Amid the COVID-19 pandemic, I doubt there’s a single company across the globe that is not rethinking its short- and long-term strategies. I believe companies can survive the current crisis by doubling down on digital transformation. Now is a great time to experiment, overcome corporate inertia, and get rid of sacred cows. Here’s how CIOs can position their companies for success in the COVID-19 era and beyond.
No doubt, these are challenging times for IT leaders. Millions of employees are working from home, putting pressure on networks, security regimes and IT supply chains. Industries such as airlines, hospitality, and tourism are seeing revenues collapse as economies worldwide go into a deep freeze. As a result, IT budgets are under siege, with IDC predicting global IT spending will slow in 2020.
Meanwhile, companies like Amazon and Disney are weathering the storm, and in some cases prospering, because they already have digital business models based on subscription revenues. As the pandemic blows apart traditional value chains, companies around the world need a digital strategy to help them retain customers and unlock new growth.
Research suggests that companies with solid digital foundations and effective digital business models will be poised to succeed in global markets. A recent McKinsey study found the best-performing decile of digitized incumbents earns as much as 80% of the digital revenues generated in their industries. And IDC predicts that by 2023, more than half of global GDP will be driven by digitally transformed enterprises.
However, you can’t create a transformative digital business model unless you first build a sound digital foundation that enables smooth, efficient workflows in every part of the enterprise. Because digital transformation enables business continuity, it can help companies weather the storm and position themselves for future growth.
Sustain service levels
When business leaders face economic headwinds and uncertainty about top line revenue, their bias is to protect margins. A very natural motion is to reduce costs as a percentage of revenue across operational as well as G&A functions. Yet leaders can’t afford to let service levels drop. Companies today have little margin of error when it comes to serving customers. If your service goes down, customers may not have the patience to wait for it to come back up. After all, if their only interaction with you right now is digital, there’s no human factor to help smooth over rough spots.
Quality checks aren’t optional. Orders still need to go out on time. And compliance obligations must still be met. Given all these requirements, it can be very tempting to rapidly cut labor costs.
We’ve all seen that movie. When you quickly slash your labor force, the productivity of the remaining workers immediately drops because they are focused, understandably, on their own survival. At the same time, operational and compliance risk increases because you have more organizations trying to do the same job with less capacity. Over time, those short-term cost gains usually disappear. As shadow organizations emerge, the costs just show up in a different cost center.
Digitize the repetition
How does all this position you for sustainable performance and growth? Poorly. Here’s a better way: Double down on creating digital services to create top line growth and remove the requirement for labor to focus on routine, repetitive work. The goal is to optimize your business by digitizing every process and function to the maximum extent possible.
Read alsoBuild your digital foundation
Digital services can accelerate work and boost productivity in every department, from IT to customer service, finance, and HR. At ServiceNow, 49% of employee requests for IT services are fulfilled through self-service automation without IT involvement. We’ve seen 40% productivity gains from employee service automation across functions. On the operations side, we’ve achieved 70% deflection of shared service workloads from operations automation.
Instead of reflexively cutting labor costs, companies should focus on maximizing the productivity of their existing employees by automating every possible process. As work moves to digital platforms, the labor required for routine work diminishes, operational risk decreases, and compliance costs go down. At the same time, you’re creating the right digital foundation for increasingly remote workforces.
My thoughts for my fellow CIOs: Don’t waste this crisis. By doubling down on digital transformation today, you vastly increase the chances that your company will survive the pandemic and thrive in the emerging digital economy.