Productivity

What will the long‑term effect of Covid‑19 be on digital transformation?

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The outbreak of Covid-19 forced the rapid adoption of remote working practices and an acknowledgment of the importance of digital transformation. Following the pandemic, what will the lasting impact be?

 

“What exactly does a digital business transformation mean?” asked Michael Krigsman, CEO of Asuret Inc., and moderator of the “CIO, CMO, CDO Perspectives on Digital Transformation” panel at the 2014 MIT Sloan CIO Symposium.

In answer, George Westerman, MIT principal research scientist, described digital transformation as using technology to radically improve the performance and reach of an organisation. “When digital transformation is done right, it’s like a caterpillar turning into a butterfly,” he said. “[But when it’s done wrong], all you have is a really fast caterpillar.”

For many businesses, the Covid-19 pandemic was the catalyst for their organisational caterpillar to evolve. Yet following the crisis, it remains to be seen which companies will emerge with wings – and which will simply be crawling along slightly faster than before.

The rise of digital platforms 

The use of digital platforms exploded during the pandemic. Videoconferencing, messaging, collaboration tools and document sharing all became common for facilitating remote working. At the end of March, Slack had added 9,000 new customers in Q1 – up from about 5,000 in each of the previous quarters. Zoom saw its shares go up 112% on the year. Meanwhile, in China, there was a surge in demand for video-conferencing apps such as Tencent’s WeChat Work and Alibaba-owned DingTalk, reported the BBC.

For companies that had already begun the process of digital transformation, the situation was manageable. Technology enabled people to stay connected, keep working, and ensure business continuity. In China, an IDC survey of CXOs in March found the top three positive impacts of the pandemic were ‘improved corporate ability of long-distance collaborative work’, ‘gaining ability of online marketing and business development’, and ‘wide recognition of the value of digital transformation and information technology among all employees’.

The downsides for companies slow to act

However, the pandemic placed a lot of pressure on businesses that had previously been slow to transform. “The pandemic has brought into sharp relief how vulnerable companies really are,” reported McKinsey, pointing to instances of network overloads, security breaches and privacy issues.

“Corporate networks, unused to having a majority of their connections coming in over virtual private networks (VPNs), are experiencing unusual quirks, while internet service providers have come under pressure to lift bandwidth caps so that remote workers do not get cut off from their employers halfway through the month,” reported the Guardian’s technology editor, Alex Hern

The International Association of IT Managers highlighted the tech risks arising from homeworking, including assets that were being purposely left unsecured to simplify remote work; the rapid addition of new hardware that leaves little time for security; that assets on home networks are fundamentally less secure; and that unprepared users were making mistakes.

“The work-from-home environment has created a multitude of opportunities for leaks,” said Dr Barbara Rembiesa, president of the International Association of IT Asset Managers,” reported TechRepublic in April 2020. “Too many organisations have left themselves wide open for attack.”

There were also privacy concerns, even surrounding the biggest platforms. “Unless Slack makes changes to its encryption and retention policies, using [the platform] could put your data at risk,” said Gennie Gebhart, associate director of research at the Electronic Frontier Foundation (EFF), in The New York Times.

A safe digital environment 

What became clear during lockdown was the importance of having a safe and uninterrupted digital environment. Even post-pandemic, Risk & Insurance points out the other risk factors that might disrupt the workplace each day. While Covid-19 led to 94% of the Fortune 1000 seeing supply chain disruptions, natural disasters can also cause problems (in 2019, 14 extreme weather and climate events had losses exceeding $1 billion, each), while downtime caused by malware grew 34% to 16.2 days in 2019 Q3. 

“[The pandemic was] another social-economic change,” says Darren Murph, head of remote at GitLab, a provider of developer tools with 1,225 employees, all of whom work remotely. “Going remote acts as a hedge against future events like this.” 

The future of digital transformation

So, what will happen in terms of digital transformation in the future? Which quickly adopted changes will stick? And which won’t? 

Wade Foster is the co-founder and CEO of Zapier, a maker of workflow automation tools. Speaking to The Information, he explains that he is concerned that the current crisis-driven approach will lead to missteps in implementing remote work. That may discourage some companies from sticking with the policy when the coronavirus ebbs. “The one thing I am worried about is that because it’s being foisted upon us, there will be companies that are simply not set up to do this well,” he said. “I worry they will say, ‘Remote can’t work.’”

However, McKinsey suggests that organisations that are willing to make changes will be best positioned to accelerate out of the post-pandemic downturn. “Companies that move early and decisively in a crisis do best,” it says. “In the recessions of 2007–08, the top quintile of companies was ahead of their peers by about 20 percentage points as they moved into the recovery in terms of cumulative total returns to shareholders (TRS). Eight years later, their lead had grown to more than 150 percentage points.” 

“The value of digital channels, products and operations is immediately obvious to companies everywhere right now,” says Sandy Shen, Senior Director Analyst, Gartner. “This is a wake-up call for organisations that have placed too much focus on daily operational needs at the expense of investing in digital business and long-term resilience.” 

She has a positive message: “Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now, and over the long term.” 

 

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