“Holding on to what you know is a natural instinct for any business leader in a disruptive environment,” my colleague and founder of Pilot44 Labs, Andrew Backs, likes to say. With recession worries mounting, many decision-makers might feel the urge to do the same.
Thing is though, during a downturn, it pays off to let go of your old ways.
With inflation in the US running at an annual rate of 8.6% in May 2022 (three times higher than the Fed’s target), soaring prices, and continuous disruptions to global supply chains causing a slowdown in manufacturing across Europe and Asia, the global growth outlook is not very promising.
As much as it’s tempting to cave in to external pressures, when the economy slows down, I’d say take a leap into your industry’s future. Take Citigroup: they’ve just announced plans to hire 4,000 technology experts to make the most of the “digital explosion.”
Call it bold? I call it digital acceleration playbook. In today’s business environment, the gap between digital leaders and laggards is only going to widen, and you can’t afford to be the latter.
We’ve learned it the hard way
Remember the headlines back in 2020? Putting aside major health concerns, fear for the wellbeing of our loved ones, and overall anxiety, we’ve also worried sick about the future of education, work, retail, hospitality, and all businesses heavily impacted by the pandemic. It quickly turned out that the future we were so gloomy about, was the very same future we’ve been envisioning for years – the digital.
When COVID-19 upended our lives, we resorted to digital channels. Two years later, and we know for sure that not only do they ensure continuity – they enable fully remote education and work, open up new business models and opportunities, empower global, dispersed teams, drive efficiency, and help optimize costs.
It’s true that the unprecedented scale of pandemic-related disruption made businesses doubt their bold digital strategies: innovation budgets got frozen, digital product teams downsized, and executives focused on short-term issues. But that approach didn’t stick around too long. According to a report by Boston Consulting Group, by the end of 2021 three-quarters of companies declared innovation as one of their top three priorities (the largest year-over-year increase in the history of BCGs innovation surveys!).
When we shook off the initial fears, we witnessed the inevitable: digital have-nots needed to transform under tremendous pressure, while digital haves enjoyed increased market share.
In other words, businesses that embraced digital transformation before the pandemic, and those that were born digital, entered the digital acceleration phase and were far better positioned to respond to change and, not surprisingly, lead.
Digital acceleration means resilience
McKinsey researched over 2,000 companies over a period of two decades to measure their resilience to economic slowdowns. A closer look at “resilients” proved that the best-performing companies moved ahead of downturns and never stopped investing in innovation.
High digital maturity resulted in 7+% more revenue growth than industry peers, and nearly 6% more EBITDA growth.
Moreover, according to the same research, resilients looked for savings beyond traditional levers, as those come down to around 2%, while digital tools can boost cost reduction by a further 5%.
I’m no McKinsey, but I like to be in the know. I’ve recently spoken to about a hundred stakeholders from various companies – CEOs, CTOs, founders, VPs, and managers – to try and get their reading on the current situation, and their business approach to market uncertainty. So far, only a few response plans included downsizing staff or a push-back on innovation.I think we've learned to trust in digital acceleration, as it stands for fast decision-making, rapid discovery, delivery and validation of innovative concepts, and – now increasingly important – higher productivity, and analytics-driven savings. Today, more than ever, those are the winning factors, and it seems most businesses I’ve kept in touch with agree.
Think differently for that sweet competitive edge
Innovation is always a leap. In uncertain times, venturing out into the unknown might be the last thing on your mind, but bear with me.
Each year at Netguru’s Disruption Forums, we hear business decision-makers talk about how innovation is done successfully, and how bold new concepts bring value in no time.
I like how Alex Sion, Managing Director and Head of Market Growth at Citi Ventures, approaches a true innovator’s mindset: “If you’re stuck on Earth, you’re always gonna solve Earthly problems. I think the problem we have in banking is that the future may no longer be Earth.”
I believe high volatility calls for agility, and for leadership teams that are themselves agile and prepared to think differently.
Alex argues that the worst thing that could happen to companies that try to innovate is getting locked into existing ways of doing things. I’d add: you run the same risk when not innovating at all. Ask yourself: “What’s the cost of inaction?”
Business context is always changing
You probably heard the joke about experts having correctly anticipated seven out of the last three macroeconomic events. Economy is all about cycles, and we’re just entering the next. What we can do – at any point in life really – is brace ourselves and follow Robert Frost’s advice: “The best way out is always through.”
To weather the storm, accelerate your decision-making, be bold with your digital concepts, stay on top of trends, look for digital-first answers to your challenges, get your MVPs out as quickly as possible, and validate your ideas. You don’t innovate for the sake of innovation – you’re after winning strategies and tangible results.