COVID-19 Pushed Businesses to the Brink. Can Digital Transformation Help Bring Them Back?
Coronavirus has been like a buzz saw going through our lives and our livelihoods, with 100,000+ dead and the economy in tatters.
According to the recent numbers released by the US Bureau of Labor Statistics, 38 Million people have filed for unemployment assistance in the past few weeks, and the unemployment rate that had hovered in the sub 4% range for a while is now a scary 14.7%. With limited access to cash and/or capital, such Black Swan events tend to disproportionately impact small & medium size businesses. In a recent poll conducted by the SMB Group, 75% of the respondents indicated that the virus has negatively impacted their business, a near U-turn from the 64% who were optimistic about revenue growth just a few months ago.
Which raises the most existential question of them all i.e. is there a future for these firms once they get to the other side of the pandemic? And if so, then what will it take for them to recover, and perhaps even to thrive, in a post-COVID world?
The short answer is that it depends. If firms continue to do business as usual, the future will be inevitably bleak, but if they take this opportunity to genuinely re-invent themselves, then their best is yet to come. And that is where the whole notion of digital transformation comes in.
Simply put, digital transformation is the process of re-imagining your business for the digital age, using a combination of technology, change in business processes and viewing everything from the lens of customer experience.
According to IDC, this phenomenon presents a US$20 Trillion opportunity in the next 5 years and the spending on technology to enable such transformation is forecast to hit $1.97 Trillion in 2022, a 5-year CAGR of almost 17%. While most of the attention has focused on large companies re-inventing themselves, the opportunity for SMBs to do the same is just as large.
Here are 3 things that SMBs should think about as they plan digital transformation for a post-COVID revival and growth.
Do a thorough technology assessment:
Does your business have the right systems in place to help you run your business efficiently? Are you still relying on legacy on-premise systems that were written in the early 1990s to power your business, or are you fully plugged into Cloud-native solutions that offer you an entire ecosystem of apps to choose from?
If coronavirus has shown us anything, it is that the ability of a business to operate remotely is critical for long-term survival. It might sound like an unnecessary investment, but now is probably the best time to re-tool and upgrade your core back-end systems. Besides, the software vendors are hurting for business as well and will likely be open to making attractive deals now more than ever.
Re-design your business processes with the customer in mind:
Customers are the core of what a business is all about.
Which is why it is essential to understand how businesses engage with their customers along the different part of their interactions.
As a small or midsize business, it is likely the business processes you use to engage with your customers (as also partners, vendors and other key stakeholders) may have been put in place when your business first started. Now is a good time to review them to see if they are still appropriate. For example, do customers need to call someone for initiating critical business or technical support requests and are then placed on hold?
And if they do call, is there a way for them to be placed in a virtual queue without having to physically remain on hold? Every friction point that you can eliminate, makes the customer’s experience that much more desirable. The more existing customers you can delight, the less new customers you have to go looking for to keep your business thriving.
Cash is king:
The businesses that survive in the long run either have access to capital or are able to generate positive cash flow as a going concern. Operational efficiency sounds really boring, but it is really about focusing on the small things that cut costs out of the entire value chain. So make sure you review customer accounts to ensure minimal outstanding receivables, or get that additional point of discount from a vendor, or ensure your web shop is enabled to offer bundles that propose some low-cost (but high value items) for your customers to add to their shopping cart. The more cash you can generate from your business, the less under duress your business will be.
As Einstein said, “In the midst of every crisis, lies great opportunity”. There is a long list of companies that started during the depths of previous recessions and went on to achieve remarkable success, including Credit Karma (acquired by Intuit for $7 Billion) started in 2008, WhatsApp (acquired by Facebook for $19 Billion) started in 2009, and Slack (enterprise messaging app, a public company now) started in 2013. I am sure that in the next 5 years we will look back at a new crop of companies that either started or saw steep growth during this present crisis.
After all, even Black Swans can fly very gracefully.