Right now, every company in the world is facing the same question: What’s going to happen when the pandemic is over? Grocery stores and consumer packaged goods manufacturers have experienced an unexpected boost in sales: Will that growth sustain? Hotels and airlines have experienced unprecedented drops in demand: Will their business ever come back? Movie studios, video game producers, and theaters need to envision how the pandemic will permanently affect entertainment habits. When the pandemic is over, many companies will find that their business model has been disrupted in fundamental ways.
Over the last several months, we’ve been working with management teams in a variety of sectors, including retail, entertainment, finance, and health care, to develop a plan for what comes next. What we’ve learned is that conventional strategic thinking hasn’t helped these companies to plan for the next “new normal.” Instead, the best answers have come from a hybrid approach: one that combines traditional business strategy with the latest thinking from social science and innovation theory. Ultimately, planning for a post-pandemic world means answering three questions. The first is: How does your business really make money? Many companies haven’t taken the time to articulate their critical strategic differentiators or map out how money, goods, and information flow from their suppliers to their consumers. Next, who do you depend on to drive the business? Define your most important stakeholders and their behaviors that affect your business model.
The third critical question — what will people’s behaviors look like after the pandemic — may be more difficult to answer. Even though the pandemic is temporary, it’s lasting long enough to turn temporary behaviors into structural shifts. At the end of the crisis, some things will return to the way they were, some things will look very different, and some things will simply not come back. The trick is to figure out which is which.
To help shed some light on this last question, we’ve identified three categories of stakeholder behaviors to evaluate:
- Sustained behaviors are activities that are likely to return to their pre-crisis state virtually unchanged. For instance, people stopped staying in hotels in the months after 9/11, but that behavior eventually returned to pre-9/11 levels. Hoteliers just needed to find ways to hold on in the meantime.
- Transformed behaviors are activities that are likely to return after the crisis, albeit with fundamental changes. After 9/11, people stopped flying on planes. When they started flying again, the need for stricter security protocols at airports was clear. Airports began to make massive investments in security technology that they had been previously slow to make. This had a major positive effect on the businesses of security system manufacturers.
- Collapsed behaviors are activities that are likely to cease altogether or be replaced by alternatives. After 9/11, travelers could no longer take beverages past the TSA check point. If you owned a coffee shop outside of that point, all of a sudden, your customers just stopped buying their coffee or water as they arrived at the airport. Today, you won’t find as many beverage shops outside of TSA check points.
How do you predict behavior change?
At first glance, it can seem impossible to forecast how behaviors will change. Fortunately, we can draw on decades of research on habit formation, technology adoption and behavioral economics to make reasonable predictions on what happens next. We’ve identified four factors to help you evaluate how behaviors might change for your stakeholders:
Is the behavior a habit or has it been somehow disrupted? Being part of a routine increases the likelihood that the behavior will continue. Importantly, studies of habit formation suggest that time spent doing a behavior isn’t the critical factor in determining whether it gets embedded; it’s the number of times you do it. For example, after analyzing its order data, a home delivery company discovered that it took four deliveries to make a customer for life. Completing three orders wasn’t enough. And five orders provided no additional adherence.
Ask yourself: Sustained behavior: Are the mechanics of the behavior engrained in daily habits, routines, or rituals? Transformed behavior: Have people been forced to alter the mechanics or stop the behavior altogether? Collapsed behavior: Are the mechanics of the behavior foreign, complicated, or difficult?
Does continuing this behavior provide significant psychological or financial benefit? For example, staying at home during the pandemic has reminded us of just how much we miss other people. And while we may be reluctant to eat in restaurants right now, the positive psychological benefits of going out to eat with friends increases the likelihood that we haven’t seen the last of people dining out. As one might imagine, psychological studies show that intrinsic rewards can be far more impactful than a purely monetary return.
Sustained behavior: Is the behavior driven by psychological or financial benefits? Transformed behavior: Have these benefits shifted? Collapsed behavior: Are the benefits of the previous behavior ungratifying or dangerous? Do they come at a new cost?
3. Pressures. Human beings are herd animals, and we like to do what everyone else in the herd is doing. For example, if everyone else is speeding on the highway, we speed up, too. That, of course, changes when we see flashing lights in our rear-view mirror: Social pressures give way to an authority figure. When evaluating a behavior, examine who’s telling people to keep doing it.
Sustained behavior: Are there authoritative or social forces driving the behavior? Transformed behavior: Are people getting mixed messages about continuing the behavior? Collapsed behavior: Are there authoritative or social deterrents to the behavior?
4. Alternatives to the behavior.
People will abandon a behavior if there’s a better way to do it, but shifting to the new behavior needs to be relatively painless. Importantly, technology adoption theory suggests that the alternative needs to already be in use by early adopters. For example, Zoom wasn’t invented during the pandemic. It was already being used by a group of loyal fans when the pandemic hit.
Sustained behavior: Are there a lack of viable alternatives or substitutes to the behavior? Transformed behavior: Are there viable alternative solutions that meet the needs of the behavior? Collapsed behavior: Are there viable alternative activities that meet the needs of the behavior? One by one, take a look at each stakeholder and the critical behaviors that drive your business. Do you have reason to believe that this behavior will continue? Or does your analysis suggest that it just might fall away? In that case, it’s time to come up with a plan.
You might find that you’re left with a few behaviors that are difficult to forecast. For example, will your customers shop in-store as a way of bonding with their children? Will domestic travel spike in popularity compared to international travel? In those cases, imagine what the company might do to succeed no matter whether the behavior sustains, transforms, or collapses. By wargaming different scenarios and adding in the known behaviors, you can develop a playbook to adapt regardless of what comes to pass.
Get past the big existential questions and focus on your business. The brain gets foggy when we grapple with great uncertainty. We may feel like it’s impossible to plan for the future, and we forget that things can quickly change. In this moment, it’s critical to adapt a mindset of learning and discovery. Rather than trying to answer questions that don’t matter, we can rely on the well-researched theories that have mapped behavior change over long periods of time. And we can play out multiple scenarios so we’re ready regardless of the outcome. With that, it’s possible to come up with a radical plan that may even unlock a new era of growth in a post-Covid world.