December 16, 2020

COVID creates new paradigm for digital transformation – agility

Despite new research showing small to medium businesses are struggling to keep pace with digital transformation with the added challenge of COVID, there are ways to get programs back on track.

Pre COVID, many Australian small to medium businesses were exploring digital transformation to remain relevant, competitive and customer-focused. However, the pandemic changed the game.

At the start of 2020 most SMEs would have had at least one of these on their to-do list: evaluating initiatives to move to the cloud to eliminate paper-based activities; capturing data about their operations and customers; working out how to store and analyse that data; and using the insights to deliver targeted ecommerce services.

But with COVID-19, remote working and digital channels became urgent priorities for businesses that needed to keep employees and consumers safe in an out-of-office, reduced-contact environment. That investment came as businesses and consumers navigated a shrinking economy, falling revenues and an uncertain outlook.

With access to fewer resources, many businesses then found themselves limited in their ability to respond to the shift from customer- to employee-facing digital initiatives and to take advantage of Federal Budget measures that could help drive this and other aspects of digital transformation.

Foad Fadaghi, Managing Director and Principal Analyst of Telsyte, says many small to medium businesses are finding the disruption harder to manage than better-resourced, larger companies are.

These small to medium businesses are struggling to adapt to an environment that saw the economy contract by seven per cent in the June 2020 quarter.

This difficult environment for smaller operations is backed by research from Xero Small Business Insights and the Alphabeta consultancy, which found the pandemic hit small business employment twice as hard as overall business employment. While the disruption is not uniform across all small to medium businesses, Telsyte’s research identified some key pandemic-driven trends: businesses are fast-tracking digital transformation to reduce costs, meet customer expectations and support workers.

New digital priorities in a COVID world

Fadaghi says the pandemic prompted a major shift in digital transformation priorities across all businesses, including the small and medium sector.

“In the last three to four years, we saw a massive digital transformation focus on customers,” he says, nominating customer-facing apps, mobile apps and ecommerce as key investment priorities. But while ecommerce and customer-facing initiatives are continuing, so too is a renewed focus on the employee, he says.

Supporting remote workforces during the pandemic is critical, with a briefing paper from the Australia Institute’s Centre for Future Work estimating 30 per cent of Australian workers – about four million people – can operate from home.

“There is also a nuance [during the pandemic] that individuals are taking on multidisciplinary roles, there are [fewer] silos in organisations [and] employers are expecting heightened productivity,” says Fadaghi. “There are job cuts happening, so more work is being lumped on individuals.

“What you’re seeing with a lot of middle management is the ‘double or triple hatting’ concept of taking responsibility of managing a different part of the business as well as your own patch. They might be in charge of field marketing and then … take on a broader marketing role covering other things. Or being a state manager for NSW but being country manager for New Zealand as well.

“Where people have the skills applicable to an adjacent area, they’ve been asked to take on that responsibility, and you see it a lot within people’s email footers.”

The result is that businesses need to invest in technologies to support employees through the transition and possibly beyond, says Fadaghi.

These technologies include products that can help digitise and automate workflows and help systems ‘learn’ from experience. Some cyber security programs, for example, use AI and machine learning to improve detection of unusual activity on the network.

“We think small to medium businesses are prime to look at AI and machine learning … to possibly automate parts of their technology infrastructure,” Fadaghi says.

The 3 key considerations for businesses

Agility certainly emerged in 2020 as the number one driver for businesses in digital transformation, Fadaghi says, as businesses looked to digital to help them adapt to changed business conditions. “I think the key is … the ability to move quickly and … harness that motivation that’s happened as a result of the pandemic,” he says. “A lot of organisations are saying they were able to do things within weeks that once might have taken them months.”

Regardless of pandemics, for businesses realistic objectives and an understanding of where best to direct investments to achieve value are key, Fadaghi believes. Executing digital transformation during the pandemic may mean prioritising investments in contactless delivery of products and services to customers, participating in digital marketplaces, or implementing digital workflows to automate and reduce key process costs.

The third key consideration for businesses is selecting a vendor with the right technologies, skills and cultural fit to support a digital transformation – and to stay with a project until its completion.

 Putting digital priorities into practice

As for which areas of digital transformation individual small to medium businesses should prioritise during COVID-19, Fadaghi says that should largely be dictated by where they are on their digital journey.

For example, businesses lacking the ecommerce strategies or digital supply chains needed to function properly in the digital world should focus on these ‘hygiene factors’ first. Other businesses may need to focus on the employee side of the digital transformation.

Fadaghi also points out that many digital transformation technology ‘nice to haves’ have now become ‘must haves’ – and October’s Federal Budget included incentives to make the required investments.

He says these vital technology investments should be in workplace modernisation, analytics tools that enable decisions to be made based on data rather than on gut feel, and cloud-based services that allow businesses to easily make changes and develop products and services.

Ultimately, the key for small and medium businesses is a digital transformation able to accommodate upheavals like a new coronavirus outbreak and associated government response, or rising geopolitical tensions. They must look at the technologies, processes and models involved to determine where change is needed to reduce their costs and improve their agility. Only then can they position themselves to thrive in a post-coronavirus environment.