There is a high level of uncertainty surrounding the pace of economic growth. The International Monetary Fund predicts that global growth will have slowed to 3.0 percent by the end of 2019, down from 3.6 percent in 2018. And although it’s currently projected to pick up a bit in 2020, it will still be slow, and forecasts are constantly in flux. Already, growth has slowed in China and India, and some key indicators in developed economies such as Germany and Australia are dipping.
Simply buying or implementing technology won’t give you an advantage. You have to use it to transform your business.
In the face of this uncertainty, there’s a counterintuitive but convincing argument for investing in technology to improve internal processes and revamp your portfolio of products and services. But simply buying or implementing technology won’t give you an advantage. You have to use it to transform your business so you can “accelerate through the turn.”
That phrase comes from car racing. When drivers approach a turn, they have to slow down, but how they go into the turn makes all the difference in how they emerge from it. If they pick the right line and time their acceleration correctly, they can come out with far more momentum.
The parallel in business is that in the face of heightened and rising uncertainty, the steps you take now will have a big impact on your ability to withstand whatever may come. The right approach could set you up to pull ahead of your competitors. And to do this, the line you want to pick is digital.
In previous cycles, companies would start preparing for a period of muted growth by cutting costs and scaling back investments. If they were in a strong market position, they could potentially assemble a war chest of capital to buy up distressed competitors — picking off and integrating the weak. This time around, that strategy by itself won’t work.
What makes this environment different from previous ones is that growth is slowing at the same time that we’re seeing a major disruption — the fourth industrial revolution (4IR) — that brings together all sorts of new technology, from data and analytics to artificial intelligence (AI) to machine learning. As a result, you can no longer treat investments in these areas as a cost, as you might have in the past — you now need to view these investments as a means to unlock value.
Internally, 4IR technologies allow you to streamline and improve your processes and functions, making them far more efficient and less costly. New solutions also help you harness data to generate insights that enable managers and senior leaders to make more objective, fact-based decisions, leading to better performance. For example, you can invest in supply chain technology that uses AI to generate more accurate demand forecasts and predict how and where the supply chain might break down in response to specific risks.
But digital technologies have a customer-facing component, too, enabling business model innovation centered around new types of products and services. For example, companies increasingly offer mobile, cloud-based services rather than products, and customers no longer buy software outright but instead subscribe to software-as-a-service models. Even automakers, who have been selling cars the same way for decades, are rethinking how they do things.
Most 4IR technologies are evolving rapidly, but they’re not risky. Rather, they’re market-tested solutions already in use across a range of industries. And acquiring these technologies should be a priority for virtually all companies heading into uncertain times.
To be better prepared for heightened uncertainty, consider the tech you already have and the acquisitions you’ll make, then get to work on three big initiatives:
Plan for automation. You need to look at roles and processes with an eye toward automating everything you possibly can. You might be able to get a head start on some of this work if you already have the tech to make it happen. Otherwise, be ready to act once you do have the tech. Algorithms should handle any rote, repetitive steps that don’t require judgment calls or discretion. Not only will this lead to more efficient and less costly work (bots don’t take breaks), but it will also generate more accurate data that you can begin to aggregate and use to generate insights. Even more important, increased efficiency will free up capital that can be reallocated to other areas, such as new business offerings and investments in innovation.
Upskill your people. You might need to train your workforce on how to use new tools such as analytics, AI, and other 4IR technologies. Start that training now so you don’t waste any time once you have the technology. But rather than take the traditional approach to training — “build it and they will come” — you can take a more forward-thinking and employee-driven approach.
As the business leader, you should set the overarching direction and goals for training, and provide the time, tools, and resources for people to learn and apply new skills. From this starting point, employees should take the lead in their own upskilling by innovating, building, sharing, and test-driving solutions. And because employees will be directly engaged in developing solutions, they’ll also be more motivated and excited to share their ideas. That enthusiasm will get other people invested, and change will spread quickly throughout the organization — ultimately helping everyone improve.
Build your ability to capitalize on data. You need to build the right capabilities to collect, aggregate, and clean up and standardize data. Many organizations have a wealth of data, but they’re unable to make sense of it because it’s unstructured and sitting in unlinked databases. More important, you need to synthesize the data so that it’s translated into clear insights and actionable steps that people can take on a day-to-day basis.
An ancillary advantage of improving how you handle and manage data is that you’ll be better equipped to acquire and integrate other businesses. As uncertainty persists, it’s likely there will be plenty of companies ripe for the picking, as less digitally enabled companies run into problems and become attractive takeover targets.
In uncertain times, you might feel like you’re at the mercy of powers that are out of your hands. But you still have a lot of control over your company’s fate. By investing in digital technology and preparing your organization for digitization now, you can help your enterprise accelerate and come out stronger on the other side.