3 Ways Digital Transformation Can Protect Your Business

Shelly Dutton

Tightening of the U.S. monetary system. Europe’s struggle with the refugee crisis and rising debt. Financial instability in China. Global political instability. For anyone reading these headlines, 2016 is gearing up to be anything but boring and predictable. But is it really as bad as we think?

In a recent story in The Atlantic, James Pethokoukis, Dewitt Wallace Fellow of the American Enterprise Institute, expresses a different take on what’s happening. “Perhaps what’s happening is that we’re really bad at measuring the effects of technological progress, especially in the digital economy,” he theorized. Pethokoukis argues that innovations can take a considerable amount of time to impact productivity. Just like it took years, decades even, for factories to determine how to manufacture mass quantities efficiently, it may take years for recent advancements – such as Big Data, cryptocurrency, and the Internet of Things – to transform the world on a broad scale.

However, this realization is not convincing CEOs to set aside plans for such digital transformation. In fact, IDC predicts that two-thirds of Global 2000 enterprises will put digital transformation at the center of their corporate strategy by the end of 2017. Meanwhile, 80% of smaller companies will likely be dragged into digital transformation because of these larger businesses.

Why are so many enterprises relying on digital transformation to move forward? Simply put, it can be a protective layer that cushions the impact of a downturn – whether fueled by speculation, a misunderstanding of standard economic indicators, or real monetary constraints. Here are three of IDC’s 2016 predictions that provide some clues into how.

Prediction #1: 65% of large enterprises will shift their focus from resources, labor, and fixed capital to digital mastery of relationships, operations, and intangible capital.

This is not to say that cost containment of resources, labor, and fixed capital is no longer concern – it’s just not the only one. Senior executives are quickly realizing that relationships with customers, employees, and the entire business network; operations; and intangible capital (such as brand perception) are equally, if not more, important.

Considering that the average life expectancy of a Fortune 500 company has declined from around 75 years half a century ago to less than 15 years today, it’s easy to see how technology is accelerating a business’ lifespan. However, companies with staying power can build a brand reputation that makes customers feel invested, trust, and secure – even during lean, economic conditions.

Prediction #2: 80% of B2C and 60% of B2B companies will create immersive, authentic, omni-experiences for customers, partners, and employees by 2018.

Business-to-business (B2B) and business-to-consumer (B2C) companies with advanced omni-experience capabilities can study the entire ecosystem to learn from every customer interaction and take those lessons to the next deal over and over again in an iterative cycle. Although this capability is ingrained in the retail industry, every business – no matter the industry and size – needs to better understand customer preferences and needs, factors that trigger purchase patterns, and activities that have proven to improve sales revenue and profitability.

Prediction #3: 75% of the Global 2000 will deploy full, information-based, digital twins of their products, services, supply network, sales channels, and operations.

The combination of the digital economy with economic volatility can create an environment that is incredibly fast-paced, high-risk, and operationally lean. And for business, any error or design flaw can spell disaster. This is where digital transformation can become a catalyst for product innovation and lifecycles.

With a digital twin of a product or service, companies can avoid costly quality issues or rework because performance, processes, updates, and errors can be modeled before they occur in the physical offering. Thanks to the Internet of Things, digital twins can live well beyond the initial launch because embedded sensors and data flowing to and from a business’ system can enable performance tracking, usage monitoring, and predictive analytics of potential risks and opportunities for optimization.

Will digital transformation safeguard your company from an economic downturn? It all depends on you on how you take advantage of it. Check out Bill McDermott’s advice on the Timeless Truths in a Digital Age. Simple is key.