How can Danish tech startups create competitive strategies during the COVID-19 pandemic?
A case study of MyLoyal
Master’s Thesis
Copenhagen Business School, 2021 MSc in E-business
Number of Pages: 77
Number of characters: 175.111
Date of Submission: 17.05.2021
Author: Mathias Lange Heide Rasmussen Student number: 111000
Supervisor: Per Østergaard Jacobsen
Abstract
The COVID-19 pandemic is influencing our daily lives, our businesses, and our society. As an entrepreneur in the Danish tech startup scene myself, I have felt and witnessed, like many others, the changing and highly challenging new business environment that is emerging. The motivation for this Master’s Thesis, is the pursuit of finding an answer or direction as to how to navigate this new complexity. This leads to my research question:
How can Danish tech startups create competitive strategies during the COVID-19 crisis?
The methods used to answer the research question follows the critical realism research philosophy. Following the research philosophy, a mixed-methods methodology approach has been used, combining four interviews as primary qualitative data, while supplementing the research with both qualitative and quantitative secondary data with the aim of creating more breadth and depth.
A typical case-study design has been chosen, with MyLoyal as the case company. A strategic analysis is presented, with firstly an analysis of the external environment followed by an analysis of the internal environment of MyLoyal. The strategic analysis is concluded in a TOWS analysis, from which four Maxi-Maxi strategies are selected for further
discussion.
It is concluded, that MyLoyal can create a competitive strategy through making a
combined strategy based on the four Maxi-Maxi strategies, but that it is not enough to only formulate a strategy. For the strategy to be competitive, it is crucial that the company is aware of its mindset and willing to adapt to the changing environment.
I go on to suggest, that following the strategic analysis that is proposed in this research will not be a golden thread for all startups to succeed. Following the framework, and the
considerations and discussions throughout the analysis, will instead help position Danish tech startups better, in the pursuit of creating competitive strategies during the COVID-19 crisis.
Table of Contents
Chapter 1 - Introduction ... 1
1.1 Motivation ... 1
1.2 Research Question ... 2
1.3 Delimitation ... 3
1.4 Thesis Structure ... 4
Chapter 2 – Literature & Theoretical Review ... 5
2.1 Competitive Strategy ... 5
2.2 The Four Managerial Mindsets ... 7
2.3 The Extended Business Model Canvas & Strategic Analysis ... 9
Chapter 3 - Research Methodology ... 12
3.1 Research Philosophy ... 12
3.1.1 Hermeneutics ... 13
3.1.2 Positivism ... 14
3.1.3 Logical positivism ... 15
3.1.4 Critical rationalism... 15
3.1.5 Critical Realism: The chosen philosophy ... 16
3.2 Research Strategy ... 17
3.3 Research Design ... 18
3.4 Data Collection ... 20
3.5 Data Quality ... 22
Chapter 4 – Introduction to MyLoyal ... 23
4.1 Team, mindset and leadership style ... 24
4.2 Customer identification ... 24
Chapter 5 – Industry and Competitor Identification ... 26
5.1 The industry ... 26
5.2 Competitor Identification ... 28
Chapter 6 – Strategic Analysis ... 31
6.1 External analysis: PESTEL ... 31
6.2 Competitive analysis: Porter’s Five Forces ... 39
6.3 Revenue & Cost Streams ... 44
6.3.1 Revenue Streams ... 44
6.3.2 Cost Streams ... 50
6.4 Internal Analysis ... 53
6.4.1 The 7-S Framework ... 53
6.4.2 The 12-Step Framework ... 61
6.4.3 Ansoff’s Growth Strategies ... 69
6.4.4 Porter’s Generic Strategies ... 70
6.4.5 Value Chain Analysis ... 71
6.5 TOWS Analysis ... 76
Chapter 7 – Discussion ... 78
7.1 Creating a competitive strategy ... 80
7.1.1 New services to existing customers ... 81
7.1.2 Invest in data ... 81
7.1.3 Develop E-commerce web-based loyalty solution ... 81
7.1.4 Use market traction to capitalize on the market ... 82
7.1.5 The competitive strategy... 82
7.1.6 Changing mindset ... 83
Chapter 8 – Conclusion & Perspectives ... 85
8.1 Conclusion ... 85
8.2 Perspectives... 86
Bibliography ... 88
Appendix ... 93
Appendix 1: Interview Guide 1 – Peter Bodskov, CEO at MyLoyal ... 93
Appendix 2: Interview Guide 2 – Jurate Puodziukaite, CMO & CDO at MyLoyal ... 95
Appendix 3: Interview Guide 3 – Tadas Planciunas, CTO at MyLoyal ... 96
Appendix 4: Interview Guide 4 – Frederik Hvorslev, CEO at Petlux ... 97
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Chapter 1 - Introduction
“ It’s not that consumers are necessarily becoming less loyal, it’s just so much easier to access them and so much easier for them to try something new. So brands are really trying to figure out a way to develop and maintain that relationship with the consumer.”
- Jess Huang, McKinsey Partner (McKinsey, 2021)
The COVID-19 (COVID) pandemic has created global challenges, that are affecting every one across the world. The challenge can be felt for all of us. The implications are complex and massive, from social and political uncertainty to changing economic and technological landscapes. But the pandemic has also been a catalyst for boosting e-commerce, creating apps, and digitalization of industries. This study will look towards Denmark and the Danish tech startup industry. The aim of the research is to look into the impact that the pandemic currently has on the industry and how the tech startups (startups) can survive and create competitive strategies in the midst of the crisis.
1.1 Motivation
It is a challenging world to do business, and even more so as a startup – but there are also boundless opportunities. I am the COO & Partner at the loyalty app development
company, MyLoyal, and has been a part of the company since 2017. I have personally felt the impact that the pandemic has had on our startup, and have together with our team tried to the best of our capabilities to navigate the new complexity. This search was the spark for this thesis, as I could not seem to find any strategic framework, that was ready to be applied to MyLoyal, in order to figure out how the company should move forward and continue to compete amidst this new world. The aim is to create a strategic framework based on existing literature, that Danish tech startups can apply to their own companies, through using MyLoyal as a typical case company representative for the Danish Tech startup industry. I am aware that MyLoyal never can be fully representative for the entire industry, but I seek to create new knowledge by applying the framework on MyLoyal and thereby showing the necessary considerations and knowledge needed in order to
successfully apply the framework during COVID-19.
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1.2 Research Question
‘’How can Danish tech startups create competitive strategies during the COVID-19 crisis?’’
Sub Questions:
• Chapter 4 – Introduction to MyLoyal
- What mindset and leadership style does MyLoyal use?
- What is the product & who are the customers?
• Chapter 5 – Industry & competitor identification - How is The Loyalty Industry characterized?
