- The COVID-19 pandemic is a watershed moment for the digital transformation of business;
- Updating business models for a digital-first world, led by purpose, is now an imperative for almost every company;
- New and creative digital collaborations can reach and serve a more diverse set of people at unprecedented speed and scale.
COVID-19 has irrevocably changed our world. As we learn to work, learn, shop and interact through virtual means, the companies we interact with are also adapting. The pandemic is a watershed moment for the digital transformation of business. The rules for business success have changed and are ever more reliant on harnessing the power of digital models to create new value and experiences.
Among the many trends that COVID-19 has accelerated, two stand out: the call for companies to lead in addressing societal challenges is getting louder, and the marketplace is indicating that companies must adopt digital business models at their core to survive and compete. In May 2020, a Fortune survey found that roughly half of chief executive officers believe the crisis will accelerate their move towards stakeholder capitalism.Seventy-seven percent say it will force their companies to speed up their digital transformations.
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Digital transformation is not a new endeavour for business, though prior attempts have often failed to realize its full potential. Companies are estimated to have spent $1.2 trillion on digital transformation efforts in 2019, yet only 13% of leaders say their organizations are ready for the digital age. What is new in the wake of the pandemic is a shared opportunity for leaders. Successful leaders will now seize the opportunity to advance a new trajectory for digital transformation that aligns with the changing role of business: to be a powerful enabler of long-term value creation for all its stakeholders.
A recent report, Digital Transformation: Powering the Great Reset, shaped by leaders from across industries, explores three opportunities for digitally enabled corporate leadership to support the Great Reset of our economies and societies.
Opportunity 1: Transform business
Amid the uncertainty as to what behaviours and trends from the crisis will endure, this much is clear: Updating their business for a digital-first world, led by purpose, is now an imperative for almost every company. To do so, companies will have to determine where new business value exists in the new normal, what digital business models will capture it, and which tools and behaviours will support the adaptability and resilience that these models require.
Successful efforts will affect structural shifts within a company and go beyond incremental efficiencies to fundamentally transform what business they are in and how they operate. A good example is Ping An in China, which over the last decade transformed from being an insurance company into managing five digital ecosystems in finance, property, automotive, healthcare and smart city services, and today serves more than half a billion online customers.
Technology disruption is rapidly shifting traditional industry boundaries, and increasingly forcing companies to collaborate with others, and create new, shared value in digital ecosystems. It is estimated that digital ecosystems could represent more than $60 trillion in revenue by 2025, or more than 30% of global corporate revenue. In this rapidly changing landscape, “digital-at-the-core” business models that are adaptive, data-led, asset-light and based on services rather than products give companies an advantage. Operating models, supply chains and teams must become more intelligent, resilient, and agile.
A company’s ability to harness value from data will be at the heart of this transition. More granular, real time, predictive data can enable decisions “at the edge” distributed across multiple partners and machines. It can empower front-line employees to deliver better consumer experiences and stronger collaborations. At the same time, as digital interactions with consumers grow, companies must take proactive steps to protect their data privacy and security and adopt models that give them agency over their data.
Learning from prior attempts, companies must ensure their digital transformations are guided by its overall purpose and strategy, driven by cross-functional teams, and measured by “fit-for-purpose” performance metrics. They must balance goals – combining short term efficiency gains with long-term new value and integrating business value with a broader societal purpose. The approach to implementation must be iterative – charting a clear course yet retaining the flexibility to pivot when needed. Most importantly, companies must continuously update capabilities and skills of executive teams and Boards to be digital leaders.
Opportunity 2: Empower stakeholders
Digital technologies and models can be powerful tools for companies to empower all their stakeholders, and to put into practice stakeholder principles of the COVID era.
As consumers seek stronger health and safety measures, convenient and flexible purchase options and affordable and trusted products, models such as digitally enabled platforms and “as-a-service” can help redefine service delivery.
Digital models can also help suppliers and partners who were hit hard by lockdowns, border restrictions and a sharp economic downturn. Schneider Electric, for example, expanded its e-commerce platform in India to enable business customers and partners – many of which are small businesses – to source products digitally, with free shipping, expert guidance and flexible payment options in partnership with fintech companies.
Technology has already played a critical role in helping communities respond to the crises and will continue to be a key enabler in their recovery.
Opportunity 3: Change systems
Traditional business models have left multiple communities unserved in “market deserts” with no or limited access to services such as food, digital connectivity, skills or finance. While the pandemic further aggravated these gaps, it also presents a unique opportunity to accelerate digital collaborations that can transform age-old systems and address systemic market failures. Built across traditional industry boundaries, new, creative and unusual digital collaborations can reach and serve a more diverse set of people at unprecedented speed and scale.
Take for instance digital inclusion and transformation of small businesses around the world. Small businesses constitute 40–60% of GDP in most countries, yet many are cut off from the digital economy. In Europe, for instance, only 20% are digitalised. Innovative partnerships among technology companies, banks, governments and education providers can accelerate digital transformation for small businesses, equipping them with skills, finance and digital tools needed to update their businesses for the digital era. The power of digital models to redefine systems is already visible in examples like Ant Financial, that uses its digital platform for microloans in China.
It conducts algorithmic analysis of huge amounts of transactional and behavioural data from sellers, marketers, service providers and manufacturers to calculate real-time credit scores and process microloans in minutes. Appropriate finance and technologies tools can be especially empowering for businesses and households that have seen persistent gaps in racial equity and justice, such as black communities in the United States. The digital transformation and financial inclusion of small business can set forth a virtuous cycle of enhanced labour productivity and innovation, rejuvenated local communities and strengthened social cohesion.
In the coming years, it is possible that no one will speak of “digital transformation” because the term will have become irrelevant: Non-digital businesses will simply not exist. To avoid becoming one of those dying businesses, business leaders must take the opportunity – and a pressing need – to invest in bold and purposeful digital transformations now.