Issue 16 - Winter 2020
HOW 2020 HAS SHAPED BUSINESS AND CONSUMER BEHAVIOUR AND THE TRENDS THAT LOOK SET TO CONTINUE IN 2021
Prior to the global pandemic, the world was already grappling with political, social and environmental change. On the streets and on social networks people were voicing their concerns and demanding a more equal and just society. Issues such as racism, climate change, and homelessness, as well as Government accountability were already dominating the headlines long before we knew anything about Covid-19.
Consumers had been demanding more from businesses in terms of their products and services and were seeking out organisations that have ‘real values’ and offer meaningful change. The pandemic has only intensified this desire, with businesses now being held to a higher standard and expected to be both environmentally and socially responsible at all times.
Like every other country, over the past year we here in Ireland have witnessed enormous change, not only to the way we live our lives, but to how we work, how our health system operates, and how our economy functions – these changes would have been unimaginable just a year ago.
The disruption caused to the business world has been both sudden and dramatic – technology solutions have been accelerated as a result of the crisis – digital transformation, remote operations, and moves away from traditional structures and business models quickly became imperative to survival.
These unexpected events, coupled with the societal changes that were already in train, have radically impacted how we do business and how we live.
So as we look toward 2021, we examine how business and consumer behaviours have changed, and what trends look set to continue.
It is said that ‘necessity is the mother of invention’ and this statement could not be more accurate when it comes to discussing the digitisation of businesses during the pandemic. Literally overnight many companies had to find ways to operate their entire business remotely, digital solutions offered companies continuity which in turn made them resilient and provided them with a life-line. Workplaces were digitally transformed in order to continue to function effectively, and decisions around the adoption, the assessment and the deployment of technology, which ordinarily may have taken years, were achieved by many organisations in a matter of weeks.
In a McKinsey report, entitled ‘Digital Strategy in the Time of Crisis’ it states that the way companies use this moment and the exponential learning curve will "deeply influence their performance in tomorrow's changed world, providing the opportunity to retain greater agility as well as closer ties with customers, employees, and suppliers." Meaning that the business world has irreversibly changed and so organisations need to continue to adapt to this new accelerated digital environment in order to stay relevant.
At the recent Insurance Institute Certified Insurance Director Alumni presentation, Lory Kehoe, Adjunct Assistant Professor, Trinity Business School referenced research which shows that revenue for growth for digital leaders is on average four times that of companies that dabble in disjointed digital initiatives. During this presentation to Institute members, Lory referenced just some of the benefits to those who implement these modernisation initiatives, including, a 40% reduction in IT costs, 40% increase in operations productivity and an increase in revenues.
The majority of organisations are aware of their need to implement digital tools throughout their operations, and are already planning for the next phase of their digital acceleration. In PWC’s CEO Pulse Survey (published in September) organisations were asked if they expect their business models to further embrace digitisation and virtual business models as a result of Covid-19 – it found that the technology, media and telecommunications (24%), health (24%) and financial services (23%) sectors believe that their operations will become more virtual as a result of the changes to their products and services after the pandemic.
This digital transformation of business however is not new – but the pandemic has brought it into sharp focus and it has reshaped the way businesses operate. It is expected that this wide-scale digital adoption will outlast the global pandemic, beyond the roll out of a vaccination.
Capitalism is being revolutionised and growth for profit alone is becoming something of the past. Consumers are becoming increasingly conscious of how their behaviours impact other people and the environment. With this has come the desire for products and services that are both meaningful and environmentally beneficial. In many ways, the pandemic has only intensified this shift, with people becoming even more conscious of where and who they spend their money with.
We are seeing this move towards purpose rather than profit across the board and it would seem that the future of companies will be shaped by the actions they take to address their role in the climate crisis, and other major global issues – in this new ‘values’ focused environment, organisations cannot be passive, and must be seen to be taking action.
Fjords Trends 2020 Report, from Accenture Interactive, outlines how this new move towards purpose, rather than profit will lead to new definitions of growth and new thinking for businesses in terms of their meaning and metrics. New performance measures might include personal growth, good health, reduced waste or employee satisfaction.
The Fjords Report also states that Economic models will evolve. Meanwhile, environmental social and corporate governance will be demanded by shareholders because they believe “it's going to drive everything else they care about: growth, market share, profitability“ according to Robert Eccles, Visiting Professor of Management Practice at Said Business School, University of Oxford.
Businesses are already being held to a higher standard and this looks set to continue as consumers will be seeking out companies whose values and ethics align with their own and positively impact upon the world around us.
