INNOVATION | 15.07.2020
Startups’ innovative model is key in the post-COVID-19 scenario
It is a fact that the market is experiencing a time of uncertainty. The situation has not stabilized and the health crisis still remains unresolved, which has given way to an economic crisis that many companies do not really know how to weather. Within this complicated scenario, there are also a large number of startups that have been shocked by this unprecedented situation.
The particular idiosyncrasies of this type of business means that startups could become the true survivors and forerunners of new business models. “In the post-COVID scenario, many companies that have been around for months or years must now confront the challenge whereby, in order to continue in the market, innovative approaches and principles need to be applied, as with any startup,” explains Javier Redondo, business consultant and author of the book ‘¿Una manera distinta de hacer negocios?’ (A different way of doing business?).
After all, a startup is an emerging company in which technology and innovation form part of its philosophy. And that’s precisely where they have a major opportunity: developing solutions and products that are able to innovate and respond to changing consumer demands.
Changes in business models
In the months of lockdown and the weeks that followed, the way that people consumed changed. Firstly, e-commerce experienced a positive rebound in most sectors due to the fact that people couldn’t go to physical stores, and due to the subsequent social distancing measures. The figures don’t lie: e-commerce shot up by 300 percent in Latin America.
Secondly, anything related to healthy living and well-being also increased significantly in terms of consumer preferences. This paints a picture in which value propositions, experiences and the ability to facilitate the purchase process take precedence.
The response to this new reality must therefore be agile and consistent, as businesses that are unable to adapt may just collapse. Startups have a lot to offer in this field, starting with how they work.
The work of startups
As explained in an article by Marta Domínguez, an innovation professor at IE Business School, an expert in startups and director of I-Thread Consulting, innovative entrepreneurs deal with three frameworks for investigation: “change or adapt what doesn’t work” based on incremental innovation, “make things easier for the client” using disruptive measures, and “make things more affordable for the client.”
“Startups cover ground that is relatively unexplored by other companies, and they’re also the businesses that take more of a chance with disruptive proposals. However, the three-framework methodology is a model that can provide companies with the same internal benefits for managing uncertainty in the same agile way as startups do. The key is to capture some of the essence of a startup,” Dominguez concludes, making it clear how these innovative models will tend to be adopted by more traditional companies.
Ultimately, startups aim to grow and consolidate as larger and more established companies, or simply to be acquired by large companies.
A good example of startups’ abilities can be seen in MAPFRE’s insur_space program, for which the third call is open and in which startups wishing to grow in the insurance world can participate. Its objective is simply to enhance its products and services in three verticals: population aging, proactive health and well-being, and the management of risks, damages and claims.
One trend of the post-COVID era is the acceleration of digital culture, another aspect where startups are stronger. Several business opportunities arise in this area, and startups will have a lot of input.
Although its increased adoption at this time is due to the fact that there’s no alternative, there’s no doubt that many companies have found that this approach solves certain problems. This reality will lead many companies to seek the best solutions to meet their particular needs.
“Proposals will grow in light of increased remote working, offering online alternatives from a perspective of personal interests. People will also place more value on interpersonal relationships with fewer participants that provide added value,” says Javier Redondo.
This decentralization of work involves taking a series of cybersecurity-related measures that provide secure communications. And that’s where many startups are focusing their business, as it’s a business segment that has continued to grow throughout the last decade. According to the consultancy firm Canalys, the global cybersecurity market increased by 9.7 percent during the first quarter compared to the same period in 2019, and protecting mobile (remote) workers was a major contributing factor.
E-commerce will also tend to proliferate given the possibility that production and sales will stop if lockdown comes back into force. However, there is still significant unchartered territory if we consider a study carried out by the company GoDaddy, which uses Spain as an example where only 10 percent of SMEs have an online store for selling their products and services. In this context, startups can work on developing disruptive methodologies that facilitate the transition of many companies for which the possibility of e-commerce was zero until just a few months ago.
Another area where a surge in technology solutions is expected to result in significant progress is in logistics and supply chain management, which must adapt to a new reality whereby e-commerce is increasing and consumers do not want to leave their home to purchase products.
Investment in innovation
Finally, it is worth noting that investment in R&D will need to be increased, given that innovation and digital transformation have become two of the cornerstones in ensuring companies’ futures. In this regard, startups will also have an opportunity to develop new projects focused on market demand.
However, it will become advisable for them to have institutional support. This is evident in Latin America. According to a survey by the World Economic Forum, the entrepreneurship of startups and the creation of startup ecosystems will be essential in “empowering” young people aged 15 to 29, who see corruption, lack of education, insecurity and the scarcity of economic opportunities as the main pitfalls for innovation.
Private initiatives such as the aforementioned insur_space will also be of vital importance, given that they are stimulating businesses that might not succeed without external support. In this specific case, MAPFRE brings its experience and investment to enable the selected projects to be launched.