Innovation in the time of COVID-19

We explore the imperative for businesses to transform and digitise their operations and customer experience, and to seize opportunities arising from COVID-19

25 February 2021

There is no denying the adverse economic impact of the pandemic on many in our society; those working in hospitality, travel and traditional retail have borne the brunt. Many small and medium-sized businesses are forced to rely on external finance (often for the first time) or personal funds to survive, as well as embarking on serious cost-cutting. In consequence, there is undoubtedly financial stress and human cost.

While there is no doubt the pandemic will have a lasting impact on society as a whole and aspects of the economy for years to come, there are some direct impacts which are already being felt in terms of the digital transformation of businesses. At a workshop held by Scottish Financial Enterprise (SFE) earlier this month, as part of its Financial Services Strategy refresh process, we heard that digital transformation was the highest priority for members over the next 12 months.

There is no doubt that great progress has been made by digital-first businesses in the last 10 years and traditional business models have been disrupted. It is also the case, however, that digital-first businesses still have plenty of space to grow.

What we have witnessed over the past year is a surge to digital. It will be no surprise to most that, in retail, businesses like Amazon have done well (The Times estimating spending of £1 in every £20 in the UK through their platform), but also look at fintech. We have seen first-hand that many firms have seen 'hockey stick' growth as customers have been forced from physical branch to online store. Whilst third party investment and funding may have taken a hit, technology-enabled businesses have taken a disproportionate share of available funding. This trend appears to be continuing in the first part of 2021.

In our view, the pandemic makes the case for further investment in technology enablement and digital innovation. This applies to start-ups and scale-ups focussed from the outset on digital, but also to traditional businesses who must develop their digital proposition and the way they utilise technology to bring operational efficiencies.

Not all in our society have suffered financially through the lockdowns. According to Bank of England figures, households have built up record levels of excess savings due to lockdown, estimated to be around £125 billion, and likely to rise further. The Bank apparently expects the vast proportion of this 'pandemic bonus' (£120 billion) to be used to top up pensions, pay off debts and for investment. Wealth and pension platform providers (so-called 'wealthtech' and 'pentech' firms) be advised.

Those businesses without digital and technology expertise will need to invest to thrive in this environment. This should be badged as an opportunity for re-invention and growth, a view which seems to be shared by the SFE members engaged in the strategy refresh.

With competition to succeed in the digital environment, businesses will need to innovate and differentiate themselves. The approach here could be varied: re-thinking the whole customer experience from the beginning; creating products that are digital by design – not just digitising existing products; finding increasingly creative ways to engage with customers and understand their behaviours; creating a leadership position in online trust issues by investing in cybersecurity and digital identity management; and collaborating with other businesses to create fuller service propositions. The list could go on.

Last, and by no means least, this trend is not limited only to the business-to-consumer segment. We anticipate huge growth in traditional firm / tech firm collaboration (certainly a very likely trend in fintech), but in business-to-business technology services too, such as platform white-labelling, client-onboarding and other compliance solutions – as well as those that provide services into tech companies (including marketing services, data analytics and software solutions).

Not a new sentiment but relevant nonetheless: out of adversity comes opportunity.

If you have any questions or want to discuss anything mentioned in this article, please contact Martin Cook, Head of Fintech.

A version of this article was first published on the Scottish Financial Enterprises’ website.

Key contact

Martin Cook Temp Corporate Image Web Profile

Martin Cook Director

  • Head of Fintech
  • Financial services
  • Technology and Communications

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