- What are the competitors?
• Chapter 6 – Strategic analysis
- (PESTEL) What key macro-economic factors influence MyLoyal?
- (P5F) What is the attractiveness of the industry and how does it affect MyLoyal?
- (Revenue & Cost Streams) How are the revenue and cost streams structured?
- (Internal: 7-S Framework) How is MyLoyal organized?
- (Internal: The 12-Step Framework) How does MyLoyal operate?
- (Internal: Ansoff’s Growth Strategies) What growth strategy is MyLoyal pursuing?
- Internal: Porter’s Generic Strategies) What Generic strategy is MyLoyal pursuing?
- (Internal: Value Chain) What are the resources and capabilities of MyLoyal?
- (TOWS) What strategic options does MyLoyal have?
• Chapter 7 – Discussion
- How to create a competitive strategy - What does it mean to change mindset?
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1.3 Delimitation
I’m not an app nor backend developer, and hence my knowledge on the deeply
technological parts of the research is limited. I have aimed to counter this unknown field through interviewing MyLoyal’s CTO, with the purpose of providing authoritative answers on the technical aspects.
There has not been conducted a financial analysis of MyLoyal, which would have been a great supplement, but is not a prerequisite for creating a competitive strategy. A financial analysis is required when the implementation of the chosen strategy must be planned.
This is outside the scope of this thesis, and will be described more in Chapter 8 - Conclusion & Perspectives.
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1.4 Thesis Structure
In this chapter the thesis structure is illustrated. The structure is made up of a Strategic analysis, discussion, and a conclusion. The Strategic analysis is made up of an External and Internal analysis, which is concluded in a TOWS analysis. The TOWS analysis is the foundation of the discussion. I recommend the reader to read the thesis chronologically.
Figure 1 Thesis Structure
Source: Own creation
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Chapter 2 – Literature & Theoretical Review
In the following chapter the literature and theoretical framework will be presented and reviewed. The focus of the literature and theoretical review will be on Competitive
Strategy, The Four Managerial Mindset, and The Extended Business Model Canvas. It is noted, that the applied theories and frameworks in the strategic analysis in Chapter 6 will include a more in-depth review of the theories and frameworks in use. This structure will be described in Chapter 3 – Research Methodology
2.1 Competitive Strategy
With the aim towards answering the research question of the thesis, as to how tech startups can create competitive strategies, the literature review will start with looking towards what is a business and what is a competitive strategy.
A business is defined as a company unit who has (or should have) a clearly defined strategy (Aaker & McLoughlin, 2010). The company unit, or business, can be defined further through factors such as their target segment, country, sales channels, or product.
Big company’s thus generally have many separate business units, who intertwine
throughout the organization and correlate with each other both vertically and horizontally.
The complexity of business units when looking towards tech startups in Denmark is
significantly lower, due to the simply smaller size of the company’s and therefor often also the amount of business units.
With the now classic piece of literature by Michael E. Porter (1980) called How
Competitive Forces Shape Strategy, he lays out that strategy formulation is not just about positioning the company in the best possible way in relation to pricing pressures from competitors, but to position the company in relation to all of the forces in the competitive environment. This theory went on to become the famously, Porters’ Five Forces model, which is also used in this thesis in an attempt to do just that. This also created the
seemingly foundation for 17 years, as to a broad agreement of what strategy actually is.
6 of 87 But in 1996 Porter published his important article called ‘’What Is Strategy’’, where he lays out his criticism of what he sees as misinterpretations of the concept of strategy, and clearly presents his definition of strategy as, ‘’Competitive strategy is about being different.
It means deliberately choosing a different set of activities to deliver a unique mix of value’’
(Porter, 1996).
If you look towards the ways that Porter manages strategy, it can be said very broadly that they can be summarized into two options: Do what no one else can do, or do what
everyone is doing but spend less on it (Ovans, 2015). But it is important to remember the context and time in which Porter wrote this. Porter is creating is theories and definitions within the context of American international conglomerates, such as Southwest Airlines.
The limitations of the theories lies in the historical context of which they are created. By spending less Porter is talking about price competition which in this case is a classic move towards the bottom, and industry profitability will be reduced (Ovans, 2015). Or you can do what no one else can do in an attempt to make the pie bigger through a preferably
complicated amount of activities within the value chain or business model.
There is a seemingly boundless ocean of literature written on different ideas within strategy, which can be boiled down to three overall themes (Ovans, 2015):
1. Do something new
2. Build on what you do now
3. React opportunistically to possibilities and opportunities
Within the field of literature on answering how to do something new is the well-known classic ‘’Blue Ocean Strategy’’ by Chan Kim and Renée Mauborgne in 2004, and later Clay Christensen, Henning Kagermann, and Mark Johnson’s ‘’Reinventing Your Business Model.’’ (Johnson et al., 2008). The key finding by Johnson et al. is their comment on why it is so difficult to execute successfully on a new strategy and business model. The reason being, that the company simply don’t have a thorough enough understanding of the
current business model and strategy, which means that when building a strategy the
7 of 87 company can’t know if the strategy will create new opportunities or hinder them in their tracks.
Looking at the literature on building on what you do best there is another classic, namely
‘’Competing on Resources’’ (Collis & Montgomery, 2008). They seek to answer what makes resources valuable and how to use them to compete strategically.
Finally the third field of strategic literature on how to react opportunistically to possibilities and opportunities lies the perception of more recent literature such as ‘’Stop Making Plans;
Start Making Decisions’’ (Mankins & Steele, 2006), but actually dates back to the 1990’s with articles such as ‘’Judo Strategy: The Competitive Dynamics of Internet Time’’ (Yoffie
& Cusumano, 1999), which is one of the early pieces of strategic literature within this field in the internet era.
To round up this section, another purpose of reviewing this sample of vast amount of strategic theories is to illustrate, that it is possible to combine the different and talented thinkers from across the world and across time to look towards a world of ever expanding opportunities. Though we are living in uncertain times with the COVID-19 pandemic surging through our lives, the technology is continuously expanding and changing all of our behaviours and lives across society and business. This continuous change will create an accelerated world with new possibilities of beating the competitors, making money, having a positive impact, and ways of building a tomorrow we never would have imagined.
2.2 The Four Managerial Mindsets
Our mindset has great impact on our actions, which is why an initial focus on the different managerial mindsets is relevant. The pandemic has changed the world that we operate in across almost every facet of life. This shift in the world has challenged many of the existing business models and customer behaviour. Digitalization, digital disruption, domino
disruption, and digital transformation are among the focus areas of many managers when they look towards an understanding of the future customer journey and design – but without an understanding of your own and the customers mindset, only half of the picture is painted. Rydén, Ringberg, and Jacobsen (2017) presents in their book ‘’Disrupt your
8 of 87 Mindset to transform your Business with Big Data’’ the four managerial mindsets, which will be described more in depth below. The model is based on thorough analysis of several managers, who has been followed through a longer period of time, and on more than 5.500 completed mindset-tests.
