COVID-19 and the future of business

Leading executives highlight five key opportunities that will help organizations respond to crisis and change.
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When everything is a priority, nothing is a priority. And as executives struggle to make sense of the post-COVID business environment, many find themselves leading from this gray area of indecision.

Two years ago, relatively few executives considered competencies in crisis management, enterprise agility, cost management, workforce resiliency, innovation, or cash-flow management as critically important to their business. Today, however, top executives tell a different tale.

New research from the IBM Institute for Business Value shows that executives are now prioritizing all these capabilities. In the next two years, our findings show that we should expect another huge shift in prioritization. Executives are clearly telling us they plan to emphasize workforce safety and security, cost management, and enterprise agility.

Opportunities for a new era
Executives' top priorities are shifting dramatically as they plan for an uncertain future.

Change remains the name of the game

Leaders are expecting more from their transformation initiatives. They identify competitiveness and workforce resilience as the benefits they most want from ongoing digital transformation. Transformation is also accelerating among a majority of organizations. But strikingly, greater focus on transformation seems to be at the expense of customer relationships and partnering opportunities.

Executives identify competitiveness and workforce resilience as the benefits they most want from ongoing digital transformation.

This special IBV Trending Insights report integrates results from multiple proprietary surveys of consumers and executives conducted from April through August 2020, punctuated by new data from executives across industries who collectively oversee USD 3.7 trillion in revenue. Our overwhelming conclusion: Post-COVID-19, the reality for businesses has radically shifted.

Whether reflecting on current conditions or future plans, business leaders’ needs for speed and flexibility have been amplified dramatically. Old barriers are being brushed aside under the pressure of unrelenting disruption, rapidly evolving customer expectations, and an unprecedented pace of change. There seems to be renewed clarity in their perspectives. Motivation is not aspirational—it has become existential.

The COVID-19 pandemic has accelerated digital transformation at 59% of surveyed organizations.

Our research suggests five key epiphanies from leading executives for the post-pandemic business landscape, offering new perspectives on digital transformation, the future of work, transparency, and sustainability. Together, they provide a playbook for proactive leaders who understand that old ways of working are gone.

Epiphany 1: Digital transformation was never just about the technology

Anecdotal tales of “game-time” pivots—moving swarms of workers to remote platforms, rethinking and remaking supply chains, shifting manufacturing to produce in-demand personal protective equipment—aren’t just near-term business contortions. Adaptability is now a mandatory business competency, and an accelerated pace of change has become normal.

The COVID-19 pandemic has accelerated digital transformation at 59 percent of organizations we surveyed, and 66 percent say they have been able to complete initiatives that previously encountered resistance. This culture shift is in part defensive: reducing costs is the top benefit attributed to transformation initiatives.

Organizations see a need for speed

But something bigger and more long-lasting than crisis management is underway. Before the pandemic, many organizations seemingly distrusted their own technological capabilities and doubted the skills of their own workforces. Yet, in the blur of this year’s pandemic-induced reactions, those anxieties proved largely unfounded.

Executives have become more trusting of what technology can do, and they are pushing ahead with digital transformation.

Reliance on tech platforms became more acute, and those platforms—along with the corporate teams who use them—delivered results. It’s not that new tech was suddenly discovered and implemented; rather, the tools already at hand were deployed to fuller potential. Previous barriers to implementation were unceremoniously shoved aside, and those who moved first saw nearly immediate results.

The COVID-19 pandemic has forever altered how organizations around the world operate. Some 55 percent of respondents say the pandemic has resulted in “permanent changes to our organizational strategy.” An even larger 60 percent say COVID-19 has “adjusted our approach to change management” and “accelerated process automation,” with 64 percent acknowledging a shift to more cloud-based business activities.

Defining a different normal
Organizations made big changes in response to the pandemic—and there’s no going back.

Shifted to more cloud-based business activities
Accelerated process automation
Adjusted their approach to change management
Made permanent changes to organization strategy
IBM Institute for Business Value

Executives have become more trusting of what technology can do, and they are pushing ahead with digital transformation. They indicate they are planning for COVID-19 recovery to include investment in technologies such as AI, IoT, blockchain, and cloud. The benefits long extolled by technophiles have become more broadly embraced across organizational leadership. To stack the deck for success, organizations need to be sure their people are as capable, resilient, and adaptable as their technologies for the long term.

Epiphany 2: The human element is the key to success

While executives plan to expand almost all tech competencies during their future digital transformations, the secret to success lies in human resources. In one IBV data set, our analysis confirms that the business competencies that account for the largest part of an organization’s expected growth are those centered around employees and customers, such as workforce training and customer experience management.

But remarkably, these factors seem to have eluded executives. More than three-quarters of executives expect changed customer behavior to continue after COVID-19, trading face-to-face contact for more shopping and customer service interactions online. To that end, 84 percent of executives say that customer experience management will be a high priority over the next two years, compared to only 35 percent just two years ago. And yet, “improved customer service” sits in the bottom half of the list of benefits that executives seek from digital transformation.

More than 3 in 4 executives expect changed customer behavior to continue after COVID-19.

