Trust, technology and transformation: The TMT trends affecting us all

Quentin Cole, PwC:

Welcome to our Business in Focus podcast. I'm Quentin Cole, Head of Industries at PwC, and member of our UK management board. I'm inviting some of our own PwC industry experts, alongside leading voices from industry, to discuss some of the trends that we're seeing in particular sectors.

Today we're looking at the big themes that emerged during the pandemic. Notably, digital consumption. And more broadly, how the change is seen through technology, media, and advertising are now creating opportunities and challenges for organisations. I'm delighted to be joined by Lindsay Pattinson, Chief Client Officer at WPP, and our very own Mary Shelton Rose, who leads our Technology, Media and Telecoms practice.

So Mary, a good starting point is probably assessing some of the big themes that have emerged in the TMT space since Covid, and which of those are likely to endure. So what are you seeing?

Mary Shelton Rose, PwC:

So Quentin, I'd say really three things. First I would say, the structural, digital acceleration. Those trends are going to continue. If you look at our global entertainment and media outlook report, we show that digital consumption is set to go to 100 billion by 2026 here in the UK. And that's really powered by the second thing, which is a shift to digital and mobile first, content which is going to be increasingly focused on serving youth wherever they may be. And part of that story is really continuing growth in VR and AR, which are showing to be about 17% per annum. And then lastly, I would just say it's all about the customer experience and continuing that journey.

Quentin:

Fantastic, and Lindsay, turning attention to you here. Given the range of industries you work with at WPP, are there any particular sectors that have been, or will be, big winners from these trends?

Lindsay Pattinson, WPP:

Yes, I mean just to go back, just some stats to help out. 60% of shoppers say they want their future work habits to include more working from home. So I don't think that will accelerate, but that's just a change in how everybody's expecting to live and work, which is going to have implications on how we try and communicate with them. I think the importance, and Mary spoke to this, of having a good customer experience across all channels, and that's really challenging, and I'm sure we'll come back to that. But that will stay. And then I think consumers have really focused during the pandemic on how people reacted and responded to the crisis, and how they reacted and responded to George Floyd, and therefore the morals and ethics and purpose of a company is quite normal behaviour. So I see that would continue. What will continue to grow, spend online, 57% online, consumers who are super comfortable using technology. So that final vanguard of old people; my mum, your mum, actually realising that online shopping was fine, and doing everything online was fine. And I think what will continue to grow within online shopping is shopping through social commerce. In terms of what may fall back, we saw a lot of wariness, again in that older audience of people going back to shop in store. 36% of people are still wary of that, but that was 45% a year ago. And 35% of people now are shopping via marketplaces, but actually that was about 45% last year. So that's quite interesting that they're pulling back from that. So those are kind of consumer trends, sorry I'm talking too much.

In terms of the sector, which was actually the question you asked me, what did really well? Technology, obviously apps, software. Software that will help you work from home, or be entertained at home. But then, ally to the working from home, cyber software. Massive focus, which obviously is a core part of the area you cover Mary. The pharma industry obviously did very well, bits of CPG did well as they learned to pivot their business. Beauty and lux did really well, and then retail, after it pivoted, is still I would say, influx. Autos had a bit of a nightmare, but that's more to do with the supply chain. And travel, still super challenged.

Quentin:

We've seen a lot of that in the last few weeks. So a lot's happened, a lot's changing, and some of those developments I think are really exciting. But no doubt, some of them aren't without their challenges for businesses, and perhaps turning to you Mary. What are you seeing when it comes to how businesses are responding to those consumer needs, consumer lifestyle plans?

Mary:

I think there's huge opportunity, and we see different industries leaning in in different ways. I think what we're also seeing is how companies are starting to appreciate the structural complexity of what this world brings. So, areas like data and privacy, and of course the economic challenges that I think we're all seeing in the not too distant future, even if you think about some of the biggest platform companies that were really winners early on, are starting to see some challenges as they see the impacts of what I would call the less time, and maybe less money phenomenon. So people are going back to work, so they're spending less time at home, and have less time to consume content. And they may have less money, less discretionary income, because of the rising effects of inflation. So I think what all that means, is customers are really looking at the value of the content they're consuming, of the goods they're purchasing, and they're making judgements about that, and about where they're going to choose to spend their funds. So at the end of the day, it's a really great opportunity to engage with customers much more closely, to understand what makes your product, or your service, or your content sticky. What makes it differentiated, how do you advertise it, which I'll turn to Lindsay in a moment. And then, what does that mean to the overall trends of the industry?

