The sudden shutdown of all businesses due to the epidemic has triggered an economic recession has wreaked havoc on businesses. Many executives have assumed everything is going to change. However, the reality of how the companies are dealing with the crisis and preparing for recovery is quite different.
Spotify, the music streaming company should have benefited due to lockdown as customers would have turned to music to fill their time. But Spotify depends on free users with advertising revenue to sustain it. However, the companies cut their advertising budget, directly hitting the revenue. Spotify immediately pivoted by offering original content in the form of podcasts and it started to sign exclusive contracts with celebrities and started to curate playlists. This gives a new avenue for growth into the future by making it a tastemaker offering diverse content and takes care of the immediate present. Pivoting works for digital business but what about traditional business?
For eg. Restaurants. They were forced to close down due to lockdown. Many restaurants are envisioning permanent closing down. However, one way to survive would be to treat the restaurant as a kitchen for churning out meals and offer eat-in, take out, delivery, and catering. One way to pivot would be to offer a flat rate, set the number of meals per week/ month with limited choices. Another option could be to offer pre-cooked meals with additions and toppings to be added at home. Maybe a video of what can be done can be sent to customers, getting them involved in experiencing and learning. Many such options can be designed depending on local requirements.
The crisis also led to broken supply chains, especially in daily food items. This has offered a new opportunity for small farmers to focus on home markets instead of big retail chains. many farmers have set up online shopping sites offering goods directly to home users. They have also been assisted by the software companies offering them a complete bundle of software required to run a complete business.
Even big companies like Unilever have pivoted to prioritize packaged food, surface cleaners, hygiene products over other products. The move towards in-home consumption would require a repositioning of food and personal care offerings.
An even bigger threat to big companies is that consumers are willing to experiment and preferring companies that are perceived as doing more for society. Brand loyalty can no longer be taken for granted. Brands may have to be repositioned as consumers become more interested in safety, experience, and comfort.
Three conditions are necessary for pivots to work.
- First, it should align the company with one or more long-term trends created by the epidemic.
- Second, It must be a lateral extension of the companies capabilities, reinforcing its strategy.
- Third, it must offer a sustainable model to profitability, one that preserves and enhances brand value.
The economic crisis triggered by the epidemic does not necessarily spell the end of the business. It weeds out business models that fail to pivot to the new reality of shorter value chains, social distancing, enhanced technology use.
How Businesses Have Successfully Pivoted During the Pandemic
by Mauro F. Guillén HBR July 07, 2020
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