It’s a given- businesses all over the world have been experiencing considerable financial difficulties as a result of the COVID-19 pandemic. With lockdowns and restrictions still in place in many places, both large corporations and small-to-medium-sized enterprises (SMEs) have felt the pang of reduced economic activity, disrupted supply chains, and other abrupt changes that have forced businesses to adopt an adapt-or-die approach to in order to avoid being caught in the wave of uncertainty that still plagues the market.
While it’s true that the pandemic has largely brought doom and gloom, no other time has been ripe for businesses to diversify their business model to stay ahead of the new economic reality of the world. But what exactly does it mean to diversify? What are the options available? How can this be achieved?
According to Igor Ansoff, creator of the Ansoff Matrix, diversification refers to the development of new products or services for new markets. While this is considered to be a significantly risky move due to the amount of investment required to execute new business ideas in a new and often-unfamiliar market, successful moves towards diversification can provide businesses with significant returns and may offset business and economic risks in the long term. In the context of the COVID-19 economy, this could mean preparing a business for losses in an existing market by entering a new one.
Learn more about Ansoff’s Matrix here.
A notable trend seen among businesses that have successfully diversified in the last few months is the move towards digital services, particularly e-commerce platforms and services that serve them. According to a report by the World Trade Organization about e-commerce during the COVID-19 pandemic, both B2B and B2C online sales have surged as a result of lockdowns, social distancing measures, and general caution among the public which have rendered going to physical stores or conducting in-person transactions to be a factor in contagion risks. This not only reflects a shift in the channels used by businesses, but it also highlights the fact that they have diversified their services to include digital services to make transactions during the pandemic safer and more convenient.
The clearest example of diversification, however, is the shift many companies have undertaken towards products that directly correspond to the people’s necessities for combating the virus. This is exemplified by companies such as appliance manufacturer Dyson which began producing respirators in the UK to meet the demand from the NHS, fashion retailers like Khaki Bros. which have allocated resources into making face masks, and FMCGs like Beiersdorf and Unilever which have begun emphasizing on the sale of hand sanitizers. This move towards diversification has not only allowed them to access new markets that require certain products, but it has also allowed them to project an image as contributors towards the fight against the virus.
Of course, as previously mentioned, diversification is difficult and is often easier said than done. MohrWolfe’s founder, Ashton Wolfe states “In order to fully capitalize on the opportunities that have begun to emerge during the pandemic, businesses must reflect on their core competencies to determine what their skills are and how they can leverage this to create new products or services to unfamiliar customers. In doing this, they have to be aware of market trends that are best suited to meet the needs of the market and must convince their customers that they are indeed capable of providing products or services that contribute towards the fight against COVID-19. This not only involves significant investments in marketing and research but also into the legal and licensing issues that may emerge.” The key is to stand out amongst your competitors and provide real value in your services. Bad actors are weeded out with the recent uptake in moral business strategies.
All in all, while it is all too easy to give in to the pessimism that has dominated the narrative surrounding COVID-19, businesses that find a way to capitalize on opportunities that come around during the worst of times end up getting ahead of the game in the long run. There has been a noticeable spike in emerging industries looking to overtake their competitors via the media. After being locked down without any means of travel, the first impression is often found online.
Welcome to the new normal: Pandemic Edition.