Quentin:

That's great, and Lindsay, it'd be great to get your perspective on some of the challenges as business try to respond.

Lindsay:

Yes, I mean inflation I think is really hitting businesses hard because consumers can't take any more price premium. I think many clients have loaded the consumer, and the spend just is not there, so we have to be thoughtful about how we manage budgets, and I guess for us, simplistically is the mix between advertising and promotion. The mix between short term and long term. So one of the clients I was with this morning talked about sales overnight, and brand over time. And I wonder how many of our clients will shift more to sales overnight, and pull back from brands over time. And of course we have lots of research that says you should spend during a recession-, sorry I've got to the ‘R’ word. We're coming to a recession, but you should spend your way through it, and not fall back from the long term impact of a brand. And I think that will be really challenging because you know, to the earlier points, purpose, and what a brand, and really what a company stands for, are more important than ever. And Mary raised the point about, most of our clients are thinking about the younger audience. So Gen Z, purpose matters more to them than anyone else. So I think we're going to have to be careful. Having said that, people say one thing, and then their actions-, so we talk about the gap between people wanting to do the right thing, verses people being able to afford to do the right thing, and I think we're ever looking at the difference between those two things as we think about the messages that we want to communicate. Are we trying to say, 'Buy now, buy quickly.' Or are we trying to say, 'Trust this company, it looks after its employees, and it cares about the environment.' And they're very different messages, and I think there can be a tendency to flip between the two, which is confusing for consumers.

Quentin:

Thank you. A new word to a lot of people, that we're seeing a lot, is metaverse, and I know you haven't really touched upon it yet. It'd be great to get both of your perspectives really on, maybe firstly, is it really here? What should companies be doing about it? And what's it mean for us all?

Lindsay:

It's here, but I think it's been here for 25 years. I think what's new is the term 'metaverse', which is a cover all term, to cover AR, VR, now NFT is in a blockchain, or Web 3.0, and those are four very different technologies, which combined are different aspects of the metaverse. But actually, second life was part of the metaverse. QR codes have been around for a very long time, they just realised their true potential during Covid. But anything that can be a mix of where technology is augmenting a real life experience could be considered the metaverse. But what is new is actually really the focus on how that might be monetised in the future, and I think that's really where, certainly our clients are getting very excited, and as we begin to talk to clients about it, I think there's a few things. One, we're generally talking at board level to clients, because there's so much noise around it and a lack of understanding. I think two, we're very conscious of the, and very careful that there's a metaverse for good. I think some of the challenges we've seen in the online world, particularly the social platforms over the last five or so years, make us careful about how we enter the metaverse, and working at a cross industry function to ensure that the right regulations and controls, and that it's democratised and open, and that's quite hard. But it will be big, so I would say experiment, but don't bet your house on it.

Quentin:

So it's definitely here Mary, what should companies be doing about it?

Mary:

So I might take a tiny bit of a contrary view there just for fun. I think it's still relatively nascent in its potential. So we might be agreeing actually, but I think it's been here a long time, but because of the advances in technology, and because of peoples' willingness to consume things in digital ways, I think they're much more willing to be able to recreate, or have a difference experience but get the same sort of objective in a virtual world, verses doing it in a physical world. And so, I think about the metaverse in terms of people, places, and things. Right. We're still people, we're going to be interacting, we'll do it in a different place, and we might be acquiring things like NFTs. So different things that we might acquire in a different way.

I wanted to pick up actually on something Lindsay said about trust, because I think trust is really important in the metaverse. It's not like you're walking in a physical store, so how does your company really know you are who you say you are? Have you covered your basis from a cyber perspective, as you mentioned. Are you handling a customers privacy in the way that they've asked for it, or expected it. And then I think there's structural issues around it. Data, taxations, things like that, that companies really need to think about. And lastly I would just say, partnering with others in the metaverse is going to become increasingly important, as you have to move at speed to get the experiences that you want. And something I know Lindsay's an expert in is, how do you really build your brand with purpose in that metaverse environment?

