Digital Transformation in the Pandemic and Post-Pandemic Era
If there were any lingering doubts about the necessity of digital transformation to business longevity, the coronavirus has silenced them. In a contactless world, the vast majority of interactions with customers and employees must take place virtually. With rare exception, operating digitally is the only way to stay in business through mandated shutdowns and restricted activity. It’s go digital, or go dark.
This digital mandate isn’t new; it’s simply been brought into sharp focus. Prior to the pandemic, a paradigm shift towards digitization and servitization of the economy was already underway. Current events have accelerated the paradigm, as evidenced by the marked shift in spending towards digital businesses.
And this is just the beginning.
The pandemic is a reality check for businesses that have been reluctant to embrace digital transformation and now find themselves woefully unprepared. On top of the stress of potentially health-compromised employees, a sudden and dramatic drop-off in demand and total economic uncertainty, these digital laggards are now scrambling to migrate their operations and workforce to a virtual environment. While fast and furious is the name of the game when it comes to digital innovation, fast and frantic can lead to mistakes.
On the other hand, businesses that had not only developed digital strategies but executed on them prior to the pandemic are now in a position to leapfrog their less nimble competitors. That isn’t to understate the COVID-19-related challenges they now face, irrespective of their current level of digital maturity. Going digital in and of itself isn’t a panacea to all that ails businesses in the current economic environment. They do, however, have significantly more tools at their disposal to not only weather the storm, but to come out the other side stronger for it.
Don’t write off the digital laggards just yet, however. Crisis breeds ingenuity, and good ideas put into practice can propel any business to breakout performance. Organizations that rest on their existing digital laurels can be surpassed by those that invest in adapting their digital capabilities for the post-coronavirus future—a future that looks very different from the world pre-pandemic.
Spotlight: The Digital Advantage
Organizations that embrace digital solutions have greater resiliency in the face of adversity—and a leg up on the competition that will enable them to recover faster and pivot from playing defense to chasing growth.
|Efficiency advantage: They harness digital technologies to streamline operations and automate manual processes—resulting in greater speed, less waste and more focus on revenue-generating activities.
|Productivity advantage: Their employees were already set up to work remotely, so their focus is on leveraging collaboration technology and tools to maximize workforce productivity and sustain company culture.
|Security advantage: They are better prepared for and more resilient to the proliferation of cyber threats in the current environment.
|Customer advantage: They mine customer data to monitor for shifts in demand and uncover emerging customer needs.
|Agility advantage: They leverage data-driven insight to make decisions faster and act on them faster. They have built-in cultural flexibility to adapt or change course at any point.
New Reliance on Digital Solutions During COVID-19
Under COVID-19, the world has, by necessity, gone into isolation. Social distancing is currently the most effective way to slow the spread of the virus until a vaccine can be found to protect the population. As a result, anything that relies on human-to-human contact–which is to say, most aspects of our lives–must be amended to account for the dangers of the virus.
Digitization has stepped in to bridge the gaps left by mandated shutdowns and social distancing measures. Without digital tools and technologies, we would have no way to work, shop, go to school, and more.
Let’s take a closer look at how digitization is keeping society–and businesses–afloat during the pandemic:
The pandemic serves as a widespread test case for the effectiveness of these digital solutions, many of which will be permanent fixtures and lead to long-term changes for many businesses.
The Case for Digital Transformation in Crisis
The economy is now mired in a downturn, which may outlast the current (and hopefully sole) wave of the pandemic. Some organizations may be inclined to retrench on their digital transformation plans, as part of a broader belt-tightening agenda. A good cost reduction program focuses on trimming the fat without cutting away the essential parts of the business that are necessary to sustaining current levels of business performance. If we view an organization as a living organism, digital transformation powers the backbone, muscle, brain and heart of the organization. Halting digital innovation efforts in crisis will significantly compromise overall business health.
Though it may seem counterintuitive, crisis is the ideal time to double down on digital transformation. Rather than putting digital transformation plans on hold, organizations need to go all in.
It shouldn’t be prohibitively expensive. Many businesses are understandably reluctant to loosen the purse strings in the current environment of uncertainty. While digital transformation is often viewed as a massive upfront investment in long-term results, it doesn’t need to be. Some of the most successful transformation projects start with low-cost pilots and limited resources that are scaled up once the kinks are worked out and the results are proven. Done in the right way, digital transformation can be self-sustaining, with each incremental improvement paying for the next leg of the journey.
You can actually save money. Past recessions show that controlling costs by improving operational efficiency—a task for which digital solutions are perfectly suited—is more effective in sustaining businesses through financial turbulence than traditional cost-cutting measures alone. For example, companies that rely primarily on workforce cuts to manage costs only have an 11% chance of “breakaway performance” coming out of a downturn, whereas companies that focus on operational efficiencies over layoffs are more likely to experience breakaway performance, according to research from Harvard Business Review.
The biggest efficiency play is automation. With automation projects, ROI is realized near-instantaneously, offsetting the upfront investment. Robotic process automation allows organizations to automate certain types of work processes to reduce the time spent on costly manual tasks and reallocate resources elsewhere. The economics of automation are simple: the same work is performed faster and with fewer mistakes, while human capital resources can be redeployed to higher-value tasks or to fill critical gaps. More sophisticated machine learning tools can be used to identify and address unforeseen areas of waste.
Business reinvention isn’t always a choice. Many businesses are experiencing devastating financial consequences from the pandemic, whether because of supply chain impacts, forced shutdowns, a significant pullback in consumer spending, or all of the above. Consumer discretionary manufacturers and retailers, oil and gas companies, and the service industry are among the sectors that have been struck the most grievous blows. To avoid catastrophic revenue losses, these companies have no choice but to shift focus to their business’s existing digital channels or make a bigger pivot to a digital business model. But again, there is a silver lining: The innovations that are made out of necessity could become lasting pillars of the business that help it to thrive well beyond the pandemic.
There will be no “return to normal”. The coronavirus is permanently reshaping the way we live and work. Some of the behaviors developed in crisis—including wide-scale digital adoption—will outlast the pandemic, well after restrictions on activity are lifted. To stay competitive, organizations must respond to these behavioral changes and meet emerging customer demands. Savvy organizations will focus now on leveraging advanced analytics to extract insights from their customer data and continue internal and external data integration efforts to develop a more holistic view. Detecting those signals of change early will be crucial to optimizing the customer experience and redefining customer value propositions in line with evolving preferences and needs.
COVID-19 Trends Here to Stay
Digital transformation is more necessary during this crisis, not less. But that doesn’t mean it will look the same as it did before the pandemic. Resources—both in terms of talent and money—will likely be constrained. Digital initiatives may need to be reprioritized based on relevance in the current environment. New problems and opportunities may come to light with greater urgency. For some businesses, the forces of disruption may be so great that the long-term strategic vision will need to be overhauled. And any digital transformation roadmap that does not deliver value at every increment will need to be reimagined. The key is continuing to experiment and innovate with digital solutions front and center. With the right approach, businesses can come out of the fray stronger, more agile, and more customer-centric than before.