Covid-19 has accelerated digital transformation by seven years

According to a McKinsey & Company study, businesses have surprised themselves with the speed and success of their digital initiatives in response to Covid-19. On average, digital offerings have leapfrogged seven years of progress in a matter of months.

Earlier this year, the global strategy consulting giant surveyed around 900 C-suite executives and senior managers at businesses around the world, aiming to track digital transformation under the Covid-19 paradigm. A range of sectors, business sizes, functionalities were represented in the survey, which produced the unanimous conclusion that digitalisation has skyrocketed this year.

Notable among the driving forces of this boom are the fundamental changes to consumer behaviour, specifically the growing shift to online channels. Under lockdown and weary of infection, consumers have warmed to the idea of using ecommerce for everything, from grocery shopping to financial transactions.

“Respondents are three times likelier now than before the crisis to say that at least 80% of their customer interactions are digital in nature,” noted Kate Smaje, a Senior Partner at McKinsey & Company in London.

As consumers turn to digital channels, businesses have made their best effort to meet these shifting demands. The fact is that face-to-face interaction or brick & mortar visits all but evaporated during lockdown, so the only access point to consumers shifted online. As a result, the share of digital customer interactions around the world is three years ahead of where it would be if the pandemic hadn’t occurred. 

The response to this shift has been remarkable. The survey reveals that businesses have spent more on digital investments than on any other business continuity measures during the pandemic – cost cutting and customer acquisition included. As a result, growth in digital product/service offerings has jumped ahead by an average of seven years in just a few months of 2020. Strikingly, offerings in Asia Pacific have undergone up to 10 years of progress in a fraction of the time.

In many cases, digital offerings aren’t possible without more fundamental digital transformation initiatives. According to Smaje, businesses surprised themselves with the speed at which they managed this transition.

She explained, “For many of these changes, respondents say, their companies acted 20 to 25 times faster than expected.”

Take the case of remote working. Businesses could scarcely remain operational without setting up remote working infrastructure and reliable online communication channels – all of which was achieved in a matter of 11 days on average, according to McKinsey's survey. In pre-pandemic times, executives suggest that a transition of such scale would have taken up to a year, marking an acceleration of 40 times. 

Here to stay

No doubt, many of these changes are quick fixes. In fact, McKinsey suggests that the rapid acceleration is more the result of redirecting company resources than it is of product development. Despite this premise, many expect these changes are here to stay for the long term.

McKinsey asked respondents about twelve pandemic-induced shifts and the likelihood that they will stick around through the economic recovery phase. Broadly, these shifts span: changing customer needs or expectations, increase in remote working and collaboration, use of more advanced technology in business and decision-making; higher rates of cloud migration and data security investments; and supply chain restructuring and redistribution.

Each of these has been a core reality during the pandemic. For more than 60% of respondents, shifts in consumer behaviour and demands are here for good. For the rest of the metrics, around half or more expect the changes will at least have staying power in the post-recovery period, while the lowest share – 41% – expect nearshoring or insourcing practices to be a reality of the future.

According to Smaje, these expectations are reflected in business transformation efforts. “Companies are making these crisis-related changes with the long term in mind,” she added.

Whether these changes stay or not, the pandemic has certainly taken digital transformation efforts to levels that few anticipated up until last year.