McKinsey: Technology tipping point triggered by COVID-19
The COVID-19 crisis has been a tipping point of historic proportions for technology adoption and the pace of change is not going to slow down, reveals a survey from McKinsey & Company.
According to the report: How COVID-19 has pushed companies over the technology tipping point - and transformed business forever, the global pandemic has accelerated digital technology by up to four years. And the share of digital or digitally enabled products in a companies’ portfolio has accelerated by up to seven years.
McKinsey’s global survey of nearly 900 C-level executives revealed most respondents said their companies had met the unexpected demands from the pandemic “much more quickly than they had thought possible before the crisis”.
Executives reported they expect the changes to be long lasting and are already making investments to ensure they are permanent. Top of their list is funding for digital initiatives which includes:
- Filling gaps for technology talent during the crisis
- The use of more advanced technologies
- Speed in experimenting and innovating
Quantum leap sparked by crisis
A quantum leap for digital adoption was seen during the pandemic with customers moving towards online channels, particularly in Asia with at least 80% of the customer interactions digital in nature.
The COVID-19 crisis has accelerated the speedup in creating digital or digitally enhanced offerings. “The results suggest a seven-year increase, on average, in the rate at which companies are developing these products and services. Once again, the leap is even greater, 10 years, in developed Asia,” commented McKinsey & Company.
The survey polled executives on 12 potential changes ranging from remote working to cloud migration and customer expectations. The findings suggest that during the crisis, companies have re-focused their offerings in the span of a few months instead of a few years.
Executives report that companies were much more agile in reacting to changes triggered by the crisis as can be seen in the expected time response to the actual time responses implemented during the pandemic:
- Increase in remote working/or collaboration; expected 454 days – actual 10.5 days
- Increase in customer demand for online purchasing/ services; expected 585 – actual – 21.9
- Increasing in use of advance technologies in operations; expected 672 – actual 26.5
It is reported that companies acted 20 to 25 times faster than expected. In the case of remote working, respondents said their companies moved 40 times more quickly than they thought possible before the pandemic.
“When respondents were asked why their organisations didn’t implement these changes before the crisis, just over half said that they weren’t a top business priority. The crisis removed this barrier: only 14% of all respondents say a lack of leadership alignment hindered the actual implementation of these changes,” commented McKinsey.
Changes are set to stick
Remote working was identified as the most significant change (93%) followed by changing customer needs 63% (a switch to offerings that reflect new health and hygiene sensitivities) and customer preferences for remote interactions (62%).
A total of 62% believe the changing customer's needs is a change that will stick while 54% believe remote working is here to stay and 54% see an increased migration of assets to the cloud as change that will remain.
“Respondents reporting significant changes in these areas and increasing migration to the cloud are more than twice as likely to believe that these shifts will remain after the crisis than to expect a return to pre crisis norms,” said McKinsey.
The results also suggest companies are making crisis-related changes with the long term in mind. McKinsey reports that of the 12 changes, remote working and cloud migration are the two that have been more cost effective than pre-crisis norms.
“Investments in data security and artificial intelligence are the changes respondents most often identify as helping to position organisations better than they were before the crisis. Across these changes, remote working is the likeliest to remain the longer the crisis lasts, according to 70% of the respondents.
Technology focus is critical
The survey revealed organisations that experimented with new digital technologies during the crisis are twice as likely to report revenue growth.
“The crisis has brought about a sea change in executive mindsets on the role of technology in business. In our 2017 survey, nearly half of executives ranked cost savings as one of the most important priorities for their digital strategies. Now, only 10% view technology in the same way; in fact, more than half say they are investing in technology for competitive advantage or refocusing their entire business around digital technologies,” say McKinsey & Company.
The results also show lessons have been learned during the pandemic. “One is the importance of learning, both tactically, in the process of making specific changes to businesses (which technologies to execute and how), and organisationally (how to manage change at a pace that far exceeds that of prior experiences).
“Both types of learning will be critical going forward, since the pace of change is not likely to slow down,” concludes the report.