Lindsay:

Yes, and I think that's-, I think we are agreeing that it's nascent, but it's-, and I think Covid, to your first question Quentin, obviously accelerated that trend and shame on us for not flagging it. But of course, people were stuck at home, and actually, therefore, being stuck at home and entering a world that was augmented was more interesting, because we were all quite bored of sitting at our kitchen table. But I think, I was reading a report that Roblox produced about three weeks ago. Roblox has four million daily active users, and 50% are under thirteen, which you may raise your eyebrows at, but if you've got kids you won't. But actually, what's interesting is that 50% are over thirteen, because everyone thought that was just a kids game, and it's not just a kids game, and actually, the way that they build their blocks I think is very interesting. And they, to the point of metaverse , is this catch-all phrase: it makes real money for people. So you obviously pay on Roblox to get Robucks, so they're making physical money. There's no reliance-, they're not interested in crypto or blockchain technology. And the platform pays out about 150 million to developers quarterly through normal dollar, so that's real expenditure. But a good example of where partnership, to your point Mary, is coming in Forever 21. They licensed its brand actually to a Roblox developer, VBG, who have then developed in-game and physical articles of clothing, and actually, they're their top selling item on Roblox. So VBG and Roblox earn a share of the proceeds from the virtual item, so great revenue stream, and Forever 21 earns a licensing income, and they're getting marketing value, and that's quite a different way of thinking about how you might generate traction with that elusive Gen Z audience. So, giving them something fun to play with, but quite brave I think of Forever 21 to license their brand.

Quentin:

Fantastic. Well look, clearly one for us to watch closely over time. Let's turn to something that does seem perhaps even more immediate, and perhaps defined for our audience. And that's the increasing prominence of purpose, and you touched on that earlier Lindsay. We know from our own employees, our friends, our families, our consumer research even, how this is becoming increasingly important. And it seems there's a huge opportunity to broaden the message we convey through advertising and media beyond just products and services, to topics such as purpose. So perhaps Lindsay, how is this creating change in the world of advertising at the moment?

Lindsay:

So again, I'll start with some stats. So I'll talk about consumers first, and then I want to talk about employees, because I know as we separate them, but actually they're often just one person, as we all are. So 61% of consumers feel like sustainability isn't their responsibility, it's up to businesses and product. So they want it, but they're a bit like, 'So can you just sort that out for me PwC, or Adidas, or Unilever.' 60% agree that companies much make sacrifices to end racism and xenophobia, even if that means losing a brand name, advertising icons or business. So I dug into that a bit, so you might-, depends where the listeners are from, but Aunt Jemima, which is a massive iconic syrup brand, Mary will know it well, in the states is now just the Pearl Milling Company. Uncle Bens, the rice brand, is now Ben's Original. The Washington Redskins, which I think actually some people had been complaining about for many years, NFL team, are now the Washington Commanders. So actually that's a real impetus from consumers or society really saying that this is unacceptable, you have to change. And there's a lot of heritage in those brands and products, but they are changing. And 51% of consumers think brands have an important part to play in conversations around gender equality. But then I think what's also interesting is attracting employees, so 75% of millennials look at a companies sustainability strategy when considering where to work.

77% of Gen Zs want to work for an organisation where the values align with their own, and that's challenging because their values are quite tough. And for the world's largest companies, when we run surveys as you do, nearly 100%, so let's say 99% of CEO's believe sustainability is critical to their company's success. So it's super high on everyone's agenda, and I think people are just balancing what to let go of, how to move forward, and what to do with brands and advertising. But really what to do with their own company. So is my chicken simplistically-, is it green chicken, is it happy chicken, or is it cheap chicken? I mean let's work out the advertising. Three very different advertising messages, but actually for the corporation selling that chicken, what are you doing, and are your employees going to be proud to work there? And consumers will also check what the corporation is doing versus the products that's being served. So I think it's complex, but it's definitely here, and we're really trying to help our clients figure out their way through it. And actually again sorry, a client, I asked them about their own Net Zero targets, and they told me Net Zero by 2050, and I actually laughed. This was this morning. I mean completely unacceptable. This is not an oil and gas company, and so they have to do better than that.

Quentin:

I was just going to ask you actually, just a follow on question. Real risk for those company's that don't adopt and adapt to this kind of requirement.

