Powering the Great ResetWorld Economic Forum Community Paper delves into our ever-changing digital landscape. Access full report here.
During COVID-19, we have had to learn how to live differently – to learn, work, socialize, shop, worship and collaborate in different ways. And many of us are doing all this virtually. The pandemic is therefore a watershed moment for the digital transformation of business. The rules for success have changed, and are ever more reliant on harnessing the power of digital models to create new value and experiences.
Digital transformation is not a new endeavor for business, though prior attempts have often failed to realize its full potential. What is new in the wake of COVID-19 is that this is a shared opportunity for leaders. Successful leaders will now seize the opportunity to advance a new trajectory for digital transformation that aligns with the changing role of business: to be a powerful enabler of long-term value creation for all of its stakeholders.
The Rising Urgency Of Digital Transformation
For consumers, employees and partners, the shift in behavior has been swift and dramatic. Since the onset of the COVID-19 crisis, internet usage has risen by 70%, the use of communication apps has doubled, and some video streaming services have seen daily usage rise 20-fold.
Never have we been so aware of our dependence on digital models, and we are not going back. With the power of digital technology so very visible, leading companies must now use technology to transform business itself to deliver for a broader set of stakeholders.
The Digital Dividend Is Gigantic…
“Digital natives” and companies that started early on their digital transformation journeys have often better withstood the current crisis and adapted faster to new human and societal needs. Even before COVID-19 hit, digital leaders were seeing
twice the revenue growth of laggards, a trend expected to accelerate. Some 47% of incumbent companies who pivoted to competing in new digital ways have achieved organic growth greater than 10% over the past three years. Only 30% of
traditional incumbents have done the same.
When COVID-19 hit, many disadvantaged communities, lower-paid workers and small businesses lacked the resources or capabilities to adjust to this new, more digitally demanding world. Job displacements caused by automation and the growing skills gap have heightened difficulties. Small businesses, which constitute 40–60% of national economies globally, have often had to confront limited access to digital connectivity or remote work, great reliance on cash-based transactions
and massive demand uncertainties caused by shifting consumer behavior.
Job displacements caused by automation and the growing skills gap have heightened difficulties. Small businesses, which constitute 40–60% of national economies globally, have often had to confront limited access to digital connectivity or remote work, great reliance on cash-based transactions and massive demand uncertainties caused by shifting consumer behavior.
Time To Shift Gears: Add Purpose To Digital Transformation
Among the many trends that COVID-19 has accelerated, two stand out: Calls are rising for companies to lead in addressing societal challenges, and the marketplace is indicating that companies must adopt digital business models at their core to compete.
The time has come for companies to combine the two agendas – they must use digital business models and Fourth Industrial Revolution technologies to transform their businesses and lead systems change at scale. Many are already advancing on this path. In May 2020, a Fortune survey found that roughly half of chief executive officers believe the crisis will accelerate the move towards stakeholder capitalism, and 77% say it will force their companies to speed up their digital transformations.
Amid the uncertainty as to what behaviors and trends from the crisis will endure, this much is clear: Updating their business for a digital-first world, led by purpose, is now an imperative for almost every company.
Three Opportunities For Corporate Leadership
As companies seize the opportunity to integrate purpose with profit and invest in digital transformation to help deliver on their purpose, leaders can use digital transformation to create value along three inter-related paths:
Transform business: Reorient digital transformation investments and initiatives to drive sustained, long-term value for the company and beyond.
Empower stakeholders: Use technology to respond to the needs and priorities of a broader set of stakeholders, including employees, consumers, partners, governments and society.
Change systems: Create new collaboration and value-creation models across ecosystems to address global challenges through new markets and enable systemic change.
Creating Societal & Economic Value
In a few years, it is possible that no one will be speaking of “digital transformation” because the term will have become irrelevant: Non-digital businesses will simply not exist. To avoid becoming one of those dying businesses, organizations must embrace digital transformation now
Yet being digital-at-the-core by itself is not enough. A company’s success will also depend on its capacity to create societal as well as economic value and demonstrate purpose-led leadership. Digital technology offers this potential: new ways to create new value for all stakeholders, while making business models more inclusive, sustainable and trustworthy.