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Digital Economy

Digital transformation after the pandemic


In the wake of last year’s COVID-19 shutdowns, information technology groups pivoted nearly overnight, launching technology-driven initiatives to enable remote work and distance learning. New customer experiences and new online sales channels followed close behind.

The moment was not just an exercise in fast-tracking technology deployments, it was also a test of companies’ ability to get employees and customers to embrace new forms of business engagement and interaction.

“Unless organizations change, the technology really does nothing for the business,” said George Westerman, principal research scientist for workforce learning in MIT’s Abdul Latif Jameel World Education Lab.

“Digital transformation is less of a digital problem than it is a transformation problem,” said Westerman in a recent webinar for MIT Sloan Management Review. “It’s a leadership problem for envisioning and driving change.”

Challenging assumptions

Westerman, a senior lecturer at MIT Sloan, said a number of longstanding assumptions about how companies typically evaluate and prioritize digital transformation initiatives were upended by the business response to COVID-19:

Assumption: Customers value the human touch. Reality: COVID-19 proved that a well-architected digital experience can offer an equivalent or even a more personalized transaction than an in-person engagement.

Assumption: Regulation inhibits digital transformation. Reality: During the pandemic, highly regulated industries like health care were open to  addressing barriers like privacy concerns for much-needed services like telehealth visits.

Assumption: It’s prudent to be a “fast follower.” Reality: Evaluating others’ innovation efforts before taking action on your own wasn’t an option during COVID-19, and isn’t a good idea going forward, Westerman said. Companies operating from this playbook during COVID-19 were more likely to lag behind competitors and miss opportunities, putting them at higher risk for business closures.

Assumption: IT can’t keep pace with digital transformation efforts. Reality: Tech organizations across every industry stepped up to keep operations going and revenue coming through the door.

Assumption: People won’t pay full price for digital-only. Reality: Consumers paid for digital products and services — and will continue to do so post-COVID, Westerman said.

Next initiatives

 With consumers and organizations finally ready to embrace digital change at scale, how should companies leverage that shift to facilitate future transformation? Westerman identified four areas where companies should focus their next-generation digital initiatives:

Customer experience: While not necessarily new terrain, customer experience in the new digital era is becoming more personal, with more emotional engagement than in the past. Companies are leveraging data to provide better customer experiences, whether it’s an online clothing site leveraging technologies like artificial intelligence and machine learning to curate an outfit based on personal preferences or a brick-and-mortar retailer using a mobile app to offer customers curbside pickup and contactless payment.

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Employee experience: Automation and machine learning can bring efficiencies to routine tasks, while other technologies like augmented reality can assist workers in ways not possible before. Westerman cited an initiative underway at Newport News Shipbuilding, which is using AR to overlay digital instructions onto the workspace, for example telling electricians how to route their wires, or showing when a piece of equipment is too heavy to lift alone. “Workers are not working harder, they’re working better, and as a result, the company is working better,” Westerman said.

Operations: Fueled by the Internet of Things and Industry 4.0, innovations like digital twins and machine learning help companies better leverage real-time data to improve operational performance and introduce new services.

For example, contract manufacturers are using data to determine what components work best together and what suppliers are most reliable to help their customers design better electronics products. Defense manufacturers leverage simulation to adjust designs, boosting quality and reducing the number of failed prototypes. And other companies are able to introduce new product-as-a-services offerings, having optimized operations through the use of data.

Business model transformation. Not every company needs to be an Uber or an Airbnb, disintermediating an industry, Westerman said. Organizations can seek out smaller opportunities for digital enhancement and information-based extensions. Insurance companies, for example, are monitoring and scoring customers as they drive to optimize policy pricing; fleet companies are leveraging real-time data and analytics to deliver predictive and proactive maintenance services. 

People power

Those initiatives aren’t likely to succeed without strong leadership, Westerman said. “What’s changed over the last five years is two dimensions: Employees matter as much as customers in many cases, and you need to create a digital-ready culture to be fast enough to compete in this world,” Westerman said.

Those leading future efforts will be tasked not just with bringing the right technology to bear, but in inspiring people to embrace the change that goes hand-in-hand with transformation.

“If we’re going to make digital transformation happen in the pandemic and after, it’s got to be all about working through the people by providing the tools, energizing them, and listening to them,” Westerman said. “That’s how we come out of this stronger than we were before.”

Read next: 4 digital transformation insights from MIT Sloan Management Review

For more info Tracy Mayor Senior Associate Director, Editorial (617) 253-0065