While brands crumbled into administration or struggled to adapt, digital-native startups thrived in the pandemic. What can big enterprises learn?
Digital transformation. Until now, many found the phrase confusing, nebulous, even meaningless altogether. But like so many things over the past 18 months, the pandemic changed everything.
With global lockdowns forcing companies to transform their operations, the adage that digital transformation was “do or die” suddenly came to pass. More than ever before, digital capabilities became integral to day-to-day operations, almost across the board.
Legacy mindsets really did slow people down, while digital natives thrived. Those that lagged before struggled even more, while the digital natives and startups were well equipped to deepen their capabilities and improve their offerings, thanks to their nimbleness and agility.
So what lessons do these smaller, younger players offer to older and bigger enterprises? Here are six key takeaways.
A hybrid working world is on the horizon, with companies relying on a mix of in-office staff and remote workers, depending on necessity. Downsizing on expensive office estate has obvious financial appeals, but it also offers real operational agility for a huge range of organisations.
Engine B is a startup that provides data services to the professional services industry. It won £1.7m in funding in April 2020, just after the first UK lockdown.
According to CEO Shamus Rae, the company had a “big advantage over most of our larger counterparts” because it wasn’t running any legacy systems.
“All our work and support systems were in the cloud and we were already leveraging remote outsourced services for finance and HR,” Rae says. When the pandemic hit, Engine B was impacted early, he says, because some of its staff became ill. It quickly moved to remote working before the first lockdown, minimising further risks.
“We were lucky to be in a co-working space where we could terminate our office at short notice and pivot to remote working without any continuing costs.”
Once the preserve of startups, more Silicon Valley businesses are adopting a mixed or remote model. Companies like GitLab, for example, have long been majority remote, even before the pandemic struck. This set them up for the future of work, expanding their talent pool in the process.
Martin Rehak is CEO and founder of security fintech startup Resistant.ai, which launched in 2019 and grew over the pandemic. For companies to remain competitive, they must commit to automation in the same manner as the smaller, digital-native companies, he believes.
Businesses must take automation and digital transformation seriously or die, says Rehak. The way forward can be illustrated by developments in chess over the years. Computers long ago proved their chops against humans at the ancient game, a superiority that remains the case today in a one-on-one match. But economist and former youth chess champion Tyler Cowen notes that if humans and computers work together against another computer, they make a formidable, practically unbeatable team
“If you want to operate in the new world, you’ll have fewer people, they’ll be better trained and they’ll be experts,” Rehak says. Organisations simply shouldn’t use employees to do menial tasks that should have been automated a decade ago. “That is the big transformation.”
Enterprises have long found value in running corporate incubators, attempting to bring some of the startup mindset to legacy companies that may be overwrought with governance, hierarchy and red tape.
Corporate incubators bring early stage startups under the tutelage of the parent organisation, allowing them to operate with autonomy but with access to resources and guidance that otherwise could be hard to come by.
The parent business, meanwhile, gains access to disruptive technology, innovation, and an outsiders’ perspective within the walls of the company before the business spins out.
It’s clear that some large corporates have long understood the value in looking to startups and SMEs. But there’s plenty to learn in a more general sense, too, and especially over this recent, strange period.
“I think that learning will continue and intensify” after the pandemic, says Helena Nimmo, CIO of software development company Endava. A lot of large companies have already established digital incubation units where they trial a new digital layer on top of some of their heritage IT, she notes. For many companies, it’s now OK to try and fail.
“I think that is a huge shift in many mindsets.”
It’s no secret that many tech companies flourished under the challenging circumstances of the pandemic. It was another matter for retailers.
The brands of high-profile casualties like Arcadia Group, which went into administration last November, were quickly snapped up by digital-first retailers such as Asos and Boohoo. The reliance on brick-and-mortar stores meant businesses like Topshop and Burton weren’t considered viable as they were.
The fact that huge e-commerce platforms absorbed them suggests a shifting requirement for genuine “omnichannel” retail, where digital platforms are melded with physical assets but in a smarter way than merely occupying premium real estate locations.
Perhaps nothing could have saved Arcadia from its fate, but there are lessons to be learned all the same. Take the automotive sector, which initially felt the full brunt of the pandemic as economies everywhere buckled. After a recovery in search queries towards the end of 2020, dealerships began to connect their offerings digitally. They altered the online buying experience based on customer need, merging digital channels with physical logistics.
Many of us gave cash a wide berth, with businesses favouring contactless payments. Santander, which had faced challenges from challenger banks such as Monzo, took the opportunity in 2020 to rethink its approach to digital.
Rather than turn in-house, it partnered with fintech startup Personetics to drive the backbone of its digital offering. The bank launched My Money Manager in November, bringing it somewhat up to speed with the neobanks.
This is a clear-cut case of an enterprise turning to a fintech startup to deliver the capabilities it had been lacking. The bank takes this seriously, viewing startup collaboration as a key pillar in its strategy. It hopes to work with the businesses that emerge from its fintech venture capital arm, Mouro Capital, which it spun out in 2020.
Sweating the assets
A lot of corporates fail to look forward in their business strategies, aligning the technology strategy and roadmap accordingly, says Jaco Vermuelen, a portfolio CTO currently at BML Digital. Remote communication tools like Skype lingered on many of our machines since its first software client was released in 2003, but it wasn’t until the pandemic that businesses were forced to use such stuff remotely.
However, smaller businesses have a stronger imperative to actually utilise what they’ve paid for, gaining maximum value.
“Smaller organisations might face greater pressures, so they definitely look at what they can do with their assets,” Vermuelen says. “Since they are in a near constant shaping phase, they look at how these need to be augmented or replaced when it doesn’t meet the objectives they’ve had for the business.”
To make the most of a company’s assets, a shift towards an outcome-based mindset is required. Startups have long had a tendency – especially in the software industry – to prioritise results over process. It’s something enterprises would do well to consider ahead of any future crises.