Understanding the mindset, sets the scene for the analysis, and can pave the way towards a deeper understanding and learning. By applying and referencing back to the four
managerial mindsets throughout the thesis, the aim is to increase a higher quality of strategic analysis and to avoid worthless strategic choices which does not align with the mindsets of the company, customers and users. The four mindsets are shortly described here:
Promote & Sell: Blue mindset
The blue mindset is about self-expression with a focus on one-way-communication and promotion towards the company’s’ customers. Someone with a blue mindset has an internal focus, which the person projects out to the world, and the focus of product development and sales is based on internal resources and experiences.
Listen & Learn: Red mindset
The red mindset is about being aware of the customers and users’ needs and emotions, to listen and learn. Product development, sales and management is based on insight
collected on the customers or users preferences, needs and motivations, in an attempt to provide more meaningful products and services.
Connect & Collaborate: Yellow mindset
The yellow mindset is about co-development with the customers and users. Managers following the yellow mindset, values highly the customers thoughts and perspectives and uses technology to develop new products and services in collaboration with the customers and users.
9 of 87 Empower & Engage: Green Mindset
The green mindset is about having a holistic and empathetical view towards the market and customers, and how ethics, sustainability, and responsibility works together within society. With the green mindset, the manager sees himself as a citizen within society, and takes responsibility for the organisation and the impact that it has on the environment and all other stakeholders. These mindsets are illustrated in the Figure 2:
Figure 2
The Four Managerial Mindsets
Source: Jacobsen et al. (2017)
2.3 The Extended Business Model Canvas & Strategic Analysis
The core of this thesis is the strategic analysis, which is built upon Jacobsen et al.
Extended Business Model Canvas (EBMC). The EBMC is built upon the original Business Model Canvas (BMC) created by Alexander Osterwalder & Yves Pigneur (Business model generation, 2010). The BMC was shaped with value proposition at its core, and is
surrounded by 1) Revenue streams, which entails customer relationships, channels and customer segments, and 2) Cost structure, that holds activities, key resources and key partnerships. The model has been acknowledged for its easy-to-use and intuitive structure, and is widely spread globally as a classical exercise for every startup company who seeks
10 of 87 to disrupt existing business models. It is essential to think innovatively in relation to the creation of the business model in order to create sustainable growth and to compete efficiently in long term. Exactly this claims Clayton M. Christensen (Reinventing Your Business Model, 2008) that the model is good at achieving, but Jacobsen et al. (2020) criticises this claim. Jacobsen et al. critiques the model and explains, that the model doesn’t consider the external factors such as the competitors and the external rules in the market. He explains that the purpose of strategic positioning is about building a bridge between the organisation and all its functions together with the market and all the customers’ needs, in a profitable way. In order to create this bridge, it is required to explore and exploit unique opportunities within the market. Based on the missing link within the original Business Model Canvas, Jacobsen et al (2020). presents the Extended Business Model Canvas. As in BMC there are the revenue streams and cost factors, but also the external factors such as society, legal, and the competitors. The model is based on the foundation of mutual value between the customer and the company. The model seeks to help the company figure out to whom they create value, and what problems and challenges the company solves. By mutual value Jacobsen et al. present the
understanding, that if the company can create value for the customer, then it must be possible to create value for the company. Applying the EBC in the context of COVID-19, provides additional strength due to the changing external environment,
Figure 3
The Extended Business Model Canvas
Source: Jacobsen et al. (2020, p. 136)
11 of 87 As mentioned previously, the strategic analysis that is the structure of the thesis is built upon the foundation of the EBMC. It has been deemed necessary, that in order to create a framework upon which startups can apply to their own company during the pandemic, that the EBMC is expanded further and supplemented with more analytical theories. In the following chapters the theoretical framework of the thesis will be described and the literature will be critically reviewed. It is noted, as previously mentioned, that a part of the strategic analysis, is to start every application of the theories with a purpose of why it is used, followed by a critical review of the theory and finally potential alternatives if any are deemed to fit within the context. This structure is used in an attempt to create an easier reading experience, where the different theories are reviewed in context of the case company. This is further elaborated in Chapter 3.2 Research Design.
The strategy radar (Jacobsen et al., 2020) is also used as a underlining guiding principle to further structure the strategic analysis. Through applying this I seek to answer where are we and where are we going? The Strategy Radar is divided into two parts, the external environment and the internal environment. First we analyse the external environment which is divided into: 1) The rules that must be followed in the market. 2) The possibilities that exists and what potential the company has in the market. Following the analysis of the external environment, we now take a look at the internal environment, where we look at 1) where the company wants to go. 2) Internal analysis of how these goals can be
accomplished, by analysing what the company has of resources. The goal is to
understand the company and its environment through bridging the external factors to the relationship between customers, the company and competitors. In the analysis of the external environment, there is conducted a competitive analysis, where I set out to
supplement the Revenue & Cost streams (R&C) analysis in the EBMC with a Porters Five Forces (P5F) analysis. The purpose of conducting both the P5F and the R&C analysis is to counteract the weaknesses of each model by supplementing them with each other. The R&C analysis is there for placed within the structure of the thesis as the bridge between the external and the internal analysis.
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Chapter 3 - Research Methodology
In this chapter the methodological framework will be presented. The purpose of this chapter is to outline and discuss the thought process that has been made upon choosing the research philosophy, strategy and design.
3.1 Research Philosophy
In the following chapter the different research paradigms that has been considered will be described and discussed. There are different ways of approaching the research based on the chosen research philosophy. Within the context of the thesis, the considerations has been between initially hermeneutics and positivism, which are illustrated in figure 4, until finally deciding on the research philosophy of this research, Critical Realism.
Figure 4
Considered Research Philosophies
Source: Own creation
13 of 87 3.1.1 Hermeneutics
The first research philosophy that was considered was hermeneutics. Hermeneutics was originally based on theology and originates in ancient Greek philosophy from Aristoteles term, ‘’Peri Hermeneias’’, meaning the interpretations (Black, 1991). The thinking that would later transform into hermeneutics as a research philosophy, was firstly made by the German historian Wilhelm Diltheys (1833 – 1911), who criticised positivism, see Chapter 3.2.2 Research Strategy, views of researchers seeing themselves as neutral objects and observers without any cultural or historical prejudices. Diltheys was clearly inspired by the German theologist, Schleiermacher (1768 – 1834), to who hermeneutics was a study of methodology related to theology and philology (Justesen & Mik-Meyer, 2010). The concept of the hermeneutic circle originates from Diltheys, and hermeneutics was based on text analysis. Diltheys argumentation was that one cannot work with the humanities and social sciences based on the notion of the culturally and history absent observer, because these sciences are precisely about culture and history. The prerequisite for understanding culture is that you yourself are a cultural being. It is therefore necessary to draw a sharp line between the natural sciences and what is now called the humanities (Justesen & Mik- Meyer, 2010). Hans-Georg Gadamer (1900 – 2002) later developed a systematic theory of understanding, based on the hermeneutic philosophy and iterated on the hermeneutic circle. For Gadamer, the time interval is no obstacle and it should not be sought to be lifted. On the contrary, it is a positive opportunity for understanding, because we now also know the impact history has had on the texts.
