Where do we go from here?

By    |    December 3rd, 2020

As 2020 comes to a close, I’d like to take a look at what was, in most respects, a game-changing year.

In the first quarter, as countries began closing borders and employees began working from home, there was considerable concern over how we would survive this abrupt slow down. In our field, working with manufacturers of complex products, visualizing how factories could continue to run when workers were ordered to stay home was a vexing paradox.

Now some nine months on, we have a bit more road behind us and can see that many companies have not only survived, but have grown in these challenging circumstances.

How?

A global crisis like the one we saw this year can spur radical experimentation in an effort to navigate the choppy economic waters. In this case, experimentation consisted of rapid adoption of digital technologies. So rapid, in fact, that according to a new McKinsey Global Survey of executives, their companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally enabled products in their portfolios has accelerated by a shocking seven years.

Graph showing average share of products

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A large motivator for these digital enhancements and upgrades was the dramatic increase on online buying habits. With the closure of in-person buying opportunities, companies that traditionally sold through dealers, resellers and old fashioned showrooms were quickly pivoting to online solutions.

This doesn’t include just the customer-facing operations. Accelerations in the digitization of internal operations such as back-office, production and R&D processes were also evident.

A crucial result of this rapid acceleration can be seen in the overall increase in organic growth. What began as a “survival” mechanism has turned into a long term strategy.

At the organizations that experimented with new digital technologies during the crisis, and among those that invested more capital expenditures in digital technology than their peers did, executives are twice as likely to report outsize revenue growth than executives at other companies.

Diagram showing respondents reporting revenue growth

But it’s not just about cost savings. In a McKinsey 2017 survey, nearly half of executives ranked cost savings as one of the most important priorities for their digital strategies. Now, only 10 percent 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.

Diagram showing organizations current strategic posture towards technology

2020 was an unpredictable year. And while we don’t know what 2021 will bring, it is important to understand that being prepared, being adaptable, and having the right tools to navigate can not only manage risk, but strengthen a company’s foundation.