In a global order disrupted by COVID19, the new normal is very dynamic. The long-term strategy for an organization is now no longer sacrosanct.  It in this dynamic environment that the emergence of Adjacency Strategy should be seen. Adjacency strategy is defined as an extension of the brand’s core business into a hitherto untapped segment or market without disrupting the core construct of the business. In the post-Covid-19 world, however, brands are now leveraging emerging technology to adopt adjacency strategy and protect their core business, or in some cases making the adjacent business their new core. Take online video conferencing tools like Zoom or Teams, for example. These tools have historically been targeted at an enterprise level for cross-border collaboration. However, during lockdown, these brands created adjacent strategies by targeting opportunities such as online learning and consultation.

Let’s take a closer look at how technology can play a major role in redefining an organization’s strategy using adjacency as a strategy.  Technology firms are increasingly focusing on offerings centered around Digital Workplace for customers. With evidence showing WFH has increased employee productivity, organizations have started taking actions in these areas. Capgemini’s recent research highlights that 56% of organizations associate “remote working” as the new normal.  

The pandemic has negatively impacted banks and financial institutions, especially customer-facing functions such as client acquisitions and servicing. That’s where organizations are increasingly adopting adjacency using new-age technology as the backbone. For instance, In India, traditional insurers who rely mainly on agents for sales have seen a decline in policies sold during the crisis as they have been unable to meet with customers during lockdowns. Banks are trying to adopt adjacent strategies of going more digital in nature and interaction. Though digital has always been part of their core offering, banks need to think if it could become their main value proposition. And, we have already seen evidence of digital propositions succeeding in the crisis. For instance, India-based online insurer, Digit Insurance, which has digital onboarding processes, has seen a 50% sales increase during the crisis. ICICI recently has introduced digital KYC without physical interactions using online video conferencing and other tools for customer onboarding. Going forward it is not hard to imagine the rise of a next generation of neobanks – those that exist solely on the mobile using a combination of technologies such as voice, video, augmented reality among others to deliver a superior experience to customers.  Time has come for banks to look at differentiating services using digital channels to replace branch-based services. Customer journeys, which involve branches will now have to be replaced by its digital equivalent. In that sense COVID19 provides an opportunity for banks to transform from a mix of physical and digital to being completely digital.

Manufacturing firms are using new emerging technology tools such as AR/VR to collaboratively work and launch new product lines. Many are also turning to 5G for building predictive maintenance systems. The more advanced among these companies are resorting to developing digital twins – a digital replica of a physical machine. Organizations with extensive multi-level supply chains are driving up their adoption of AI in order to ensure they have better visibility and can respond rapidly to future market shocks. The rise of the pandemic has also brought 3D printing to the mainstream – while it is largely being used for medical supplies currently, the interest levels will likely mean that organizations will start actively engaging with the technology beyond their innovation labs.

Contactless Retail stores such as Amazon Go, are a good illustration of adjacency using technology. In the future, we are likely to see retailers use smart inventory management systems and actively mix usage of their stores for the high-street consumer and as a fulfilment centre for online orders as well. It is likely that there will be an increased usage of facial recognition technologies, particularly for self-serving fully automated stores. One under-appreciated nuance of adjacency strategy using technology – companies can gain enough competency to start creating businesses out of their adjacent businesses. The case of Ocado, the British online grocer, who now supplies its technology to its competitors as well is instructive. The time has now come to make such strategies as part of an organization’s core construct.  

COVID-19 has forced organizations to focus more on agile execution than ever before. Adaptive business strategy using new age technologies like AI, ML and 5G should be the new way of decision-making. For this, organizations must first realign and reorient their agendas and create business plans centered around new age technologies that are more amenable to mid-term course correction.

Closely tied to agile business plans is effective scenario building, taking multiple internal and external factors into consideration. Diversification or adjacency strategy should not be reactive in nature but be part of the organization’s DNA. That’s where Technology can play a major role in not only aiding decision making but also be in the forefront of the actual execution.

We are living in a new, fragile world. A robust, workable, flexible technology driven business strategy which is resilient to the next big disruption in global operations is the need of the hour for organizations today.