Hermeneutics main goal is to answer the question, what is understanding? This translates into an example, answering why the author writes in this very way, why the company communicates as it does, or why investors sell out? In the humanities and social sciences, it is not about explaining, but about understanding. The task of these sciences is therefore not to discover causal connections, but to interpret expressions of human activity. This research philosophy was not deemed optimal to stand alone, hence it was deemed necessary to seek further research philosophies who could create the foundation of generating new knowledge.
14 of 87 3.1.2 Positivism
Positivism is a philosophy that is developed by Auguste Comte (1798-1857). The philosophy played a crucial role in the enlightenment and was a sort of rebellion with metaphysics and speculative concepts (Saunders et al., 2016). Comte believes that the history of knowledges has gone through three significant phases. The first phase people explained themselves and their surroundings based in theological concepts. Natural disasters were seen as punishment from god, not as the result of geological or meteorological phenomena. The second phase replaces theology with metaphysics.
Metaphysics is worldview that are not based on empirical observations. Examples of metaphysics are ethics, morality, political ideologies, and classical philosophy. Here one no longer uses god as an explanation but instead abstract concepts. It was not our Lord but nature that was the cause of disaster. The final stage, that Comte presents through his work with the introduction of positivism is the introduction of natural science. The natural disasters are no longer explained by god or nature, but through geological and
meteorological surveys (Saunders et al., 2016). This drastic new approach created a paradigm shift, with intense amount of criticism towards the church and their historical monopoly on knowledge. The scientific theory of positivism undergoes a historical development in which emphasis is placed on different but related epistemological and ontological conditions. Positivism was an attempt to create a science based on a objectively empirical foundation, that can bring forth accurate and positive knowledge about the world, as it is The ontology of the philosophy is categorised as positivistic or realistic. This means that reality is defined by the outer sensory reality, which leads to the understanding that quantitative methods and experiments can uncover the objective facts about reality (Sanders et al., 2016). In other words this is natural science where natural observations has the authority.
Psychology is rejected by Comte as a pseudoscience, as it is based on introspection. That is the person turns his gaze inward to consider his feelings and moods, but for Comte, one cannot be both observing and be an observer, for then one cannot be neutral and
objective. Today positivism is seen as a collective term for different approaches, rather than a fixed, collective doctrine. This evolution transformed positivism into the so-called
15 of 87 post-positivism, which is a more softened version that can better redeem practical
questions and culminates into logical positivism (Saunders et al., 2006).
3.1.3 Logical positivism
Comte's positivism created for the first time a program for the theory of science. It is ground-breaking, but his ideas, on the other hand, also contain some very fundamental weaknesses. First and foremost, he himself has problems with the clear distinction between science and metaphysics. His own account of science is to a large extent metaphysical.
It is this and similar weaknesses that in the first half of the 20th century led a large number of scientists and philosophers to try to rethink positivism in a stronger and more stringent version, which goes by the term logical positivism. It originated in Vienna in 1920 and managed to become the dominant scientific theory before it began to lose ground from around 1960. The group would go on to be called the Vienna Circle, and among its
representatives were Alfred Jules Ayer (1910 – 1989). The logical positivism was defined by their open-mindedness, theory independent, and systemic observations (Saunders et al., 2006). The logical positivists demand that a statement must be verifiable in order to be meaningful. The aim was to answer, what is science? This means that you must be able to state what possible observations are needed to be able to prove the statement. Logical positivism has had major impact on the natural sciences, but rarely exists anymore in its pure form. Instead the criticism by Karl Popper (1902-1994), moved positivism forward to the next era.
3.1.4 Critical rationalism
The Austrian-English philosopher Karl Popper was one of the first and most important critics of positivism. Popper believed that the positivists had asked the right question, namely: what is science? (Saunders, et al., 2016) But he did not believe that one can prove through observations whether a theory is true or false. As an example, a horoscope will always to some extent fit with reality, but that does not make astrology a science.
Popper lays out, that a researcher will always be capable of finding evidence for a chosen theory, if that is what the researcher is looking for. Still, Popper believed that empirical
16 of 87 studies should be based on theory. Following the theory, hypothesis are made and tested through observations. Hypotheses are what, based on the chosen theory, that are
expected to happen in a given situation. Criticising verification from logical positivism, Popper instead introduced falsification as the scientific principle. Here it is not a matter of conclusively proving the truth of a theory, which is to him not possible, but of constantly and critically verifying the theories that have been developed. You can’t prove a theory through observations, but you can instead falsify. When that happens, the theory must be rejected or at least changed, and then one can start testing the new theory again.
Therefore, scientific theories must always be developed and disseminated so that it is possible to test them (Saunders, et al., 2016).
The aim of the thesis is to uncover patterns and tendencies within the research towards creating a general conclusion upon how tech startups can create competitive strategies.
Deduction is used in the context that the research design of the case study starts with choosing theories, but these are not tested in an attempt to either verify or falsify them, but instead to reveal their limitations and alternatives for tech startups (Holm, A.B, 2018). In order to solve the thesis as just mentioned, the critical rationalism research philosophy is still not well suited, which finally leads us to the chosen paradigm, critical realism.
3.1.5 Critical Realism: The chosen philosophy
In this chapter the chosen research philosophy will be presented, witch reveals based on what philosophical assumptions this thesis has created new knowledge. The aim of this research is to uncover how tech startups can create competitive strategies during COVID- 19, which has a explorative nature. This is a highly complex problem, which has been approached with the critical realistic worldview. The primary goal of critical realism is to explain what the researcher sees and experiences, based on the underlying structures of the reality we live in.
Critical realism is a relatively new direction in the theory of science, which was first developed in the 1970s by Roy Bhaskar (1944 – 2004) and onwards (Saunders, et al., 2016). The philosophical starting point of realism is that a reality exists independently of our knowledge of it. The assumption that such an objective social world exists is, the
17 of 87 trademark of realism. The ontological and epistemological basis of critical realism is the notion that reality has an objective existence. This means that there is a reality that works independently of the concepts the researcher has about it. Critical realism also recognizes that this objectively existing reality is always conceptually conveyed. Concepts mediate our relationship to the world. Thus, on the one hand, critical realists distance themselves from a naive objectivism / realism (positivism), which claims that everything that is real is empirically observable, and on the other hand they also distance themselves from radical postmodern and discourse theoretical currents, who doubts that there is a reality outside language and concepts at all (Saunders, et al., 2016).