Lindsay:

Yes, consumers won't buy their product, they will boycott their brands, and employees won't want to work there.

Quentin:

Yes, so this is a game changer.

Lindsay:

It's a game changer.

Quentin:

Mary, your perspectives?

Mary:

Well first I would like for my chicken to be happy and green, but I'd be willing to pay just a bit more for it if it's happy and green. I think another dimension of this is how you actually talk about what your strategy is around purpose, and the fact, as Lindsay mentioned it, you really have to live it. We're just in a world where you have to manage all of your stakeholders with a very transparent and consistent communication, because what gets said on the inside gets repeated on the outside very quickly and compared. And so I think when you think about your employees, your customers, your investors, the public at large, people that you might be partnering with, as we've spoken a little bit about partnering, that conversation and the consistency of it is really, really important as you move forward. And so just getting that alignment in what you value and finding your path, which is really hard to do well and doing good at the same time, and on our executives of clients, both are on the agenda. Today, maybe there's a little bit of a path to differentiate yourself and have a competitive advantage, I think it just becomes table stakes as we move forward into the future.

Quentin:

I was interested about your chicken and paying more, just to dwell on that for a moment. Lindsay's mentioned the ‘R’ word, but whether it's recession, we're certainly seeing tough times for consumers and the public. Will people pay more in a kind of hardening economic environment, or do you think that will actually test those principles for people? And perhaps a question to both of you.

Mary:

Yes, it's a great question. I think it will absolutely test the principles, and it will test what you're willing to pay more for. I think what's a given is that consumers will become more educated, and they are listening to what you say about your purpose and what you're doing around your green initiatives. And so I think what's different than in the past is they will make conscious decisions about where they will choose to pay more and where they will not, and that will be a very strong consideration for them in that decision.

Lindsay:

I think the rise in convenience is a trend that I wonder if that will stagnate or go back, because people have become lazy. It's not great for the environment to have everyone running around delivering a bottle of washing up liquid or a carton of chips. It's not particularly healthy for the individual, they could get up and walk and get it in some places, in some urban places. And the cost premium of that doesn't make sense actually in an inflationary world moving perhaps to a recession. So I think, some of the convenience factors and trends we've seen, I think they're going to be really impacted by the economic situation.

Mary:

I think we're seeing that already. Like I see differential pricing when I order takeaway or have it delivered, versus go and get it myself. And it's meaningful. Like there's a meaningful trend there that I'm going to go get my happy green chicken with my own two feet.

Lindsay:

And actually yes, someone said to me that Domino's are now advertising in the states and they say it's cheaper to come and pick it up in store. Which is the first time-, everyone's been so quick to rush to delivery, but there's a disaggregation of delivery, and actually your control over your immediate supply chain is challenged.

Quentin:

So balance between convenience, price, and values, isn't it? And we're going to see that tested even more.

Lindsay:

Yes. Those levers, yes.

Quentin:

I don't really want to move away from the chicken, but I feel I have to. But I'm going to latch onto something else you said Mary around transformation. I guess, given the nature of this sector in terms of the creativity, the technology, and having a reputation for transformation, how are you seeing companies effectively transform in this TMT marketplace?

Mary:

So first I'd actually start with the word 'transformation', I think it's a challenging word because, when you say you're going to transform, it infers that you're done, that you complete a journey. I think we're in a world where you never really complete that journey. I think you have to be continuing-, you have to continue to be agile and you have to develop muscles as an organisation that allow you to transform as you need to, to the trends as they evolve. So I think the biggest challenge in transformation is really humans, right? It's really us. As you think about a transformation and as we all undertake them in our businesses, we really have to start with, what is the purpose? What is the outcomes that we're trying to achieve, and how does this impact the human beings that are going to be part of that transformation over time? So I see more focus, certainly more focus on how to use technology in a better way, but a greater appreciation of it's typically not the technology that's hard, it's the people part of it.

