Being resilient isn't enough. Get digital right—now

Resilience can seem challenging to define, elusive to achieve and hard to quantify

Though it’s top of mind as companies and countries deal with COVID-19 disruptions and economic fallout, there’s nothing heroic or mysterious about resilience, especially when it comes to organizations.

Think about the definition of resilience: Toughness and capacity to recover quickly from difficulties. That’s great if, say, your new product was delayed a few months and pausing didn’t hurt the bottom line. It’s a temporary problem: you weather a storm and return to normal when skies clear. You bounce back.

But that’s definitely not what we’re experiencing. This is a tsunami, not a storm. The force of the COVID-19 is mowing down everything in sight. And there are ripple effects.

Yet, there’s another, often-ignored resilience definition: elasticity, the ability to spring back after being pushed down and beaten up. What you’re made of—the material and substance of your company—can be the difference between bouncing back or being crushed by the weight of an economic downturn, a pandemic or other unforeseen disruption.

If your company wasn’t elastic enough before COVID-19 to pivot quickly to stay above the crushing wave, you’ve got work to do—work you should have done when times were great and bottom lines were flush. Now, you have little choice but to mandate changes, adapt quickly and make the moves you’re now forced to make. (You had a choice a half dozen years back, but no longer.)

That means you have to make your business elastic. Digital transformation is how you get there: Technology is the engine, and your people are drivers. Companies merely talking the talk without action, had their dysfunction exposed these last six months. The result isn’t pretty.

Of companies surveyed, said revenue growth and profitability would suffer if they didn’t digitally transform quickly enough.

Source: PwC’s 2020 Global Digital IQ survey

A full 66% of companies surveyed summer and fall of 2019 said revenue growth and profitability would suffer if they didn’t digitally transform quickly enough, according to PwC’s 2020 Global Digital IQ survey. Imagine how many more lament that lapse today. This is a moment for leaders to show courage and take the steps (or leaps) their business needs. Simply bouncing back isn’t good enough.

Companies need to take advantage of this moment and act on the years of digital lip service and big announcements never realized. This includes automating menial tasks (finally) and freeing up time for more strategic work; shutting down unneeded brick-and-mortar locations; investing significantly in online capacities; deploying remote-only digital monitoring; engaging in more digital marketing; making more of what you do via self-service; using tech and digital to take care of your people and customers; and being more ruthless about what you keep and what you leave behind.

Businesses should strive to come back reimagined: lighter, faster, more focused on the most important things and relationships. And driven by what’s essential now.

Whether you sell pizza or structure complex deals, become digital first. Any company can become a living, breathing, elastic digital company.

Six ways to transform to move beyond resilience

Separate magical thinking from digital reality

Companies that invested heavily in digital transformation and the new ways of working—before COVID-19—have been able to pivot more quickly than competitors, and have been better able to manage a short runway. When Spotify’s business model was threatened by a pullback in advertising dollars, it was already in the process of a pivot and quickly turned to content creation, signing exclusive deals with celebrities and curating podcast playlists.

Bumble used its digital expertise to offer video dating during the pandemic, while Airbnb accelerated its transition to a lifestyle company, connecting hosts with frustrated travelers with online sessions in cooking to art therapy. And consider Chipotle’s deep investment in technology transformation, which made it relatively easy for the burrito giant to pivot to remote ordering, delivery and curbside pickup.

This digital advantage is apparent to many companies. Of the myriad investment cuts planned, CFOs around the globe largely say digital transformation won’t be among them.

But it’s not just about the size of your budget—it’s what you do with it. Plenty of companies spend large sums on digital transformation, but few get the changes they seek. Why? They’re chasing the latest and greatest tech, not what they need to deliver: a transformed organization. They’re using “a hammer in search of a nail” mentality, often solving the wrong problems.

However, there’s proof doubling down on digital in a strategic, broad way—from tech and tools to mindsets and ways of working—works. Not many companies report getting full payback from all aspects of their digital transformation, but our 2020 Global Digital IQ found among those that did report getting a substantial payback on digital investments, 67% had been through at least one major disruption and emerged stronger. It’s not magic. It’s because they made the tough—and smart—decisions before they were forced to.
 

Repeat after me: Digital isn’t just tech

For consumer-facing companies, successful transition to e-commerce and widespread remote work is an important and actionable result of their commitment to digital transformation. That ongoing evolution doesn’t mean transformation is a walk in the park—many companies suffered mightily—but it gave them an advantage as they adapted to the demands of low- or no-contact purchasing, working across geographically-scattered teams, and scrambling to deliver products and services faster and more cost-effectively.

Digital transformation helps build resilience, regardless of the function; it’s not just about reducing costs or wringing efficiencies. It’s not about faster systems. It’s more innovation, faster and deeper collaboration, and a mindset driving the best ideas to the top—and to market faster.

What does this mean in practice? If every strategic initiative does not have a mix of business know-how, technology expertise and human-focused design skills, you may not get far. In contrast, if you’re doing this right, your product life cycle should be reduced by about 20%. If not, you’re missing the mark and need to rethink. And if your C-level team doesn’t work in an agile, human-centered design way, you’re missing the mark.

The small group of companies that do this consistently reap outsized returns across all their digital initiatives.The most interesting thing about this group, which we call Transcenders, is they’ve managed to get good at disruption and operational resilience. They can pivot and generate more innovative ideas that are actually implemented.