Critical realism is deemed as the best fit for this thesis, also due to the axiology of critical realism being based on the researchers acknowledgement of the biases created by world views, cultural experiences and upbringings, which is well suited here as I, the author, is working within the case company. My goal is therefor to minimise bias and errors and create as objective research as possible, while being aware of the limitations there comes with working for the company.
3.2 Research Strategy
Following the chosen research philosophy of critical realism, the guidelines for the
research strategy and data collection is made. The methods classically used within critical realism is based on retroduction, or abduction, and on in-depth historically situated
analysis of existing structures and emerging agency (Saunders, et al., 2016). In order to align with the chosen research philosophy’s ontology, epistemology and axiology the following research strategy is described. This thesis is grounded in mixed methods
research design as per the research philosophy of critical realism, meaning that there will both be used quantitative and qualitative data collection techniques and analytical tools (Saunders et al., 2016). The abductive approach is used, in the sense that instead of using deduction where we move from theory to data, or from data to theory as in induction, I will instead move between two, combining both deduction and induction (Saunders et al., 2016).
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3.3 Research Design
This study uses a combined mix of study designs, also called mixed-methods research design. This also leads to using qualitative and quantitative research approaches in order to create more breadth and depth of understanding (Schoonenboom & Johnson, 2017).
The primary research strategy is exploratory in its nature, but it is also supplemented with evaluative research. The explorative research strategy starts off with a broad focus on the external environment, and then becomes narrower as the research progresses (Saunders, et al., 2016). Another beneficial element of a explorative research strategy is the flexible nature of it, where there is freedom to adapt to changes based on results of new data or insights that occur during the research. The evaluative research is based on the structure of this thesis, as to a part of the analysis is to evaluate the chosen theories and
frameworks in relation to applying them during COVID-19 on tech startups (Saunders, et al., 2016).
The research design of the thesis is based on a single holistic case study of MyLoyal ApS.
A single case study is chosen as it is deemed a typical Danish tech startup, and because the author works within the company, hence it provides an opportunity to observe and analyse the phenomenon closely (Saunders et al., 2016). As previously mentioned, I am aware that MyLoyal is not representative for all Danish tech startups, but can be used within the context of being exactly typical, and can based on this generate new knowledge.
The time horizon of the study is defined as a cross-sectional study. There are two different time periods that will be analysed and discussed in the research, namely the time before COVID-19 or during COVID-19. The cross-sectional date is set to the 27th of February 2020, where it became public that the first danish citizen was diagnosed with COVID-19 (SSI, 2020), and until the 17th of May 2021.
As mentioned in Chapter 3.2.3, a part of the research design has been to critically review the applied models and frameworks from the EBMC and the strategic analysis. The method for the analysis is divided into four parts. Firstly every analysis will begin with a short introduction and purpose of the model or framework. Secondly the model will be criticised where relevant and the limitations will be described in relation to tech startups having to apply them during Covid. Thirdly the alternatives (if any) will be mentioned, since
19 of 87 even though MyLoyal is deemed as a typical case study for the tech startups in Denmark, then there might still be in some cases the need to alter the framework presented in this thesis, to fit their specific customer segments or type of business. Finally the fourth step will be the application of the model to the case company, MyLoyal ApS. This method for the analysis is illustrated in Figure 5. The structure of the thesis is based on three parts.
Firstly I set out to describe the current situation. Secondly as per critical realism I attempt as objectively to analyse the external and internal environment for MyLoyal during the Strategic Analysis. Finally I analyse and discuss the pros and cons of where MyLoyal is today, and what possibilities and opportunities lies in front of the company, which can be converted to creating a competitive strategy.
This methodology is an attempt to first distance myself from the situation that I am a part of, in order to gain potentially new and meaningful insight. The same methodology can be used for other companies who attempts to reflect upon their situation, by asking questions that are aimed at bringing out potential biases that might lie under the surface (Saunders et al., 2016.
Figure 5 Method for analysis
Source: Own creation
20 of 87
3.4 Data Collection
This research applies both qualitative and quantitative research design. The primary data is made up of a qualitative data collection of four semi-structured interviews. The semi- structured interview style was chosen due to its flexible nature, as there are more ways to gain a deeper contextual understanding of the research topic (Justesen & Mik-Meyer, 2010). The interviews has been divided into two groups, one being the interviews with MyLoyal ApS employees, and the other being an interview with one of the customers of MyLoyal. The interviewees from MyLoyal has been selected based on their different expected insights related to MyLoyal, and the interviewee from the customer was chosen based on seniority under the assumption of getting the needed information to answer the theories discussed in Chapter 2 – Literature & Theoretical Review. Following the semi- structured interviews, some of the interviews has been altered, as it has been left open for further explorative questioning when deemed necessary, where the interview guide has not been followed fully.
The ethics of the research design has been taken into consideration upon data collection, and all interviewees has been made explicitly aware what the purpose of the interview is.
All interviews was started with a briefing prior to the actual interview, where all the interviewees rights where stated and the way in which their data would be processed by the researcher in this thesis. They were also made aware, that the interview would be recorded. All interviews has been conducted in English, and the audio-files has been attached as separate files to the thesis upon hand-in. Even though all of the interviewees are Danish native speakers, it is not deemed to have influenced the data quality negatively that the interviews was conducted in English, as all of the interviewees are fluent in
English. The list of interviewees is shown in Figure 6 and the interview guides are available in Appendix 1-4.
21 of 87 Figure 6
Interview overview
Source: Own creation
The secondary qualitative data for this thesis is based heavily on articles and papers from McKinsey and Harvard Business Review. Quantitative data has been collected from official sources such as Danmarks Statistik or from the e-libraries and databases available
through CBS in order to ensure high data quality.
Interviews:
The cognitive bias that occurs when interviewing a high-ranking person in the analysed company is taken into account, which is why, in order to strengthen the validity of the data collection, facts have been checked on several of the stated claims. Information that cannot be quantitatively validated in the form of publicly available data is handled with critical eyes through the thesis. The same applies to all information provided through the interview.
Due to the COVID-19 pandemic, is has been highly difficult to schedule interviews, it has only been possible to get one customer interview, from the retail chain customer segment.
It would have substantiated the argumentation of the thesis, if there would have been conducted more interview with the customers from the restaurant chain segment, and also end-users of the MyLoyal loyalty apps.
