Heightening Your Digital Senses — Identifying the Right Dose of Digitalization to Build for Immediate and Long-term Resiliency

By Sam Andrews and Carol Conover

Overview

Several years ago Scientific American published an article detailing how “the brain rewires itself to boost the remaining senses” when one sense is lost. In other words, the brain has the built-in ability to automatically tune and strengthen remaining senses when one is no longer present. In the wake of COVID-19, direct-to-consumer businesses are losing one of their main senses — physical stores. Below we discuss this assumedly temporary loss and how businesses can rewire themselves for resiliency during this unprecedented time in history.

It’s safe to say 2020 is off to a rough start. COVID-19 is causing disruption around the world and there is limitless speculation on how long this will last — weeks, months or even into next year. MIT Technology Review published an article, “We’re Not Going Back to Normal,” arguing that it’s likely we will iteratively go through these periods of lock downs due to insurmountable healthcare constraints in the face of projected virus infection rates. Regardless of the duration, this pandemic has caused a seismic shift in our daily lives, altering how we live both professionally and personally and coining the phrase “shut-in economy.” For this discussion, we’ve chosen to focus on a topic that is equally permeative — digitalization. Let’s consider your degree of digitalization today, and how you can rewire your organization to rally and respond with the resilience necessary for immediate survival along with long-term growth.

Degrees of digitalization

As humans, we have five main senses. In this context, we propose five degrees or levels of digitalization. For the purposes of this discussion, we’re classifying digitalization based on the varying abilities to accept payment virtually for services and/or products rendered.

• Purely digital businesses operate completely online with no need for physical interaction with consumers from initial engagement to payment. These brands tend to be successful in a completely virtual context because they have demystified offerings in their respective verticals and made products and services accessible, convenient, efficient, and cost effective along with a high degree of trust and transparency. Examples include Wayfair, eBay, Legal Zoom, Capella University, and Stitch Fix.
• Mostly digital entities operate primarily online with some physical presence. For example, Amazon has taken steps to extend its value proposition to new physical formats.
• Equally digital and physical brands, often referred to as Omnichannel businesses, are comprised of an intentional distribution of fluid consumer interaction across virtual and physical touchpoints. Some prime examples of this classification include Walmart, Target, and quick-serve restaurants and grocers.
• Mostly physical brands rely heavily on in-person interaction for purchasing while using digital to complement the experience by serving as research destinations to help inform consumers. Ross has chosen not to offer a traditional e-commerce experience but rather focus on building out its physical presence across markets. Automotive retailers (or dealers) is another example of this category. This category can also encompass retailers that have an online shopping and purchasing presence yet, for a multitude of reasons, still realize most of their revenue from their brick and mortar storefronts.
• Purely physical operations possess no presence of virtual interaction, requiring consumers to physically change where they are to consume products or services. Traditional entities ranging from beauty salons to state licensing facilities comprise this category.

So, what happens when a business with some degree of a physical presence suddenly loses that touchpoint, relegated to only virtual, purely digital consumer outlets?

Until recently, businesses have been able to consider and depend on multi-channel touch points as part of their business and customer engagement strategy. And for the first time in in history, since the advent of the internet and virtual technologies, physical, in-person channels are now off limits, albeit temporary. This situation is likely to continue for many months to come as citizens around the world are required to stay at home and restrict interactions to only matters of necessity.

In the wake of an entire consumer channel becoming unexpectedly shuttered, businesses must quickly and astutely rethink their digital strategy to figure out how to keep the lights on in the short term while evolving for continued growth in the longer term. This requires having a strategic plan built on creativity and agility to re-balance business models at any given time, especially for brands that rely on physical experiences with little to no digital connection for their consumers.

The approach

Considering the following factors will enable you to swiftly yet accurately determine the evolution of your business in such extreme and time sensitive conditions:

· What your business is selling or providing.

· Problems solved and solutions presented by your products or services.