Lory Kehoe, Trinity Business School said that it’s not only organisations that are becoming more ‘human’ and ‘conscientious’ but their leaders as well – he calls this the emergence of the ‘compassionate leader’. Lory said, “The last 10 months have been a testing period for everyone in society but also a real test for how companies responded to their customers and employees. Overall, company responses have been positive with increased efforts made to simply do what it takes to be there for customers, but also and refreshingly, taking the same approach to their employees. We have seen the emergence of the compassionate and developmental leader. Where once compassion was seen as a potential sign of weakness, especially within financial services, it has now become table stakes when managing others.”
The world of work is being somewhat revolutionised – and again this has been fast tracked by the pandemic. The modern workplace looks nothing like the one of the past, and so with that comes the need for a completely fresh look at what drives business growth and employee productivity. Business leaders are realising the importance of making their organisations more employee-centric, and as a result of the pandemic, are prioritising their employee’s well-being more than they ever have before. Research has long shown that employees are happiest when they feel they are contributing to meaningful work, and when they feel valued by their employer. However the pandemic has resulted in a host of struggles for many employees - issues such as isolation and loneliness, connectivity issues and adjustments to working from home have all impacted enormously on employee’s well-being and their job satisfaction levels. Business leaders are realising the impact this is having and they have seen the importance of engaging with and making efforts to care for their workforces since the start of the pandemic.
In PWC’s CEO Pulse Survey, 23% of Irish leaders said their first priority would be expanding their health, safety and wellness programmes for their staff in the months ahead. They also have little appetite for making their operations leaner by reducing headcount – only 3% in Ireland said that was their first priority. An overwhelming majority, 97%, said that they felt that protecting employee health and safety would be a lasting result. While, 70% felt that conducting employee well-being initiatives will remain in place for the foreseeable future.
In addition to doing more to help their employees, the pandemic has also resulted in many business leaders becoming more trusting of their staff – mainly because they have less direct control over them. Increasing trust, along with employee satisfaction can result in extremely positive outcomes and better staff performance. Also when there is more trust, there is less stress and this can only be a positive in the current environment!
It’s expected that businesses will look for ways to better engage employees as they continue to work from home and we can expect to see more discussion in relation to employee physical and mental well-being in the workplace.
Over the past year there has been an unprecedented demand for increased internet speeds and bandwidth, everything from business, to education to socialising is being conducted online. A recent report from McKinsey Digital (entitled ‘The Covid-19 Recovery will be Digital’) shows that both business and consumers have vaulted five years forward in digital adoption in just a matter of months.
5G is the fifth generation of mobile wireless communications technology — the upgrade to the 4G network. By using shorter, higher-frequency bands of the radio spectrum, 5G promises lower latency, faster speeds, and greater load capacity. Some researchers believe that 5G could deliver browsing and download speeds 10 to 20 times faster than the 4G network. This is definitely the need of the hour as the internet is fast becoming a basic necessity in everyone’s lives.
With such high download speeds, it will radically change the way we interact on the internet and is expected to influence all facets of how business operates. Insurance is no different, in fact it’s anticipated that 5G will expediently increase the speed of every aspect of insurance, with many in the industry describing it as a tsunami about to take over. Many believe 5G is a window of opportunity for insurers because it offers greater efficacy, and a more precise and accurate calculation of risks. For insurance there are three key ways that 5G will change the industry – this includes:
It’s expected that 5G will impact all areas of insurance. In healthcare for example, it will enable always on and secure device connectivity which is expected to reduce costs and improve outcomes by supporting, proactive and predictive care.
In essence, the more information insurers have access to the more easily they will be able to calculate risks and prevent claims.
However, 5G won’t be rolled out everywhere immediately – but it is on the way and we should expect to see a lot more from it next year.
While many believe that AI is something of a future trend we actually already see it every day in algorithms that preselect content for us.
It would be impossible to talk about AI and not mention the role of 5G – the two are very much intertwined. Put simply, 5G speeds up and enhances the integration of various technologies, including cloud services. AI then analyses this data, but can do so at a much greater speed because of 5G.
Prior to the global pandemic, AI was already invading our daily lives but its relevance has become more prevalent since. International Futurist, Bernard Marr, predicts that AI is set to become an even more valuable tool in 2021, helping us to interpret and understand the world around us. Marr states that the volume of data currently being collected on healthcare, infection rates, and the success of measures we take to prevent the spread of infection will continue to increase. This means that machine learning algorithms will become better informed and increasingly sophisticated in the solutions they uncover.
While many worry that AI has the potential to make some jobs obsolete – it’s much more likely that AI will only serve to increase business productivity and drive success. Over the next few years it’s expected that AI and machine learning will continue to be the most important modern business trend, with companies of all sizes and in all sectors utilising it to provide the most innovative solutions available.
Commenting on the potential impact of AI on the insurance industry, Stephen Dunne, Founder of Praxis Consulting and Lecturer at Dublin Business School said, “AI is set to revolutionise the insurance sector, it will modernise what is in many ways a traditional model and move it towards a much more innovative and tech central one – we can expect it to bring benefits but there will of course be challenges.”
