Digital transformation more important than ever due to pandemic

22 February 2021 Consultancy.uk 5 min. read

Since the global pandemic forced employers around the world to open up their business to remote working, digital transformation has become more important than ever before. According to a new research, more than nine-in-ten organisations now believe digital transformation is a key priority, not only in response to the need to work from home, but also in order to deal with the huge disruption facing business ecosystems across the industrial gamut.

According to a various studies, businesses have surprised themselves with the speed and success of their digital initiatives in response to Covid-19. On average, one white paper from McKinsey & Company found that digital offerings have bypassed seven years of progress in a matter of months. It is clear in that context that digitalisation is no longer a question of if, but how fast?

In a global survey of leading executives, professional services firm HCL asked respondents to rate the level of impact their organisation experienced from Covid-19 on both demand and supply sides of their business, finding that there was no industry left untouched by the global lockdown. However, even as the pandemic era sees everyone racing to accelerate, that will still mean something different for every industry.

Demand-Side Disruption Caused by COVID-19

The manufacturing sector was been most negatively impacted by the pandemic on both supply and demand sides. The recession which was exacerbated by the advent of Covid-19 has seen many clients scale back their spending, meaning 68% of that sector’s respondents reported a decrease in demand, and a further 89% reported a disrupted supply chain. The professional services sector was also a major victim of the pandemic, with 60% reporting a decreased demand for services, and almost seven-in-ten reporting a disrupted supply chain.

Even sectors which saw less of an impact on demand saw a drastic shift in their ability to meet that demand thanks to supply chain strains. Around 45% of banking and financial service operators reported reduced demand, while just one-third of retail and consumer packaged goods reported as much.

However, more than half of the former reported supply chain disruptions, while 60% of the latter said the same. According to the study, this shows that even if they were able to reduce the amount of disruption their demand for products faced, the pandemic still had a major impact on how they could deliver them.

Priority of digital transformation per sector

Understandably, the sudden shock of the lockdown months has had a huge impact on the priorities of those worst effected by the crisis. Before 2020, only 27% of manufacturing leaders believed digitalisation was a priority, while now that has almost doubled to 46%. Similarly, professional services and retail saw double-digit growth in the number of executives prioritising digital transformations.

Most notably, however, Life Sciences and Healthcare, the lowest-focus industry at the start of 2020, saw the greatest jump. The sector rose from 24% to 59% now, making it the second highest-focus industry currently. While there were industries with supply chains worse disrupted by the virus, the 65% of firms in the sector facing such disruption were also supposed to be part of the solution to the health crisis – making their learning from this problem all the more crucial. Overall, this is illustrative of the effect the pandemic has had on all sectors which previously thought digitalisation was a nice-to-have rather than a must-have.

“There has been remarkable levelling between industries’ attitudes towards digital since Covid-19,” observed digital transformation expert David Rogers. “This is a truly telling data point in the shift to digital acceleration: no longer will we see entire industries where digital is not on the board’s agenda.”

Digital transformation als a board level focus per region

In his foreword for the report, Rogers added, “Digital has been the big winner in the Covid-19 era. Our new reality has forced a pivot to digital operating models in industries as diverse as healthcare, retail, education, automotive, banking, and more. But transforming any large and complex organisation for this era is an immense leadership challenge. It encompasses new strategy and business models, but also profound shifts in organisational process and culture.

“In order to lead the kind of agile, customer-focused, bottom-up organisation demanded by today’s rapid pace of change, leaders need to invest in the right technology and business architecture.”

In response to these challenges, the demand for digitalisation among executives has gone through the roof in the last 12 months. According to HCL, businesses in the US have seen the most marked change since the advent of the coronavirus, with just 37% of bosses stating it was a priority at the start of 2020, contrasting sharply with the 57% who believe as much now.

At the same time, companies in Europe risk being left behind by this sudden sea change. While still seeing an increase in board-level focus, Europe has dropped from being the region where this was most likely at the start of the year, to the least likely now – with 54% of executives prioritising digitalisation. This places it behind the US and the APAC region – at 56%.