Lindsay:

Yes, I mean I think it's the world's most overused word because it means so many different things to different people. And I think it's vital we recognise actually that there's an ennui with the word transformation, and the amount of organisational change that many of our clients have gone through, and that's been hard. You know, the two years, two and a half years of Covid have been hard. The challenges on racial inequity particularly in the US and the UK has been felt very keenly, and I think people are a bit tired and they need motivating, as Mary says, with why are we changing, because people kind of go, 'What does it mean for me?' So I think you need to get really clear and specific about what it is you're trying to do. So internal commerce is really, really important. I think showing that you're investing in people, in humans. So we're seeing a big focus on L&D, and when we're working with our clients on org change it's about cultural change and bringing people along, and showing-, you've got to attract and retain employees in quite a tough environment, so I think understanding how you can communicate, and then train and develop and inspire people. And earlier this year we asked some of our senior CMOs around the world, what's got the greatest potential to unlock growth in 2022, and how well equipped are you to take it on, and much of what came back, as expected. So digital transformation is first, whatever that means. Omnichannel sales, the metaverse, and a connected smart customer experience. But what was surprising was where the employee experience came in, and we add it in, but it came second only to digital transformation, which was new, and also the employee experience as a driver of growth was the one that RCMOs felt least well equipped to tackle. So after all of these structural changes, all of these business challenges, all those pivoting and reorging, actually how are they going to tackle the employee experience? And they don't feel well equipped to do it, and I think that's something where companies like both WPP and PwC with slightly different skill sets, but often when you share clients where the combination of resources and expertise may come to play.

Quentin:

Fantastic. Well listen, we've covered a lot of ground over the last twenty minutes. Just thinking about advice to the listeners to help them get started in tackling some of these challenges, issues, but also I think opportunities that you've talked about. Perhaps, start with you Lindsay, big points of advice for people out there?

Lindsay:

Okay, so I'll do two. So metaverse, just get going. Open a MetaMask wallet, buy an NFT, try a headset. If you've got kids, go and actually look at what they're doing on Fortnight, or on Roblox. So just get going and try and understand. You know, years ago I had clients kind of go, 'Oh I'm not on Instagram.' Or 'I'm not on Snapchat.' And I was like, well shame on you. Get out there and experience it, and it's not that hard. I'd say in terms of the employee experience, I just think you have to be really focused on how do you give a great experience to your employees so that you retain talent and you can acquire it in a really competitive job market. We're so used to looking at net sales, but actually employee satisfaction, as well as client satisfaction, is really important, and actually we're doing some work at the moment to run the correlation. And no surprise actually for the clients where we have the highest employee satisfaction, we have the highest client satisfaction, and vice versa. So there's definitely a positive spin wheel. I think also, think about your employees as drivers of cultural change. During lockdown, employees grew a strong voice, and they kind of got used to having a point of view. I'm sure you feel it on your Ex Co.

Quentin:

And it stayed, and it's great isn't it?

Lindsay:

And then I think thirdly, you know your employees are-, they live and breath and are an embodiment of your brand. So how they experience you, how they experience PDBC, how they experience WPP manifests itself, because they are real people, as we keep coming back to, in the world. So it matters more than perhaps we ever thought in the past, and are one of the, if not the most important stakeholder.

Quentin:

So what advice can you give then Mary?

Mary:

Well first I would pay attention to what Lindsay said, because I think she's absolutely right on all fronts there. Couple things I would add. Pay attention to the structural challenges. The things that we're talking about are significant changes, and they're not easy. So pay attention to the structural challenges, so that when you are ready to take advantage of the rapid scale and the growth, you're well suited to do that and you've got everything you need to have in place. The other thing I'll just close with is, Lindsay mentioned things like employee satisfaction, customer satisfaction. If you want that on a sustained basis, you really have to focus on trust, and what it takes to build trust in the relationships with your employees, with your customers, with your ecosystem partners. They're what takes the friction out of the systems in which we need to operate in the way that we need to run our businesses, but they're really-, it's really important to how we can talk to business and how we impact people as human beings as we move forward. So I would just close with the importance of trust.

Quentin:

That's fantastic Mary, thank you. That draws us to the close of another In Conversation with episode in our Business in Focus podcast. Thank you so much Mary, and of course Lindsay for taking part. You can discover more insights from our experts about the trends affecting industries, and the practical steps to take on our website PwC.co.uk/industry. And of course, thank you to everybody for listening. Finally, don't forget to subscribe to keep up to date with the future episodes. Thanks everyone, and please tune in again soon.

Participants

• Quentin Cole
• Lindsay Pattison
• Mary Shelton Rose