Accelerating Technology Adoption
The COVID-19 pandemic and resulting economic shutdown have substantially increased technology adoption across all industries. A McKinsey survey from Oct 2020 finds that companies’ responses to this crisis have sped up the adoption of digital technologies by several years—and that many of these changes could be here for the long haul.
According to the McKinsey Global Survey of executives, their companies have accelerated the digitalization of customer and supply-chain interactions, as well as their internal operations, by three to four years. Furthermore, the share of digital or digitally enabled products in their portfolios has been expedited by an unprecedented seven years. Nearly all respondents agreed that their companies have instituted at least temporary solutions to meet many of the new demands on them, and much more quickly than they had thought possible before the crisis. In addition, respondents expect most of these changes to be long-lasting and are already making the kinds of investments that all but ensure they will stick. When asked about the impact of the pandemic, executives say that funding for digital initiatives has increased above all else—more than increases in costs, the number of people in technology roles, and the number of customers.
Moving toward online channels
Consumers have moved dramatically toward online channels during the pandemic, and companies and industries have responded in turn. The survey results confirm the rapid shift toward interacting with customers through digital channels. They also show that adoption rates are years ahead of where they were when previous surveys were conducted. Respondents are now three times likelier to say that at least 80% of their customer interactions are digital.
The Difference Between Sectors
However, the results also suggest that rates for developing digital products during the pandemic differ across sectors. Given the timeframes for making manufacturing changes, the differences, are more apparent between sectors with and without physical products than between B2B and B2C companies. For example, respondents in consumer packaged goods (CPG) and automotive and assembly report relatively low levels of change in their digital product portfolios. By contrast, the reported increases are much more significant in healthcare and pharma, financial services, and professional services, where executives report a jump nearly twice as substantial as those reported by CPG companies.
The customer-facing elements of organizational operating models are not the only ones that have been affected. Respondents report similar accelerations in the digitalization of their core internal operations (back office, production, and R&D processes, among others) and supply chain interactions. Unlike customer-facing changes, this rate of adoption is consistent across regions.
The speed with which respondents say their companies have responded to a range of COVID-19-related changes is remarkable, even more so than digitalization processes. In the case of remote working, respondents say their companies moved 40 times more quickly than they thought possible before the pandemic. Previously, respondents say it would have taken more than a year to implement the level of remote working that took place during the crisis. In actuality, it took an average of 11 days to implement a workable solution, and nearly all companies introduced workable solutions within a few months at most.
Respondents across sectors and geographies are most likely to report a significant increase in remote working, changing customer needs (a switch to offerings that reflect new health and hygiene sensitivities), and customer preferences for remote interactions. Respondents reporting significant changes in these areas and increasing cloud migration 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. Both remote working and cloud migration are viewed as more cost-effective than previous practices, while investments in data security and artificial intelligence are most often identified as helping to position organizations better than before the crisis.
The extent of technology’s differentiating role in this crisis is stark. At the organizations that experimented with new digital technologies during the pandemic, and among those that invested more capital expenditure in digital technology than their peers, executives are twice as likely to report outsize revenue growth.
The results also indicate that, along with the multiyear digital acceleration, the crisis has brought about a sea change in executive mindsets on the role of technology in business. In McKinsey’s 2017 survey, nearly half of executives ranked cost savings among 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 to pursue a competitive advantage or refocusing their entire business around digital technologies. The report’s authors concluded: “The notion of a tipping point for technology adoption or digital disruption isn’t new, but the survey data suggest that the COVID-19 crisis is a tipping point of historic proportions—and that more changes will be required as the economic and human situation evolves.”
Edward Yardeni predicted, “In my Roaring 2020s scenario, technological innovations will boost productivity-led growth and real pay per worker while keeping a lid on inflation.” Digitalization is the key to modernization. This is why 85% of companies accelerated their digital transformation programs last year.
Technology leading to improved productivity via platforms like Instawork, ShiftPixy, Shyft, and Jobletics can also help to fill short-term workforce gaps. The Instawork network, for example, has more than 1 million workers across the U.S., and the number of available shifts on its platform has grown 8x in less than two years, with professionals finding work in less than 24 hours.
The pandemic, in conjunction with a difficult insurance market, has pushed contractors to reevaluate their old ways of doing business. “The pandemic forced contractors to do their work differently, and I think that was an improvement,” Gary Kaplan, president of construction for AXA XL, said. “They brought in technology to automate some stuff that was pretty clunky.”
According to Kaplan, the adoption of technology by construction firms tended to be a lower priority before the pandemic. But COVID forced the sector to bring in newer, more innovative tools to improve safety. Michael Teng, assistant vice president of regional pricing, products, and underwriting at Sentry Insurance, agreed that the pandemic has spotlighted workplace safety. That includes the use of telemedicine, which picked up significantly in construction: “We began to see a lot of contractors starting to utilize electronic badging.” The sector also improved processes for workers entering job sites and increased the use of wearable technology tools, such as monitors.