Our low touch future with Nick De Mey
Podcast episode 31
COVID-19 is accelerating the adoption of technologies that would otherwise have taken years to go mainstream. But how are companies evolving in this “low touch” future?
Nick De Mey, co-founder of the Board of Innovation, says it takes more than just a QR Code or an app to succeed under the “new normal.”
Below is a transcript of this conversation. Some parts have been edited for clarity.
Michael Hainsworth: COVID-19 is accelerating the adoption of technologies that would have taken years or decades to go mainstream. Take the low leak QR code. In 2011, only 4 percent of Americans had ever scanned one of these 2.0 versions of the bar code. You've seen them, those collections of squares that look like a space invaders video game machine from 1977 blew up or something. You see them on restaurant tables everywhere today. So for my first dinner out on a patio, since lockdown, I asked my waiter, if she waited on 10 tables, how many customers would have scanned the sticker on the table instead of asking for a menu? He said nine. 90 percent knew to hit the code.
Nick De Mey is a principal at the board of innovation. He helps companies understand how to evolve in this low touch economy under this new normal. I began by asking him to define not low touch, but how do you define the new normal?
Nick De Mey: When we look at the low touch economy, or what we see as new normal, we mainly look at three elements. One, of course, is the different changes that are happening due to the pandemic itself. So the health crisis, this has less of our attention. Our biggest focus today is on the changes in human behavior and economic disruption it creates. So basically, the new ways that companies and consumers are interacting with a chart. That's frankly, the most important change.
MH: Well you describe a feedback loop for the low touch economy, in which the longer the health measures sustain, the more fundamental the behavior shifts. What though of issues like Zoom fatigue? You know, what's the difference between a short term solution and a long term evolution?
NDM: Most people today, they have had some kind of a lockdown experience. So everything was restricted and people had to change their behavior from one day to the other. But it's important to look at which of those elements are just temporary things (for example, homeschooling). People made some other changes, like the adoption of a lot of new digital tools, a lot of new e-commerce, a lot of the older generation that's suddenly connected now to the internet or they are at least using more digital tools than before. Those kinds of habits that create more convenience for people. And those kinds of habits will probably stay for a longer time.
MH: So it sounds like what you're talking about is not a wholesale change in the way we live our lives, but an acceleration of the adoption of a variety of technologies and mindset.
NDM: Yes, indeed. There was a lot of Doomsday talk that the world will be totally different and so on. I think that's a more nuanced view. And also many of our webinars and reports, we point out a lot of things that will bounce back to normal, and that's what people have already experienced in certain regions but there are some certain things that will be different from now on like the adoption of a lot of digital technologies.
You could look at domains that were a little bit more conservative, like the legal industry or industries are like construction and architecture. There are certain domains where digital transformation was a little bit slow. Then this crisis suddenly accelerated a lot of the adoption of those tools. So first, as an innovator, it's quite an exciting time now to track once what's going on. Unfortunately there's also the health crisis. But it's interesting as an innovator to see how many new tools and technologies are being experimented on now and how it can influence the life of other people.
I think the more fundamental changes are in the backend, a lot of new flows are being set up and policies are being adopted.
MH: You mentioned the legal industry as an example. I can imagine e-health is another one too, where these were ancient industries. I know when you buy a house, someone still uses a fax machine. So it sounds like what we're seeing here is we're dragging some of these older economies and older professions into the modern age. How do you go about doing that effectively? Because it's one thing just to sell everyone that they can jump on a Zoom call now, but there are going to be processes and there are going to be issues and protocols that need to be put in place. How do we ensure that our own organizations have that pivot in a positive fashion?
NDM: Yeah, very good question. Many people look at these changes and they will look at the technology. They will look at adoption of new video tools or data management tools, but that's just an artificial layer.
I think the more fundamental changes or what's interesting to track is that in the backend, a lot of new flows are being set up and policies are being adopted. And maybe a lot of the barriers that existed for years or decades, even in terms of laws and regulation, were suddenly improved in a matter of weeks. Local governments, they changed regulations. Let’s say, if you visit your doctor remotely, that it's okay with your insurers, that they can actually count as an official doctor's visits. Those barriers existed for a long time.
Every company as well, they have a lot of policies in place, but they often aligned with the legal and regulatory frameworks of those local governments. So if by tracking what's going on in changes in regulation and laws, companies will also need to change their policies. And that creates a new opportunity because that will take away hurdles that existed for decades that are now open territory. Now you can actually use that open space to innovate. Again, that's an exciting change. It’s less about the technology, more about how the backend is now quickly evolving.
MH: Well, let's talk a little bit about that technology, even though as you point out, it's ultimately the societal change, that will be the indelible mark that COVID-19 leaves. You plotted on a graph, everything from the consumer adoption rate of the flush toilet to the microwave. As the rate of product adoption accelerates, can we connect that to permanent change in the way we operate things to COVID-19?