This is curious, since 60 percent of executives also said they will employ AI-based customer engagement tools to achieve their goals, and in some organizations, chatbots are handling upwards of 80 percent of customer assistance traffic during the pandemic. We wonder how they will enhance customer experiences, if not at least in part through digital transformation.

If executives are conflicted about how they’re connecting with customers, they’re doing even worse with their employees. While workforce safety, skills, and flexibility are important, employee satisfaction has been deprioritized. Executives recognize that their employees have been under intense pressure, and they contend that employee well-being is among their highest priorities.

Employers significantly overestimate the effectiveness of their support and training efforts.

But our research highlights a gaping chasm between what executives think they are offering their employees and how those employees feel: employers significantly overestimate the effectiveness of their support and training efforts. Only about half of employees say they believe that their employer is genuinely concerned about their welfare. Clearly, there is massive opportunity for leaders who can get this right, when most seem to be struggling.

This trust gap is not simply about perceptions. On the contrary, there is a reasonable foundation for employee skepticism about corporate commitment to them. According to our survey results, 22 percent of people have been either temporarily furloughed or permanently laid off since the pandemic began. Pair that with corporate priorities on cost-containment and technology resources—which are practical and even necessary—and employers may be sending signals that human resources are replaceable. Increased automation, AI adoption, and the emergence of other “contactless” activity reduce the number of people needed to do the work. In addition, the rising cost-management priority can hinder workforce support, work- from-home tools lag significantly behind needs, and the move to more remote work undercuts the personal connections that help define many corporate cultures.

Employees and executives don’t see eye to eye

Epiphany 3: Traumatic stress has hijacked corporate strategy

Executives are tasked with defining their organizations’ vision. But it can be hard to focus if they are continually putting out fires. While workforce safety and resilience, cost management, and organization agility emerge as top priorities for the short- and longer-term, the pandemic has amplified old business fears and introduced new ones. The result? Executives are enamored with the priority du jour.

Since the beginning of 2020, executive priorities have been a bit fluid, and they’ve reshuffled again the last few months. Now they seem to be focused on internal operational capabilities, which may be taking attention away from the customer service experience at a time when it could be critical.

Executives are looking inward in the wake of COVID-19
Leaders plan to prioritize operational capabilities—not external growth—over the next two years.

Cost management
Enterprise agility
Cash flow and liquidity management
IT resiliency
IOT, cloud, and mobility
New product development
New market entry
IBM Institute for Business Value

According to survey results from 3,450 executives in 20 countries across 22 industries, corporate priorities are much more focused on crisis management, workplace safety and security than they were two years ago. But in the future, 86 percent of executives expect cash-flow and liquidity management to be a priority— for more than twice as many respondents as two years ago.

In the same vein, 87 percent of respondents say cost control will be crucial. There is a heightened emphasis on resiliency, with 75 percent planning to prioritize IT resiliency over the next two years. And supply-chain reliability is of rising importance, with 40 percent of executives stressing the need for spare capacity to weather future crises, a telling move away from longstanding just-in-time-delivery goals.

94% of executives surveyed plan to participate in platform-based business models.

Cybersecurity concerns have skyrocketed, too, with some industries showing an increased commitment of more than 90 percent. Overall, 76 percent of executives plan to prioritize cybersecurity over the next two years, with 46 percent planning to use AI to enhance cybersecurity in the same timeframe. That is twice as many as deploy the technology today.

Pre-COVID-19 commitment to business agility, AI, data and analytics, and other emerging technologies has grown. With the promise of competitive advantage now augmented by a new appreciation of the risks posed by crises, 87 percent of executives plan to prioritize enterprise agility over the next two years. More than 65 percent of respondents say investment in IoT, cloud, and mobility will be a priority; a whopping 94 percent plan to participate in platform-based business models.

So, everything is important. Everything except improving the customer experience— the one thing that can help drive performance and growth when the competition is lost in the fog.

Epiphany 4: Some will win. Some will lose. But few will do it alone.

The COVID-19 pandemic has not impacted all organizations and industries equally. This situation mirrors what some economists have described as a “K-shaped” consumer environment, where some thrive and others languish. The bifurcation in the stock market—where the biggest consumer tech platforms have steamed ahead while other shares drop—is just one indication of this divide.

Consider Amazon, which is up 78 percent this year. Its rise helped offset declines by more than half of the other companies in the consumer sector. Or look at Apple, which is up 60 percent and is now bigger than the bottom third of companies in the S&P 500 combined. The Amazons and Apples of the world may be examples of successful solo players, but most businesses need partnerships and ecosystems.

Scale alone doesn’t predict above-industry performance. The melding of size and flexibility is the defining characteristic of those poised for success.

Our findings show that executives expected health-related sectors to be the most likely post-crisis winners. Telecommunications, media, and entertainment were also expected to show positive impacts, buoyed by stay-at-home orders and habits. Atop the losers’ list: travel and transportation, and manufacturing-intensive industries, including automotive.

Within sectors, expectations are growing that broader reach will help define winners. Our data also point to greater reliance on platform business models and partner networks, with 70 percent of executives planning significant partnering activity inside their industry and 57 percent looking outside. Either way, they expect such participation to grow more than 300