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Universal trends - Common over all industries?

The last few years I have done quite some market studies for potential new business ideas, mainly in the Fintech, banking and insurance industry, but also in the IT, FoodTech, horeca and mobility sector.
Such an exercise typically starts with identifying the trends in the market, i.e. how the market is evolving, as this is key to ensure your business idea is in line (and preferably ahead) with what is happening in the market.

While every industry has its specific challenges and opportunities, most trends seem to reappear across all sectors. These universal trends result from a general change in our lives. Obviously technological evolutions, and more specifically digitalization, is impacting all sectors and results in a number of widespread "universal" trends.

Overall, I identified eight of those universal trends:

Pressure on margins

The margins of almost any existing player in any sector are under pressure. The underlying cause is two-fold. At the one hand there is increased price competition leading to lower revenues. This is caused by the increased speed with which new businesses can be created (thanks to rapidly scaling technologies, partnerships and an increased access to VC capital) or with which existing businesses can expand to adjacent products and services. Typically these new businesses will arise in existing industries which still have excessive margins. Furthermore businesses become more and more international, allowing to disrupt more quickly national leading players, which are not at par with the rest of the world. This competition is accelerated by an increased transparency imposed by governments and resulting from the widespread access to any information over the internet, which is additionally supported by online platforms like price comparators and marketplaces.
On the other hand, there are increasing costs, due to increasing customer expectations (on quality, service, sustainability…​) and increasing regulatory needs (like e.g. GDPR, KYC, AML, accounting standards, safety standards…​).

The result of this trend is consolidation (to profit from Economies of Scale) on the one hand and an increased specialization to offer niche products and services (to niche customer segments) on the other side. Furthermore businesses focus more and more on Operational Excellence to cut operational costs, which is done by process improvements and outsourcing offers, like IaaS (e.g. cloud offers like AWS, GCP or Azure), SaaS (e.g. SalesForce), BaaS (e.g. HR administration, logistics…​)…​

Some examples of this trend are:

  • In the banking industry the neo-banks clearly disrupted the banking industry, pushing incumbent banks to exponentially accelerate their digitalization efforts, but also to cut their prices (e.g. security trading fees) to stay competitive.

  • In the horeca and food industry new concepts like meal boxes (like HelloFresh or Foodbag), prepared meal services (like Mealhero), virtual restaurants (also called Dark Kitchens), living room and concept restaurants…​ force the traditional horeca also to work more efficiently and to consolidate in chains or to find their specific niche (of clientele).

  • In the mobility sector, traditionally a heavily subsidized sector, there is also very aggressive competition in shared bikes, steps and scooters, taxi hailing apps, MaaS offers…​ Via extensive digitalization and large scaling effects, these companies try to compete with national monopolistic mobility companies, which are often working far from efficient.

Trustworthiness

With companies becoming more and more international and virtual, trust becomes harder to earn, but even more important to aspire as a business. Whether your business is perceived as a credible and reliable party to do business / transact with is critical, now that everyone can do a simple due diligence with a click of a button on the internet (via Facebook/LinkedIn profiles, reviews and scorings, comparators…​).

As a result, companies focus more and more on gaining and maintaining this trust by focusing on:

  • Transparency and traceability: modern companies try to be more transparent on all aspects of their business, like giving transparency on product characteristics and risks, on pricing, on the business model, but also on investors, suppliers…​ While it’s easy to be transparent in positive times, the trick is to stay transparent also when things go bad, i.e. in times of issues and crises. A typical example of such transparency is given by modern SaaS companies providing detailed outage reports and blogging publicly about the causes and lessons learned of an outage. Another nice example is open sourcing internal software. As described in my blog "Banks are finally embracing the Open Source Movement" (https://bankloch.blogspot.com/2020/02/banks-are-finally-embracing-open-source.html) open sourcing internal software components shows also a strong commitment to be transparent.