Scientific journals and articles
It has been attempted to focus primarily on Danish quantitative data, or data directly regarding Denmark. For some of the analysis there has been used studies etc. from
22 of 87 McKinsey in USA on digital consumer behaviour during the pandemic. In the thesis it has been explicitly noted when data is not focused on Denmark, but it is assessed that the international data still has the quality to bring value to the study, even though there might be cultural differences or other context within the studies, that may result in the data not being 100 pct. applicable to the Danish market. In secondary data it is possible to quickly assess the reliability and validity of data, through assessing the authority or reputation of the source (Saunders, et al., 2016). All used literature is assessed as being of high validity and reliability, and are collected from well-known and respected sources. However, the articles used may appear to have a limited reliability due to the qualitative and subjective form of these.
3.5 Data Quality
The case study's data quality will be assessed in the subsections below, based on validity and reliability. By validity is meant the validity of a data set or concept where reliability is an assessment of the case study's measurement accuracy (Saunders et al., 2016) Reliability and validity are key concepts as to judge the quality of the research. In other words, reliability is about how well the research is possible to replicate and how consistent it is. Validity on the other hand refers to how appropriate are the measurements used, how high is the accuracy of the analysis of the results and is there a generalisability (Saunders et al., 2016).
In order to attain reliability, a full documentation of the collected data is provided in the thesis and in the Appendix, hereby increasing the transparency of the research. Secondly all quotes used via verbatim are explicitly noted, which creates the possibility to show that the conclusions are well-founded on data based on decision-trail (Saunders et al., 2016).
These two techniques has together increased the reliability of the research, so that it is possible for other researchers to arrive at comparable conclusions with the same data, which defines a reliable research (Noble & Smith, 2015; Saunders et al., 2016). But as I, the author, works for MyLoyal, I also have access to data that would not be possible for other researchers outside of the organization, so when it is noted that it is possible to arrive at a comparable conclusion, it is meant for other researchers in similar positions as I, conducting research within their own tech startup in Denmark. The reliability is there for
23 of 87 limited in scope, but still existing, but it can be argued that there is a lack of repeatability and rigour. Answering the question of the validity of the research, it Is deemed that the four semi-structured interviews provides adequate method to attain an in-depth and broad understanding of the informants knowledge within both MyLoyal and Petlux. The semi- structured interviews are also deemed the optimal type of data collection, as other types such as questionnaires would not create the same depth as the semi-structured interviews provide. Finally the abductive validation approach which is followed as per the critical realism scientific philosophy, leads to abductive validation (Saunders et al., 2016). The move between induction and deduction creates a substantial focus on identifying causal relationships between the research phenomenon and its context, a (Saunders et al., 2016).
Chapter 4 – Introduction to MyLoyal
MyLoyal is a Danish loyalty software development company founded in 2016 by Torben Nordal Clausen, Peter Bodskov and Henrik Bodskov. The primary focus of MyLoyal was originally to digitalize the physical stamp cards, with a target group of small one-store retail and restaurant businesses. The solution was a loyalty app called MyLoyal, where all the businesses could pay a mthly subscription to be a part of the ecosystem. The app was split into two through a either company or customer login. The customers would download the MyLoyal app an login with a customer login, to access the stores that was a part of the MyLoyal ecosystem. The stores was able to give their customers stamps and points. I joined the company in the early 2017 and became a partner in the summer of the same year. Through 2017 and until the middle of 2018, we tried to penetrate the Copenhagen market in an attempt to gain a proof of concept. We had over 500 meetings with potential customers, which gave us an insight into the needs in the market, but we didn’t manage to gain significant traction on our platform and therefor realised that we had not successfully hit the target or our expectations with our app. We reflected upon our learnings and decided to make a strategic change towards bigger customers with more than one-store.
This decision was the kick-off to what MyLoyal is today, and what we call MyLoyal 2.0.
MyLoyal 2.0, from now on just called MyLoyal, moved away from a single app in the MyLoyal brand and instead embraced the idea of building white label loyalty apps.
24 of 87 Today MyLoyal is a SaaS white-label loyalty app provider. Included in the company
product is a backend admin panel, from where the customers has full control over all content that is presented within the live app. Besides the core product of the loyalty app, MyLoyal also provides a data subscription add-on, which is a new product that MyLoyal started offering in the end of 2020 during the pandemic. This add-on provides a data dashboard to the customers, who then get an overview of the users behaviour and performance on their loyalty app.
4.1 Team, mindset and leadership style
MyLoyal is owned by six partners. Two investors and four managers. Among the
managers are the CEO Peter Bodskov, CTO Jurate Puodziukaite, Tadas Planciunas, and I, COO Mathias L. Heide.
As a startup, MyLoyal has always had a pure focus on operations and execution, which is widely the reason as to the company’s success but also its failures and learnings. MyLoyal has historically worked with a Blue Promote & Sell mindset with the first MyLoyal 1.0, and when the company made the strategic change towards bigger clients, there was a need to change the mindset. These moved the company into a Yellow Connect & Collaborate, proactive mindset, that is currently highly project based and is focused on engaging the customers. As the company is growing to a bigger size, the need for a thorough analysis of the company and its environment is necessary in order to identify the threats and
opportunities there exists, and how best to capitalize on them, and how these factors affect the mindset of the company.
4.2 Customer identification
MyLoyal currently has three main segments: 1) Restaurants, Nightlife and Cafés (RNC), 2) Retailers and 3) Communication platforms.
The history of the customers of MyLoyal is based on a lot of heart, luck and network. The first big customer for MyLoyal was the Max Hamburger (Max) chain in Denmark, with three stores. What we sold to Max was an idea, presented through a mockup of the app we
25 of 87 intended to build for them. This mockup build upon the first MyLoyal app, with stamp
cards, but also introduced three new main features, which we came up with through dialogue with (1) Max. The app could collect the interests of the users, and allowed the user to receive coupons, news and stamps from Max.
Fast forward some months, and MyLoyal managed to find a IT consultancy house that could develop the Max App based on the mockup that was created inhouse in MyLoyal.
MyLoyal then got three new sales over a few months, namely (2) Bonnie Dyrecenter (Bonnie), (3) ONLY and (4) Stofa. The Bonnie and ONLY app was almost entirely white labels of the Max app, while Stofa was something entirely different. The Stofa app was focused only on communication where we build improved news feeds, removed all coupons and stamp cards from the app, and introduced an event page and a team member page to the app. At that point in time, in early 2019, we decided to build
everything that the customers wanted and we was capable of building, and also decided to accept any customers that we could get. We didn’t have any efficient sales strategy or strategy in general, and we build mainly upon the network of the company, as all three new customers was gained through the personal network of the board members of MyLoyal. At this point we started seeing patterns in what our existing customers was asking for, but there was still not any clear target segment. We then signed (5) Petlux a pet food retailer, a Jewelry shop called (6) Dulong, (7) Paradis a Danish ice-cream chain and (8) Dansk Erhverv (DE). Petlux and Paradis is got a white-label solution from Max and DE was inspired by our Stofa app but the new app for DE included some deep integrations to their existing event systems, and the app quickly became the DE Event App. All our new customers was also gained through the network of board members of MyLoyal. By April 2020 we had these eight customers ready and running, and from this we created our three segments.
