2021 Industry outlooks has been saved
Cover art by: Matt Lennert
In 2020, businesses and governments struggled to figure out how to operate during a pandemic, but we also see significant evidence that many organizations made the best of a very difficult situation. Across industries and sectors, many organizations managed to accelerate trends that were already underway during the global pandemic—trends such as digitization, the evolution toward customer centricity, a focus on shoring up business foundations (including talent), and the increasing willingness of organizations to embrace the idea of corporate social responsibility (CSR)—all trends that may bode well for the US economy’s productivity in 2021 and well into the future.
My colleagues and I reviewed Deloitte’s 2021 US industry outlooks—research, trend analyses, and executive interviews that map out what public and private leaders can expect in the coming year—and, irrespective of sector, we see an expectation that these trends likely will continue to develop at an accelerated pace. Some organizations seem to be taking advantage of the COVID-19 pause to dig deeper into digitization efforts, raise the quality of the relationships between customers and employees, rethink and reinvent business foundations, and start figuring out how CSR efforts can be better baked into business models and strategies versus serving as just HR- or PR-oriented community service initiatives.
This is a success story in and of itself. Organizations could have hunkered down and used the COVID-19 pause to hit pause on their own initiatives, but our research shows that, instead, many organizations pushed through their pandemic response and recovery efforts to quickly focus again on how to thrive. These actions are what is needed to increase productivity, and increased productivity can help repair the damage COVID-19 has wrought on the economy and improve our ability to deal with our sharply diminished fiscal situation.
It comes as no surprise that lockdowns, suddenly remote workforces, challenged distribution channels, and the closing of various brick-and-mortar locations would prompt organizations to expedite their digitization efforts, but Deloitte research shows that those efforts now are in hyperdrive.
For example, according to Deloitte’s 2021 insurance outlook, the need to accelerate digitization and enhance virtual operations turned headwinds into tailwinds at many insurers, driving faster action to deliver within the coming year what might originally have been three- to five-year transformation plans. And more than one half of respondents (56%) to the survey underpinning Deloitte’s commercial real estate outlook believe that the pandemic exposed shortcomings in their organizations’ digital capabilities, pointing out the importance of faster action.
Digitization efforts also are heating up to help industries meet regulatory and reporting targets. Deloitte’s oil and gas industry outlook notes that apart from enabling remote operations and driving human-machine collaboration, digitization has an important role to play in setting near-term emissions targets, using standardized and credible reporting, and tracking accountability across integrated value chains.
And with accelerating digitization comes increasing digital access. Our aerospace and defense industry outlook notes that the space industry is likely to experience increased opportunities, primarily in satellite broadband internet access. In the first half of 2020, space investments remained strong at US$12.1 billion,1 and the momentum for investments should remain solid in 2021 as well.
Customer centricity is a well-established strategic priority, but organizations across industries are doubling down on their efforts to boost customer engagement and customization this year.
Deloitte’s 2021 consumer products industry outlook reports that industry players are adjusting how they segment consumers, prioritize channels, establish product portfolios, position their brands, and deploy service models. This work continues in the new year. Four in five companies surveyed indicate that resetting their go-to-market strategy is critical to meeting their 2021 objectives, but only half of the respondents rated the current maturity of their related capabilities as high relative to industry peers. As a result, the vast majority indicated that go-to-market is a top investment area.
The move toward personalized service delivery is highlighted in the government and public services industry outlook, where many organizations are shifting to citizen-tailored services, taking cues from their commercial counterparts; reinventing service delivery by anticipating citizen needs; and shifting from a traditional department-based model to a life events approach. The pandemic also has accelerated the importance of contactless government and public services, so we expect to see innovation continuing in this space over the coming months.
Putting the consumer at the center of health care model innovation can help health care delivery organizations reduce or eliminate many of the challenges arising from today’s delivery models. Our 2021 health care outlook notes that health care organizations continue to focus on increasing consumer empowerment; broadening the definition of “health” to include its spiritual, mental, and emotional components; changing the focus from acute care to prevention and well-being; and enabling seamless physician-patient and physician-physician interactions. Interoperability and health care partnerships also will continue to rise in priority because patient care and health outcomes can improve by automating, aligning, and integrating connections among all data sources, functions, and stakeholders. Real-time access to insights from this aggregated data ideally will enable a proactive approach to health care aimed at keeping people well.