  • Security and privacy: as our lives become more and more digital, stakeholders (i.e. suppliers, employees, investors, clients…​) are increasingly sensitive about security and privacy. They want to make sure that a maximum of security is aspired and that privacy concerns are properly addressed, so that their personal data is save within the firm and they can safely transact with the company. A very nice example of this is Apple, which positions itself more and more as a "Privacy-as-a-service" company, trying to distinguish itself from other Bigtech players like Google and Facebook where privacy and sometimes even security is a growing concern.

  • As trust takes years to build up, but can be lost in a second, it becomes also critical for firms to focus on a long-term relationship via fair practices, rather than trying to make short term profits from a customer. This trend is often in contradiction with the pressure of the quarterly targets to be achieved and reported to investors. However in start-ups you can see this long-term goal, where often several years of heavy investing (and thus yearly losses) is required to establish trust and a large user base, before becoming a profitable and sustainable business.

Companies respond to this trend by obviously adapting their business processes, but also via new technologies like

  • Accessing customers via marketplaces, which work with a rating and review system to establish trust.

  • Passing via trustworthy large established players, like telcos or banks to do customer acquisition. Their trustworthiness can reflect upon a smaller company, which still needs to gain trust.

  • Decentralized technologies, which are inherently secure and anonymous, such as blockchains.

Some examples of this trend are:

  • The banking sector, a very trust-sensitive sector by nature, is historically already very sensitive about security and protecting personal data but continue to become more transparent (often forced by regulators) via more detailed reportings on their commissions (cfr. MiFID2 regulation) and obtained results. At the same time, we see neo-banks still struggling to build up this trust, which ultimately impacts their growth potential - cfr. my blog "Neobanks should find their niche to improve their profitability" (https://bankloch.blogspot.com/2020/12/neobanks-should-find-their-niche-to.html)

  • In the horeca and food sector, you see also a strong trend for more transparency, like providing more info about each dish and more transparency on ingredients (which is important for specific diets and allergies), nutritional value and the origin of the product (i.e. farm-to-table).

Frictionless experience

People expect to get their product/service whenever they want, wherever they want and with the lowest effort possible (I want it here and I want it now). As people have become accustomed to the excellent products and services of Bigtech firms (Amazon, Netflix, Google, Facebook…​), which are often even offered for free, they tend to expect the same level of quality, speed and efficiency of services offered by other companies.

This results in several trends like:

  • Hyper automation: only by fully automating business processes, an optimal experience can be delivered.

  • Embedded user journeys: instead of having to combine yourself different services and products to deliver a specific end-result (user journey), customers expect to get integrated and embedded user journeys, where all relevant products and services (often offered by different parties) are integrated in the same journey. This requires open architectures, allowing to integrate different parties via APIs in 1 user journey, often delivered via an aggregating super-app. See my blog "From app to super-app to personal assistant" - https://bankloch.blogspot.com/2020/08/from-app-to-super-app-to-personal.html for more info on this trend.

  • Multi-channel experience: in order to ensure that a customer can be serviced at any moment, it is also required to offer a variety of channels (web, mobile, physical, integrations in other platforms, contact centres, chatbots…​) to interact with. Furthermore in this fluid world, cross-channel continuation should be supported, meaning it should be possible to start a journey in 1 channel and continue it in another channel in a fully frictionless way.

  • Take away all obstacles via technologies and efficient UX experiences. This includes features like maximum pre-filling of data, automatic adaptation of screens (and screen flows) to user preferences (identified via AI), fluent and guided user flows, single sign-ons…​

Some examples of this trend are:

  • Onboarding as a new customer at a bank. While this used to take several days (if not weeks) and required physical visits to a branch, neo-banks have been able to reduce this onboarding time to a few minutes while keeping the same level of control (i.e. risk management) and this via a well-designed process and the use of modern techniques. In the meantime many incumbent banks have adopted similar processes.

  • Frictionless payments and more general frictionless check-out processes have become more and more the standard. See my blog: "A frictionless check-out experience, what does that actually mean?" (https://bankloch.blogspot.com/2020/04/a-frictionless-check-out-experience.html) for more information on this.