· Primary customer dynamics: demographics, socioeconomic statuses, needs, proclivities, and perceived value of your offering(s).

· Your business’s distinctive competence in the marketplace.

· How to solve for now, while creating resiliency for the future.

· Possible and probable constraints and tradeoffs to continue to create and capture value.

For brevity, we’ll focus on the mostly physical category to best illustrate opportunities to pivot to a temporarily pure-digital play. For example, let’s consider a direct-to-consumer retailer with both a physical presence and digital footprint. Although this retailer has a website and mobile app, the majority of their revenue still originates within the store. They have a strategic roadmap that spans the next 24 months for gradually building up sales online and in the app, then the unthinkable occurs — the COVID-19 pandemic sweeps through nearly 200 countries at current count and subsequently hundreds of this retailer’s stores are forced to close for an undetermined amount of time. Immediately, this brand must mobilize to operate in a 100 percent digital condition — for how long, and if this will be a recurring condition, are just two of the countless unknowns.

Immediate, Tactical Pivoting and Strategic Evolution

In the interest of short-term survival, this retailer must plan for the worst-case scenario and evaluate all virtual outlets available for their utilization. Immediate tactics would revolve around getting as much traffic through their existing digital touchpoints while distinguishing themselves from their competitors. Orienting to their unique value propositions, this retailer needs to:

· Evaluate their current assets and data to support existing challenges and unlock new opportunities.

· Reimagine their end-to-end supply chain to bring products closer to the consumer.

· Identify how their products fit with the conditions of the ‘shut-in lifestyle’ day to day.

· Reconsider how to virtually deliver on in-store offerings and experiences valued by customers.

· Adjust operational processes and procedures for expedited go to market endeavors.

By changing the inputs, a response strategy can emerge that allows brands to quickly pivot their business model when the shut-in economy or similar conditions present themselves. Additionally, an unexpected benefit from this type of fire drill is realizing how nimble your business can be in times of great pressure and constraints.

In parallel, our example retailer must be looking beyond the coming weeks to further grow their digital presence, support store re-openings, and establish a plan to flip the switch with the next shut-in wave. Critical strategic moves would include:

· Re-evaluating the business strategy and roadmap to align to resiliency.

· Identifying conditions resulting from the tactical pivot efforts that should become permanent.

· Updating and enriching user experiences across digital touchpoints.

· Intentionally preparing to return to market with restored touchpoint(s).

· Investing in enhanced capabilities across digital touchpoints that facilitate a more connected social community such as hosting virtual shopping events, elevating retail associates as brand ambassadors, and experimenting with emerging technology, such as augmented or virtual reality to enrich the customer experience.

· Defining how the new purely digital model and the traditional way of doing business with physical storefronts are reconciled. They may be able to co-exist as is, or there may be some amount of integration between the two to ensure a cohesive consumer experience.

Elaborating on this last point, of utmost importance is codifying how the newly created pure digital mode of business operation fits when (or if) physical stores re-open. Back to the article referenced at the opening of this paper — when the brain rewires itself to accommodate for the missing sense, if that sense is restored, significant confusion can result for the person experiencing the shift. The brain does not seem capable of immediately reconciling the rewired condition with the newly restored sense. Businesses have to ensure they can do what the human brain seemingly cannot — they must demonstrate fluidity and cohesiveness of experience the moment their purely physical “sense” is restored.

Conclusion

Throughout this discussion we never mention the phrase “shut down.” At Slalom, it is our fervent belief that in times of great challenge such as these, we as businesses and individuals alike can use this moment in time to evolve into stronger versions of what we once were. We can choose to use this timeframe of uncertainty to take stock of our current state, thinking critically and creatively about how to continue on in the face of losing foundational touchpoints or “senses” previously relied upon. If done properly, we all can come out on the other side of this unparalleled pandemic with a repeatable response strategy in times of stress that minimizes business disruption and maintains fluidity of customer experience.

To learn more, contact Slalom Strategy (strategy@slalom.com)