NDM: Already due to the fact that people are more connected and information is more exchanged, you already see in the last few years that technology adoption is going quicker and quicker. So that's what's already happening.
What this crisis now accelerates is that in a matter of weeks, many people were forced to start using new tools, a whole new audience is suddenly connected to online services. They do their groceries online, order food online, connect with their pharmacies online. And that's something that will probably stay here for a longer time. We don't see technology as the main driver in this era. It's more impactful to see how consumer behavior is evolving, how our society is evolving. And the technology is just an enabler. Those tools existed and now are being adopted and used in a new way. People are improvising with the tools that they have. People are using Zoom for babysitting or to facilitate your wedding, but those tools were never designed for that purpose.
In the next wave, in the year ahead, we will now see a lot of experiments with those technologies. People are trying those tools. People are socializing in online games because they feel disconnected from other people. And then those tools will be optimized for those new specific use cases. If you're out there as an innovator, it's interesting how people are experimenting with those technologies for things that they were never designed for. So that's something to keep an eye on, how people mix and match or remix those tools for new use cases.
MH: So for people who may not have gotten involved in a Zoom conference call for some time, because they never really found themselves in the need for it right away, or the adoption of touchless contactless banking type technologies at the retail level with your store that now has to only let one person in at a time. How many years did COVID push adoption forward. Do you think of any given technology?
NDM: I think the CEO of Microsoft, I think they just said it's about 10 years of tech adoption forced in two, three months for certain technologies. It depends on the use case, but I can definitely see that in, like I mentioned, the use of grocery sales or online banking. There was definitely a certain audience, typically older generations, that were reluctant to jump on this new behavior or new tools. And there was never a real trigger, why they should suddenly start using that. They had their way of working. It takes a long time. But of course, if you're disconnected then suddenly a large group is now forced to try it out. And many people will now see that it offers new convenience. It creates new access to tools. And in terms of timing, it depends on a contact tracing. I can indeed see that we accelerated a couple of years in a matter of a couple of months now. So that's actually nice to see.
MH: Well, let's expand upon your idea that it's not so much about the technology as it is about how we as a society are evolving. And we're just leveraging that technology. What about we as corporations, it's suggested that if you want to evolve, it's the business model that needs to evolve more than the actual product or service, how so?
NDM: It depends a little bit on the context, but overall, one of the big issues now with this crisis is that companies are disconnected from their customers. The traditional sales channel is disrupted because people might not be allowed to fully interact with their offline or retail sales channels, or that in certain areas, there's a big change in the type of demand. People have new priorities. Certain products are less in demand and more in demand. If you want to challenge that, you need to sometimes redesign your way of operating, maybe your full business model. It's not just tweaking your product a little bit, adding a couple of features and it's being solved. You might have to look for a new type of audience, which then would lead to a new depth of sales and marketing channel, or maybe it leads to a new pricing model.
For some industries or some companies, they really need to reinvent themselves. It's just a matter of looking at, how do I connect again with my customers? Maybe just switching from offline communication channels to more digital communication channels. It's good to do this exercise even if the need is not urgent today. I think most companies have experienced now that you need a certain level of flexibility. The market can change in a matter of weeks. So if you don't have those skills in-house to try new channels or new business models, and you need to learn that from scratch when it's really needed, then of course you're not in the best position. So even if you don't have the pressure now to innovate and to find new revenue tomorrow, it's always welcome to have the skills in-house to accelerate and to know how to do experiments.
Certain companies were optimized already; they were ready to scale. Then some companies are just taking your first steps now in this crisis.
MH: Well you've stated Whole Foods Market, as an example of a low touch economy shift, what permanent long term evolution in Whole Foods has come out of COVID-19?
NDM: There are companies that already had a certain e-commerce lead and they're now able to accelerate that. I think the most successful companies today are not the ones that are just now starting with digital transformation or with digital tools. The companies that are doing quite well today already had a track record in using digital technologies. They already had an e-commerce business in place, so they can now accelerate on that behavior.
It's not just only the front end, either. They also have a supply chain that already was optimized, if they use certain dark stores or supply chain solutions to have logistics processes in urban centers that are optimized for local logistics. That's a lot of buzzwords but it means that those companies already had flexible logistics solutions in-house. So they were able to deliver locally in a very efficient way, while you see other organizations in the same industry, that they had some kind of a e-commerce business in place, but just more like a marketing gimmick on top, just to make sure that there is some kind of offering but they could never scale up. So as soon as more people started ordering online, they could not handle it. You had to wait weeks to get your products delivered.
Certain companies were optimized already; they were ready to scale. Then some companies are just taking your first steps now in this crisis. And unfortunately they can't keep up. So there's a big gap in digital adoption in large companies. Some are just doing better already, but give a year. Every company is now clear on like, these things be a side thing or a gimmick in the organization.
MH: We've looked at fashion brand Zalando as an example, as one that has a broad infrastructure in house to move into other business areas. How would you like to see a company like that evolve?