How? This group of companies—just 5% of those surveyed—took decisive actions to become digital-first. Transcenders don’t encourage employees to work across functions and departments. Instead, 84% mandate it and provide the tools, culture and infrastructure to make it happen. They spend 33% more than others on digital initiatives and ways of working. This leaves Transcenders better prepared to respond to external impacts—and gave them 17% higher profit margin growth than their peers over three years.
 

What it looks like, in practice

A year ago, fast-casual restaurant Chipotle was coming down the home stretch of one phase of its digital transformation. Chipotle revamped its website and signed on new delivery partners.

That was just the beginning: the company also invested in customer experience, tech transformation and becoming digital. Chipotle examined the order and payment experience, developing a proprietary technology to dynamically schedule digital orders and forecast wait times. They also implemented a personalized cross-platform loyalty system. And they built kitchens to cater to online orders.

In a move that would prove to be prescient, Chipotle eliminated the option of paying for an online order in-store. At the time, Chipotle wasn’t thinking about COVID-19; it was thinking about unhappy customers who waited in line after paying online.

These changes created a better customer experience and stronger customer loyalty—which was instrumental when the company pivoted in the wake of COVID-19. In the second quarter of 2020, according to the company’s earnings report, revenue declined 4.8% to $1.36 billion, as a result of shut-down orders and store closures in malls, but that beat estimates, and was far better than overall restaurant and bar sales, which fell 38.8% in the second quarter, according to the US Census Bureau. However, Chipotle’s online sales more than tripled in the quarter, up 216%, driven by loyalty program sign-ups. By June 2020, comparable store sales were up 2%, according to the earnings report.
 

Becoming elastic with digital

No two organizations—and no two disruptions—are the same. How can you find the pivot you need, fast?

First, make sure you’ve got the right vision, the right goals—and a mindset that carries you into an uncertain future. You should invest in the present, but you also need to commit resources to what the world might look like tomorrow—or, more importantly, what you want the future world to look like.

For most companies, embedding innovation is the new productivity measure. Investing in the future will require an unrelenting focus on a few core things: different talent, super-lean automated operations and a customer experience driving growth. Technology alone is unlikely to create the digital transformation you need, but it will enable it.

For instance, as Unilever opened about a dozen digital hubs to bring people from different disciplines together to collaborate in new ways in person and virtually). The goal: finding new customers for its products. Other companies also made it clear they’re no longer relying on specialized departments to implement digital—every employee is involved.

Working in new ways with new tools. Mandating participation. These approaches more deeply entrenched digital, and tech tools and drive adoption of agility and elasticity. A full 92% of Transcenders say they’re able to capture ideas—and act on them—from all levels. Combined, these ideas help build skills, revenue and that elastic style of resilience.
 

Ask the tough question: Is this essential?

Take a look at your offerings and figure out which are essential. The definition is going to change with every disruption. Certainly, no one would have predicted six months ago that in the midst of the next crisis (COVID-19), oil prices would crater.

A hard question comes next: Do my people and processes have what it takes to deliver the most essential ideas, products and services—like, yesterday? The answer might be “no” or “kind of.” That’s ok. Just don’t wait any longer to figure out what “essential” means to your businessnow, and to invest in what’s needed to have that conversation faster and pivot more quickly in the future.

Panera, smaller restaurants, and chains used this as a way to stay open during the pandemic. For them, defining “essential” was simple: they sell food, and people need to eat. Grocers were running short on some items, and people were anxious about going into packed stores. In response, these companies repackaged ingredients bought wholesale quantities into consumer-friendly sizes, offering them for curbside pickup. Red Roof Inns realized their “essential” offering was private space with WiFI—so they promptly offered day rates (and enhanced cleaning efforts) for people who needed a break from home.
 

Leave no favorite untouched

Start to think more like a startup, and ask the basic question: what can we provide that people will pay for? Don’t worry about margins, because everyone’s margins are squeezed. Focus on creating value for customers. Then, reverse-engineer the technology, tools and ways of working you need to do that. Not tomorrow—yesterday.

Protected products and services are expensive. They may have served you well in the past—but you’re heading into a future that is less predictable than ever. That’s hard to hear, but it’ll be even harder in a month if you’ve done nothing to double down and replace lost income. According to the June 15 PwC CFO Pulse Survey, 63% of CFOs say offering new or enhanced products will be key to recovery, highlighting innovation potential as companies pivot to thrive in a new environment.

 

Double down on what’s essential—and digital

After you identified the most promising areas, think about what your organization can realistically accomplish. This isn’t a five-year plan. It’s about what you can do now to be more adaptable in the next few weeks or months, and to deliver on your most essential customer promises today.

Some 75% of CFOs say they already gained flexibility as a result of this crisis—flexibility that they should take advantage of to build a digital company that sees benefits now, not in a decade. Doing so will help build the elasticity you will need to make your organization stronger in the long run.

COVID-19 won’t be the last upheaval your business faces, but digital transformation is one of the few things that can prepare you for the next disruption.Miss this opportunity, and you might end up in the graveyard of companies that were too stubborn or unaware to do what was necessary to survive.

Contact us

Tom  Puthiyamadam

Tom Puthiyamadam

­Global Digital and Consumer Markets Advisory Leader, PwC US

David  Clarke

David Clarke

PwC Digital Strategy and Innovation Leader, PwC US

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