The Great Reset – 2021 innovation trends for startups

Necessity is the mother of invention, and the Covid-19 pandemic has dramatically accelerated corporate digital transformation. As companies rush to develop new digital capabilities to build resilience and retool for the post-pandemic world, keeping up with fast-moving technology trends is critical. The pandemic tested many businesses this past year as they looked toward the cloud and machine learning. While challenging, I see this migration of dated business processes into modern-day solutions ultimately leveling the playing field, giving companies the ability to quickly scale, compete with global enterprises, and be ready for what some are calling “The Great Reset.”

At Microsoft, we continue to build meaningful partnerships with growth-stage startups who are at the helm of changing ‘new normal’ dynamics. Looking back at 2020, one of the key innovation trends I anticipated was the prominence of Social Impact. This past year there was an outburst of social entrepreneurs. According to a World Economic Forum report, social entrepreneurs solve market and government failures by serving excluded and vulnerable populations, which are most at risk of impacts of COVID-19. This gave way to new social impact models leading solutions in critical areas like education and healthcare in developing economies. At Microsoft, in addition to our Tech for Social Impact efforts, we launched the Microsoft Global Social Entrepreneurship Program to support these social entrepreneurs by building solutions to support the economy, community, and society.

The sheer number of newly created and experimental startups that emerged last year to support the shift to remote work was incredible. Founders of startups of all stages adjusted and pivoted quickly. As someone who met many entrepreneurs last year, it was fantastic to see this quick action to keep pushing innovation forward. Looking at the year ahead, I see three top themes that will either gain traction or come to life within the startup ecosystem in 2021:

Data and Extended Use of AI

We are looking ahead to a new decade where data will take center stage. Data quality, machine learning (ML), data analytics, and migration will be the zeitgeists that shape the next wave of innovation. Data marketplaces’ will usher in a new wave of digital innovation wave that brings together the virtual economy like global supply chains. As more businesses shift to an online model, every stage of the customer interaction will be delivered digitally, in real-time. Integration and deployment of data to support this customer experience will be the new norm for enterprises.

In parallel, AI will experience vast expansion and development. It will continue permeating all aspects of our lives in the form of natural language processing and conversational AI, IoT, hyper-automation, AI-as-a-Service, and others. In 2021, I believe we will see AI technology mature into mainstream products allowing the wider business community to reap the benefits of these advancements: working smarter, streamlining supply chains, improving production processes, and more. AI will also create less waste in our systems and support sustainability goals and AI as an application in our day-to-day lives will be more prolific and diverse in its application over the next year.

Remote-Work-Powered Speech Tech Boom

Since most companies will continue to be remote through 2021, there will be a renaissance in “speech tech,” the catch-all term for technology that revolves around the spoken word, from auto-transcription to speech recognition APIs, and audio-first communication platforms. Startups with organic or diversified business models will invest in speech recognition to identify insights and trends and unlock the value.

Social distance and travel bans prevent typical ways of interacting with customers, training, on-site service support, and more. Technologies previously dormant and gradually emerging, such as augmented reality (AR), Industrial Internet of Things, robotics, and automation, will be frontline technologies. Enterprises have already started allocating budgets towards voice-enabled solutions and remote customer-facing experiences, contributing to more significant innovations in this category. According to a recent survey conducted by McKinsey & Company, digital adoption has taken a quantum leap at both the organizational and industry levels. In the case of remote working, respondents in their study noted their companies moved 40 times more quickly than they thought possible than before the pandemic.

Next-Gen Connectivity

Next-Gen Connectivity5G is not new, but circumstances in 2020 showed we need to improve connectivity speed. I anticipate startups in the 5G space will enable everything from smarter homes and businesses to self-driving cars. The most transformative feature of 5G is its ability to accommodate tens of billions of connected devices, smart objects, and embedded sensors. Augmented reality and virtual reality adoption will also push for further 5G adoption. Millions of kids, especially in developing countries, lost access to education due to school shutdowns this year. Connectivity helped bring education to their homes, and 5G will ensure that it can continue to happen.

General market trends I see continuing in 2021 are strong corporate partnerships with startups and more IPO as well as SPAC public offerings. Last year was one of the best years to surface the value of corporate entities partnering with startups. In 2021, large enterprise customers will understand how to partner more closely with startups to reach their goals faster. In regard to IPOs and SPACs, they are both subject to the same rules depending on market conditions. An upmarket, disruptive technology, and an improving economy, I believe, will be helpful for but we will see more well-known unicorn startups take the IPO route.

While having coffee at University Avenue in Silicon Valley may seem like a luxury now, the good news is the year behind us has allowed us to reflect, iterate, and stand tall against the unknown. Founders will need to continue navigating the uncertainty and economic impact of the pandemic. Yet nimble and agile startups will continue to push the envelope of innovation. I’m looking forward to seeing founders build strong, lasting businesses during The Great Reset this year. I wish you all a safe and stellar 2021!