already on the digital transformation journey and engaging in various partnerships. However, these partnerships need to be expanded beyond just data and customer acquisition. To accelerate digital collaboration, FIs must think in terms of a platform that can realize the benefits of collaboration, optimize data sources, break down silos and learn from itself. They need the ability to test out various scenarios and operationalize advanced analytics and machine learning models to optimize interactions with their customers and partners while managing risks.
Playing your best hand
To prepare for this new normal, digital collaboration is key. Businesses need to assess and invest in key areas of supply chain, innovate, partner, and willingly share the profits in proportion to value, to build the new digital virtuous cycle.
A collaborative digital ecosystem requires businesses to invest in technology that will automate work that adds little value to their mission. If you sell loans or education or car parts, you need to focus on that and not security, cloud, software and all the other specialty and administrative areas.
Many businesses had already begun exploring this and COVID-19 has only fast-tracked it. However, I believe those that dare, win! Whatever changes come about due to COVID-19, we must transform our businesses to ensure digital collaboration with our partners.