Transportation and Infrastructure in the New Normal

This article presents content originally published in "Design Mind," a design journal operated by frog, under the supervision of Mr. Noriaki Okada of Dentsu Inc. BX Creative Center.

The COVID-19 pandemic has exposed fundamental vulnerabilities in the operations and business models of the infrastructure and transportation industries. This article proposes three ways these two industries can adapt to the "new normal" following the pandemic.

Companies in the infrastructure and transportation sectors are known for being "asset-heavy" businesses. These companies have made large upfront investments to build proprietary assets and "economic moats" (a concept indicating competitive advantages that act as barriers to entry for other companies), based on the premise of stable, long-term revenue. However, both industries rely heavily on the movement of people and goods, as well as gatherings of people. Consequently, they suffered significant blows during the pandemic, and their predictions for stable growth were completely off the mark.

So, what happens when what a company considered its greatest asset becomes its heaviest burden? For example, what happens to a toll road operator when traffic drops by 85% in just a few weeks? What if travelers cancel flights and avoid airports out of fear of infection? What happens to construction projects when governments impose social distancing regulations that halt work on sites?

Yes, you guessed it. Companies in the infrastructure and transportation sectors appear to have seemingly stable, solid, and reliable business models in the long term. However, unforeseen events like the COVID-19 pandemic have proven they can be severely impacted. Many sectors, including these two, are still struggling to adapt to this situation even now, over a year after the pandemic began.

Three Ways to Adapt for the Post-Pandemic Era

As the world enters the post-pandemic era, companies can leverage lessons learned from this crisis to transform business vulnerabilities into opportunities.

1. Capture Changes in Consumer Behavior and Prepare for New Needs

The COVID-19 pandemic is significantly altering how we live, work, interact with others, and travel. For example, since the pandemic began, consumers have become much more conscious of the hygiene standards of the products and services they use, or the places they visit.

Going forward, customers may expect even higher standards of cleanliness. In fact, robust hygiene management will be fundamental to alleviating anxiety and fear about visiting public places and shared spaces.

Singapore's Changi International Airport is one business that has been compelled to respond to these shifts in consumer behavior. It has systematically implemented numerous initiatives to enhance cleaning and sanitation, striving to minimize the potential for viral contamination and passenger anxiety.

Specific measures included installing infrared temperature screening systems, applying antibacterial and antiviral agents to frequently touched surfaces, and using ozonated water to sterilize and disinfect toilet bowls and floors. Changi Airport's approach clearly demonstrates the importance of adopting new technologies and modifying processes, taking proactive steps to protect customer safety, and staying ahead of policy and regulatory requirements.

For businesses to survive in the post-COVID world, they must adapt to changes in consumer behavior. This requires observing current consumer actions, responding to the needs revealed, and predicting future needs based on the present situation. Companies that listen to user feedback and observe behavioral shifts will be able to respond swiftly to emerging needs.

2. Creatively Repurpose Existing Capabilities and Assets

Transportation companies need to increase asset utilization to generate profits. However, due to secondary impacts of the pandemic, such as social distancing and city lockdowns, many transportation companies experienced a sharp decline in transport volume.

The proliferation of video conferencing tools accessible from home and new travel restrictions have also reduced business travel demand. Consumers, too, have shifted from purchasing goods in physical stores to shopping online from home.

Effectively pivoting requires creativity and flexibility.
One example is Chinese ride-hailing company Didi Chuxing, which announced its entry into the food delivery business during the pandemic. It swiftly adapted its traditional operating model of providing ride-hailing services and made organizational adjustments to simultaneously launch the new service across 21 Chinese cities.

This was an attempt to leverage its existing platform and driver network to mitigate the impact of reduced demand for ride-hailing services. The company now provides services to safely deliver groceries, coffee, and other items to people staying home.

It's easy to see why customer-centric companies will thrive in the post-pandemic world. By creatively rethinking how they use their capabilities and assets to meet evolving customer needs, they can adapt to change.

3. Diversify your portfolio with customer-centricity to capture new user value

Companies that can quickly respond and adapt to the "new normal" will find it easier to recover performance post-COVID. "Consumers will choose brands that constantly challenge new frontiers, deliver greater value through novel products, services, and experiences, and maintain their loyalty to those brands"—this is likely the era ahead.

In this context, the speed of delivery may sometimes be more important than the perfection of the products or services offered. Companies must also continuously learn to advance into new fields and establish strategic partnerships.

A prime example of successfully entering a new field while simultaneously building partnerships is Waymo, a sister company of Google. Waymo is widely known for its fully autonomous ride-hailing service, "Waymo One," operating in Phoenix, Arizona.

However, responding to the pandemic-induced drop in ride-hailing demand and the rapid expansion of e-commerce, the company raised $2.25 billion in March 2020 to advance its "Waymo Via" autonomous delivery service, designed to replace traditional long-haul truck transport and goods delivery. A few months later, it also announced a partnership with Daimler Trucks to develop Class 8 (heavy-duty) autonomous commercial semi-tractors, further expanding its logistics and goods transportation business.

Focusing on customer experience (CX) clarifies the direction for business expansion needed to meet new customer needs and provides insights for adapting to the highly uncertain post-COVID future. Asset-heavy industries like infrastructure and transportation, in particular, must find new value in investments to move forward into the future.

Customer-centricity drives strategic expansion into new domains. To explore this further, download frog's " The Business Value of Customer Experience " to understand why optimizing capital expenditures, alongside expanding customer networks and lifetime value, is a critical CX metric.

Want to learn more about how to leverage lessons from crisis to build business success? At frog, we use a method called " Futurecasting " to map emerging market trends and technologies across industries, helping you develop a vision that forms the foundation for stronger, more future-proof strategies.

This article is also published in the web magazine "AXIS".