1. RNC chains (Max & Paradis)
2. Retail chains (Bonnie, ONLY, Petlux and Dulong) 3. Communication platforms (Stofa & DE)
26 of 87 Since MyLoyal no longer actively pursue The communication segment like Stofa and DE, these will be excluded from the following thesis. Hence the point of departure will for MyLoyal be the focus on medium sized retail and restaurant chains, where restaurant chains also include nightlife and cafés in the definition. The customers are illustrated in Figure 7.
Figure 7
MyLoyal’s Customers
Source: Own creation
Chapter 5 – Industry and Competitor Identification
5.1 The industry
The pandemic has rocket launched the digital evolution and adaption in many industries at record speeds. Prior to the pandemic, the digital evolution was already in growth, but the pandemic has further accelerated this speed.
The digital loyalty program industry is in rapid growth and is expected to grow at a CAGR of 20,92 pct. in the forecast period of 2020 to 2027 (Data Bridge, 2020). Sources disagree on the total market value of the digital loyalty program industry, but it is estimated at a
$181b market value as of 2019 (Beroe, 2019).
But what is loyalty? There are many ways of defining loyalty, throughout philosophy, psychology, business, and personal definitions. For this research, I will look at business
27 of 87 loyalty as the relationship between the customer and the company, and the desire to do business together. Loyalty will be based around three desires, the rational, the emotional, and the social / community based desires. The rational desires are the classic rewards based loyalty. The emotional desire, is best known in Apple products, where loyal
followers will go above and beyond to purchase and promote Apple products. The social or community desire is how the relationship creates a sense of belonging and meaning.
Looking towards Denmark, the country has not been adapting to the new technology and loyalty trends as fast as compared to Sweden and Norway. In Sweden 85 pct. and in Norway 56 pct. of retail companies has a loyalty program in place, whereas that number is only 32 pct. in Denmark, which indicates great future potential in the market (Omnichannel Index, 2020).
The app industry is booming, with a 6,9 pct. increase from 2019 to a total of 218 billion mobile app downloads worldwide in 2020 (Statista, 2020).
The mobile gaming market is also in great growth, which is also an indication for the growth of gamification technology, which plays an important role within the digital loyalty industry. By gamification I will use the definition by Oxford Language (Oxford Languages, 2021):
‘’The application of typical elements of game playing (e.g. point scoring, competition with others, rules of play) to other areas of activity, typically as an online marketing technique to
encourage engagement with a product or service.’’
The revenue generated through mobile gaming in Denmark increased by 19,23 pct. from 2019 to 2020 to a total of €93m a year. The revenue is expected to show an annual growth rate (CAGR 2021-2025) of 9,15 pct., resulting in a projected market volume of €147m by 2025 (Statista, 2021).
The new growth is also defined by new customer behaviour, as the lockdowns has influenced society as a whole. A McKinsey study from 2021 of US customers show that users are browsing faster and jumping between different websites, apps, brands, stores,
28 of 87 and are more willing to try out new products, now more than ever before (McKinsey,
2021).The same study reveals that 75 pct. of consumers have tried different digital purchasing experiences and brands during the pandemic. 60 pct. of these consumers intent to continue with the new purchasing behaviours and to integrate the new brands into their lives. As explained above, MyLoyal is primarily a loyalty app developer but the
company is also moving into offering web e-commerce plugins.
The development in the mobile app industry, e-commerce, gamification and digital loyalty programs reveal an exciting and blooming industry. These factors leads us to the definition of The Digital Loyalty Industry which will be the departure for the rest of the thesis:
‘’The Digital Loyalty Industry includes loyalty app platforms and web e-commerce loyalty technologies’’
5.2 Competitor Identification
The competitors can be divided into three overall categories:
• IT Consultancy
• One Brand
• White Label
IT Consultancy strive on high customizability and high prices. The consultancy houses are often the most premium providers of digital solutions, and the companies include names such as Netcompany and Nodes.
One Brand providers in the industry are providers of technology in the providers own brand name. MyLoyal was as explained in the previous chapter categorised as a One Brand provider of digital loyalty, as its clients would subscribe to be a part of the MyLoyal app.
Currently there is very low competition within this category in Denmark, but the players include Stampz and Stamp Me.
White Label providers of digital loyalty are the closest to direct competitors to MyLoyal.
The White Label providers in Denmark are Lobyco the spin-off company from the successful inhouse developer team from COOP, and Loyalty Key who provides white
29 of 87 labelled payment integrated technology. The development of the industry in other parts of Europe and especially the UK is significantly more developed than in Denmark. There are four significant White Label providers in Europe, namely Talon.One, Loyax, Bobile, and Loyalty Prime. These players are currently not operating within EU but they are potential future competitors. An overview of the competitors in the industry is illustrated Figure 8.
Figure 8 Competitor Matrix
Source: own creation
Besides the different categorizes of companies within the Digital Loyalty Industry, there are many different factors that define the competitive environment. The overall competitive environment will be elaborated in the Porters Five Forces analysis, but there are two primary factors which will be defined here, namely price and customizability which is illustrated Figure 9.
30 of 87 Figure 9
Competitor Position Matrix
Source: own creation
MyLoyal is currently positioned in a niche on the Danish market, with medium pricing and medium customizability. The closest competitors are the White Label companies Loyalty Key and Lobyco followed by the IT Consultancy companies Nodes and Netcompany, illustrated in the above group 1.
Though the international companies, illustrated in the above group 2, are also relatively closely positioned in technology compared to MyLoyal, they do not yet operate within the Danish market, and will therefore not be the focus from this point and forward in the thesis.
It is noted that there are a final type of competitors, who has not been listed above. These are namely the secondary competitors, Forbrugsforeningen and the PlusKort.
Forbrugsforeningen is a big Danish loyalty club, which provides simple loyalty offerings to their customers. The PlusKort is a loyalty offering, especially targeted to specific Danish union members. These are not mentioned above and will not be included in the following
31 of 87 research, as the purpose of the solutions are to only generate traction towards the end- users, but the customers don’t acquire any insights and data on their own customers (end- users). This is strategically a very different way of working with loyalty.
Chapter 6 – Strategic Analysis
In the following chapter, the strategic analysis of the thesis will be completed. The strategic analysis is divided between an external analysis and an internal analysis, which is finally summarized in a TOWS.
