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As we combat the current inflation crisis and market downturn, it is becoming more and more difficult for businesses to remain competitive. Increasingly, organizations are looking for ways to cut costs and optimize existing assets and processes.
For many, this will mean pausing all non-essential projects, digital transformation initiatives included. If your organization already has working digital strategies and processes, spending money on newer, shinier digital projects feels counterintuitive.
Unfortunately, this intuition is flawed. It is a relic of a recently bygone age to assume that digital projects are anything but essential during a market downturn. The business world is becoming more digital every day, despite the market. With the threat of recession looming, Gartner still predicts worldwide IT spending to reach $4.4 billion this year. Moreover, in a 2020 survey, Deloitte found that more digitally mature companies reported 45% revenue growth compared to 15% for lower maturity organizations. If able, organizations must embrace digital change or risk being left behind.
Addressing digital strategy
While keeping up with digital trends is important, how organizations go about creating a digital strategy can be the difference between keeping up and getting ahead of competitors. However, what level and kind of digital work businesses should undertake will vary immensely between organizations.
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Pragmatically, this will inevitably mean investing a lot of time into research. For example, some organizations will benefit immensely from investing in automating their internal processes to save on labor costs. For others, investing the bulk of the digital budget into digital brand building, demand and lead gen programs, building content leadership and leveraging social media platforms to generate traffic would be more worthwhile.
Researching how competitors spend their digital budgets can also help inform your strategy, as you can gather market-tested data on what is and what is not worth the investment. This strategy can sit alongside broader internal and external data gathering. Although it can be painstaking to sift through, the more data collected on internal processes, staff satisfaction, digital customer experiences and end-user trends, the more targeted and effective the digital strategy will be.
Taking advantage of expertise
Something else to bear in mind is that many businesses do not effectively use their available expertise.
This may have something to do with the fact that many business leaders aren’t aware of their knowledge gaps. In our own research, we have found that 73% of UK family firm board members have no digital competencies. Concerningly, Salesforce has found similar knowledge gaps. In a 2022 Salesforce survey of more than 23,000 workers across 19 countries, 54% of senior leadership respondents marked that they had the digital skills needed today. However, less than half of the managers and individual employee respondents agreed, meaning that senior leaders weren’t aware that they lacked adequate digital expertise.
Part of being digitally aware is knowing that the digital world moves at a fast pace and most senior business leaders do not have the time or capacity to keep up constantly. From there, becoming digitally mature involves integrating digital components across the organization and its business strategy. For this to happen, organizations need to start consulting with CTOs and digital teams on a much more serious level. This could mean involving senior IT leaders in the company’s board or creating a separate digital board to manage digital projects at a senior level. It could even mean looping in external consultants.
We are amid a digital skills crisis, but taking digital offerings seriously can help to retain IT staff and build out your customer offering while competitors pause their digital investments.
There are clear benefits to digitalization. For example, automating your internal processes with AI can save on labor costs; conducting website testing can drive traffic; and improving digital marketing channels can improve customer engagement. And, if there was ever a moment for digitalizing, it’s when your competition is pulling back.
Moreover, as valuations are under increased pressure, digital strength can make all the difference. Digitalization is also seen as a key value driver for investors, as we are currently seeing strong links between financial performance and digital maturity. Investors are increasingly conducting digital due diligence as a valuation factor, so the smallest step can make the most significant difference.
As businesses battle factors like inflation, high-interest rates and low EBITDA arbitrage, investors are battling uncertainty as they look to allocate vital funds. In the long term, continuity is critical to investors as, at the end of the day, the safety of their investments is never guaranteed. Continuity is therefore a vote of confidence. Organizations that can continue building their digital strategies and innovating will encourage further essential investment.
Assuming that there is a budget available, digital transformation can be a safe route to seizing market share while others go on the defensive. The goal could be improving internal and external digital services; encouraging a high valuation or investment figure; long-term cost savings; or any other combination of reasons.
Regardless, a digital strategy can affect not only whether a business survives the downturn but how well it survives the downturn.
Stefan Sambol is cofounder and Partner at OMMAX
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