Our Top Risks survey that we released at the start of the year showed that many business leaders were worried about their organizations’ ability to compete with digital-born competitors. Had they known at the time what was around the corner, they might have been a lot more worried.
As people and companies around the world ride out prolonged lockdowns, customers are quickly transitioning to organizations that are able to effectively navigate the crisis and fulfill the customers’ immediate needs without personal contact. In most cases, those customers will not return to their traditional suppliers following the crisis. As a result, many digital leaders are prospering during this time at the expense of those that have yet to make the necessary investments to operate in the digital realm.
We have spoken a lot in recent years about the different levels of digital maturity, from the skeptics and beginners at one end of the spectrum, to those that we classify as advanced or leaders. The events of the past few weeks have quickly revealed many leadership teams’ true colors.
The current crisis has produced a disparity of responses on this front. On one hand, we have seen those organizations that have put their transformation agenda on the backburner as they look to save costs, indicating that they do not really believe that their digital teams have the vision and/or agility to deliver quick results and help the business navigate through choppy waters. On the other hand, we’ve seen those who have accelerated their digital agenda, recognizing that the opportunity is now or never to prosper as digital leaders and increase their market share.
Why Are Digital Leaders Prospering?
We are living through unprecedented times. Every company has had to make adjustments, from setting up a remote workforce virtually overnight to overcoming disrupted supply chains to continue to deliver goods and services to customers.
So what makes digital leaders different?
- They have highly optimized processes with high levels of automation that enable these organizations to scale up or cut cost rapidly where needed. As such, they are also less impacted by social distancing requirements.
- Their businesses have been built to be run from anywhere. Their people are used to working remotely, and their technology accommodates this by design.
- Their business models make the businesses hyper scalable and able to accommodate rapid growth, but also protect them better than models adopted by more traditional organizations in a downturn.
One of the most visible examples of this at the current time is retail. The digital-only retailers are obviously benefiting the most. For these organizations, the influx of customers embracing online shopping is bringing only benefits, not offset by losses at brick and mortar locations. This is an advantage compared to retailers with robust digital channels but where employees still must pick up product from the store shelves for home delivery. Worst off are traditional retailers that are not well set up for digital ordering at all and are really struggling as governments have imposed extended lockdown and required that stores remain closed for the duration of the lockdown.
What About Digital Followers and Digital Beginners?
Organizations at the lower end of the digital maturity spectrum need to recognize that now is not the time to pause but the time to act. A strategy built on the assumption that this is a short interruption and that everything will soon return to normal is high risk. It will likely be some time before we return to normal and, from all accounts, it is reasonable to presume that the “new normal” will be different than the normal we knew before.
I personally know many people that were forced over the digital edge and into online retail specifically by the current crisis. They are experiencing the not-so-new world of digital retail for the first time and questioning why they did not do this before. Similarly, companies that have been forced to embrace new ways of working remotely and over video are starting to question why they were spending so much time, energy and expenses on travel before. Companies have also embraced new flexibility on working hours, to accommodate the needs of parents during school closures. Both leaders and employees are recognizing benefits and seeing opportunities in this change and will resist returning to the way things were before.
Many leaders are also questioning real estate and whether it is necessary for the entire workforce to be office-based. And once remote working becomes the norm, this provides access to a much larger potential workforce nationally and even internationally, which may help some organizations overcome the recruitment challenges that they have been facing. This also presents opportunities to draw on lower-cost labor.
If there was ever a time to be pragmatic, it is now. Companies need to focus on those activities that will demonstrate a quick result. Many organizations are under cost pressure now, and likely will be for a while as the economy gets pushed into a downturn. On the upside, resourcefulness is high in times of need and future leaders are born in a crisis.
Immediate steps that all businesses should take at this time include:
- Align quickly on priorities and find pragmatic solutions by bringing structure to strategic and tactical planning and drawing on human-centric design thinking principles. By bringing together future leaders and infusing teams with digital and innovation expertise as necessary, companies can quickly align on priorities and assign accountability.
- Gain efficiencies through increased automation, drawing on technologies such as robotic process automation (RPA). If targeted at the right types of problems, RPA can deliver results in weeks and days, not months and years. Over time, starting to embrace artificial intelligence can significantly expand the automation potential.
- Use advanced analytics to improve decision making. In uncertain times we need dynamic reporting to gain visibility into supply chain and fulfilment cycles, financial health and customer experience. Traditional monthly or quarterly reporting cycles and static reporting that does not enable users to interrogate the data are not good enough.
- Quickly reveal bottlenecks and process inefficiencies to identify issues before your customers do. Process mining technologies can enable a business to quickly visualize its processes and identify inefficiencies such as manual processing, unnecessary rework and bottlenecks. Refine employee and/or customer journeys as needed, focusing on problem areas.
Measures of Success
A key measure of success is the ability of an organization to pivot quickly and bring disruptive thinking to management. For many, the immediate question has been “How can we cut costs and scale back to manage the crisis?” It has all been about minimizing the damage.
A digital leader, however, will be asking “How can we quickly transform and pivot our business to ensure that we are relevant and able to continue to serve our customers (and new customers) – even if this means doing something very different than what we have done traditionally?” A great example of this is Ferrari using Formula 1 technology to make respirators.
At a more basic level, the mindset difference between a leader and a beginner is illustrated by a restaurant that decides to shut down and try to ride out the storm vs. a restaurant that decides now is a good time to embrace home delivery and turns the restaurant area into a temporary distribution center. We also see the difference between schools that send children home and leave the parents to do the teaching and schools that have very quickly pivoted to utilizing online tools to teach remotely.
Eventually, the crisis management period will be over, so what next? For those who have found themselves scrambling to find their footing, it should be an urgent call to action to embrace digital transformation. Focus areas include reinventing customer interaction processes and rethinking new ways to deliver core competences to a market that certainly will not look the same. A new focus on operational resilience – critical services, impact tolerances and maximum allowable downtimes – should be part of every company’s recovered operations as well.
Foster Digital Culture Now
Implementing new and emerging technologies will not by itself enhance competitiveness. Digital maturity is fundamentally about preparing the organization to compete effectively with digital leaders. A balanced approach is needed. While technology obviously plays a major role in this effort, it is just as critical that organizations equip people with the knowledge, skill sets and capability to harness cutting-edge technologies to drive business and add value.
This cultural shift requires changing the way people act and think so that they can make good business decisions. To be successful, organizations need to pursue cultural transformation at the same time they introduce new technology, if not before – and certainly not after.
Any crisis quickly separates the leaders from the rest. We see this across industries and within organizations where future leaders often emerge. We will also see an accelerated decline for some followers who are simply not agile enough to adapt to the demands of the times. Some may even collapse in short order.
We all need to recognize that this current crisis is probably not a one off. There were SARS and Ebola and N1H1 recently. Many predict that even if COVID-19 declines in the summer, a second and stronger wave may emerge in the fall. And there is always the risk of new strains emerging.
For many organizations, the natural reaction would be to cut back on automation initiatives to help manage cashflow. But now is the time for organizations to hold their nerves and invest in the future. If well managed, the return on investment can be high, with payback in months or even weeks.
Even though it may be counterintuitive, future leaders will, by and large, be the organizations that recognize the opportunity in accelerating digital transformation initiatives instead of scuttling them. Embedding an innovation mindset and culture. Embracing technology. Not tolerating unnecessary manual processing. The worst course of action for digital beginners and followers is to retreat into their shells. Instead, they must learn from the digital leaders, rethink their business models and, ultimately, build a better and more resilient business.