Stephen believes much of the challenges will be around shifting the mindset of consumers and insurers but also particularly in terms of the willingness of customers to share data – which is central to how many of the innovations behind AI work. Stephen outlined three trends which are emerging related to AI and insurance and believes these will be transformative.
The first trend Stephen discusses is “Behaviour Policy Pricing”, which Stephen describes as “the Internet of Things but for insurance and uses data related to our behaviour. Stephen said “This usage based insurance could be a latent type of cover which is activated only when the insurer is actually using the item being insured – for example with motor insurance it will only work when driving a car. It is a switch on / switch off policy and uses policy holder’s current history and behavioural data to adjust the policy premium. This will mean changes for how insurers intake and process data and how they calculate premiums.”
The second trend Stephen mentioned was “Customer Experience and Cover Personalisation” – according to Stephen, this “Enables AI to present to you, using your personalised data, the type of insurance policy it believes you need or want. This innovation works completely off your data and so there is a potential challenge for regulation (in the context of the basis on which the most suitable products are selected) and it will no doubt look at who is driving the online selection process etc. However this is coming down the tracks and could have enormous benefits.”
The last trend Stephen mentioned was “Customised Claims Settlement with AI” – this he said refers to “peer to peer insurance – this is the concept of a virtual claims adjustor and where data is reviewed and organised in real time.” Stephen said this allows customers to review premiums and claims live, and also enables insurers to identify fraud more easily.
Stephen believes that while yes AI will bring its challenges for the insurance sector, its benefits far outweigh any risks – it will however be up to the industry to embrace it, and he believes now is the time to ensure these developments evolve in a way that the insurance sector can be satisfied reflects the unique nature of their product.
While working from home was something that was forced upon many people by the pandemic, the reality is that it’s unlikely to be only a temporary measure. Most companies have made provisions to enable their workers to stay working remotely until the middle of next year, while many, like Microsoft for example, have said that they are happy for their employees to work from home permanently.
Many businesses that may have been nervous with having their workforce remote are now seeing their employees continue to perform and in many cases it’s been reported that many employees in fact believe they are more productive working from home.
A recent study conducted by The National University of Ireland Galway (NUIG) on remote working found that 94% of employees would like to continue to work from home some of the time or all of the time on an ongoing basis. Of that 94%, the majority (54%) said they would like to work remotely several times a week, with 27% saying they would like to do so five days a week and 13% saying several times a month.
But it’s not all a bed of roses – issues such as isolation, poor connectivity, burnout and a lack of boundaries between home life and work, have all been reported as problems facing employees working from home. However, despite these challenges the benefits, such as more flexibility, no traffic, reduced costs etc seem presently to be outweighing the negatives.
During his Certified Insurance Director Alumni presentation, Lory Kehoe, Trinity Business School also commented on how the move to work from home has impacted the insurance industry.
Lory said, “For insurers, we have seen the accelerated shift by consumers from physical to digital. On the insurance employee side, we have seen the mass movement from working in large offices to working at home. The contact centre team members make up a large percentage of this cohort and this has required a huge amount of effort to equip employees with laptops and quickly ensure they have access to all the systems and tools they need to do their jobs supporting customers. More time has been required by team leads and management to spend with agents to help them answer customer queries, convert sales, and process claims. Time has also been invested to ensure that productivity levels and Net Promoter Scores remain at the levels near to where they were before Covid-19 and in addition time has also had to be spent ensuring team members continue to feel valued.”
Lory continued, “If you think about it practically, the ability to sit amongst a group / pod of experienced agents is really a fantastic way to learn from your peers and also gives you the ability to ask a colleague a question if you have a query. Insurers have had to work hard to replicate those informal learning settings through the use of digital platforms such as Zoom, MS Teams and Slack. A move of this magnitude has required many teams working together (IT, operations, contact centre, claims, HR) to continue to deliver for the insurer's customers. It has not been easy, there have been challenges but the 'new normal' has been established successfully and business has continued.”
It would seem that the resounding demand for working from home will remain, even post Covid –therefore this presents both opportunities and challenges for businesses as they will need to redefine how they manage their workforce in the future. As referenced by Lory Kehoe, Dr. Dave Cook, anthropologist from University College London outlines that there are four options for employers in a post Covid-19 world:
1. Remote First
- Where everyone works from home. This might be easier for small and early stage start-ups but challenging for large corporates where sitting next to someone provides a great and effective way of learning.
2. Remote Friendly
- Where people work from home a couple of days a week and spend the rest of the time in the office.
3. Office Only
- This model was under threat prior to Covid-19.
4. What Works for You and Your Business
- This is the most appropriate option but will take time to get right and will need consistent evaluation and tweaking.
