Amid the Covid-19 pandemic, there is not a single company across the globe that is not rethinking its short and long-term strategies. 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.
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 digital foundations and effective digital business models will be poised to succeed in global markets.
However, you cannot create a transformative digital business model unless you first build a 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.
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 cannot afford to let service levels drop.
Companies 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 is no human factor to help smooth over rough spots.
Quality checks are not 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.
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 organisations trying to do the same job with less capacity. Over time, those short-term cost gains usually disappear. As shadow organisations emerge, the costs just show up in a different cost center.
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 optimise your business by digitising every process and function to the maximum extent possible.
Digital services can accelerate work and boost productivity in every department, from IT to customer service, finance, and HR.
Instead of reflexively cutting labor costs, companies should focus on maximising 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 are creating the right digital foundation for increasingly remote workforces.
Do not 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.