Covid-19 accelerates digital transformation by seven years

Covid-19 accelerates digital transformation by seven years

13 Jan 2021

On we read an article by McKinsey, who stated that "what would normally have taken years, took place in a matter of months this year. Due to the corona crisis, the digital transformation jumped seven years ahead in one fell swoop". The global strategy giant surveyed some 900 C-level executives and senior executives from around the world to gain a sense of the digital transformation journey under the sudden pressure of Covid-19. The companies surveyed vary in industry, size and business model, but their experience is unanimous: digitization exploded this year.

A major driving force behind the giant leap is fundamental changes in consumer behavior. The shift to online channels received an unprecedented boost. Shackled to their homes by lockdown and fear of contamination, more and more consumers are using e-commerce for everything from grocery shopping to financial transactions.

"Three times as many respondents as before the crisis now say that at least 80% of their customer interactions are digital in nature," said Kate Smaje, a Senior Partner at McKinsey & Company in London.

With consumers turning to digital channels en masse, companies are doing their utmost to meet this evolving need. In many countries, physical shopping almost completely disappeared during the lockdown, leaving consumers online only. As a result, the share of digital customer interactions around the world is now three years ahead of where it would have been if the pandemic had not happened.

The response to this shift is impressive. The study found that during the pandemic, companies spent more on digital investments than on any other business continuity measures - including cost cutting and customer acquisition. As a result, the growth of the digital product / service offering has grown by an average of seven years in just a few months. In fact, adoption accelerated by ten years in the Asia-Pacific region.

Gemiddelde aandeel van (deels) gedigitaliseerde producten/diensten

In many cases, the digitization of the product and service offering was only possible after a more fundamental digital transformation had taken place. According to Smaje, companies surprised themselves with the speed with which they were able to achieve this transition: "For many of these changes, the respondents say, their companies acted 20 to 25 times faster than expected."

Take remote work, for example. It was virtually impossible for businesses to keep running without establishing a remote work infrastructure, including reliable online communication channels. This was all accomplished in no more than eleven days, according to McKinsey's research. The interviewed administrators argue that a transition of such magnitude would have taken a year without the urgency of corona. This means that the pandemic accelerated the transition by a factor of 40.

Here to stay

Of course, much of the progress achieved involves quick solutions. McKinsey even suggests that the rapid acceleration is more the result of reorienting assets than product development. Despite this, many expect these changes to persist in the long term.

De grootste verschuivingen zullen waarschijnlijk ook het meest permanent zijn

McKinsey asked respondents about 12 shifts prompted by the pandemic and the likelihood that they will persist beyond the economic recovery phase. Broadly speaking, these shifts include: evolving customer expectations and needs, an increase in remote collaboration and collaboration, the use of more advanced technology in business operations and decision-making, increased investment in cloud and data security, and supply chain restructuring and redistribution .

Major shifts took place in each of these areas. More than 60% of respondents indicate that shifts in customer behavior and needs are definitive. Regarding the other aspects, about half each expect the changes to take root in the period after the recovery. The only exception is nearshoring and insourcing - here a clear minority expect the changes to prove permanent.

According to Smaje, these expectations are reflected in the business transformation efforts: "Companies are making these crisis-related changes for the long term."

Time will tell which changes will actually last, but one thing is certain: the pandemic has brought digital transformation efforts to a level that no one saw a year ago.

Written by
Saskia van de Schoot

directeur new business

Saskia van de Schoot
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