Personalization

In the continuous fight for the customer’s attention, it is important to be customer-centric and personalize all your communications, products and services specifically to the addressed customer. Customers expect an "It’s all about me" experience, without being overly invasive and respecting privacy concerns.

In order to deliver this type of hyper-personalization, heavy investments are made in:

  • Continuous monitoring of user behavior, allowing to identify optimizations in the business flows

  • AI to identify patterns in the customer’s behavior, allowing to better service the customer via personalized recommendations (such as "Next-Best-Offers" or "People Like Me")

  • On-demand manufacturing, allowing to industrially create custom-made and personalized items without minimum order requirements and at similar costs as mass production. A nice example of this is the growing number of 3D-printing manufacturers.

  • Modularization of products and services, allowing to combine these modules at will. In IT this is typically managed via microservices in the back end and widgets in the front end.

Some examples of this trend are:

  • In the food and horeca industry, it becomes more and more common to compose yourself your dishes (cfr. Subway, Hawaiian Poke Bowl…​) or to provide a wide-variety of alternatives for different food restrictions (such as vegetarian, vegan, lactose-free, gluten-free, halal, kosher, paleo, biological…​).

  • AI-based personal assistants (like Kate at KBC bank) allowing to learn from your interactions to serve you in the best possible way.

Democratization

Thanks to increased automation (via digitalization and standardization), it becomes more and more possible to offer to a much larger audience services, which were till then exclusively reserved for the happy few.

This allows to leverage the investments and expertise built up in a wealthy small segment of customers to a much larger audience.

Some examples of this trend are:

  • Star-restaurants offering a standardized (simpler) version of their dishes via a take-out or catering service.

  • Digital platforms allowing to temporarily book a chauffeur to drive with your car for specific trips.

  • Robo Advisors allowing to democratize wealth management services

Authenticity

In a world filled with fast and fluent marketing messages, fake news and social media posts, which only portrait the best side of everyone, people crave for more pure, simple, honest and authentic experiences (products and services).

This is typically reflected in:

  • Marketing focusing more and more on the "Why" message (cfr. Golden Cirkle of Simon Sinek), i.e. the reason why an organization is doing what it’s doing. Correctly portraying this purpose or belief, in a credible and authentic way, can be a real differentiator.

  • It’s all about the story: people want to hear more and more the story behind the product. The story works on the consumers emotions and creates a bonding with the product, but also a nice conversation topic with friends and family.

  • It’s the full experience: while up in the 20th century, products and services mainly distinguished themselves on price and quality, today people expect a full end-to-end top experience (from getting to know the firm via advertisement, over sales, all the way up to customer support & services).

  • Being original: people want to escape from the stress of day to day life and want to be surprised. This can be via a short-personalized note or via another small attention, an original product design (colour, form, experience…​), putting a traditional product in a modern jacket…​

In short as a company, you shouldn’t sell a product or service anymore, but instead you should sell a moment (a sensation, a feeling…​), that the customer will not forget very soon.

Some examples of this trend are:

  • The rise of natural, artisanal, home-made products. A good example of this is the huge success of Etsy.

  • Restaurants focusing more and more on the building and interior design, like transforming old factories or churches to restaurants, more and more open kitchens where guests can see the cooks preparing the dishes…​

  • The rise of local commerce. E.g. small independent bookstores are thriving even in the age of large book webshops like Amazon.

  • Digital platforms like Airbnb, which replace the anonymous, standardized hotel rooms by places of individuals, giving a much more authentic experience.

ESG (Environment, Social and Corporate Governance)

Customer expect more and more that companies respect the environment they do business in. This means they expect the company to be sustainable towards the environment and the society i.e. act responsibly towards all its stakeholders, i.e. the government, its suppliers, its customers, its employees, its investors and even its competitors. This relates to the previous trend, where customers expect companies to evolve from pure profit to more purpose.

This leads to following adaptations:

  • Produce more locally and use more local suppliers.

  • More respect to Fairtrade, i.e. fairly compensating the suppliers.

