Innovation Opportunities in the Future of Startups and SMEs in MENA

Inspired by Market Trends and Shifts in Demand

11 April 2020

Introduction

Today’s necessity is not only the mother of invention, but of digital transformation, innovation, and the adoption of new habits.

Fighting COVID-19 is now the world’s top necessity, and therefore, its number one accelerator of innovation. Ironically, the pandemic has created the right time and environment for entrepreneurs to launch or at least test their innovative startup ideas.

In the upcoming years, development will be driven and led by the current transformation in lifestyles, consumption behaviour, and evolving demands. The ongoing shifts will bring about new opportunities and modalities for startups, SMEs, and microbusinesses. In developing economies, development actors shall grasp these opportunities to:

  1. Study new trends and development needs that are shaping the forthcoming innovation scene
  2. Support industries with the biggest potential to grow during and after the pandemic

Trends can live long

Enterprises are encouraged to keep their same strategic aims, yet adjust to the changing demand and  uncertainty of the current situation.

Most importantly, as long as the innovation is serving the emerging needs of humanity, then it will most likely persist and last. People will carry on with their normal life, seeking to satisfy the same needs, but this time, in a different manner.

If an innovative product is useful during the crisis, people will adopt it. They will learn how to use it, realise its efficiency, and look for it after the pandemic. The longer the pandemic lasts, the more people are likely to adopt and stick to new habits.

A Market Snapshot

Several economies across the region have swiftly leapt into a level of “Restricted Living”. Governments imposed strict lockdowns due to pressing concerns over the readiness of their health systems to provide adequate health care during the pandemic. Consequently, the market will likely flounder for a longer period at this level compared to developed markets. In doing so, enterprises should be supported to either adjust to the new market size or pivot their business models according to emerging market needs.

During the pandemic, consumers value essential products and services that keep them healthy: physically, mentally, and economically. They look for offerings that keep them safe, less anxious, virtually-connected, and motivated. They are more than ever open to new ideas as they adopt new habits.

When the crisis is over, life will go back to normal incrementally, bringing with it many of the changes that consumers embraced during the crisis. People will still be interested in online shopping, as well as hygiene and high-tech products. At least, in the first few months, people will spend, socialise, and travel cautiously at an ever lower scale. Development interventions shall enable enterprises to respond now to cope with this reality later.

Anxiety and Uncertainty

According to Much Rack, the number of Arabic articles about the novel Coronavirus during March 2020 reached 78,801 – almost 2,600 articles a day which is way more than that published about conflict areas such as Syria (4,545 articles), or trending issues such as refugees (1,691 articles).

Social media content reached its highest peak after the World Health Organization declared COVID-19 a pandemic. Based on data by Crowdanalyzer, the highest engagement rate with COVID-19 content is 52% in the UAE, followed by 48% in Palestine and 46% in Egypt. Around 80% of social media activities included the keyword “Coronavirus” in Arabic (كورونا).

Media has contributed to the spread of anxiety and uncertainty, which played a role in shifting behaviours and urging entrepreneurs to take action. According to surveys by Ipsos and Magenta, around 50% of the population in Jordan considers COVID-19 a high-to-very-high personal threat. About 52% spend most of their time during the lockdown checking social media on their phones, and 42% spend most of their time reading news. At the same time, only 13% believe the media is really exaggerating.

Around 20% of the survey’s participants are most concerned about a decline in the economy, and 20% are most concerned about not being able to work during the curfew.

The resulting economic concerns have created new business catalysts in the region, which innovative startups and SMEs can relish to survive, or even thrive, amid and post to the pandemic.

New Business Catalysts

Product Efficacy

In light of the COVID-19 outbreak, product function, safety, and value come first, making consumers less sensitive to prices. Mostly, enterprises that offer top quality and meaningful home experiences will be able to make it through the crisis. 

Recently, 39% of consumers in MENA expressed their will to pay a premium on electronics, 31% on hair care, meat, or seafood products, and 29% on dairy products; based on a Nielsen study. Hence, markets will value the quality of such products even more during the pandemic.

As people turn to basics, many small and medium-size enterprises may end up with stocks that consumers perceive as unnecessary. Once the pandemic is over, it might be very challenging for these enterprises to re-launch as quickly and eminently as large corporations with more resources and large advertising budgets. 

The Rise of “domestic”

Since consumers are concerned about imports from countries where the novel coronavirus has widely spread, local manufacturers should be empowered to fulfil the new market demand. 

In the past few years, based on a Nielsen survey in the region, consumers have expressed their preferences for local food products (73% dairy products, 41% biscuits and snacks, 38% tea/coffee, 34% bottled water, 33% frozen meat/seafood), which presents growth opportunities for the agriculture and livestock industries.

Consumers will be more concerned about the country of origin of food products during the pandemic. While it looks like a great opportunity for local manufacturers and farmers, it calls for urgent support to those who export to global markets – knowing that “the rise of domestic” is also a global trend.

Digital Infrastructure  

The world has learned that the need for digitisation is imperative. Enterprises that can enable the economy to operate from home are the ones who will foremost expand and scale into new markets. As social distancing prevails, everyone learns, uses, and appreciates digital solutions and technology.

Many argue that the COVID-19 outbreak will not only spur social-distancing but may also pose real risks to the survival of the sharing economy and P2P activities. Consumers will be very concerned to share their belongings and properties with others even when the crisis is over. 

As a result, development interventions should focus​ on generating further support and resources for enterprises to advance through the so-called “isolation economy”, and​ ​ strengthen their digital capabilities. 

Enterprises with zero digital services will hardly compete in the near future, and economies with weak digital-infrastructures will not easily reach sustainable​ development goals in the next decade.​  

The Silver Lining for Startups

Although COVID-19 is taking small businesses to an uncertain “evolve or dissolve” situation, it provides a wide array of new opportunities across different sectors.

The silver lining is that the innovation ecosystem and the private-sector can dramatically grow if put on the right track. In fact, most industries are able to cope fast if we harness technical and financial assistance to utilise future opportunities in each industry.