COVID-19 put many structural, logistical, competitive, and talent issues under the microscope, prompting organizations across the public and private landscapes to turn their attention to shoring up supply chain weaknesses, rethinking processes and cost structures, and reinventing talent sourcing and management.
Given the disruptions that many manufacturers have faced this past year, increasing flexibility in global supply networks naturally is a top business priority for impacted firms. Our 2021 manufacturing industry outlook states that, in a recent Deloitte survey, only 21% of respondents were confident in their supply network’s visibility and ability to swiftly flex sourcing, manufacturing, and distribution, if needed.
Pandemic-induced pressures have accelerated the retail industry’s focus on re-evaluating its very foundation. As Deloitte’s retail industry outlook observes, cost realignment can be coupled with fresh viewpoints on how to address profitability. By now, retailers have been able to regroup and analyze how COVID-19 has reshaped their business, leaving a clearer picture of what they should keep and what they can live without. This appears to be a once-in-a-career opportunity to rebalance the cost structure for retailers that were battered by lockdowns and the economic effects of the pandemic. Long-contemplated cost reductions, such as rationalizing store footprints and reducing business travel, can now be pursued in the name of responding to COVID-19.
With rising costs and razor-thin margins, the engineering and construction industry is looking to reduce costs via modularization and prefabrication design. The engineering and construction industry outlook found that 26% of E&C executives in a Deloitte postelection survey indicate that they are increasing their use of prefabrication and modular products. Module assembly yards borrow some of the cost efficiencies of manufacturing and could lead to considerable cost savings, ranging from 6% to 30%. Strategies for sourcing and managing talent also continue to evolve. For example, Deloitte’s 2021 technology industry outlook suggests that the nation should consider reimagining how students are developed for future careers in technology, potentially including companies’ input in shaping the tech educations offered by many colleges and universities. In the banking and capital markets outlook, our specialists note that banks can institutionalize lessons learned during the pandemic, including operating with agility, flattening hierarchies, speeding up decision-making, empowering employees, and introducing flexible workplaces and workforces.
2020 could go down as a revolutionary year for CSR. As the world seemingly ground to a halt during lockdowns, societal inequity was brought to the forefront, and natural disasters rang alarm bells around the globe, many organizations increased their commitment to issues including diversity, equity, and inclusion, and climate change and sustainability—and Deloitte’s research suggests that this trend will continue in 2021.
The power and utilities industry outlook and the renewable energy industry outlook both note that in 2020, the US power and utilities industry led the clean energy transition despite federal policy headwinds. Pressure coming from stakeholders ranging from citizens to shareholders intensified in the past year, hewing closely to the recommendations of the Paris Climate Accord. COVID-19 seems to have helped crystallize the urgency of the energy transition and the industry convergence it entails. In 2021, the Biden Administration could usher in an acceleration of this energy transition and convergence.
With the change in public perception and preference toward sustainable consumption, chemical companies will be driven to develop new sustainable products and business models, according to the 2021 chemical industry outlook. This could lead chemical companies to prioritize products based on circularity and carbon footprint, and to accelerate their decarbonization technologies, reexamine their existing assets, and begin to diversify away from hydrocarbons where possible. We have already seen some of this diversification with chemical companies exploring additional end markets post–COVID-19.
The investment management outlook notes that targeted environmental, social, and governance (ESG) investing has progressed from being a niche offering to becoming a mainstream product. Today, ESG considerations are increasingly in demand by investors, and investment management firms are responding with growing numbers of product launches.
There’s an undercurrent that emerged from within several of the industry outlooks we reviewed. It’s not a distinct trend. Rather, it is a foundation on which the success of the rest of the trends rests: restoring and improving trust.
None of the trends outlined here will continue in 2021 and beyond without organizations’ steadfast efforts to improve their customers’ and communities’, employees’, and ecosystem partners’ trust in their institutions. Succeeding with digitization, customer centricity, strengthening business foundations, and embracing CSR all require the trust of all stakeholders involved, and the dedicated action of organizations and industries to promote and preserve it.