Digitally advanced organizations have weathered COVID-19 best, but it’s not too late to transform
The pandemic has shifted the priorities of digital transformation. New research from IMD has found that organizations prioritizing innovation have recorded the best performance throughout the pandemic.
Over the past few months, this joke has circulated the business world: Who led the digital transformation of your company?
Option C is boldly circled in red at a talk given by Professor Michael Wade, Professor of Innovation and Strategy at IMD, on the impact of the pandemic on digital transformation recorded a near universal change.
No organization has escaped the impact of the pandemic. And indeed the OWP liVe audience gathered to listen to Professor Wade were doing so virtually.
Polling participants congregated on Zoom, Wade asked how the pandemic had affected their companies’ digital transformation, with five possible responses: significantly decelerated, decelerated, neutral, accelerated, or significantly accelerated.
Participants reported: 62% accelerated; 36% significantly accelerated digital transformation. Only 2% (one person) said the pandemic had decelerated digital transformation and, when probed, the participant explained that this was only for the first month of COVID-19, when all projects were on hold and the organization was focused on survival and business continuity.
COVID-19 has pushed digital to the top of the agenda
Google analysis shows that search for “digital” was higher in April 2020 than any previous time, jumping 25% from the previous month as the pandemic spread.
Wade and his colleague Nikolaus Obwegeser, Researcher at the IMD-Cisco Global Center for Digital Transformation, have been surveying executives across a diverse range of industry and geography since early April. Using data from the past three months, along with numbers from before the pandemic, Wade and Obwegeser have asked:
- Which organizations were well-prepared for the crisis?
- Which organizations managed best during the crisis?
- How can organizations leverage the crisis for future learning?
The impact has varied depending on the industry
Wade and Obwegeser ranked industries according to disruption: real estate and construction were least affected; media and entertainment most.
However, companies with prior exposure to disruption performed better during the crisis: “If you had experienced disruption before the crisis, you could use that as a good training ground for a ‘black swan event’ – something nobody could predict,” explained Obwegeser. And any company with a high or very high level of digital maturity before March 2020 was able to leverage this throughout the crisis, while the data showed performance slumps in organizations that entered the crisis with a low level of maturity pre-crisis.
Does it make sense to invest in digital technology mid-crisis?
The more digital technologies have been leveraged during the crisis, the stronger the organization has performed. But that does not mean that organizations with under-developed digital technology should despair. Borrowing from a Chinese proverb, Obwegeser said: “The best time to plant the digital tree was before the crisis; but the second-best time is now.”
There are three types of priorities in digital transformation: survival, cost and innovation. That is: leveraging digital tools for business continuity; using digital technology to reduce costs; or developing new products, services or revenue streams.
Pre-crisis, all three were roughly equivalent priorities across the organizations surveyed. From mid-April, survival became the clear priority and innovation was deprioritized. By mid-June, however, survival became less important and innovation grew as a point of focus.
How much does innovation matter during a crisis?
Organizations that increased prioritization innovation – new revenue streams and business models – had a stronger performance during the crisis. Decreasing the prioritization of innovation led to decreased performance.
Actively leveraging digital technology for crisis response is especially important for organizations with historically under-developed tech.
Here’s what to do now, but it won’t be easy
“Innovation is important at this stage of the crisis, but that doesn’t mean that it’s easy to do,” Wade noted.
“The data suggests that there’s no better time than right now to accelerate what you’re doing,” Wade said, because from a strategic perspective, many cultural barriers have been removed, thanks to the pandemic and the accompanying economic downturn. “From the individual perspective, barriers have been removed: people who tended to be skeptical about how technology would affect their work have realized that they can work from home.”
Moreover, the data suggests that there are big benefits to digital transformation.
“The message here is: take the win. But don’t necessarily expect the next transformation to go so smoothly. Make sure you’re setting appropriate expectations.”
He advised that the most effective transformations have five aspects, known as the PRISM model:
- Precision – objective clear and precise, often with numbers associated
- Realistic – it must be achievable
- Inclusive – not just for one dept or one part of the organization
- Succinct – short, easy to remember and understand
- Measurable – you know if you’ve achieved it or not.