  • More respect to the environment, by reducing the ecological footprint of the company. This means reducing waste, reducing CO2 emission, reducing water and electricity consumption, introducing the paperless office, stimulating employees to be more environmentally conscious (e.g. by using more ecological mobility), reducing plastic packaging…​

  • Stimulate diversity within the workforce, like ensuring minorities are sufficiently represented in the firm, gender equality and women empowerment, programs to employ disabled employees…​

  • More balanced and more transparent compensation of senior leadership of the firm, compared to rest of the employees.

Some examples of this trend are:

  • The signing of the "Collective Commitment to Climate Action" in September 2019 by 33 international banks (like ING, KBC, BNP Paribas, BBVA, Santander, …​), committing themselves to help wherever possible in facilitating the economic transition towards climate neutrality. See my blog "Innovation is the key to solve our climate issues (part 2) - The financial services sector as change enabler" (https://bankloch.blogspot.com/2020/08/innovation-is-key-to-solve-our-climate_30.html)

  • Restaurants working more and more with local, biological and Fairtrade products, but also with products which are more ecologically sustainable, like e.g. replacing meat with insects, soya-based meat replacements or vegetables)

  • The rise of all kinds of digital platforms, trying to reduce consumption and waste, via selling excess products (e.g. Too Good To Go) or via the sharing economy (e.g. BlaBlaCar, Rent the Runway…​).

Partnerships

Due to the rise of embedded user journeys (see above), the increased cost of customer acquisition (as more and more difficult to get customer’s attention) and the increasing complexity of products and services (e.g. due to increasing customer expectations in terms of product quality, customer support quality, sales experience…​), it becomes nearly impossible to create and deliver a product or service end-to-end. Instead businesses become more and more an aggregation of different suppliers and partners, which together form the product or service. As such, it becomes no longer what you know, but rather who you know.

This rise of partnerships (cfr. my blog "Ecosystems - The key to success for all future financial services companies" - https://bankloch.blogspot.com/2020/11/ecosystems-key-to-success-for-all.html) is supported by technologies like:

  • The rise of digital platforms and marketplaces

  • The exponential adoption of IaaS (Infrastructure as a Service), SaaS (Software as a Service) and BaaS (Business as a Service)

  • The increase of the Open API economy, with examples like Open Retail, Open Banking (cfr. PSD2 in Europe), Open Insurance…​ and supported by technologies like API Gateways, Development Portals with Sandboxes, micro-service architectures…​

  • The rise of super-apps, like international super-apps (like WeChat, Grab, Gojek, Alipay…​) or national super-apps (like e.g. the KBC banking app in Belgium), allowing to aggregate services from different parties in 1 app.

Some examples of this trend are:

  • A good example of a company, which is built up by the composition of multiple API services offered by other companies is Uber. A detailed explanation of this can be found in my blog "Is Lego building the new way of creating applications in the Financial Services sector?" (https://bankloch.blogspot.com/2020/02/is-lego-building-new-way-of-creating.html)

  • In the banking sector, more and more Fintechs are changing their strategy from disrupting the existing incumbent banks, to partnering up with them. A good example of this is Tink, which started as a disrupting PFM app, but later switched (very successfully) to becoming a partner for banks for profiting from the Open Banking landscape. Cfr. also my blog "Transforming the bank to an Open API Ecosystem" (https://bankloch.blogspot.com/2020/02/transforming-bank-to-open-api-ecosystem.html)

  • The insurance sector is trying to interact more and more with its customers. As insurers nowadays only interact with their customers when selling a policy and at the moment of a claim, this interaction is very low and quite negative. As such insurers look for more interaction by all types of partnerships. Cfr. my blog "Transforming the insurance sector to an Open API Ecosystem" (https://bankloch.blogspot.com/2020/02/transforming-insurance-sector-to-open.html) for more info.

Conclusion

Hope this overview of 8 universal trends gives a good overview of how almost any sector is evolving. As these are universal trends, next time you do a market study or analyse a business idea, it might be good to map those 8 trends on your specific use case to see if your idea matches all those 8 trends.

Check out all my blogs on https://bankloch.blogspot.com/

 

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