6.1 External analysis: PESTEL
The PESTEL analysis is a well-known and simple international framework, which creates an understanding of the external environment and the significant factors within. The
framework enables the startup to reflect and understand the opportunities and threats that are present for the company, due to the external factors. In the following analysis, the PESTEL analysis will be applied to the external environment of MyLoyal in Denmark.
Critique: There are some disadvantages and weaknesses that apply to using the PESTEL analysis, that are important to be aware of, if you decide to apply it. Due to its simple structure, some users can underestimate the required data that is needed in order to base your findings for decision making, hence not acquiring enough data. On the other side of the same coin, it is also possible to experience paralysis by analysis, as the external
environment is vast and there is a significant risk of collecting too much data. The data that is found and applied to the analysis are based on assumptions made early in the strategic framework, which means that the collection is based on several assumptions of the
researcher, which might later reveal itself to be unfounded. Finally it is important to be aware, that the external environment is changing very rapidly, which makes it difficult to predict future developments in the external environment. A good example is the current pandemic, I will assume that very few people worldwide had anticipated in 2019, that the world would change so drastically in the coming years. Hence it is important in order to negate this effect of uncertainty, that the framework is applied regularly by the company.
32 of 87 Alternatives: There are alternative ways to analyse the Danish startup macro-environment, such as conducting one of the many variations of the PESTEL analysis such as the PEST, SLEPT, STEPE or others. It is also possible to apply an ETOM analysis (Shtal et al., 2018), which looks at the environmental threats and an opportunities matrix. The
advantage of using the ETOM framework is due to the often faster analysis process, since there are less factors that are applied. The limitation is though, that the ETOM analysis factors are determined initially by an environment expert, which means that the startups can be limited to consultancy work in order to apply it correctly.
6.1.1 Political factors
EU: As a startup operating within Denmark, it is important to state the influence of the EU.
Denmark has been a member of the European Union since 1973, and benefits from being a member country. The internal market has been boosting the economy for many years and continues to do so, while also playing a significant role in the country’s high political stability and general economic foundation.
Lockdown: The pandemic lockdowns during 2020 and 2021 has severely impacted the political environment. Particularly hard hit has been the experience industry, travel
industry, restaurant & nightlife industry, and physical retail industry, which has in most part been entirely shut down or severely restricted for the last year. These industries has been hit the harshest since they are based around physical locations where people are
gathering. The restrictions has besides from entire lockdown periods been on opening hours, and amount of people allowed to be grouped together, both in public and private spaces. But now, as of April 2021, the restrictions are slowly starting to get lessened, and Denmark prepares to slowly re-open society. This means that more people are slowly allowed to return to school, and the above mentioned industries are being allowed to open, though still restrictions on amount of people and opening hours (STM, 2021).
Tax, delayed VAT, and compensation packages: As a result of the pandemic, Denmark has been generally strong and quick to react with ways of helping the struggling economy and most influenced industries. This has been made through a wide arrange of political tools, which includes delayed VAT, and vast sums of money compensation packages to
33 of 87 the industries that has been forced to close down or has been restricted. Also new
regulations on vacation laws, and tax deadlines has been politically regulated in an attempt to help the economy stay afloat, increase consumer spending and reduce the amount of bankruptcies and the unemployment rate (PWC, 2021). Some more successful than others.
Corona Passport and government criticism: During times of crisis it will most likely never be possible for a government to satisfy everyone, but the pandemic has created a broader level of scrutiny and criticism towards the Danish government, some saying the restrictions has been too harsh and the opening of society too slow (TV2, 2021b, p. 2). But the general frustration and dissatisfaction that has arisen among the Danish citizens might be a result of many factors, such as the impact that the lockdown has had on mental health, but also other variables as the Mink Scandal (TV2, 2020, p. 2) which among others has created a sense of political uncertainty. This will be described more under Social Factors. Highly influential is also the debated Corona Passport, which is at its core a way to improve governmental control of the pandemic while also creating a manageable way of reopening society. By implementing the Corona Passport, it will also highly increase the incentive for the citizens to get vaccinated, as non-vaccinated citizens will be restricted from society by law. This is also where much of the criticism comes from, which is combined with a fear of governmental oversight and a move towards an Orwellian surveillance state (TV2, 2021a, p. 2)
6.1.2 Economical factors
Generally the Danish economy is strong and stable, but it has been impacted by the pandemic and is currently experiencing a recession. In 2020 the GDP fell by 3,8 pct. And the estimates for GDP in 2021 has been lowered to 2,8 pct. From previous estimates in August at 4,2 pct. Indicating a lowered optimism towards the growth in 2021, and also adjusting for the still high uncertainty (KL, 2020). It is roughly estimated, that the crisis will cost the Danish society 536 billion kr., but the calculations are still under high uncertainty as there still exists high uncertainty regarding the further development of the pandemic and the roll-out of the vaccinations to the population (Finans, 2021).
34 of 87 Inflation: The core inflation (inflation exclusive energy and non-processed food) has
fluctuated during 2020, but has increased to 1,2 pct. In January 2021 from 1,0 pct. In December 2020 (DST, 2021). The changes in the inflation level for Denmark and EU are majorly the outcome of price changes on clothing. The core inflation is an indicator of the inflation development in the long run. The calculated inflation level has a higher degree of uncertainty than normally, since more prices in the index has been estimated than
normally, since several industries has been locked down or severely restricted during the pandemic.
Venture funding: The venture funding market in Denmark is important to look at for startups in Denmark, as it is for many a way to gather funding for the company, but it is also a signifier for the overall welfare of the startup industry, which is heavily where the venture funding market invests. In 2020 it showed that the Danish venture funding market has been more resilient than anticipated. There has been made 68 venture investments summarizing a total of 3,9 billion kr., primarily in tech ventures (Vækstfonden, 2021) which is very close to the same amount as of the record breaking year of 2019. The venture funding market has stagnated in 2020 compared to the previous years of rapid growth, but the pandemic has shown not to break the blossoming danish venture funding market.
6.1.3 Social factors
Demography: The Danish population is 5.837.213 as of January 2021 and it is expected to increase by 4,8% during the coming 10 years (DST, 2021b).The Danish society is highly educated, and there is a high degree of income equality (DST, 2021c)
Mobile and internet usage: Denmark is a highly digitally connected society, with 90 pct.
Of the population owning a Smartphone (DST, 2021a). The pandemic has resulted in an increase of media consumption, with the most recently available data being from March in 2020, in the start of the pandemic, where the Danes already used 23 pct. More time online than in the previous year, from 8,3 hours per day in 2019 to 10,2 hours per day on
average (Politikken, 2020) It is estimated to have become even higher during the long lockdown.
