The pandemic has drastically intensified the pressure on public and private enterprises of all sizes and across all sectors to rethink their business models.
This unprecedented crisis has radically transformed the business environment and will have a deep and long term impact on markets, consumer behavior, work organization, and, consequently, on corporate strategies.
Prominent changes we can think of include:
- Increase of State intervention and funding – with a side effect of building up public debt – which are now well accepted by markets and public opinion;
- Recognition of the need to bring back some of the delocalized production;
- Change in consumer purchase behavior with steep acceleration of e-commerce usage;
- Societal priorities shifting towards Quality of Life, Health, Wellness and ESG values;
- Employees and employers (re)discovering the value of remote working;
- Enterprises making fast progress on their digital transformation to mitigate disruption;
- Enterprises speeding up their decision process, eliminating unnecessary steps;
- Enterprises achieving quality outcomes with less mobilized employees;
The key lessons that companies should have drawn by now are obviously related to building resilience, agility, and capabilities to capture opportunities in this reshuffled environment.
Yet, are large and small companies equal to the task in these times of crisis?
We believe that the COVID-19 pandemic presents a longer list of challenges to SMEs versus large enterprises, as confirmed by the UN and OECD surveys in Q2 2020. This is no surprise considering that big shifts in market share occur in times of crisis, with large companies stealing the lead!
The advantage that large companies generally have over smaller ones in times of crisis derives from their easier access to capital and the fact that they are generally better prepared for difficult times. Their resilience stems from a structured corporate governance, a balanced business diversification, a strong management, organization, lean processes, and above all, the adoption of advanced technologies. Last but not least, digitization has proven to be an extremely helpful tool for accelerating agility, teleworking, and the expansion of digital channels to improve market reach.
Unfortunately, technology leverage and resulting productivity are notoriously lower in intermediate and small businesses, due to a lack of strategy and focus, with limited specialized skills and investments. This is particularly visible in missing data analytics capabilities, which are critical means to optimize market reach and costs. Examples of potential weak areas can be found in poor customer experience, digital marketing, automation of internal processes, etc.
Some SMEs have demonstrated their ability to limit losses by quickly leveraging technology: among other success stories, we have all seen brick and mortar brands with new e-commerce channels, while restaurant chains have reorganized and built new meal order/delivery capabilities in a matter of weeks. Nevertheless, these are the trees hiding the forest with countless SMEs struggling to survive given their poor set-up to cope with such a crisis.
Looking ahead, it is critical that SMEs catch up with their digitization gap in order to support both defensive and offensive strategies:
1. Reinforce their operational resilience, working notably on their supply chain, cash management, cost optimization, outsourcing of non-critical activities, teleworking, etc.
2. Capture market share and/or new opportunities in swiftly transforming environment reaching new markets with new value propositions, digital channels, M&A, etc.
It is the right time to accelerate digitization.
Digital technologies are now affordable and often packaged as business process services provided on the Cloud. A major challenge remains the development of an overarching plan making the right prioritization/selection of tools, and the appropriate reorganization of operations. Digitization efforts can cover almost all front and back-office functions (strategy, marketing, CRM/sales, fulfillment, operations, HR, finance, etc.), thus requiring tight governance and strategic alignment. Such moves are crucial for cost elimination and resilience. Another challenge is to keep pace with the ever fast-changing environment, with an emphasis on morphing customer preferences and new markets.
We also believe that developing and implementing a data strategy is a foundational act for companies willing to continuously optimize their operations and swiftly grab potential opportunities.
Impactful digital transformation is complex by nature as it requires trustful experts on a large span of functions and activities.
XN Consultants, as a network with deep expertise when it comes to Digital Transformation is equipped to assist and partner with companies seeking to embrace the digitization journey.
We typically start with a rapid assessment to uncover high return projects, and then, co-develop a pragmatic multi-year plan for transformation and continuous progress.
