- It's not the shape of the recovery that matters - it's what kind of economic picture emerges afterwards.
- Successful digital transformation will, for many firms, be the difference between success and failure in this coming era.
- Here are some of the factors businesses should consider as they embark on this critical journey.
There is a lot of discussion today about what the shape of the economic recovery will be: V, W, L – or something else entirely. But those discussions actually miss the crucial impact of the historical moment we are living in. The reality is that no matter the shape of the economic recovery, the composition of the post-pandemic economy will be dramatically different.
Companies that do not digitally transform will fail
Six months into the crisis, why are some companies doing better than others – and why are some doing better than before? The answer to this lies in one of the key indicators of the ongoing transition: it tends to be those companies that had already successfully implemented digital transformation and platform-based business models, or those that were able to quickly adopt digitalization. Companies that do not digitally transform will be left behind and will cease to exist.
For all the companies that lost out to COVID-19-induced low consumer demand, there were many companies that were able to leverage digitalization and digital transformation to come out on top. A lot of retailers were able to ramp up online presence as demand for e-commerce rose. Gyms were able to launch live fitness classes for their members through their own apps and on social media. Ride sharing and delivery platforms were able to expand services to other sectors, and helped them to move online.
Digital transformation has not been limited to meeting customer demands; it has also enabled the increase in remote working and has cut down costs. Transitioning towards distributed workforce solutions, reducing physical customer interactions and moving to a managed services model can help companies to utilize digital transformation as a cost-effectiveness tool as well.
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Who has survived and thrived?
The technology sector was always going to be more resilient in the face of the changes wrought by the pandemic. Since the start of the year, the S&P North America Technology Stock Exchange has grown by more than 33%; the S&P 500, in comparison, has grown by less than 3%. And as the time progresses, at least in the short-term, technology firms will continue to widen this gap.
Similarly, growth in e-commerce businesses shows how quickly the economy has moved towards digitalization. This growth is unprecedented, especially when we look at the previous decade's growth rates and the fact that e-commerce, which is a 20-year-old industry, was – until witnessing increasingly lower growth rates.
According to McKinsey’s US Digital Sentiment Survey, retail industry (grocery and apparel) is the forerunner in increasing digital adoption by consumers. Grocery retail and apparel retail industries were able to increase digital adoption by 100% and 40%, respectively.
Digital transformation for the retail industry means automating and digitalizing their existing systems, adopting DevOps (a set of practices that aims to shorten the systems development life cycle) for modernization and sustenance, and using cloud and everything as a service. The retail industry has emerged as a beacon of resilience by providing in person, omni-channel and seamless customer experience with its smart use of analytics, AR, VR, AI and facial recognition.
Other industries are also seeing similar trends. Banks are focusing more and more on internet banking and phone-banking applications, while the healthcare industry is doing more and more online and app-based consultations.
Digital transformation and adopting platform-based business models will define the shape of individual organizations' recoveries, and there are rules, guidelines and established best practices to ensure success in this area.
Can incumbent businesses think like a digital native as part of their digital transformation? Yes, this is possible. Businesses can combine engineering excellence with industry experience, niche horizontal expertise, platform assets and IPs that form the core of modern digital businesses today.
A typical digital transformation lifecycle could start with a well-articulated digital agenda and a readiness assessment. This would lead to a reimagining of the organization's business processes, and a platform roadmap to create unique digital services and product propositions.
Can digital transformation be agile and boost ROI in the short-term?
Yes, one can look at agile transformation initiatives that offer benefits in the short-term while also ensuring that the long-term, platform-based architecture is achieved that can create create open, scalable, intelligent and connected platforms leveraging open APIs and datasets, service catalogues, an integration framework, micro services, collaboration tools and solutions for agile implementation of companies' digital agenda.
Digital agility means organizations must continuously assess their digital maturity; this can lead to enhanced capabilities and innovation, and even rapid growth. When it comes to ROI, call out the standout projects and activities that realize tangible and quantifiable outcomes. These projects are a good measure of quick ROI realization, while best practices from these bright spots will bolster adoption of digital agility across organizations – which will, in turn, lead to improved ROI.
Business benevolence rooted in trust and respect is what counts in a crisis
One more key aspect is to ensure one works with a partner who understands platform models and building agile systems, and who is aligned to the organization's vision for their business and ROI. A partner who is nimble and agile enough to marshal their troops according to their customers’ needs on short notice, all while maintaining productivity and information security. Now more than ever, clients value transparency, fairness and equity from their IT service provider. Clients are looking for partners who can reimagine, reform and perform in the new normal – as it would be a big miss if partners go back to the old ways of doing business post-COVID.
What is the World Economic Forum doing about digital trade?
What is the World Economic Forum doing about digital trade?
The Fourth Industrial Revolution – driven by rapid technological change and digitalization – has already had a profound impact on global trade, economic growth and social progress. Cross-border e-commerce has generated trillions of dollars in economic activity continues to accelerate and the ability of data to move across borders underpins new business models, boosting global GDP by 10% in the last decade alone.
The application of emerging technologies in trade looks to increase efficiency and inclusivity in global trade by enabling more small and medium enterprises (SMEs) to repeat its benefits and by closing the economic gap between developed and developing countries.
However, digital trade barriers including outdated regulations and fragmented governance of emerging technologies could potentially hamper these gains. We are leading the charge to apply 4IR technologies to make international trade more inclusive and efficient, ranging from enabling e-commerce and digital payments to designing norms and trade policies around emerging technologies (‘TradeTech’).
The reality is that the effects of the pandemic on the economy will play out in a complex and hard-to-predict manner. It depends on how successful social distancing measures are, how well contact and trace works, and how fast we can get a vaccine not only developed but also widely deployed.
For businesses, digital transformation was always essential. Now, in our current scenario, this journey has become urgent and critical if firms are to emerge successfully and profitably.