COVID-19 has disrupted just about every faction of our world. So where and how does digital transformation (DX) fit into the picture now?
“Recalibrating investment priorities to mitigate the risks associated with COVID-19 should continue to be the first priority of any company,” writes EY Canada partner Anthony Rjeily. “But pushing forward with your digital transformation program should still be a priority for the organization.”
Businesses face a wide variety of challenges — shifting customer engagement models online, enhancing digital capabilities of customer service, remote work, an increase cyberattacks and so on, and so forth. Rjeily says long-term successes will come from those driving innovation programs.
Let’s look at two examples:
When COVID-19 first hit, the retail sector moved online at a near-breakneck speed to drive commerce online. It makes sense that it was easier for businesses with already-existing, scalable digital infrastructure to pivot to the pandemic realities. But as Ryan Talbott writes, this is the new norm for retailers. “A retail organization’s ability to react quickly to changes in consumer behavior has become a key survival skill. Regardless of how good their business contingency plans were, once the pandemic hit, many retailers found they were in a difficult spot and simply couldn’t move at the pace their customers needed them to.”
Within architecture, engineering, and construction industries, COVID-19 accelerated digital transformation plans but many companies still have a long road ahead. Industry experts predicted that 2020 would be a watershed moment for DX integration in these industries and this did, in fact, come to fruition. But going forward, James Dean, CEO of Sensat, says companies in these industries will need to “create a more holistic approach to the entire asset lifecycle, ensuring technology takes prime position in their approach, supporting revenue generation and ensuring continued business success,”
A focus on emerging technologies
According to a new report from KPMG International and HFS Research, 59% technology executives surveyed say that COVID-19 has created an impetus to accelerate digital transformation initiatives. The report, titled ‘Enterprise Reboot,’ found executives have shifted their focus to must-have technologies and more than half (56%) say cloud migration has become an absolute necessity due to COVID-19.
(Source: KPMG/HFS Research)
At the same time, COVID is also a caveat. Approximately four in 10 say they will halt investment in emerging technology altogether as a result of the pandemic.
“This crisis isn’t affecting all industries equally, but for many of the industries facing crisis, managing the transition to a digital business model is imperative,” explains Cliff Justice, KPMG global lead for Intelligent Automation and US lead for Digital Capabilities. “However, doing so is made more complicated in a time where investments are critical, but cash must be preserved.”
(Source: KPMG/HFS Research)
Investment for business survival
“Emerging technologies and new ways of working can play a significant role in the transformation to a more digital economy,” said Justice. “These technologies are helping companies maintain customer and stakeholder trust, keep remote workforces connected, ensure their business is resilient and prepared for disruptions, and build a strong foundation for future product and service innovation.”
Ultimately, the pandemic has placed straight-up business survival as the primary objective for most emerging technology investments.
“Now more than ever, companies need to make smart investments in emerging technologies if they are to prevail in the medium- to long-term,” said Justice. “Companies who don’t, risk threatening their own survival.”
Sustainable datacenter region coming to Sweden in 2021, accelerating the country’s digital transformation
Microsoft is investing in Sweden thanks to the Scandinavian country’s strong commitment to sustainability and innovation.
In May of last year, Microsoft announced plans to develop new data centers in Sweden. The goal? Making them “among the most sustainably designed and operated in the world.”
The company is now making good on their pledge with a press release from November 24, confirming they’ll launch a “world-class, sustainable datacenter region in Sweden in 2021 with presence in Gävle Sandviken and Staffanstorp.”
Today, we’re announcing plans to launch a new, sustainable cloud region in Sweden next year. The datacenters will be powered by 100% renewable energy + @Microsoft’s hyperscale cloud will be the first with hourly matching for renewable energy consumption. https://t.co/LVnsLx6sOr
— Brad Smith (@BradSmi) November 24, 2020
The news comes on the heels of Microsoft’s announcement of a significant digital transformation investment in Greece, involving the construction of new datacenters. This also includes a plan to skill approximately 100,000 people in Greece in digital technologies by 2025.
“Building on Microsoft’s 35-year history in Sweden and strong partnerships across the energy, manufacturing and retail sectors, we are looking forward to delivering the Microsoft Cloud from this new datacenter region in 2021,” said Jean-Philippe Courtois, Executive VP and President of Microsoft Global Sales, Marketing and Operations.
“We believe that digital transformation should always be both inclusive and sustainable.”
Elaborating further, Hélène Barnekow — General Manager of Microsoft Sweden — explained that Sweden is an ideal environment for such an investment because of its renowned leadership in sustainability, innovation, and gender equality:
“It is one of the places in the world where IT and tech have the greatest potential to create new opportunities for the individual, the organization and society, she said.
“In this time of change, we invest in the digital infrastructure and our Swedish ecosystem to accelerate digital transformation that will empower public and private companies to innovate, providing a strong digital foundation for the country’s future growth,”
As a result of these datacenters, Microsoft explains, Swedish businesses can “empower employees, engage customers, transform products and optimize operations — all through connected experiences and supported by advanced data privacy and security.”
Microsoft will also invest in skills development, providing digital skills training for up to 150,000 Swedes.