NDM: Businesses like Zalando are built on digital infrastructure. They have the right people in-house with the right mindset or right process in place. But what’s interesting here is that companies like Zalando are active in an industry that is also under pressure. People are not buying as many clothes today as they normally would. Both online and offline sales in fashion have dropped. It means that such a company with a lot of resources and skills is under pressure. And companies like Zalando are forced now to move into other spaces as well if the crisis continues.
If you're a traditional player and you're certainly being confronted with a player like Zalando entering your market, then you probably need to be a little bit more scared because those companies know how digital works. Those companies are actually interesting to keep an eye on. There are many of those digital players out there that are just being impacted by a drop in demand or being a change in their lifestyle, but they know how to pivot, and they know how the digital era works already.
MH: COVID-19 though is just one trigger for change. There are six mentioned by the Board of Innovation: industry shifts, new regulation, consumer behavior shifts, societal changes, new resources and new technology. What's the other shoe to drop here? What does COVID-19 trigger to change next?
NDM: I think companies were all optimized to work as efficiently as possible to maximize profits, to cut costs wherever possible. As a result, every company has very efficient supply chains, very efficient resources in house. What this crazy crisis now showed was that many companies were actually vulnerable if their supply chain is disrupted. If you've worked with one very efficient supply chain in China, or you only have one sales channel, digital sales channel, or only one very narrow target group, you're quite vulnerable. That's something that comes back in both industry shifts and in consumer behavior.
Companies who are often focused and optimized for one specific audience, with one operating model in place optimized for that use case. Many companies, I think, realize that it makes them vulnerable if changes are happening. So maybe they will create more redundancy right now, create more teams at different locations, different supply chains that have multiple sales channels in place, multiple marketing solutions.
Many people really feel there's more to come with COVID. There's a rise in cases in many regions. There's more tension in terms of nationalism or populism. Climate change is putting more and more pressure on society. So there might be some tipping points there as well. So companies do realize that there's a lot of potential new crises already coming up. If they don't redesign their operating model, don't rethink their business model, they might be hit again, maybe in a couple of months or years. So this situation creates overall awareness that they have to look more at the different scenarios in the near future. It's not that the pandemic was completely out of the blue. It wasn't on the radar for many people. We have similar predictions and forecasts of what might happen with climate change, how it will put pressure on sort of supply chains and companies. But companies that have that information, they rarely acted on it. Hopefully, this is a trigger for many organizations now to reorganize themselves, to be a little bit more redundant, a little more flexible for when the next crisis hits.
I don't think many people will actually want that normal.
MH: So what you're telling me here is that if you want to evolve, it's the business model that needs to evolve more than the actual product or service.
NDM: Yes, if you’re active in the event business, tourism, travel, hospitality, there's no way around that. You have to rethink your business models, or you have to redesign how you operate. But then there's a next layer. Let's say, if you were an insurer today. An insurance company interacts with almost every possible industry. Insurance companies will interact with the travel companies and hotels. If they don't adapt their service to the changes that are happening in other industries, then of course insurance will also be affected. But at the same time, those insurance companies are also interacting with health suppliers, pharmaceutical companies, and those companies are doing quite well today. So I wouldn't focus on every company following the same procedures or the same approach, but being flexible, knowing how to innovate, knowing how to experiment and redesign your business model. I think that should be a skill that every company should have in-house, because if they need to redesign something, they need to have that skill in house to do so.
MH: You point out that when it comes to how we perceive things, 60 percent of what will make us feel normal is rushing the kids off to school in the morning, the traffic jam that follows and visiting the dentist. Are you sure we want to return to normal?
NDM: I don't think many people will actually want that normal. We had a lot of problems in our society and then this crisis made it quite visible. So just reversing everything and trying to get back to the old way of working is probably not a good thing. And to give a practical example, many people started working from home, and there was a change in interaction with employers and employees. In the first few weeks, I assumed that it would create a lot of extra stress and tension. Or even having to see a therapist or something, because it creates extra stress and maybe an extra push for burnout. But actually in the last few weeks, I've talked with several therapists and people in that space and they actually showed me that the opposite was true. For many people, it’s the fact that everybody knows there's more important things than maybe having the perfect slide deck to present to your clients. There are more urgent things you need to manage in a pandemic that also takes away a lot of pressure to be 24/7 high performance or checking in every single hour. People could stay at home and could work on their own time when it fits them. They can be more flexible with their kids. It even took away some of the pressure on their job, knowing that they could improvise more. Managers were less critical about actual outputs. The therapist noted that many people with potential burnout had an opportunity to have a couple of months of a break.
But this, of course, is not universal. There are definitely people that had to work really hard at home with three kids in a small apartment. But overall, the feedback I got from several therapists are that people who had potential burnout and stress had some slack. And those people will not go back to normal. They will realize that if their job was giving them too much stress or tension, those people might find a new employer or a new type of job, knowing that they actually are showing that there's more flexibility in the market. That might be another solution for them instead of going back to the old normal.