COVID19effect

One of the things that bugs me about most people in the business world is their propensity to adopt a new term, quickly bastardize it so it doesn’t mean what it was supposed to, put it into a dozen strategy presentations and go home secure in the knowledge that lip-service to innovation and change has been paid.

Let’s take digital transformation, for instance. For most companies, it just means opening up another channel for sales and advertising. The close link between the two on ecommerce platforms may change their criteria for advertising effectiveness but that’s about it.

To me, digital transformation is really about business transformation. Digital is almost irrelevant to this – it may be that at this time in our lives, the digital ecosystem allows businesses to reinvent themselves, but 50 years ago the advent of commercial aviation was a similar opportunity and 50 years hence something else will come along that offers the opportunity to reshape businesses.

While people have been paying lip-service to digital transformation for over a decade now, COVID19 ushered in some real transformation in a matter of months. Some quick examples:

  1. The Fitness Industry: With gyms closed and social distancing in place, many trainers came up with ways to run virtual classes online. Some of these were initiated / sponsored or in some way hosted by the gyms they work at but for the most part, we saw an explosion of individuals who realized their knowledge had value for people even if it had to be delivered virtually. For the good trainers, a way of monetizing their knowledge has opened up that they never really explored before. Virtual classes with hundreds of viewers each paying a little bit can be far more lucrative than one-to-one or even one-to-few classes. Apart from trainers, home training equipment of all sorts has seen a boom but this is not a business transformation, merely a short term opportunity. A handful of businesses specializing in equipment that allows flexible remote participation in classes or group activities or trainer supervised exercise or online training programmes will find themselves accelerating now – Peloton being one of them. Physical gyms, I’m afraid, are not going to find it so easy to reinvent themselves (although I do have some ideas which I’ll share in a bit).
  2. Medical consultation: Remember long long ago (well, about 6 months ago, really) when you had to go to a doctor’s clinic and wait to be seen? Often you waited with a lot of other people suffering from various illnesses and left the clinic with more germs than you brought in. It’s astonishing how quickly doctors have adapted to virtual consultations as a result of COVID19. Did it really need to take this long? How much further can this go? Companies selling medical devices that are set up by a human being – hearing aids, spectacles and so forth – all have a golden opportunity to go direct to consumers and bypass their middlemen, there can be no better time for them to do so. Technology intermediated set-up for hearing aids, testing eyesight etc. are all possible now and if their distribution partners complain, they can blame it all on the pressures of a global pandemic.
  3. The entertainment business: Movie halls have been closed for several months now and show no signs of reopening (which is odd, gyms in China reopened in April – surely they’re a more virus-prone environment than cinemas). Video streaming services have boomed in this period. However, the number of movies where shooting has been put off for several months is growing. What will that mean for conventional movie production? I’m seeing more and more “virtual plays” being put up for viewing – with the cast and audience all scattered over various parts of the world. Is there an opportunity for the movie industry to go virtual in this way? Imagine how great it would be to have actors all act in front of a Zoom camera in their homes and an audience having to put it all together – it would be different, challenging and potentially a new format for storytelling.
  4. Work in general: The idea of going to an office suddenly seems like old hat. Why do so when you can have all of the output with none of the commuting? Tools like Zoom and Teams have helped but tools like these have existed for a decade or more. While we probably won’t continue to work remotely en masse and forever, there is a clear shift in thinking. Roster based office attendance and smaller offices with hot-desking are a clear trend. That means companies renting out hot-desks / flexible office space will start to do better than those expecting two year leases on fixed spaces. Surely that was an innovation which could have happened a long time ago.

I’m sure there are more examples. Returning for a moment to my favorite category – gyms and fitness – let’s think about this for a moment. Gyms have traditionally focused on real estate, physical equipment and selling expensive long term subscriptions. Their whole model is to get people to pay for a 2-5 year non-refundable subscription and ideally, drop off after a few months. They’ve gone after people who don’t fundamentally have the desire or motivation to go to a gym regularly and tried to get them to shell out money for an expensive membership and then pay more for training by some young punk with very little experience and qualifications. Said young punk often makes the first few training sessions so incredibly unpleasant that people just stop going to the gym. (I’m not sure if this is a deliberate strategy but it does seem to be the pattern with most trainers, mainly because most of them don’t really know anything about training other people and operate a one size fits all, high-rep, maximum-discomfort workout for everyone. I also believe that the best trainers are not affiliated with any gyms or run their own gyms where you can attend a class without first paying for a long term membership).

What’s COVID19 shown us? A lot of people are very keen on staying healthy. Clearly the number of people exercising has gone up immensely – but the key thing is that they all had oodles of time and discovered they could do so at home. When they go back to work, perhaps the time will shrink again but the insight that they don’t need to go to a gym to train will remain. For those who do go to gyms, there will be worries around being near other people, not wanting to touch a lot of things and so on.

What I would do if I owned a gym is change the model completely. I’d look at different segments:

  1. Hardcore gym users who need a place to come and lift heavy
  2. People who could train at home but want some coaching / classes / group activity whether for no-equipment strength training, yoga, spinning, dumbbells or kettlebells
  3. People who need a place to come and train (with/without a trainer) but don’t have time to commute

There are then a series of services / offerings at different price points for each segment. Instead of today’s open, crowded gyms there could be workout pods which users have to book in advance with the equipment they specify already put in the pod and the whole area disinfected in advance. This would be the most premium offering for those who are willing to invest in it because they see themselves as serious athletes. Pod and equipment booking and payment can all be done digitally but you’ll still need a physical facility and some staff to take care of the rest.

For people who want the camaraderie of a group or the guidance of a trainer there are virtual classes and possibly rented equipment. In this there are no concerns about viruses spreading in a class. This is almost completely a digital business.

For those who want to train with utmost flexibility there can be travelling gyms – equipment loaded in the back of a truck and set up so the user can work out right inside the truck (there are some people offering this already in the US and the UK). The equipment and area can be disinfected between users, making it a safe option. This can be app-intermediated like Uber, with users requesting gyms at certain locations and times and drivers responding based on where they are.

COVID19 has thrown up a lot of very interesting consumer insights. In many cases, those insights represent opportunities to transform businesses. Digital transformation? Perhaps, in some cases – but really, starting out with a digital lens is not the point. The point is to create new, better business models in response to the changes we see in the world around us.