Digital Transformation: The Key to Unlocking Business Resilience
Maintaining long-term growth has never been more difficult. A look into how agile technologies can fortify business performance now and down the line.Add bookmark
If the past year has taught us anything, it’s that you can never be too prepared for a crisis.
However, even before the pandemic, we were already living in an age of hyper disruption. Advancements in technology, evolving customer demands, new market competition - pretty much everything that defines and drives business - was already changing at breakneck speed. Being agile, adaptive or even “high velocity” will no longer cut it. Instead organizations must embrace a proactive approach to disruption.
This is where digital transformation comes in. First and foremost, digital transformation describes the integration of digital technology into all areas of a business and the automation of end-to-end processes. Secondly, it refers to a shift in mindset from “status quo” towards calculated risk taking, experimentation and innovation.
Digital transformation is not just about digitalizing processes to increase operational efficiency or cut costs (though it can enable those things). It’s about using technology as a catalyst to reinvent business processes and organizational culture to thrive in a hyper disruptive environment. As George Westerman, MIT principal research scientist and author of Leading Digital: Turning Technology Into Business Transformation puts it, “digital transformation marks a radical rethinking of how an organization uses technology, people and processes to fundamentally change business performance.”
Successful digital transformations require an all-hands-on-deck approach. Organizations must work cross-functionally to align IT investments with forward-looking strategic objectives to not only optimize business processes, but create something new.
The COVID-19 crisis has undoubtedly increased the pace at which companies have had to innovate. By pushing millions of workers into a work-from-home environment, the pandemic forced companies to accelerate their digital transformation efforts and enable seamless remote working. Massive supply chain disruptions and, for life sciences organizations, the need to rapidly and safely produce new COVID-19 treatments have compelled organizations to digitize and transform their supply chain operations. All of this is to say that many companies have accomplished 3-4 years worth of digital transformation efforts in just under 7 months.
However, the goal of these transformational initiatives is not to provide short-term fixes but rather to ensure long-term competitiveness in this new business and economic environment. In other words, fortify enterprise resiliency.
What is enterprise resiliency?
Historically speaking, the word “resiliency” in business has been associated with disaster planning. Activities like creating business continuity and recovery plans for potential business disruptions like hurricanes, cyber attacks, power grid failures, etc.
However, the concept of resiliency has taken on new meaning in recent years as business environments have grown more complex and unpredictable. Enterprise resilience refers to a company’s capacity to connect systems, people, processes and information in a way that allows the enterprise to become more collaborative and responsive to the dynamics of its environment, stakeholders, competitors and - most importantly -customers. In other words, an organization’s ability to not only react to change, but capitalize on it.
As PWC puts it, “Resilience isn’t just about surviving in the present, it’s about having the foresight, capability and agility to adapt and evolve; to identify and take advantage of opportunities as well as address challenges; to thrive as well as survive.”
But how are digital transformation and enterprise resilience related? Digital transformation is the primary enabler of enterprise resilience.
Facilitating increased connectivity, transparency, collaboration & innovation, digital transformation, if done right- should inherently pave the way towards enterprise resiliency.
In fact, according to a recent report by Mckinsey on the impact of Covid-19 on digital transformation efforts, respondents from companies with advanced digital capabilities reported better crisis response outcomes than those whose digital transformation efforts lag behind. Digital pioneers outperformed peer organizations the most when it came to “filling gaps for technology talent during the crisis, the use of more advanced technologies, and speed in experimenting and innovating.”
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Business Resilience Breakdown
Digital transformation boosts resilience across these key areas:
Cyber, Technology & Data Resilience: Pertains to the ability of systems and technology to withstand shocks. Despite advancements in cyber security technology, companies are more vulnerable to cyber attacks than ever before, especially with so many people working from home, and this has not gone unnoticed by cyber criminals. In fact, ransomware attacks increased seven-fold this year (2020) alone and they’re getting worse.
