An Increasingly Digital “New Normal”
About a dozen years ago, I attended a conference where I was interviewed on stage by then WSJ technology columnist Walter Mossberg. He started out by asking me about IBM’s near-death experience in the early 1990s, and the subsequent technical and cultural transformation that made it possible for IBM to reinvent itself and survive, while many other IT companies didn’t make it. In particular, we discussed whether a successful company transformation must be preceded by the kind of major crisis IBM went through. When it comes to humans, the ancient Greeks certainly thought so, as reflected in their tragedies.
Transformative change is very difficult for established companies. Over the years, they’ve amassed valuable assets and extensive organizations. Already consumed with managing their existing operations, they may look at transformative change as more of a threat or distraction than an opportunity, – unless they’re in dire straits and have no other choice, as was the case with IBM.
A serious crisis is an opportunity for companies to focus on the actions needed to survive in a fast changing environment. As Rahm Emanuel famously said in a 2008 interview with the WSJ: “You never want a serious crisis to go to waste.” In that spirit, how should companies take advantage of the Covid-19 crisis, – arguably the biggest shock the world has experienced since WWII, – to accelerate their journey toward what most everyone agrees will be an increasingly digital future?
“The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight,” said a recent McKinsey article, Digital Strategy in a Time of Crisis. “A world in which digital channels become the primary (and, in some cases, sole) customer-engagement model, and automated processes become a primary driver of productivity – and the basis of flexible, transparent, and stable supply chains. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior.”
In such a future world, companies must learn faster than ever before. Playing it safe is a missed opportunity to reassess and advance the firm’s strategic digital agenda. A crisis is a “mandate to be bold,” notes the article, and recommends that companies focus their efforts on a few such bold actions:
Compelling digital offerings. “In the immediate term… most organizations are looking for virtual replacements for their previously physical offerings, or at least new ways of making them accessible with minimal physical contact.” This is much easier said than done. Physical products and services have evolved and been perfected over many, many years. A straightforward digital recreation of a physical offering will generally result in a much inferior user experience. Instead, the offering must be reinvented for the digital world. Design thinking can play a major role in such a reinvention.
A design-centric approach is focused first and foremost on the user experience. Good design aims to make our interactions with complex products and institutions, – e.g., a business, a healthcare provider, a classroom, a government function, – as appealing and intuitive as possible. That’s what companies now need to do as they bring their physical offerings to the digital world.
New operating and business models. “While the outcomes will vary significantly by industry, a few common themes are emerging across sectors that suggest next normal changes to cost structures and operating models going forward.” The article cites three such new normal changes in particular: remote workforce and automation; supply chain transparency and flexibility; and data security.
The most successful business transformation are those that leverage a firm’s core assets, and bring them into the future by integrating the core assets with the new technologies and market models. For example, a major factor in the fast commercial adoption of the Internet in the mid-late 1990s was the relative ease with which companies integrated their core back-end systems with a web front-end, so that any customer with a PC and a browser could now access their legacy transaction and data base applications anytime, from anywhere. Similarly, the most pragmatic way for companies to get on the AI learning curve is by enhancing their existing business processes with AI capabilities, – thus transforming their legacy processes into smart connected processes.
Learning at the pace of the crisis. “In situations of extreme uncertainty, leadership teams need to learn quickly what is and is not working and why… Bold action and the ability to learn are highly interrelated.” The McKinsey article recommends several key areas that should help companies increase their learning pace during the crisis.
Adoption of new technologies and working models. The COVID-19 crisis “has made experimentation both a necessity and an expectation.” The abrupt shift from physical to virtual operations and interactions is an excellent opportunity to increase this real-world pace of learning how to best deploy new digital technologies.
In addition, the shift to virtual operations require companies to change the working models to which employees, customers and business partners have become accustomed to, starting with how to improve the overall digital user experience.
Rapid scalability. “Scaling what you learn is always an obstacle in a digital transformation.” In normal times, companies may be in no rush to translate what they’ve learned into production-ready, scalable, reliable digital solutions. But, whether they want to or not, the crisis is forcing companies to transition their experimental pilots into full scale operations in record time. This is very challenging, but it’s also an opportunity for real-time learning with a more forgiving and grateful user base.
Systemic effects. The rapid transition from physical to virtual requires changing multiple business and operating models simultaneously, making it very important to evaluate how they all interact and potentially interfere with each other. The article cites the example of healthcare providers, who are facing “an increased demand for services (including mental health and other non-COVID-19 presentations) at the same time that their traditional channels are restricted, all in the context of strict privacy laws. This has caused many providers to rapidly test and adopt telehealth protocols that were often nonexistent in many medical offices before, and to navigate privacy compliance as well as patient receptivity to engaging in these new channels.”
Something similar is taking place in distance learning, e-shopping, work from home, e-meetings, video conferences, and other physical activities which have now been forced to become virtual.
Simplify and focus. Given the huge complexities and challenges of this forced virtualization, organizations must take advantage of agile kinds of methods to help them simplify, focus, and avoid being overwhelmed. To do so, they need to frequently collect and quickly evaluate real-time data about customers and markets to help determine what’s working, what isn’t, why, and how to correct or change course.
“It’s often the case in human affairs that the greatest lessons emerge from the most devastating times of crises,” notes the article in conclusion. “We believe that companies that can simultaneously attend to and rise above the critical and day-to-day demands of their crisis response can gain unique insights to both inform their response and help ensure that their digital future is more robust coming out of COVID-19 than it was coming in.”
Discover Past Posts