Investing in digital resiliency
A new index from IDC shows growth in cloud, collaboration, and security investment.
Is your business digitally resilient?
IDC’s new Digital Resiliency Investment Index is a look at the progress of organizations in their investment towards digital resilience. This is especially important now with this year’s digital transformation acceleration.
Results from the initial index show an overall steady increase in investment toward resiliency.
Organizations have placed priority in cloud, collaborative, and digital transformation projects. Thanks to the pandemic-related shift to work-from-home and the aforementioned increase in cloud adoption, significant investments have been made in security.
New IDC Digital Resiliency Investment Index Shows Steady Growth for Investments in Technologies That Improve the Ability to Respond and Adapt to Business Disruptions Learn more at https://t.co/vM9KtPMfB3 pic.twitter.com/DVK3MANFnn
— IDC (@IDC) November 5, 2020
According to IDC prediction, investment toward digital resiliency will increase in 2021, in tandem with economic recovery.
In terms of geography, digital resiliency investment had the fastest growth in the Asia/Pacific region. While US investment increased in October, Europe’s had a slight decline in the same period — as the continent was experiencing a significant surge in COVID cases and restrictions.
Two factors make up the index:
- Digital Core Investments, described by IDC as “spending on the core components of digital resiliency: cloud, security, collaborative support for remote workers, and digital transformation projects.”
- Digital Innovation Investments, which are “measured using a monthly survey of enterprises on their current and anticipated IT investment focus, including how much new or reallocated spending is targeted at digital resiliency and business acceleration versus crisis response measures.”
“Digital resiliency refers to an organization’s ability to rapidly adapt to business disruptions by leveraging digital capabilities to not only restore business operations, but also capitalize on the changed conditions,” explains Stephen Minton, VP in IDC’s Customer Insights & Analysis group.
Organizational success in the midst of a global pandemic has largely hinged on the ability to react quickly to change, he says. The difference between rapid adaptation and simply responding to disruption? A plan.
“Investments in digital capabilities not only enable an organization to adapt to the current crisis but also to capitalize on the changed conditions.”
“The next several months may put increased pressure on some organizations to respond to second waves of COVID infections and economic lockdowns, which will be reflected in our monthly surveys throughout the winter,” adds Minton.
“What we have learned already this year is that the organizations which were among the early adopters of cloud, digital, and collaborative technologies were best-positioned for a crisis no one could have predicted.”
Digital transformation for economic recovery
“With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future,” explain two World Bank economists.
Digital transformation is having a moment.
Over and over, widespread reports and surveys show that — in the wake of the COVID-19 pandemic — DX efforts have accelerated. “Business-savvy CIOs who deploy highly adaptive strategies and technology to rapidly respond to the impact on their firm’s operations and customers will lead from the front,” explains Forrester’s recent Predictions 2021 report.
Can the momentum keep going? How can DX be leveraged so everyone can be better off, post-COVID?
As two World Bank economists argue in Harvard Business Review, “technological advancements were already changing the world over the past two decades,” and that in the midst of threats from automation and offshoring, it’s important to realize that tech can act as a job creator for economic recovery.
According to Federica Saliola (Lead Economist in the Jobs Group of the World Bank and co-Director of the World Development Report 2019) Asif Islam (Senior Economist for the Middle East and North Africa Region of the World Bank Group), “to reshape technology as a job creator, it’s important to understand what, exactly, the current wave of technology is changing, and how policymakers and businesses can adapt to it.”
Where we were
The economists laid out three foundational truths about the pre-COVID state of technology:
- It has always been a disruptor. Tech has been “challenging the traditional boundaries of firms, changing global value chains and the geography of jobs.”
- As tech evolved, there have been massive changes in what skills are needed by a successful workforce. “The premium for skills that cannot be replaced by robots has been increasing,” they explain. What are these in-demand skills? Critical thinking and socio-behavioral skills, for starters, as well as adaptable skills. This leads to point three.
- Thanks to tech, the very nature of work has been changing over the last few years. The standard of permanent and full-time work has given way to a gig economy.
Simply put, “it is likely that the pandemic will reinforce these pre-existing trends and increase the urgency of corresponding policy responses,” explain Saliola and Islam.
Digital-first companies are thriving, the gig economy certainly isn’t going anywhere, and “firms may also have more incentive to invest in automation and reshore production to shield against value chain disruption.”
The aforementioned barrage of surveys and reports showing the acceleration of DX efforts reported on the mostly-successful shift to work-from-home. Saliola and Islam reference World Bank and World Economic Forum reports that show (unsurprisingly) positions and organizations that have put WFH measures in place are more prevalent in wealthier countries and regions, and that women and young people are more likely to hold positions where WFH isn’t feasible.
Ultimately, Saliola and Islam explain, organizations and governments have to turn to policy to ensure that digital transformation can lead to a more successful economic recovery.
What does this look like? Reskilling and upskilling on the part of businesses, and “incentives and regulations to infrastructure projects and taxation” for governments.
It’s similar to the approach of the recent OECD report showing that DX is critical for recovery in Latin America and the Caribbean — but on a global scale.
“Technology can be a boon to society if businesses and governments prepare and adapt,” they write. “With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future.”