The stakes for this one are extremely high, especially when it comes to data breaches. The average cost of a data breach runs around $3.62 Million in 2019. Worse, 94% of companies that experienced a catastrophic data loss do not survive. 43% never reopen and 51% close within two years. Cyber attacks not only hurt a business’s bottom line, they can irretrevocally damage its reputation and eradicate customer trust.
A fine-tuned digital transformation strategy pushes organizations to rethink their approach to cyber security, evolving cyber security from an expensive after-thought, to a business imperative. Afterall, what is the point of investing in new, digital infrastructure if you can’t protect it? Plus, not only are new, emerging digital solutions such as cloud typically more effective than those legacy systems digital transformations seek to replace, they’re also more secure.
Transforming legacy systems also paves the way for the adoption of next generation cyber security tools. Powered by artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA), cognitive technologies can identify threats, data breaches or suspicious behavior significantly faster than a human can. These tools can also scan systems for potential vulnerabilities and, using predictive analytics, help organizations simulate cyber attacks or other (disaster related scenarios). This enables organizations to develop and test proactive action plans to confront these issues.
Operational Resilience: As defined by Gartner, operational resilience is a set of techniques that allow people, processes and informational systems to adapt to changing patterns. Traditionally speaking, an organization's ability to A.) ability to deliver critical operations through disruption and B.) quickly expand or retract business operations based on rapidly changing business conditions.
Digital resilience: Refers to an organization's ability to maintain, change or recover digital assets and technology. Digital and operational resilience go hand in hand. For example, cloud solutions enable workers to access critical systems no matter where they may be located. So, for example, if suddenly everyone had to start working from home, employees would still be able to access work-critical platforms via the cloud. Or, if the power grid failed in one geographical area, employees in another could still access the system.
Organizations where a high percentage of processes are automated and optimized are also prepared to do more with less and can move people or resources around more easily, without disrupting service. In addition, organizations that already have robust IT governance in place, such as those who are digitally mature, can more easily and quickly scale new technology and tech-enabled services.
Social Resilience: One area that is sometimes important but often overlooked when it comes to business resiliency, is people. Social resilience refers to the capacity of an organization’s workforce to respond to, embrace and exploit change.
As mentioned earlier, one of the major objectives of digital transformation is the adoption of “next generation” mindsets (i.e. agile, entrepreneurial, collaborative, forward-thinking, unafraid of complexity). Social resilience goes one step further with the acknowledgement that the foundation of transformation thinking is upskilling and employee experience.
It seems like common sense but if employees aren’t properly trained to use a new, digital solution- they won’t adopt it and certainly won’t understand how it delivers value. Secondly, tying digital transformation to employee experience is mutually beneficial to both objectives. Amongst many other things, digital transformation enhances the employee experience by breaking down silos, reducing administrative burden and increasing transparency. Plus, no one wants to work for a company that doesn’t invest in their employees. Upskilling talent with digital skills is a proven employee engagement & retention tool. If employees feel valued by their company and confident in their digital skills, they’ll be significantly more likely to proactively tackle difficult, complex challenges and successfully ride the waves of change.
Economic Resilience: Economic (or financial) resilience refers to an organization’s ability to withstand change and disruption from a financial standpoint. In other words, in the event of massive disruption, how long will the business survive. For decades, companies sought to enable economic resilience through cutting costs and boosting cash reserves. However, like the other 3 areas we mentioned, the emergence of digital technology has expanded the meaning and scope of financial resilience.
There are few areas more ripe for transformation than finance & accounting. In fact, a report by ISG found that around 83% of US-based enterprise finance functions have deployed RPA in some way and roughly 95% are or have experimented with it. In addition, nearly half (46%) of CFOs are facing increased demand to provide overall business counsel.
By digitizing end-to-end financial processes such as revenue cycle, invoice management and supply chain management, finance departments can not only increase productivity and efficiency, but enable real-time financial reporting. While digitization enables organizations to collect, manage and access massive amounts of data, predictive analytics enables them to transform that raw data into a vision for the future of their business. This unprecedented level of transparency allows business leaders to make evidence-based decisions to crises or change as or before they occur.
Have 3 minutes? Tell us about how your organization is leveraging digital transformation to boost business resilience.
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