Digital Transformation Now?

What impact will the COVID-19 pandemic have on organizations' digital transformation investments? Is now the time to stop―or is it time to find ways to become more adaptable and resilient? In this vlog, I explore this and other thoughts on how companies can prepare to move ahead as things return to a more normal environment.

If you prefer, you may read a transcript of the vlog instead:

As the human tragedy of COVID-19 continues to take its toll and companies weather the economic repercussions, priorities have shifted. Companies are in a reaction mode, to keep their people safe, preserve cash, reduce expenses, and protect their businesses.

Large-scale social distancing and travel restrictions have dramatically curtailed consumer and business spending. Demand has dropped and the looming uncertainty over when this will end has created a chaotic business climate.

Prior to the pandemic, according to IDC, direct digital transformation investment was supposed to grow at 17.5% and approach $7.4 trillion from 2020 to 2023.

Now—what happens to all the digital transformation efforts that were underway?

Your first thought might be—they stop. If you’re a cruise line company, that might be the only option. But if you think survival mode is playing pure defense—cutting your operational costs across the board, preserving cash, and postponing digital transformation initiatives—there’s absolutely no proof this works.

In fact, a large majority of companies that acted this way during the great recession got hammered in the post-recession.

I don’t think we’re all going to wake up in next couple of months and rush out to concerts, sporting events, or our favorite restaurants and the economy just bounces right back. Economic disruptions always prey on companies with a weaker balance sheet, but also on those that lack a resilient business model!

If you look back at any company that struggled or failed from the great recession on, you’ll see they chose to focus too much on day-to-day operations and not enough on investing in digital resiliency. They lacked flexibility—the ability to adapt to achieve sustainable business outcomes.

When companies hunkered down during the great recession, they achieved less than half the revenues of their more progressive competitors and about one third the gross profit. If you make a conscious decision not to change during tough times, you can’t expect to magically flourish during good ones.

The more progressive companies, on the other hand, played both offense and defense. Pardon the sports analogy, but great defenses make better offenses and vice versa.
Take operating efficiency as an example—if you can improve your operating efficiency across your product lifecycle without spending boatloads of cash, you can lower your costs and improve your competitiveness and flexibility to come out stronger in a post-recession economy.

It isn’t a question of survival or reinvention. For many companies, survival is reinvention. A company’s ability to become more adaptable and resilient, especially now, is the key to emerging from the recession stronger.

The question that manufacturers should be asking is, “How can we operate better, but differently?” Those companies that can answer that question and up their game to sustainably adapt are going to achieve more success, both during the recession and after.

There will be an end to this COVID-19 nightmare and, eventually, there’ll be pent-up demand. Now is the time to work together better, but remotely, and improve resiliency where possible.

If you’re an Aras customer, you already own a resilient platform, so your ability to pivot and get where you need to be with speed and agility is there.

We, of course, are responsible for your upgrades, so if you need to be on latest release, please let us know. And if we can help in any way, please reach out to us.

I’d like to give a big shout-out to all the companies that have joined the fight against COVID-19 and to our frontline workers.

Our heart goes out to those families that have been impacted and those who have contracted COVID-19, including friends of mine.

Please stay safe and be strong.

Thanks.

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